HKSTP TecONE Briefing Session on Innovation and Technology Venture Fund (ITVF)

HKSTP TecONE Briefing Session named “Innovation and Technology Venture Fund (ITVF)” was organized by Hong Kong Science & Technology Parks Corporation (HKSTP) under TecONE platfrom on 3^rd Oct 2017.  To stimulate private investment in local innovation and technology (I&T) start-ups, the HKSAR Government has set aside HK$2 billion and launched the ITVF.  The Commissioner for Innovation and Technology – Ms. Annie Choi hosted a briefing session and shared the details of ITVF, including the eligibilities, selection criteria, application procedures and so on.  

Ms. Annie Choi said Innovation and Technology Venture Fund (ITVF) aimed to encourage more VCs to invest in Hong Kong startups and increase deal flow, as well as, to fill the valley of death (gap between idea and commercialization). The scheme overview was stated included matching ratio (1:2), Maximun contribution per deal is HK$30M and per company was HK$50M.  

She said the eligible VCs should be I&T investment focus and its investment coverage included Hong Kong.  Moreover, VCs minimum remaining committed capital of HK$120m (it is very little based on VC definition).  However, the remaining fund life is at least five years.  Then she mentioned four selection criteria in the following diagram. (Where distributions were background & experience (15%); Track record (25%); Strategic value & support (30%) and Resource contribution to HK ecosystem (30%).

Ms. Annie Choi added the four principles.

-       ITVF Corporation (ITVFC) as a passive investor; VC partners will make the decisions and do all due diligence;

-       VC will refer deals to ITVFC;

-       ITVFC will have the right of first refusal; and

-       ITVFC will decline an investment if it is in conflict with Government policies, or has the potential to bring disrepute.

The due diligent for potential investee companies were responsibilities of VC partners and they also needed to identify the exit opportunities.  The duration of partnership was at least 5 years and upto 12 years which was based on the Master Agreement. There were no management fees to VC partners but ITVFC would bear taxes, stamp duties & registration fees related to its’ shares.  The incentives for VC were that sharing of investment risk and attractive carried interest at 35%. 

When to exit?  If VC partners identified third party purchaser, ITVFC would follow on same time, price and terms basis.  VC partner handled the whole transaction.  However, ITVFC may request Redemption by Investee Company if it has reason to believe that company or members of group may be involved in activities that may bring government into disrepute or other situations. 

Finally, she reminded all that the application deadline would be on 15 January 2018 and the result would be known by the end of April 2018.  Then Q&A session started.  During the answering, she mentioned the new innovation business model would be also considered as Innovation & Technology business.  Moreover, the ITVF had only ceiling and no definition of series A or B, etc. 

Reference:

HKSTP - http://www.hkstp.org

TecONE - http://tecone.hkstp.org/t1_web/

ITVF - https://www.itf.gov.hk/l-eng/ITVF.asp