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Portrait of Chinese Web3.0 entrepreneurs: Half in Shenzhen, Half in Hong Kong.

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The best time to start a business is when the tide is low, and it's also a good time to focus on the fundamentals.

Original author: Carl

Editor: Marco

Source: Techub Info

Chinese entrepreneurs in the Web3.0 industry have been self-deprecating as "wanderers" in recent years, constantly going abroad to places such as Singapore, Dubai, the United States, Southeast Asia, and Central Asia in the face of repeated policy pressures.

The policy declaration on the development of virtual assets in Hong Kong has given many entrepreneurs a glimpse of the dawn of return, and starting a business in Hong Kong has become the preferred option for Chinese Web3.0 entrepreneurs.

"Almost all Web3.0 entrepreneurs in mainland China are focusing on Hong Kong. Now there is a trend where entrepreneurs are gathering in Shenzhen from all over the country," said a Web3.0 entrepreneur to Techub News.

Another entrepreneur said that there are at least ten Web3.0 projects landing in Hong Kong in their circle of friends.

The policy and implementation of Web3.0 in Hong Kong also have various issues. Some people find it difficult to open an account, while others think the cost is too high.

To go to Hong Kong, although the future is still uncertain, innovation or entrepreneurship has always been like this - sowing in hopeful places.

01 Million-dollar funding support, investment close to angel round

READ2N co-founder Jeff expressed great satisfaction with the services provided by Hong Kong Cyberport's Web3.0 base.

Recently, Jeff obtained an office at the Hong Kong Cyberport Web3.0 Base, with "shared gym, pantry, and lounge, ready for move-in".

According to Jeff, READ2N is committed to using blockchain and AI technology to help literary works spread better around the world. They have already published over 90 literary works in nearly 10 countries and translated them into 10 languages using AI technology. Currently, they have 50,000 registered users and 4,000 daily active users.

READ2N was established in Singapore at the end of 2022 and, influenced by the Web3.0 trend in Hong Kong this year, decided to move to Hong Kong.

In January 2023, the "Cyberport Web3.0 Base" in Hong Kong was officially established. Hong Kong Financial Secretary Paul Chan Mo-po announced during the release of the 2023-2024 budget that HKD 50 million will be allocated to accelerate the development of the Web3.0 ecosystem.

Chen Maobo stated on June 18th that since the establishment of the "Cyberport Web3.0 Base", more than 150 Web3.0 companies have settled in Cyberport. Currently, the companies located in Cyberport include well-known enterprises such as the cryptocurrency exchange Hashkey Group, Web3.0 game developer Animoca Brands, and Consensys, the Ethereum software company behind the encrypted wallet MetaMask.

At the beginning of this year, READ2N applied for the incubation program of Hong Kong Cyberport. Jeff said, "There is no threshold for registration, but it requires layers of screening and interview roadshows. Many of the participating projects are Chinese start-ups, and the final admission rate is about 5%."

READ2N has passed the interview and successfully settled in Hong Kong Cyberport. In addition to venue support, READ2N has also received HKD 1 million in funding support, which will be obtained in stages.

Jeff said: "Cyberport also assigns a startup mentor to each project to help companies promote project implementation."

The preferential policies of Hong Kong Cyberport's Web3.0 base have attracted the attention of many Web3.0 entrepreneurs. Several interviewees told Techub News that many people in their social circle are paying attention to Hong Kong's Web3.0 and are preparing to start businesses in Hong Kong.

AIGO CEO Luo Hu said that there are at least 10 Web3.0 projects currently being started up in Hong Kong within his circle of friends, covering various fields such as finance, e-commerce, DeFi, and GameFi. It is expected that more and more projects that can be implemented in Hong Kong will emerge.

Luo Hu comes from a leading internet company in China. His founded AIGO focuses on AIGC and NFT commercial applications, helping enterprises and individuals improve efficiency while protecting data privacy and ownership. Currently, AIGO is headquartered in Hangzhou with branches in Shenzhen and other cities.

Luo Hu told Techub News that the company is preparing to move its headquarters to Hong Kong and plans to complete the move by the end of this year.

In April of this year, the "2023 Hong Kong Web3.0 Carnival" was held in Hong Kong with over 10,000 participants. Hong Kong Financial Secretary Paul Chan Mo-po delivered a speech at the opening ceremony, stating that Web3.0 is an irreversible future trend and expressing high hopes for its development in Hong Kong.

Luohu participated in this conference and stated: "This conference includes various sub-fields such as AIGC, industrial blockchain, Social Fi, DeFi, GameFi, etc. The Web3.0 ecosystem is fully covered, which demonstrates Hong Kong's openness to Web3.0 and its determination to promote the development of the Web3.0 ecosystem. It also sees the potential and opportunities for development."

With the help of the local association in Hong Kong, Luo Hu has established an office in the Kwun Tong district of Kowloon and submitted an application to Cyberport and Science Park for admission.

Luohu said: "The service is very thoughtful and humane. You only need to have a product prototype, and the submitted materials are not complicated, just the materials in daily business, such as BP, etc. The help that can be provided to the enterprise is listed in detail, and you can feel that they are enthusiastically helping you."

According to Luo Hu's calculation, if the cultivation plan can be successfully applied for, the headquarters can be relocated to Hong Kong within six months, achieving zero-cost transition. "The support of the cultivation plan is close to the investment intensity of angel round investment."

02 Gathering in Shenzhen, Entering Hong Kong

"Almost all Web3.0 entrepreneurs in mainland China are focusing on Hong Kong, and now there is a trend where entrepreneurs are gathering in Shenzhen from all over the country," said Ram (pseudonym).

Ram is a "veteran of the encryption industry" who entered the industry around 2015 and has been involved in investment, NFT entrepreneurship, and more. Ram said that he has been in Shenzhen for several months and hopes to find opportunities in Hong Kong's Web3.0. He is currently planning to start a business in blockchain + foreign trade.

At a recent small-scale Web3.0 gathering, Ram met with entrepreneurs from Beijing and Hangzhou. Without exception, their purpose for coming to Shenzhen was to prepare to enter Hong Kong.

Ram said that with Hong Kong's support for Web3.0, small gatherings that had been quiet in Shenzhen for a year have suddenly increased recently.

Multiple interviewees have stated that Hong Kong has convenient transportation connections with mainland China, and that the costs of starting a business and living are lower than in Singapore. In contrast, there is a widespread cultural exclusion of Chinese people in places such as Dubai and Europe and America.

After comprehensive consideration, Hong Kong remains the first choice for Chinese entrepreneurs.

The Vice President of the Hong Kong Web3.0 Association and member of the United Nations Asia-Pacific Digital Economy Working Group, Bao Yu, told Techub News that Hong Kong has a great platform, while Shenzhen has many talents and great technology. The combination of the two can produce better synergies. The best entrepreneurial model is to have business, investment and financing, compliance in Hong Kong, and development and other main business personnel in Shenzhen and other places.

Currently, Bao Yuzheng is promoting the landing of multiple projects in Hong Kong, including DePIN, AI, Web3.0+ healthcare, and more.

READ2N co-founder Jeff said: "When starting a business in Hong Kong, one should have reasonable expectations and take corresponding actions. We actively embrace Hong Kong's policies and explore possibilities, but there is no need to move everything to Hong Kong at once. Hong Kong has preferential policies, and entrepreneurs should embrace these policies and enjoy the convenience and cost savings they bring."

According to reports, currently most entrepreneurs who go to Hong Kong only have a small number of compliance and marketing personnel stationed there, while the majority of their staff remain in mainland China. Some projects only require the responsible person to occasionally visit the Hong Kong office to ensure attendance.

Divide (Equally Divided Capital) founding partner Yang Wei also has advice for Web3.0 entrepreneurs going to Hong Kong: "Don't blindly go to Hong Kong, think about what you want."

Yang Wei has more than 10 years of entrepreneurial experience, having gone through the Internet 1.0 and 2.0 eras. He previously worked at Tencent and has years of investment and capital market experience. In 2017, Yang Wei began investing in the Web3.0 field, primarily in projects of his friends.

Hong Kong is a place that Yang Wei often visits, but due to the impact of the epidemic, his visits have been interrupted. At the end of last year, when the epidemic ended, Hong Kong issued a virtual asset declaration, and Yang Wei immediately went to Hong Kong to investigate the development opportunities of Web3.0.

In May, Yang Wei decided to institutionalize his sporadic Web3.0 investment activities by establishing an investment company in Hong Kong. Currently, Yang Wei is searching for office space and recruiting talent in Hong Kong. Some of the Web3.0 projects he has invested in have already landed in Hong Kong, while others are preparing to apply for the Cyberport Incubation Programme.

In Yang Wei's view, no matter how the international situation changes, global trade will still exist in the long term. Hong Kong is linked to the mainland and the world, and its importance is self-evident. Hong Kong is now vigorously promoting the Web3.0 ecosystem, which is an invaluable opportunity for entrepreneurs.

However, starting a business in Hong Kong also means high costs, including high rent and high labor costs. Yang Wei said that compared to Beijing's rent, the core area of Hong Kong may be four to five times more expensive, and labor costs are also much higher.

Yang Wei values the potential advantages of Hong Kong. "Costs need to be calculated comprehensively, including policy support, entrepreneurial vitality, international vision, industry exchanges, etc. When calculated in this way, the cost of Hong Kong is not high."

03 Compliance Game

Apart from the high cost, Web3.0 enterprises in Hong Kong also face compliance challenges, which are primarily reflected in the difficulty of opening bank accounts.

Harly (pseudonym) has been engaged in asset management for a long time. In the crypto bull market two years ago, he switched to managing cryptocurrency assets and developed a software system for asset management.

Harly said that previously it was not possible to comply with regulations, and there was not much legal risk in not publicly raising funds. Now, it is possible to comply with regulations in Hong Kong, so he hopes to register a company in Hong Kong and engage in the business in a compliant manner.

After running a few trips to Hong Kong, Harly was somewhat disappointed, "It's much harder than I thought. Applying for a license requires at least a few million, and you need to build compliant infrastructure yourself, hire at least two ROs (license responsible person and executor). After successful application, only 10% of assets can be allocated to the cryptocurrency industry within a year. With costs such as rent, personnel, and legal fees, it may cost 20 million."

"This calculation is not as good as 'hoarding big pancakes'," Harly expressed helplessly.

"Da Bing" refers to Bitcoin, which is currently priced at 220,000 yuan per coin. The highest price previously reached was 460,000 yuan per coin. Harly predicts that in 2024, Bitcoin will enter the next halving cycle and may experience a significant increase in value.

Harly also encountered an unsolvable problem - the bank refused to open an account. Several Web3.0 entrepreneurs have also shared similar experiences with Techub News, and even banks listed as "blockchain-friendly banks in Hong Kong" by the Hong Kong Monetary Authority cannot open accounts.

Another industry insider told Techub News that despite using connections and reaching out to leaders and friends within the bank, they were unable to resolve the issue. The response they received was, "We have not received any notification and therefore cannot approve it. Otherwise, we would have to bear legal risks ourselves."

The industry insider told reporters that Hong Kong, backed by the mainland, has strengthened its anti-money laundering supervision through cooperation with the mainland. Cryptocurrency is one of the important channels for money laundering, and Hong Kong needs wisdom and strong industry promotion to solve the problem of Web3.0 enterprise bank account opening.

Regarding the difficulty of opening bank accounts for virtual asset enterprises, the Hong Kong Monetary Authority has convened a meeting with banks and virtual asset companies to guide the latter on the materials required for account opening and other related matters.

The acting CEO of Zhongan Bank, Xiandi Yun, who participated in the aforementioned meeting, told Techub News that the Hong Kong Monetary Authority is very supportive of the development of Web3.0, but also understands that banks may have some concerns. This meeting has narrowed the distance between banks and other participants, and both sides can better understand each other's needs.

Xian Diyun introduced that when a virtual asset enterprise opens an account, the bank needs to conduct customer research, which can be done in just two or three weeks for simple cases, but for cases with complex shareholder structures, it may take longer.

However, some companies have expressed that they should not encounter any difficulties in opening an account.

READ2N co-founder Jeff told Techub News that due to its incubation program at Cyberport and endorsement from Cyberport, it is expected to have a smooth account opening process with banks.

Previously, Jeff had communicated with the bank regarding the issue of account opening.

He believes that since Hong Kong is vigorously promoting the development of the Web3.0 ecosystem, these issues will gradually be resolved.

04 Entrepreneurship is Suitable During Ebb Tide

In April of this year, the Web3.0 event in Hong Kong was exceptionally popular, and people from all over the world who are interested in Web3.0 flocked to Hong Kong. Within a month, there were over 100 Web3.0 events held in Hong Kong. Some entrepreneurs said, "There are so many events to attend from morning till night, until dawn."

After 3 months, the booming scene of Web3.0 in Hong Kong has disappeared.

The Vice President of Hong Kong Web3.0 Association, Bao Yu, stated that the ebb and flow of the industry was expected. In the Web3.0 world, there objectively exist malicious scythes and victimized leeks. Hong Kong hopes to solve this problem. The value of blockchain technology innovation lies in the application value of reducing transaction costs and increasing transparency of stocks and other assets in the form of tokens, as well as the natural financing function and changing financing and other business models. These are the real values that entrepreneurs should focus on in Web3.0.

On the road to compliance in Web3.0, Hong Kong is at the forefront globally. Bao Yu stated that Hong Kong has established a licensing system for virtual asset exchanges, and from the Chief Executive to the Financial Secretary, they are vigorously promoting Web3.0. This level of determination is unparalleled in the world. Unlike Singapore, Hong Kong also allows local residents to participate in compliant virtual asset investments.

On June 1st, the new licensing system for virtual asset exchanges in Hong Kong officially came into effect, allowing retail investors to trade virtual assets on licensed platforms.

Hong Kong Legislative Council member Wu Jiezhuang told Techub News that more than 150 companies have expressed interest in submitting license applications, and some companies have started to submit applications. Two companies that have already obtained some licenses are also submitting additional materials.

Bao Yu believes that the core issues of Hong Kong's Web3.0 have already been resolved, and other details are only a matter of time. Currently, the Hong Kong government's compliance control is also very good, and there are no particularly bad situations, it is just a matter of reaching 100 trillion or 1,000 trillion.

Several entrepreneurs have told Techub News that true industry practitioners should not be overly concerned with the ups and downs of cryptocurrency prices, but rather focus on real and long-term value. The more the tide recedes, the more suitable it is for entrepreneurship, and it is a good time to do the basics well.

Bainawei Technology founder Gao Zhimin values the empowerment of equity fragmentation through blockchain. He stated that blockchain has characteristics such as decentralization, openness, and immutability. By leveraging blockchain technology, low-liquidity assets such as real estate can be fragmented and put on the chain, greatly enhancing asset liquidity.

Gao Zhimin graduated with a Ph.D. from the University of Houston in the United States and has been conducting research on blockchain technology for a long time. He has successfully implemented a national-level blockchain project for the entire shipping process in the United States. Currently, Gao Zhimin has applied for incubation programs at Science Park and Cyberport, and his submitted project is the fragmentation of property and shipping rights.

The CEO of Jingling Technology, Ma Youxin, is preparing for his trip to Hong Kong. He has registered for the Web3.0 Welfare Roadshow BIG DEMO DAY on July 25th and hopes to find like-minded partners and angel investors.

BIG DEMO DAY is jointly organized by Central Research and Hong Kong Cyberport, co-organized by Techub News, and will be attended by multiple global investment institutions and family offices with high-quality projects.

Ma Youxin's project is AIGC+NFT. He hopes that his project can break away from the logic of domestic digital collections, focusing on PFP created by AIGC, building a fan economy, and combining cultural and creative peripherals to extend the consumer market.