Fund focus: CityU promotes entrepreneur enablement

Hands Life Science, a Hong Kong biotech start-up, completed several pivots before establishing the scientific basis for what it hopes will become a portfolio of consumer healthcare brands.

The company's first iteration began in 2014 when Marco So, a third-year biology and chemistry student at City University of Hong Kong (CityU), teamed up with 11 classmates to enter a genetic engineering competition in Boston. They won the gold medal for a project that involved using genetically modified bacteria to produce a vegetarian fish oil intended to combat obesity.

Unfortunately, the solution could not compete with traditional fish oil due to the cost of the bacteria fermentation process. The team turned its attention to microbiomes and allergies, reasoning that feedstock costs would be lower because microbiomes rely on photosynthesis. It turned out even more expensive: a sophisticated bioreactor design is required to apply light evenly to the organism.

"We pivoted again to active ingredients. We asked what valuable molecules could be extracted from photosynthetic organisms so we can continue exploring our fermentation technology. There was a lot of preliminary data on photosynthetic pigments and obesity and anti-inflammation," says So.

However, there was one more pivot to come. The anti-obesity strategy worked in the test tube, but not in real life because the molecules cannot enter fat cells on being applied to the skin. Eczema became the focal point instead. Hands already has one product in the market – an affordable, locally made skincare brand – and the eczema treatment is due to begin clinical trials this year.

The start-up is a case study in the rewards of perseverance. It is also an early example of the entrepreneurial flair within the CityU student body, something the university is keen to nurture. Hands received HK$200,000 ($25,700) from a CityU seed funding program to support early exploration, but So found the mentorship aspect just as helpful.

"Almost all our team members are CityU biology students, we knew nothing about business, coming up with business plans and financial projections, or fundraising," he recalls. "CityU helped a lot. – not just providing funding, but also coaching us and connecting us with experienced businesspeople who could advise us on the business plan."

Thinking bigger

CityU, by its own admission, thus far hasn't been especially proactive in driving entrepreneurship. About half a dozen start-ups emanating from research projects have benefited from the seed funding program, while best efforts are made – on an informal basis – to get industry veterans to serve as mentors. Beyond that, steps are taken to lock down intellectual property pertaining to research in case there is future value and students are encouraged to join start-up competitions.

"Hong Kong universities are public institutions, so once a project becomes a business, it must move off campus. The university role is more at the beginning, when the founders are trying to set things up. Turning research into a workable technology is a journey on its own. You need people who will champion the research outcome and do all that transformation. If they are more fixated on pursuing an academic career, it's a big struggle," says Tricia Chong, director of knowledge transfer at CityU.

The university recently launched an entrepreneurship program intended to expand research commercialization efforts and place them in a formal structure. Known as HK Tech 300, the goal is to establish 300 start-ups over the next three years founded by students, alumni, research staff, or members of the general public who use CityU patents or research technology. A budget of HK$500 million has been allocated to the initiative, sourced from public donations and the university itself.

Participants are enrolled in an eight-week training phase during which they receive pointers on developing business plans and pitching investors. All costs are covered by CityU, which estimates the training is worth HK$10,000 per team. Participants can also apply for up to HK$100,000 in seed funding. Those teams selected for the incubation phase, during which they develop and validate their business models, receive angel funding of up to HK$1 million apiece.

Once the start-ups are ready to launch, external funding of up to HK$10 million kicks in. This is awarded based on recommendations made by the program to organizations such as the Technology Start-up Support Scheme for Universities (TSSSU), the government's Innovation & Technology Fund, and incubation schemes run by Hong Kong Science and Technology Parks Corporation (HKSTP).

The seed funding is much like a grant, but thereafter CityU will take equity stakes in the start-ups it backs. These would be subject to a cap of 15-20%, but there is little expectation of getting anywhere near that level.

CityU looked at university entrepreneurship programs in other countries, including the University of California Berkley's SkyDeck and Georgia Tech's VentureLab. Chong says there are similarities in ethos, but CityU is more ambitious in terms of scale.

Local tailwinds

The program is expected to benefit from general growth in Hong Kong's start-up ecosystem as well as from greater interest among young people in participating in it. There are several contributing factors. It is cheaper and easier to launch a technology business than ever before, sources of capital and advice are plentiful, and a handful of success stories have emerged in recent years. Chong notes there is now a start-up competition almost every other week.

Moreover, the social inhibitions attached to start-ups appear to be fading. "Most of my secondary school and university classmates wouldn't even consider doing a start-up. In Hong Kong, the culture is more about getting good grades and decent, stable job. There is a lot of pressure," says So. "But in recent years more people have been talking about start-ups."

Meanwhile, feedback from venture capital firms and incubators with a presence in Hong Kong has been positive. For incubators especially, it is easier to source opportunities emerging from a single funnel than rely on tips from professors. HK Tech 300's supporting organizations include the likes of Mindworks Ventures, Qiming Venture Partners, Alibaba Entrepreneurs Fund, Lingfeng Capital, Isola Capital, Beyond Ventures, and Brinc.

Success will not be judged based on how many participants secure follow-on funding from these investors. The program's primary objective is educational, offering students a taste of entrepreneurship and seeing if it whets their appetites. It is an experiential process that cannot be run from a classroom. At the very least, participants will learn about the mechanics of running a company, which could make them better-oriented employees on entering the workforce.

"We want to be enabling, so it's about getting as many people through the program as possible and have them absorb something from that journey. If they become very successful, that's a bonus," says Chong. "Who knows, maybe they won't become successful in the program itself but in their next project, partly because of the experience they had in the program. To us, that would be a success."

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• Topics
• Greater China
• Technology
• Fundraising
• Venture
• Hong Kong (China)
• seed