Incubator Says Asian Investors Growing Selective

HONG KONG (05/16/2000) - Following the stock market's volatility over the last month and anticipating more of the same for companies listed on the Nasdaq stock exchange, investors are becoming more selective when investing in technology companies. Those investors who invest in technology because it is fashionable might well stop investing in start-ups when consolidation starts to happen later this year as a result of fierce competition, according to executives from a Hong Kong-based incubator.

The landscape has changed gradually since late last year, and investors are becoming even more cautious when deciding where to put their money, said Jonathan Cheng, founder and managing partner of Incubasia Ltd.

Most investors focus on business models that have a greater chance of making money, and might not be as willing as before to take risks in trying out new models, he said.

On the other hand, Cheng has also noticed changes in the exit strategy for investors. "It might take longer now to (launch an) IPO. Previously, there were companies that launched in November and got listed in March the next year," he said.

In addition, Cheng pointed out that although Asians establish about 30 percent of Silicon Valley start-ups, there are actually few world-class technology start-ups coming out of Asia. This is because the business infrastructure is not complete in Asia and it is difficult for entrepreneurs to quickly turn their ideas into real businesses, he said.

Cheng characterized the Asian start-up environment as having an abundant supply of money and ideas. The most important obstacle faced by start-up companies is the lack of management skills required to run a high-tech start-up.

As a result, Cheng said there are huge opportunities for incubators in Asia, where they can leverage scarce management skills to help nurture start-up companies by providing support for business planning, technology, marketing, team-building and fund-raising.

"The incubation and venture-capital financing life cycle are in an underserved stage in Asia. There are many high-quality investors in the U.S., but there are a lot less on the list here," he said, adding that the lack of so-called smart money in Asia has left many start-ups looking for guidance.

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