Hong Kong is world's fifth fastest-growing start-up ecosystem – study

The Global Startup Ecosystem Ranking 2015, released by research firm Compass, assessed different cities based on funding, talent, market reach, start-up experience and policy. These assessments were based on 11,000 start-up surveys conducted between January and June of last year, plus 200 interviews in 25 countries, and various industry research.

Silicon Valley, New York City, Los Angeles, Boston and Tel Aviv emerged as the top five start-up ecosystems. The study didn't not include mainland China, Taiwan, Japan and South Korea, due to difficulty getting access to local survey participants and data.

The research firm also released a separate report on Hong Kong's start-up ecosystem, which is home to nearly 2,000 active start-ups. The city is ranked outside the top 20 and is still at an early stage of development, but it is thought to have potential for continued rapid growth.

Hong Kong is weak in terms of its ecosystem value - the combined total of start-up valuations at each funding round and at exit - amounted to $2.8-3.5 billion, four times smaller than Singapore. Local start-ups also have relatively a low exit valuation ($1.4-1.7 billion), there is a lack of unicorns (start-ups valued at more than $1 billion), and the total valuation of all existing portfolio tech start-ups of $1.5-1.8 billion is less than one sixth that of Singapore.

Nevertheless, Hong Kong's growth index - the primary metric used by Compass to measure an ecosystem's growth in terms of changes in VC investments and exit value, and the creation of new start-ups - came to 3.0 last year. This was thanks to faster growth in overall start-up numbers, and a close to nine-fold increase in exit value, even though there was a 21% decrease in VC investments.

The study suggests that Hong Kong has strong potential in areas such as the internet of things (IoT), given its proximity to Shenzhen, which offers easy access to cheap and rapid prototyping, as well as financial technology.

The Hong Kong government has recently announced several initiatives to support local start-ups. It plans to launch a HK$2 billion ($256 million) fund that will co-invest in start-ups alongside venture capital funds on a matching basis.

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• Topics
• Greater China
• Venture
• Performance
• Technology
• Hong Kong (China)
• Venture
• Performance
• Technology