Friday, March 31, 2000

Can Hong Kong duplicate Silicon Valley? So far, no.

As the Internet and E-commerce frenzy (which is close to what it is reaching in Hong Kong) sweeps across Asia, Internet start-up activity in Hong Kong buzzes to an all time high. For example, in June 1999, Richard Li obtained a back door listing on the Hong Kong Stock Exchange by buying Tricom Holdings, essentially a dead, inactive company. At the time Tricom shares traded at 13 cents HKD (Hong Kong dollars). As rumours spread and the stock began to surge, trading was halted by the Hong Kong SFC (Securities and Future Commission). Several days later, as Li’s Tricom deal closed under the new name Pacific Century Cyberworks (PCC), the stock began trading. Its first day out of the gate, early in July, the shares shot up to $4.00 HKD. Over the next several weeks they settled to a low of 99 cents HKD. Today, those same shares in PCC trade at roughly $25.00 HKD. Even $10,000 HKD invested at 99 cents, would today be worth $250,000 HKD. Since then, as PCC rose, hundreds of entrepreneurs have come forward with small start-up ventures in hopes of their own sky rocketing IPO just like PCC.

To nurture and incubate these start-ups, many people in Hong Kong hope to replicate the Silicon Valley entrepreneurial environment, where money and ideas flow. Can this be done in Hong Kong - so far it is highly unlikely.

There is no doubt that Hong Kong has an entrepreneurial environment, in fact, the territory is know for its hardworking, business focused population. However, there is one characteristic Silicon Valley has that Hong Kong entrepreneurs are grappling with - the ability to share. Silicon Valley has a commonly established practise of sharing ideas, even to the point where individuals will share ideas with competitors in the name of technological advancement when their own abilities fail to produce a breakthrough, or the future demand of a technlogy may be in danger. This type of environment is often referred to as "coopetition." In other words - cooperation between competitors in the name of developing technology, growing markets, or knowing that something currently being created will be in demand. Silicon Valley is known for coopetition. Keep in mind, too, that many of the particpants in this Silicon Valley coopetition phenomenon are children of the self development era. They've done the likes of The Forum and EST (that includes myself), where they learned to basically "get off it" and share with people in the name of moving life forward. (In Hong Kong the equivalent would be AsiaWorks.)

One excellent organisation attempting to create this type of sharing atmosphere in Hong Kong is Internet & Information Asia. (I & I) This organisation’s success in itself resembles that of an Internet company. Founded about the same time Richard Li launched PCC, I & I has gone from a handful of people meeting to network every Wednesday night, to an average attendance of 250 people. Their geography has spread, too, with the same network popping up in Singapore, Manila, Beijing, Shanghai, Silicon Valley and New York just to name a few cities. Each event is normally accompanied by some individual of Internet notoriety speaking for 30 - 45 minutes on the Internet. While the initial purpose of I & I is to bring start-ups together with venture capital, I find these events worthwhile to meet people, and usually learn very interesting things from the guest speakers. But that’s it - I meet people in the Hong Kong Internet scene, and gain valuable information from the guest speakers who are quite forthcoming with their information. After all, most of these guest speakers have strong ties to Silicon Valley.

But, that is all I learn - doesn’t that strike you as odd? I NEVER learn what start-up ideas people have, in fact PEOPLE REFUSE TO TELL ME. And NO ONE has yet to ask me if I have any money to invest. I do, and so do some of my buds who have a hell of a lot more experience with venture capital than I do. (One of them has been involved in several Internet and technology IPOs.) Me, I would be willing to invest $100,000 USD in the right Internet idea. With my buds involved we could pull in anywhere from $500,000 to a Million USD in a week. I’m not kidding either, never underestimate how connected I am.

To add to this ludicrous scene, consider the number of people I know who are launching Internet start-ups. First, there is the friend of mine in the financial industry. I know him, you know, fairly well but a very good friend of mine is best friends with his sister. In fact we are all connected several times over. Anyway, with already one major Internet business model launched and growing like a house on fire, he is working on a closely related second model. According to him this idea is even bigger, better, faster. "Fantastic," I replied, "what is it?" His answer: "I can’t tell you." Okay, I understand, you don’t trust me. (I will spare you the stories of individuals I asked who I did not know.)

Next: another friend of mine, again connected to me in many different ways including through my wife. This person told me about a fantastic idea they were working on. I mean, according to the two of them (a partner was there, too) this was the ultimate, never tried anywhere in the universe, Internet model. "Wow, that’s great. What is it?" The answer: "I can’t tell you." Oh, okay. So after waxing so eloquently for five minutes about how great your idea is (but you won’t tell me), I have now come to the conclusion that you think I am unworthy of knowing about your idea. And you know what, frankly I don’t like being insulted, which is exactly what you have just done to me. And I am also pretty clear you don’t trust me. Next.

The final two stories are so outrageous I am unable to describe them in any detail for fear of destroying relationships. But let me just say, that there are two more individuals starting up completely unrelated and separate Internet companies. Neither of them will talk to me about their idea except of course how great the idea is. (One even had the nerve to diss my suggestions of where they could get help with their start-up.) It would shock you if you knew how these people are connected to me. Obviously these people think I have no integrity. That would leave me both insulted and untrusted.

Those in the know have also recognized a number of other unique factors historically fueling Silicon Valley. One of them is the availability of capital. With Hong Kong almost on the eve of the Tom.Com IPO, one would think that there is no shortage of money to launch technology companies. Everyday, it seems that more and more money is available for new ventures. Compare this to the United States, though, there was one major backer (I said "BACKER, not Hacker!") that started this whole initiative is the United States military. That is a big backer that prides itself on being on the bleeding edge. Very quickly, Internet development efforts shifted from the military to commercial applications, catching on like fire. It doesn't appear Hong Kong has an equivalent. Having a lot of money is very different than the type of entrepreneurial, bleeding edge, testosterone driven culture found in military labs that is eventually transferred to commercial applications.

Finally, (but certainly not last - this debate will go on forever) there is education. Surrounding Silicon Valley are the top schools in the world including the much technology hailed Stanford University. Yes, Hong Kong's education system is advancing quickly, and certainly the Hong Kong University of Science & Technology is an excellent example of an institution attempting to create a technology driven environment. For example, I just finished my MBNA there, through the 16-month Kellogg Graduate School of Management and HKUST School of Management joint program. One of the things HKUST has done is created a "live network." In other words, there is no last mile… it's fiber to the curve. Surfing the Internet can be done at 100 MBPS in most classrooms and 10 MBPS everywhere else. Having the Internet so quickly and readily available fuels the learning appetite. The rapid introduction of broadband in Hong Kong will help, too.

All this, however, it is not quite the same as growing up or going to school in a technology driven environment. In the long term, yes, perhaps Hong Kong can replicate Silicon Valley. And don't get me wrong, initiatives like I & I Asia are an excellent way to start. But, if even friends cannot share their ideas, the rest of Hong Kong has no hope of achieving a Silicon Valley type environment. Lastly, nothing would give me greater pleasure than to see Hong Kong reach this type of environment. Anyone who knows me, or frequents this web site, knows that I am a huge fan of Hong Kong. That's pretty obvious. But until we realize we are one team, and bring down the insanely competitive mind set which inhibits sharing, I really question if Hong Kong can take itself to where Silicon Valley sits.

So, I do my own thing. Continue to learn at I & I events, and back to my buds to see what ideas they are cooking up. They’ll take my money, and increase it ten fold, too. Oh yeah, and I am busy speaking at six conferences (two of them The Economist) between now and June. Seems to them that my Internet/E-commerce expertise and two graduate degrees (including an MBA from Kellogg) makes me worthy of talking about the impact of the Internet and E-Commerce. The one in June should be fun - I speak just after Richard Li.

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