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Paying to the Crowd

The millions of people who have contributed to past crowdfunded projects have had to keep their expectations modest. But a global shake-up means there’s now serious money to be made.

When a garment touted as “the world’s best travel jacket” hit a crowdfunding website in July last year, stylish geeks around the world couldn’t wait to hand over their money. In launching his initial appeal for funds on Kickstarter, BauBax founder Hiral Sanghavi declared he was looking for US$20,000 to help develop his multifunctional jacket: a Swiss Army knife of a garment with multiple pockets for a phone charger, iPad and other gadgets. The design was apparently everything the global technorati were waiting for—Sanghavi reached his goal in just five hours. It didn’t end there, though. He went on to secure US$9 million by November, thanks to pledges from 45,000 backers, going down in crowdfunding history as the highest-funded clothing project to date.

Kickstarter, the platform used by Sanghavi, was recently launched in Hong Kong to make it simpler for local start-ups to fund their projects. Not surprisingly, Hong Kongers are some of the crowdfunding giant’s top project backers in the world, with pledges on the platform averaging US$575. While it operates in 18 countries already, the launches in Hong Kong and Singapore are its first in Asia.

Earlier in the year, Exploding Kittens (“a card game for people who are into kittens and explosions and laser beams and sometimes goats”) had received pledges totalling US$8.7 million from 220,000 people. The game was created by Elan Lee, former chief design officer for Xbox Entertainment Studios. Also in 2015, Palo Alto-based Pebble Technology attracted about US$20 million in pledges from more than 78,000 backers when it asked technophiles to fund its new e-paper smartwatch with an extra-long battery life.

The 340,000 backers of these three projects collectively handed over nearly US$38 million, but that’s just a fraction of global crowdfunding activity. Some 9.3 million others have pledged a total of US$2 billion on Kickstarter alone. But a typical return on a crowdfunding investment might be as straightforward as an early discount, a limited edition product or a simple T-shirt—so why would people back such projects?

"Many backers are rallying around their friends’ projects,” says the Kickstarter team. “Some are supporting a new effort from someone they’ve long admired. Some are just inspired by a new idea, while others are motivated to pledge by a project’s rewards—a copy of what’s being produced, a limited edition, or a custom experience related to the project. Backing a project is more than just pledging funds to a creator. It’s pledging your support to a creative idea that you want to see exist in the world.”

In Hong Kong, the aptly-named FringeBacker, is a crowdfunding platform that was the first to provide bilingual services, and it is the world’s first multimedia showcase, dedicated to artistic projects in film, performance, tech and music, among others. A pioneer in Hong Kong’s crowdfunding space, Maryann Hwee founded FringeBacker to facilitate artists, designers, filmmakers, and other talents within the creative field to reach out to a community of financial backers in unprecedented ways. In fact, one of the most successful startups last year was when 3,300 Hong Kong residents funded and founded FactWire, a non-profit investigative public service news agency, in the first round of seed fund via FringeBacker.

Alex Man is co-founder of e-commerce data-analysis site 29th Century, one of 10 startups that recently won backing from Blueprint, an accelerator funded by Swire Properties. Blueprint is one of the few initiatives in Hong Kong that actually gets involved in the development of the company, offering not only six months of rent-free workspace, but also, more importantly, six months of mentoring from representatives of “unicorn startups” such as Net-A-Porter, Uber and Tesla. Guidance also comes from two of the most-influential venture-capital firms for tech startups: Seedcamp and 500 Startups, who each visit Blueprint for a week, giving feedback, practical advice, sales and marketing, customer acquisition, growth hacking and more. Naturally, the startups are also given the opportunity to go under consideration by both VC firms for investment.

In fact, Hong Kong’s nascent startup scene isn’t quite so nascent anymore, with a proliferation of startups and accelerators. It’s not just that Elon Musk visited Hong Kong as part of the Hong Kong government’s StartmeupHK programme, but also the fact that the government recently announced a HK$2 billion Innovation and Technology Venture Fund. Interesting too, is that Alibaba has poured $130M into its Hong Kong investment programme for startups that build on its platforms.

Call them angel investors, venture capitalists, crowdfunders and wannabes, they’re flocking to Hong Kong as investment opportunities increase, with startup launch parties and events daily. Simon Squibb, founder and CEO at Nest.VC recently launched a 12-week smart city accelerator programme in partnership with Infiniti Motor, and this week announced Metta, an invitation-only membership club to connect the city’s entrepreneurs with multinational companies and capital.

Today, Hong Kong is the fifth fastest growing startup ecosystem and the 25th largest overall, according to the Global Startup Ecosystem Ranking 2015 study released last July by the San Francisco based research firm Compass. InvestHK, Hong Kong’s economic development authority, reported last year that there were 1,558 startups in Hong Kong, up 46% from 2014.

So what’s hot in Hong Kong? Well, not surprisingly, Fintech and IoT. Janos Barberis, founder of FinTech HK, a directory for the fintech community in Hong Kong, has eight companies in the Hong Kong fintech accelerator SuperCharger, while Hong Kong based fintech startup WeLab raised $160M by itself.

Somehow, Sheung Wan has become the epicentre for IoT offices and other startups including, an IoT accelerator based in Hong Kong, 500 Startups and Y Combinator, cowork spaces including Paperclip and The Garage Society and international startups in expansion like FoodPanda and Uber.

While technology entrepreneurs have benefited from crowdfunding in the past, the non-tech area is seen as something of an opportunity in the right markets. In the US, CircleUp has gained a reputation as the fundraising platform for “anything-but-tech” start-ups. “We see a massive shift in the landscape,” says CircleUp co-founder Rory Eakin. “In virtually every category, large brands are losing share to small brands, driving significant share growth for the innovative emerging brands in the market. As millennials’ buying power grows, so does the demand for smaller, more personalised brands, especially those that provide healthier, natural products.”

Original article written by George Hopkin for Hong Kong Tatler.

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