Aligning with HKUST's Knowledge Transfer Mission and with a view to strengthening the promotion of entrepreneurship spirit among HKUST stakeholders leading to social and economic impact, the HKUST Entrepreneurship Fund (“E-Fund”), with an initial fund size of HK$50M committed by HKUST, is established for the benefit of promising HKUST technology start-up companies.
E-Fund is intended to be a capital investment solely for HKUST start-up companies, but not a condition-free grant. It will also help bridge the funding gap of HKUST start-up companies before they could secure sufficient external funding to grow or to expand.
- E-Fund typically invests in angel, seed, or pre-A funding rounds, but may also invest in subsequent financing rounds if feasible.
- E-Fund acts as an early stage investor, with a typical holding period of approximately 5 years.
- The initial investment in each Start-up is limited to a maximum amount of HK$2M.
- E-Fund normally invests directly into Start-up through primary investment in subscribing to new shares issued by Start-up in exchange for a minority stake of the company. Start-up supported by E-Fund should use the investment for operational activities such as research and development, as well as business and market development. The investment should not be used to pay off any company debt.
- Secondary investment by acquiring shares owned by existing shareholders should only be considered if there exists a compelling reason to justify the secondary investment.
- HKUST would generally not take up board of director seats of Start-up although HKUST may reserve the option to take up observer seats.
E-Fund will only invest in HKUST start-up companies (“Start-ups”), which meet the following eligibility requirements:
- Private and owned legally and beneficially with at least 10% by faculty member, staff member, student, and/or alumni of HKUST.
- Established for no more than 5 years when E-Fund makes the initial investment.
E-Fund may invest in any Start-up featured with innovative technologies and/or business models. Start-up should preferably have Hong Kong operation and/or registrations.
E-Fund will not make an investment that represents a reputational risk to HKUST. E-Fund will also not make investment in companies involved in activities which are illegal or against public interest, or are linked to countries or regimes subject to United Nations sanctions.
Under E-Fund, there are two investment models: Co-Investment Model and HKUST-Initiated Investment Model.
The Investment Sub-Committee (ISC), established under University Council’s Knowledge Transfer Committee (KTC), makes investment and divestment decisions for E-Fund.
E-Fund co-invests with qualified co-investment partners (“Co-Investment Partners”) into Start-ups. The matching co-investment creates a multiplier effect in availing more funds to Start-ups. In evaluating prospective Start-ups, E-Fund leverages the expertise of Co-Investment Partners in screening and due diligence, and intends to adopt Co-Investment Partners’ investment terms and conditions. E-Fund’s initial investment in each Start-up is limited to a maximum amount of HK$2M.
There are two variations of Co-Investment Model according to the category of Co-Investment Partners:
- Government and Private Matching Co-Investment
E-Fund qualifies and co-invests with venture capital funds that are selected as co-investment partners under Hong Kong SAR Government’s (“Government”) Innovation & Technology Venture Fund (ITVF). E-Fund intends to invest into such Co-Investment Partners as a Limited Partner (LP) but with the purpose to solely invest into Start-ups. Under the ITVF scheme, Government contributes matching investments into such Start-ups;
- Private Matching Co-Investment:
E-Fund qualifies and co-invests with investors that are not qualified under or otherwise do not prefer Government and Private Matching Co-Investment Model. Such Co-Investment Partners include institutional investors such as corporate venture capital (VC) or firms with formal VC fund structure including General Partners (GP)/Limited Partners (LP) partnership arrangement, family offices and corporate entities. E-Fund’s direct investment into Start-ups is intended to be matched by such Co-Investment Partners.
HKUST-Initiated Investment Model
HKUST-Initiated Investment Model is a model stressing “provision of support” to HKUST start-up companies at an earlier stage in comparison to those under Co-Investment Model, while aiming for a sensible long-term investment return in order to sustain E-Fund and its continuing future objectives.
E-Fund takes its own initiative to invest into Start-ups without Co-Investment Partners. Such Start-ups could be very early-staged companies that may not be the focus of typical Co-Investment Partners. Alternatively, donors, who support entrepreneurship in innovation and technology, may be interested in supporting such Start-ups as a reason rather than for an investment return.
E-Fund performs due diligence with the support of HKUST’s Technology Transfer Center (TTC) and intends to adopt investment terms and conditions customary to HKUST. E-Fund’s initial investment in each Start-up is limited to a maximum amount of HK$1M.