Hong Kong is officially the fifth easiest place to do business in the world. According to the World Bank’s Ease of Doing Business rankings, it is the third best place in the world to start a business, backed up by the fact that around 150,000 new companies register there every year.
This is despite Hong Kong’s soaring office space costs. In central HK, a square foot of space cost a company $306, 30 percent more than the second most expensive area, London’s West End. However, the rise of co-working spaces is helping to alleviate this cost pressure, and many other factors also help to offset this potential barrier to entry in Hong Kong.
One company that has successfully established itself is Neat, a digital banking startup which aims to eliminate barriers for smaller enterprises looking to set up in Hong Kong. Its CEO and Co-Founder David Rosa took time to answer our questions.
Asia Outlook (AO): Introduce me to Neat. How did you come to start the company in 2016?
David Rosa (DR): As a consumer, I felt very frustrated with the banking experience offered by local banks. The online banking platforms were not user friendly and I often had to visit the branch to get things done. Coming from the industry and working at Citi for many years, I was also aware of the challenges large banks face when trying revamp their systems. Therefore, I saw a big opportunity to start something from scratch.
We started off with a consumer product, which has gained a lot of traction with entrepreneurs, expats and travellers. As a natural extension of this, we’ve now also launched a business product that allows businesses to open a current account online very easily.
AO: How big a problem or challenge is extending banking services to small businesses in Asia. How does Neat help tackle this issue?
DR: When we think of developed markets, and especially financial centres such as Hong Kong, the term “unbanked” may not immediately come to mind. And while it’s true that consumers in the city are relatively well served by the traditional banks, startups and small businesses are not. For traditional banks, small businesses are an unprofitable customer segment and therefore banks make it difficult to open and expensive to maintain bank accounts for small companies.
In fact, the problem is so big that it is driving entrepreneurs away from the city and they incorporate their companies elsewhere. With Neat Business, we are solving this problem by offering an alternative to a traditional corporate bank account. The account can be opened online, from around the world, and we welcome startups to sign up for our service.
AO: What is your take on Hong Kong’s startup scene? Is it vibrant?
DR: When I started my first company, the startup scene in Hong Kong was still in its infancy, but in the last few years it has exploded. New co-working spaces are opening every month and more and more accelerators and startup events are popping up. Access to local funding is improving as well and more global VC money is flowing into the city. For startups in their early stages fundraising remains challenging, but for startups in their growth stage all the way to IPO, there is plenty of funding available. We’re also definitely noticing an increased interest from recent university graduates to join startup companies, which is a very promising sign for the future.
AO: Likewise, how does Neat help budding entrepreneurs set up in Hong Kong?
DR: Setting up a company in Hong Kong is straightforward and fast. Entrepreneurs can do it themselves, but there are also plenty of agencies that can help with the setup. The entire process is quick and inexpensive. However, the next problem entrepreneurs face is opening a corporate bank account. This requires flying all directors and shareholders to Hong Kong, visiting a bank branch, and then waiting for months to get an account opened.
With Neat Business, this process has been simplified tremendously. Companies can apply online in 15 minutes and get their account up and running in a matter of days. The product offers all features that new companies need, such as receiving payments, paying suppliers and employees and MasterCards to pay for travel or online subscriptions.
AO: How easy is it to set up business in HK? What are some of the advantages versus other Asian nations?
It is very easy to set up a company in Hong Kong. It can be done in a few days and there is no need to fly to Hong Kong in person. There are fees to be paid, but we’re talking about a few hundred USD, very low compared to some other Asian countries.
Another major advantage is that there is no need for a local director or shareholder, which makes it easy for foreigners to set up a company. In addition, Hong Kong’s corporate taxes are low and the judicial system is very strong.
People often don’t realise that Hong Kong is in fact the second market in the world – after the UK – when it comes to the number of company incorporations per year. Over 150,000 new companies are set up in Hong Kong each year. That’s a huge market.
AO: How do you envisage the mix of foreign and local startups evolving over the coming years? Is there a healthy balance at the moment?
DR: At Neat, we value diversity immensely. Our team alone consists of more than 10 different nationalities. I believe this is very important for any startup that wants to be successful and target Hong Kong as well as the global market. Generally, within Hong Kong there is definitely a good mix of foreign and local entrepreneurs. Universities within the city are also increasingly starting to encourage entrepreneurship. Most have entrepreneurship clubs and centres to support budding entrepreneurs. I can only see the startup scene growing over the coming years.
AO: How important are trends like the rise of co-working spaces to the growth of startups in Hong Kong?
DR: One of the main challenges of doing business in Hong Kong is high rent. Co-working spaces are a great solution as renting a (hot) desk in a co-working space makes it affordable for new startups to get started.
AO: Are there any other key trends, for example with technology, that are also encouraging companies to the city?
DR: With Shenzhen, the world’s global factory, just around the corner, Hong Kong is also an excellent place for startups that need to manufacture products. The rise of IoT will likely attract more companies to the city. In addition, Hong Kong is a great hub to ship products globally so it’s also a great base for the growing ecommerce industry.
AO: What are your ambitions for Neat over the next year or so?
DR: Our mission is to make the lives of entrepreneurs easier. Everything we do and any feature we add is aimed at making this happen. For instance, we are planning to roll out several cloud tools to automate accounting. This allows entrepreneurs to save time on admin and focus on what matters most: growing their business.
Additionally, while our customers can already transfer funds around the world, we are also planning to add multi-currency accounts to make our product even more appealing to our customers, whose businesses often have a global nature.