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Getting Down To Business: How Can Mumtrepreneurs Raise Capital?

Family LifePost Category - Family LifeFamily Life - Post Category - Career & MoneyCareer & Money

Bring in the money required to expand your business and take it to the next level.

While Hong Kong holds an enviable reputation as a global financial hub, its startup ecosystem possesses the potential for greater growth. According to a 2018 joint study conducted by KPMG and Alibaba Hong Kong Entrepreneurs Fund, start-up ventures (including those by mama-entrepreneurs) could play a significant role in the long-term financial prospects of the Hong Kong economy. However, finding the funding required for any new business to thrive is difficult. Estimates put personal and family savings as the top two sources of capital for entrepreneurs and, in many cases, this proves to be the biggest roadblock.

While the process of raising capital may seem complicated to those of you who have just taken the entrepreneurial leap, it’s actually fairly straightforward. These are a few of the options for you to consider:

Equity Financing
Debt Financing
Government Assistance
Crowdfunding
What fundraising method suits you?

Read more: Starting A New Business In The 852 Just Got Easier For Mumtrepreneurs

Equity Financing

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Equity financing (by venture capitalists and angel investors) is very prevalent in Hong Kong and is the process of raising capital through the sale of equity. Simply put, that means selling (partial) ownership of the company in return for cash.

Firms such as Brinc and Click Ventures are known to offer funding to promising early-stage tech ventures. Another good place to start looking for angel investors and VCs is StartmeupHK. It is an initiative started by the Hong Kong Government’s InvestHK (which advises companies on growing and expanding businesses in the SAR). It has an emphasis on industries that could have a positive social impact on the community and assists innovative and scalable startups. Services also include providing information about the entrepreneurial ecosystem here, connecting people to the startup community, hosting events and fostering a positive environment for new ventures.

The 2020 StartmeupHK Festival is one such event scheduled for Monday, 10 February to Saturday, 15 February 2020. It will feature a series of thematic startup events such as Jumpstarter by Alibaba Entrepreneurs Fund and Startup Impact Summit by WHub. An action-packed week, it will draw in innovative, high-impact ventures, angel investors, venture-capital firms, corporates and students from countries all over the world. If you are looking to start or expand your business any time soon, this is one event you should slot into your calendar right now!   

Debt Financing

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Debt financing is a well-documented source of funds for firms of any size. SMEs in Hong Kong may utilise many local banks’ Business Instalment Loans which are unsecured loans provided to self-employed individuals and entities. HSBC and Standard Chartered are some of the banks which provide these loans, ranging from $50,000 to $1,500,000. Companies which are registered and have been operating in Hong Kong for a certain minimum number of years (requirements vary for different banks), and whose owners currently reside in the city, are eligible for these loans. Perhaps the most attractive factor for HSBC’s Business Instalment Loans is that no collateral or financial statements are required for an application submission!

Generally speaking, to apply for a Business Instalment Loan, the following documents must be submitted:

  • Application Form
  • Certificate of Incorporation and Business Registration Certificate
  • HK identity card or passport of guarantor(s)/owner(s)
  • Hong Kong residential address proof of guarantor(s)/owners(s)
  • Personal guarantee by company owner/director (for Limited Companies only)

Banks such as HSBC also often provide Business Instalment Loans focused on certain industries. For example, HSBC’s Innotech Business Instalment Loans offers digital and technology-related companies preferential interest rates for their loans. In addition, handling fees are also waived for firms in Hong Kong Science Park and Cyberport. Do make sure to consult professional advisers to see which loans are best suited to your business needs.

Government Assistance

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In recent years, the Government has acknowledged the importance of the SME (Small and Medium Enterprises) community and has established various incubators and accelerators to assist local startups. Incubator programmes such as the Cyberport Incubation Programme offer a range of professional services to potential entrepreneurs. In addition, mamas looking to expand their new ventures could also get up to $500,000 in support over a 24-month period. The programme also offers logistical services in the form of the provision of rent-free working spaces and the ability to utilise various networking opportunities.

The Hong Kong Science and Technology Parks Corporation is a public company established by the Hong Kong Government with the intention to foster the development of innovation and technology in Hong Kong. Applicants to its incubation programme can expect to receive financial aid packages and funding strategy advice.

To ensure that you are eligible to apply for the schemes from the Hong Kong Government, it is important to apply through a Hong Kong incorporated company. This process is different from just a business registration that many mumtreprenuers choose to do at the beginning when they are merely testing the waters. To set up a company, you may seek help from professional firms, such as ours, about company formation and appoint a Hong Kong licensed company secretary to deal with statutory matters.

Read more: Co-Working Spaces In Hong Kong: Best Options For Mumtrepreneurs

Crowdfunding

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Crowdfunding is becoming an increasingly popular practice in Hong Kong, as it is worldwide. This is primarily conducted via online crowdfunding platforms which allow individuals to advertise their products or services to a large number of potential investors. Interested individuals can contribute small amounts of money and in return, get anything ranging from social media mentions to the first prototype of the product, and more. This is a great option for men and women who are often dabbling with passion projects that they would like to take commercial – they get to test the waters and raise money relatively painlessly. Although some forms of crowdfunding require individuals to give up equity, it’s not always the case (a relief for mums who may not want to give away any part of their business baby yet!).

In Hong Kong, AngelHub is currently the first and only SFC (Securities & Futures Commission) licensed investment platform for crowdfunding activities. The process is fairly easy. To apply, simply create an account on AngelHub. Upon careful review of a submitted application, mumtrepreneurs may be invited to pitch their business to AngelHub’s investment committee. If approved, the business will be listed on its platform for professional investors to contribute. These investors get their returns through dividends and liquidity events (such as sale or IPO).

Popular global crowdfunding platforms such as Indiegogo or Kickstarter are also available in Hong Kong. Through these, you can access capital from all over the world and get opinions on your business idea from a worldwide network of early adopters. There are some other interesting crowdfunding options in the 852 too – NextChapter is solely for women entrepreneurs while SparkRaise is for the socially conscious.

Read more: Career Choices For Expats In Hong Kong: How To Get Back To Work

What fundraising method suits you?

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This depends on the nature of your business and your growth plans. VCs and angel investors look at a wide variety of industries (tech, retail, etc.), so it would be wise to conduct research on their investment history and look for an appropriate match.

The Hong Kong Government’s funding schemes have stated that they seek to emphasise the development of the tech industry. If you incorporate some form of technology into your business, it will increase the likelihood of obtaining funding. Creative mamas looking to expand their design-based ventures needn’t despair. You can access government assistance through the CreateSmart Initiative. In addition, the Hong Kong Design Centre (also a government initiative) provides consultation services and a Design Incubation Programme, so reach out for hardware, software and financial support here.

Fundraising is often considered daunting for entrepreneurs of all levels of experience. With the range of options available though, you are sure to find something that best suits you and will help catapult your business to the next level.

Read more: Building A Budget: Steps To Becoming Money Savvy

Featured image courtesy of rawpixel.com via Pexels, image 1 courtesy of rawpixel.com via Pexels, image 2 courtesy of Daria Nepriakhina via Unsplash, image 3 courtesy of stevepb via Pixabay, image 4 courtesy of rawpixel.com via Pexels, image 5 courtesy of rawpixel via Pixabay

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