The entrepreneurial gambit

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The entrepreneurial gambit
By Kane Wu ( HK Edition )
2011-June-14

Chairman and CEO of EastSpider Limited, a 6-year-old company, Geng Chunya is also president of the Hong Kong Association of Mainland Graduates, which he says fights for fair and better employment environment for mainland graduates in Hong Kong. Provided to China Daily

Enthusiastic, young mainland entrepreneurs see Hong Kong as ripe for the picking, but the risks are high - and failure can mean a one-way ticket home. Kane Wu reports.

Wang Weichen was feeling upbeat. After considerable hassle, Wang's business partner from the mainland finally had been given permission to come to Hong Kong in June.

Wang, a 25-year-old Shanghai native works in a serviced office building in Kwan Tung, New Territories. He manages an online music software developing company, Knowledge Innovation Technology Limited (KIT). His partner, 25-year-old Zhou Lei, a classmate of Wang's at the Hong Kong University of Science and Technology (HKUST), was supposed to have been at the adjacent desk in the 6-square-meter office. But he wasn't. Zhou had been denied an extension of his student visa, which expired at the end of January. He was forced to leave Hong Kong immediately to return to Shanghai. He worked there, from home for almost six months, while Wang filled out all the documents and furnished the materials needed to get Zhou a new visa to bring him back to Hong Kong.

Wang is one of a growing number of mainland graduates in Hong Kong who are starting up their own businesses instead of playing it safe hiring on with local companies.

"It is so easy to register a company in Hong Kong," said Wang. "You pick a name, fill out the application form, submit a few thousand dollars, in a few days, voila, you are the boss!"

But for many, the thrill of entrepreneurship soon washed away when it came time to renew their visas.

The Hong Kong Immigration Department started to grant non-local graduates one-year student visa extensions in its "Immigration Arrangements for Non-local Graduates" (IANG) program in May, 2008. Successful applicants, within the time limitation, are not restricted to any conditions of stay, provided normal immigration requirements are met.

After the 12-months, however, they are required to secure an offer of employment which, according to the department, should be at a level "commonly taken up by degree holders and the remuneration package is set at market level". Those who have established or joined in business in Hong Kong, are required to produce proofs of their business.

"I thought my partner could qualify for the second category (joining a business), but the immigration officer told him that he had to be a board member of some established company, instead of a start-up company that hasn't proved sustainable," Wang told China Daily.

Wang and Zhou both graduated with bachelor's degrees from HKUST in the summer of 2008 and January, 2010 respectively. With another partner based in Beijing they started KIT in February, 2010. Last October, Wang quit his job at a French company and devoted full-time to the company that focused on www.imelody.fm, an online music website that relies on cloud computing, the most talked about technology these days.

"It takes years for most start-up IT companies to generate revenues, let alone our company that has been open for only a year!" Wang said. "It felt like the Immigration Department was discouraging non-local people from being entrepreneurs."

In a written reply to China Daily, the Immigration Department said the assessment criteria on extension of stay applications under the IANG when applicants have established or joined in business include:

(a) business size;

(b) applicant's engagement in daily operation of the business; and

The department also said each case is considered on individual merits.

Wang's company may be too young and too unpredictable, but mature companies also face visa problems when hiring employees. Geng Chunya, chairman and CEO of EastSpider Limited, told China Daily that getting visas for his mainland employees has been the most difficult challenge for his 6-year-old company. The company provides online social networking management systems.

The Tsinghua alumnus from Anhui province, who came to Hong Kong in 2002 on a scholarship to City University, wanted to hire someone from mainland to take charge of the company's technology department a few years ago. The visa application for his selected candidate was rejected because there was not sufficient evidence that Geng was unable to find someone with similar competence locally.

"The high-tech market in Hong Kong is not very good, only the least competitive people get those jobs," Geng said. "And Hong Kong still has this protectionism mind-set that if local people can't find jobs in the industry, why should the opportunities be given to immigrants?"

As the president of the Hong Kong Association of Mainland Graduates, Geng helped push the SAR government to establish the one-year extension of the student visa in 2008. He said the association is always fighting for fair job opportunities for mainland graduates.

"We write annual reports and hold conferences. We talk to people from all sectors in Hong Kong," Geng said. "That's what I like about Hong Kong. If you push hard enough, you can make it happen."

Wang was thankful when he heard from the Immigration Department that his partner Zhou had been granted a one-year visa extension after he submitted "more than enough" documents showing the company exists and is making money.

"They gave the visa on condition that our company will still be able to function and make a profit in one year's time," Wang said. "If we don't pass their annual review, my partner still has to go home."

But Wang is confident about the future of his partner and the company. "My plan is to spread the online music website to the entire continent of Asia in a year," he declared. The website was launched officially on June 1.

It is not easy to start up your own business anywhere in the world. For mainland entrepreneurs, it is especially difficult when they are doing it in Hong Kong, where the game of business is played differently, and not only because of the Cantonese language.

"There is almost no venture capital in Hong Kong. You can only approach angel investors or venture capitals overseas," Wang Weichen said. "And the only thing these people want to know is whether you can make a profit this year."

Unlike venture capitalists who manage money in a professional way, angel investors invest their own funds and thus tend to take business decisions personally. "To be honest, it all relies on your personal relationship with them," Wang said. "And they won't help you with management. They only give you money."

Wang and his partners raised all the money themselves. Currently their revenue comes mainly from side projects such as providing enterprise resource planning software for companies.

"There is no social mechanism that helps with start-up companies in Hong Kong. Everything depends on your connections," commented Jenny Wang, a Hangzhou-native who just quit her full-time job at an investment bank to become the owner of a trading company that she manages with her Hong Kong husband.

Jenny Wang has a good number of local friends and is president of a local badminton club that is enrolled in the city tournament. There is no problem for her to mingle with locals, but when it comes to business, she said the communication gap was "insurmountable".

"The way business is discussed and done here is completely different from the way on the mainland. Sometimes you just offend people unconsciously," she said. "Many times you meet people who make promises that they are unable to realize."

Wang said wealthy people in Hong Kong tend to live a low-profile life and would rather invest money in property and the stock market, where profits are more predictable and controllable, than start-up companies.

"On the mainland the nouveau-riche are willing to buy any idea that they think will work. They are more open-minded and more willing to take risks, but in Hong Kong people don't trust you that much and they want to use their money the safe way," she said.

Wang is basically investing into the company out of her own pocket, along with her husband's money. She said it might take years before she can make ends meet.

Geng Chunya, whose company has already earned millions in annual turnovers, offered some suggestions to mainland entrepreneurs.

"I used to observe people in Festival Walk, the grand shopping mall near CityU, watching how they talk to each other and how they react to different situations; and I read a lot of local newspapers and magazines," he said. "That's how I got to know the local culture and what people are interested in and where the money normally goes. Then I know where to go."

Geng constantly arranges meetings with people from investment banks, private equity funds and venture capitals to talk about his company. "If there is anything that I'm good at, that is convincing people. Even if my Cantonese is not that good, I still get people to listen," he said. "In Hong Kong, there are so many people from the banks, money is never the problem. It is always your problem."

The physics major used to sweep all the top prizes for entrepreneurship planning contests in Hong Kong. In one of the contests, he won HK$1 million from the Incubation Program of the Hong Kong Science and Technology Parks that aims to support local technology and design start-ups.

"I got free office space and other financial support from the parks. The initial investment also included all the prize money and what I was able to save up from the scholarships. What else can I ask for?" he said. "It's not about how much money you get. It's about the idea. If you come up with a sustainable business model, profits will come naturally."

"Local young people are not really entrepreneurial. The talented ones always settle for a job in an investment bank. Even if they do start on their own, they tend to do something not so technical, like opening a shop. That's why there is so much business potential for mainlanders!" Geng explained.

Geng currently has 20 employees, mostly from the mainland, and two offices in Hong Kong and Shenzhen. He plans to expand the company to 300 people with business nationwide over three years. "Hong Kong will always be my headquarters. It has the fairest business environment in the world," he said.