The success of the government’s Hong Kong Investment Corporation (HKIC) in establishing an ecosystem for start-ups to raise funds has put a damper on the Christmas plans for employees of some local venture capital (VC) firms.

“After partnering with the HKIC, the number of deals we are working on this year has tripled compared to last year,” said David Chang, founder and CEO of leading VC firm MindWorks. He added that 2025 was one of the busiest years for the firm since its establishment 11 years ago.

“I have told some of my staff that they will not have Christmas holidays as they need to focus on closing numerous ongoing deals,” Chang said.

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The HKIC, first announced in Chief Executive John Lee Ka-chiu’s 2022 policy address, was set up to use the government’s reserves to boost the city’s economy.

It managed HK$62 billion (US$8 billion) in funds and invested in more than 150 projects as of October, with 62 per cent of deployed capital going to mainland China and 34 per cent to Hong Kong. Of the projects, 71 per cent were in hi-tech, 13 per cent in biotech and 11 per cent in renewables and green technology.

Financial Secretary Paul Chan Mo-po said HKIC had a dual mandate: to generate reasonable returns and enhance the long-term competitiveness and economic vitality of Hong Kong.

“One of its key priorities is to channel market capital into high-potential, nascent-stage industries, and attract innovative enterprises to Hong Kong to help build the related ecosystem and industries,” Chan told the Post.

A partnership with HKIC is a very important endorsement, according to Stephen Shum, left, chief operations officer of Soy-Sky Farm Tech Company, and Lin Yiwei, head of BioMap’s Hong Kong Innohub. Photo: Enoch Yiu alt=A partnership with HKIC is a very important endorsement, according to Stephen Shum, left, chief operations officer of Soy-Sky Farm Tech Company, and Lin Yiwei, head of BioMap’s Hong Kong Innohub. Photo: Enoch Yiu>

HKIC earned HK$2.34 billion in investment income last year, according to its first annual report released earlier this month.

“HKIC has so far invested in over 150 projects, leveraging more than HK$6 of private capital for every Hong Kong dollar it has invested,” Chan said. “Many projects involve cutting-edge technologies and carry strategic importance, such as supporting Hong Kong-designed and developed RISC-V chips, applications of embodied artificial intelligence, and the expansion of Hong Kong’s electric vehicle-charging technology to overseas markets.”

HKIC’s first partnership was with home-grown artificial intelligence unicorn SmartMore, which committed to using Hong Kong as a development base and making it the first choice of venue if it goes public.

SmartMore said HKIC had helped it establish links with local university research teams and with companies in the Greater Bay Area, while also providing opportunities for young talent.

“HKIC is establishing an ecosystem for the innovative industry in Hong Kong,” SmartMore told the Post. “It not only provides funding for start-ups but also emphasises establishing a network in the same industry.”

HKIC’s second partnership, finalised in June last year, was with Beijing-based BioMap – a biotech firm launched by Chinese internet giant Baidu’s founder Robin Li Yanhong – to establish a BioMap InnoHub accelerator to support more than 50 early-stage research projects in life sciences.

“The partnership between HKIC and BioMap is a very important endorsement for our company, which helped us get funding from other investors,” said Lin Yiwei, head of BioMap’s Hong Kong Innohub.

HKIC’s network was also important for BioMap, Lin said, as it enabled the company to establish research projects in three universities in Hong Kong, while also helping to promote its AI foundation tools for drug discovery to overseas companies.

But Lin said the high cost of living in Hong Kong was a problem for start-ups trying to attract talent.

“We found it difficult to attract the talent we need to work in Hong Kong because the rent and the cost of living are so high,” Lin said. “We would like to see the government provide [affordable housing] to make it easier for talent to live in Hong Kong. Talent is important for the city to develop its innovation industry.”

“We found it difficult to attract the talent we need to work in Hong Kong because the rent and the cost of living are so high,” BioMap’s Lin Yiwei said. Photo: Handout alt=”We found it difficult to attract the talent we need to work in Hong Kong because the rent and the cost of living are so high,” BioMap’s Lin Yiwei said. Photo: Handout>

Jerry Chang, managing director of executive search firm Barons & Co, shared the view.

“Hong Kong’s rent and living costs are very expensive by international standards, which discourages start-up talent from relocating here because their income may not be enough,” Chang said. “Remuneration for these talent is much higher in mainland China and the US, where markets are much bigger and more competitive.”

He said there were also more job opportunities in those two markets, with the US hosting the Magnificent Seven tech firms, while China had big players like Baidu, Alibaba Group Holding, Tencent Holdings and the “six little dragons”.

Chang said the government may also want to consider having more local training programmes aligned with international standards to develop local talent.

HKIC has also brought start-ups together to collaborate. Through its networking activities, BioMap met another investee, Soy-Sky Farm Tech Company, a Hong Kong-based agricultural start-up focused on developing drought-resistant and salt-tolerant varieties of soybeans. The two companies signed a memorandum of understanding to combine BioMap’s AI technology and Soy-Sky’s research.

“The HKIC investment is an endorsement giving us confidence to partner with other investees without the need to do due diligence again,” said Stephen Shum, chief operations officer of Soy-Sky. “We found at least two well-known Hong Kong companies that became early co-investors of Soy-Sky.”

HKIC’s investment has effectively turned Soy-Sky into a government-backed company, which Shum said was important when pitching its agriculture technology to Belt and Road countries.

HKIC has also strengthened Hong Kong’s VC market. MindWorks’ Chang recalled struggling to raise funds in Singapore in his firm’s early days because it was not well known there. By contrast, Singaporean VC firms could raise funds easily thanks to government support for local VCs and start-ups dating back two decades.

HKIC has been compared with Singapore’s Temasek, but Chang said the two were different because the Singapore sovereign was focused on making profits while HKIC looked for projects to promote Hong Kong’s innovative industries.

MindWorks has co-invested with HKIC on a number of projects, which has encouraged greater investments in its funds and the broader GBA ecosystem.

“Teaming up with HKIC also makes it easier to negotiate investment deals,” Chang said. “MindWorks is a homegrown venture capital firm, and we share the same mission with HKIC, which extends beyond seeking financial returns; our mission is also to foster and establish a robust ecosystem for the innovative industries in the Greater Bay Area.”

Chang said HKIC not only helped VC firms raise funds and find investment targets, but also played a role in attracting talent to innovative industries in Hong Kong, which has lagged behind other markets in this regard.

He pointed to Israel’s Yozma programme, launched in 1993, which was a dedicated investment arm to support start-ups. The initiative eventually led to about 280 VC firms being set up in the country. Similarly, Singapore began actively supporting its VC ecosystem in the early 2000s and now boasts about 400 VC firms.

Hong Kong currently has around 100 VC firms, and Chang anticipates the number to grow significantly in the coming years with government support.

“Being a second- or third-mover is not necessarily disadvantageous, as Hong Kong can learn from the mistakes of others,” Chang said.

The start-up investment market experienced a severe downturn during the pandemic and had only rebounded over the past two years, according to Chang. “I believe the sector is now entering a spring-like phase of growth, making this the perfect time for the HKIC to establish a robust ecosystem for the innovative industries in our city.”

Chang believes AI, logistics, and longevity would be key growth drivers for Hong Kong’s investment ecosystem in the coming years.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2025. South China Morning Post Publishers Ltd. All rights reserved.