How crowdfunding can allow Hong Kong’s youth to thrive in their own city

Instead of moving elsewhere in the Greater Bay Area or leaving China, entrepreneurial youth should consider starting an innovative business in Hong Kong by raising funds from the public

Christopher Tang

Published: 6:45am, 17 Aug 2021

Why you can trust SCMP

The youth unemployment rate in Hong Kong, which stood at 8.5 per cent in June, is worrisome. These jobless youths might appear to be content, but many are feeling lost after a series of events, from protests to the Covid-19 pandemic. Yet, there is hope.

Because entrepreneurship has always been in Hong Kong’s DNA, the media should showcase successful start-ups that have raised funds through crowdfunding platforms such as Kickstarter, Indiegogo and Patreon. Young people can learn from each other about starting a business by raising funds on these platforms, and this can rekindle Hong Kong’s “can-do” attitude.

The future of Hong Kong looks bleak to many youths. They are disappointed at losing out to foreigners and mainlanders in the job market. University graduates in Hong Kong take home less than their counterparts 30 years ago, and one in six ends up in unskilled labour.

Some are considering emigrating to Britain, while others are searching their souls to find their way. To encourage young people to pursue a career in the Greater Bay Area, the Hong Kong government has offered subsidies to firms there for employing Hong Kong university graduates who earn a monthly salary of at least HK$18,000 (US$2,300).

The region has much to offer: a booming economy, an efficient transport system connected to Hong Kong and the headquarters of leading technology companies such as Tencent and DJI. The take-up rate has been limited, however, with some 6,000 Hong Kong youths applying for the 2,000 jobs offered by 275 Greater Bay Area businesses.

Aside from emigrating or working in the Greater Bay Area, there is a third option: start an innovative business in Hong Kong. Because young people lack proven track records, it is difficult for them to raise funds from private investors.

In addition to Hong Kong’s Innovation and Technology Fund, crowdfunding platforms have helped entrepreneurs here turn their ideas into innovative products by raising money from potential customers without leaving the city.

Kickstarter has, in total, helped raise more than US$6 billion, with more than 20 million backers supporting almost 210,000 projects, while a recent report indicated that more than US$30 billion had been raised for more than 6 million projects across multiple crowdfunding platforms in 2019 alone.

Besides donation-based or equity-based crowdfunding, rewards-based crowdfunding project campaigns are popular. In these campaigns, the entrepreneur or creator sets a target amount to be raised before a pre-specified deadline by offering backers a menu of rewards based on different pledge levels.

For example, consider a campaign for a T-shirt made out of natural fibres. The creator might give a backer one shirt for pledging US$75 and two for pledging US$140. The project will be funded only if the total pledge amount exceeds the target by the deadline.

In that case, the creator collects the funds, pays a 5 per cent service fee and 3 per cent processing fee to the platform and proceeds to produce and deliver the rewards to the backers, as promised.

Crowdfunding gives city's worthy causes a chance

A rewards-based crowdfunding campaign essentially pre-sells a product to potential backers, and the creator will produce and deliver the product only after the goal is reached. Therefore, it shifts the financial risk from creators to backers.

This explains why many campaigns fail. More than 60 per cent of projects on Kickstarter fail to be fully funded, while Indiegogo’s estimated failure rate is more than 80 per cent. To increase the campaign success rate, creators should take the following steps to engage, entice and involve backers.

First, the creator needs to describe what makes their product unique to get backers’ attention. For example, after developing a prototype, a Hong Kong team launched a Kickstarter campaign to pre-sell an AI-powered, auto-tracking phone mount called OBSBOT Me. When using the mount during a live stream or video call, the phone will rotate automatically, following the user’s movement via its auto-tracking function.

The homepage for Kickstarter, a popular website for crowdfunding projects. Photo: Getty Images

Second, creators should offer early-bird discounts to get pledges from backers. For example, OBSBOT Me offered up to a 47 per cent discount for early backers and received 199 suggestions about improving the product, including having the capability to track more than one person during a recording session.

The campaign was a huge success as it raised over US$400,000 from more than 3,000 backers, well over its initial US$50,000 goal.

Crowdfunding campaigns help creators solicit feedback from early backers who are essentially investors. Such feedback can allow for modifications and improvements to the product design. This could help attract more backers later in the campaign.

When one creator launched a campaign with a £50,000 (US$70,000) target for a navigation device for cyclists, for example, backers suggested an extra wristband so hikers could wear the device as well. The creator modified the design, resulting in a successful campaign with more than £63,000 pledged.

Crowdfunding campaigns can help Hong Kong youths start an innovative business by raising funds from the public without leaving Hong Kong – a city they truly love.

Christopher S. Tang is Distinguished Professor in Business Administration at the University of California, Los Angeles

Post