Hong Kong offers Israeli start-ups ‘soft’ China landing

Israeli entrepreneurs interested in the China market, but intimidated by the idea of being set adrift in a country and culture far different than their own, have an “oriental alternative” in Hong Kong, and a possible “shortcut” into the Chinese market. “Hong Kong has access to the Chinese markets, but is very Western in nature, politically, culturally and from a legal perspective,” according to Simon Galpin, director of investment promotion at InvestHK (Invest Hong Kong).

Hong Kong has officially belonged to the People’s Republic of China after the UK ceded sovereignty to Beijing in 1997. According to the handover agreement, the city was to have autonomy in all matters, except for defense and foreign affairs, for at least 50 years. China has been satisfied to adhere to that arrangement, said Galpin, because of the territory’s unique role in bridging East and West. “Hong Kong has been a great engine of investment for Mainland China, providing access to capital that has enabled Beijing to become a world economic power.”

Despite occasional political tensions — such as in an unofficial referendum vote on instituting democracy in the territory to be held Friday, and opposed by Beijing — it’s unlikely China would do anything that would result in a loss of Western confidence in Hong Kong as a stable, safe place to do business in the Far East, said Galpin.

That’s good news for Israeli start-ups, especially those that want to do business in China, said Galpin. Although Hong Kong isn’t known for its start-up ecosystem, with most people associated the city with manufacturing, finance and diamonds, “we actually have had many more start-ups and individual entrepreneurs coming to Hong Kong to start businesses in recent years, and we want to reach out to Israeli entrepreneurs as well.”

Galpin was in Israel recently to do just that, visiting, among other events, the MIXiii high-tech event that took place in Tel Aviv in May. Although most Israelis don’t realize it, more than 80 Israeli companies already do business in Hong Kong, including Nice Systems, Rad Vision, Amcor Ltd., Orbotech, Zim Integrated Shipping, and numerous telecom, finance, cosmetic and diamond companies. Israelis don’t need a visa to get into Hong Kong, and the seven million strong territory has a Jewish community of 4,300, which sponsors a day school, several synagogues, and kosher restaurants.

Just as Hong Kong is distinguished from much of the Far East in its political culture and Western leanings, so it is distinguished as one of the few places in Asia that truly “gets” Israeli start-ups. While Asian countries, including China, Korea, and Japan, have been frustrated by the difficulty of getting a start-up ecosystem going, Hong Kong in recent years became a mecca for entrepreneurs, said Galpin. “Unlike in China and other countries in this region, Hong Kong has a strong entrepreneurial spirit and culture,” he said, pointing to the colony’s early history as an outpost of British business and a free-trade zone. “Most of the people who come here, whether from Europe or China, do so because they want to make money, so Hong Kong is more amenable to start-ups than most cities in Asia,” he added.

Hong Kong would like to have more tech start-ups, and Israel is a likely place to find some, said Galpin. InvestHK is a department of the Hong Kong Special Administrative Region Government. As an official government body, the organization is in a position to help Israeli entrepreneurs set up operations in the city. The group recently started an accelerator program called StartMeUpHK, and start-ups chosen for the program are entitled to a basket of goodies worth $500,000, including a free trip to Hong Kong, mentorship programs with top Asian business executives, entry into several major tech events in the region, and connections to customers and partners in Hong Kong and China. The first Israeli companies enrolled in the accelerator last year.

“Hong Kong has become an important center for overseas entrepreneurs looking to expand globally. With our StartmeupHK Venture Program, we hope to build on momentum and put Hong Kong on the global start-up map,” said Galpin. “We are seeking to bring in not only innovation but also to promote Hong Kong to potential founders and angel investors who will, in the long run, help further develop Hong Kong’s start-up ecosystem.” It’s a great opportunity for Israeli entrepreneurs, he believes. “For Israeli companies seeking a berth in China, Hong Kong offers a shortcut. It’s faster, cheaper and easier to begin an operation here than in a Mainland city.”