Hong Kong vs Singapore VC: Flawed comparisons

Hong Kong and Singapore are pitted as rivals across so many segments of financial services, why should venture capital be any different? This is a debate shaped by those with strong views on how much of a role government policy should play in driving technological innovation.

On one side, Singapore, where the authorities have been keen to act as market makers across a variety of areas, with venture capital no exception. Government-backed funds have in turn helped nurture incubators, seed investors and Series A players, with a view to encouraging start-ups at one end of the spectrum and attracting overseas Series B investors at the other.

The early success of these policies has inevitably drawn sometimes unfavorable comparisons with the relative inaction of traditionally more laissez-faire Hong Kong.

It is against this backdrop that AVCJ frequently receives inquiries about the levels of venture capital investment in Singapore and Hong Kong, as if the difference between the numbers offers conclusive proof as to which market is superior. However, the situation is too nuanced to be accurately reflected in headline data sets.

According to AVCJ Research, Singapore has consistently surpassed Hong Kong in terms of the number of VC investments made and the amount of capital committed for the last four years. In each of 2013, 2014, and 2015, Singapore has seen more investment than the combined total of $411 million preceding this period. Hong Kong has broken through the $100 million barrier for the first time in 2015, but Singapore is way ahead at $676 million. By deal numbers, Singapore has outscored Hong Kong four or five-fold.

The key difference is Singapore's position as a hub for start-up activity that extends beyond its borders into Southeast Asia. While there are companies in Hong Kong - delivery start-ups GoGoVan and Lalamove come to mind - that have managed to find footholds in Taiwan and Southeast Asia, they are nowhere near the scale of their leading Singapore counterparts.

At the same time, these Singapore companies are not necessarily Singaporean; the country is used as a convenient headquarters, or perhaps just a jurisdiction of incorporation, while the money is made selling sneakers to Indonesian consumers.

Since 2012, Singapore has seen VC deals worth $2.1 billion. Yet nearly $1 billion of this was committed to Lazada and Zalora, e-commerce platforms set up by Germany's Rocket Internet that operate region-wide. Another $275 million has gone to GrabTaxi, a ride-hailing platform that is now present in six countries. The likes of PropertyGuru, Giosis Gmarket, Reebonz and Antuit - with $310 million in funding between them over the last three years - can also claim a wide geographic presence.

In attracting these companies, it could be argued that Singapore's ambitions to become a regional tech hub have been fulfilled. But Hong Kong is not expected to serve as a similar conduit for China, so comparisons are somewhat redundant. Perhaps a better test would be to see which market is first to produce one or more truly homegrown start-ups - in financial technology, life sciences or enterprise software, for example - that manage to capture a global audience.

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• Topics
• Venture
• Early-stage
• Southeast Asia
• Greater China
• Technology
• Hong Kong (China)
• Singapore
• Venture
• Technology
• TMT