Hong Kong tech hub progress ‘significant’, Dalton Venture’s Steve Sun says

Hong Kong has made “significant” progress in its bid to transform itself into a technology hub, according to a Chinese venture capital investor, whose firm was recently selected by the city to invest in local start-ups under a HK$2 billion (US$250 million) government initiative. “You can see fundamental, significant changes are indeed taking place,” said Steve Sun, founding managing partner of Dalton Venture, in an interview on Thursday. “I believe that over the next decade, Hong Kong can replicate the innovation and technology ecosystem we see in Shanghai.” The Hong Kong government’s measures to retain research talent and encourage the commercialisation of research results were “gradually taking effect”, according to Sun. Dalton Venture, a Shanghai- and Shenzhen-based venture capital firm focused on life sciences, was among nine firms admitted last week to an “enhanced scheme” of Hong Kong’s Innovation and Technology Venture Fund (ITVF), which enlists venture capital partners to co-invest in tech start-ups. The ITVF was launched in 2017 to attract private capital to Hong Kong’s tech industry, and had so far selected 17 funds as partners with 57 start-ups in its portfolio. The fund in December 2024 launched an “enhanced scheme” to deploy up to HK$1.5 billion in start-ups in “strategic industries”, including artificial intelligence and data science, life and health technology, as well as advanced manufacturing and new energy. The Shanghai municipal government has adopted similar methods to boost its tech sector. In January, Shanghai State-owned Capital Investment selected 17 market funds to invest a total of 4.71 billion yuan (US$680 million) in key industries such as semiconductors, biomedicine and artificial intelligence. The ITVF represents part of Hong Kong’s broader efforts to reinvent itself as a centre for innovation and technology. Among other initiatives, the city is working with its neighbour Shenzhen to develop the massive cross-border Hetao Shenzhen-Hong Kong Science and Technology Innovation Cooperation Zone. It is also building major supercomputing data centres to provide companies with computing power. Some of the Hong Kong government’s measures had generated positive results, according to Sun, who pointed to subsidies for companies that employed research talent and schemes that incentivised university professors to commercialise their research and development outcomes. The Research Talent Hub programme run by the Innovation and Technology Commission, for instance, provides companies with a monthly allowance of up to HK$45,000 for researchers with doctoral degrees. Since 2020, the University Grants Committee has been tracking universities’ performance in transferring their research to innovative solutions as a factor in funding decisions. “The professors we’re engaging with now are genuinely working on translating their research into real-world products,” Sun said. The Shanghai-born investor, formerly an executive in China’s medical-device industry before founding his venture capital firm in 2015, said that while Shanghai had industrial and manufacturing support from the Yangtze River Delta, Hong Kong still faced challenges in Greater Bay Area integration. Certain hurdles still remained in the Greater Bay Area in terms of free flow of people, capital and resources, Sun said. The ITVF’s enhanced scheme stipulates that the government will commit HK$1 for every HK$3 raised by its fund partners and contribute up to HK$250 million to each fund. Dalton Venture’s new Hong Kong fund would leverage the scheme to raise up to HK$1 billion to invest in areas including AI and synthetic biology, as well as brain-computer interfaces, according to Sun, who did not disclose a timeline for completing the fundraising. Dalton would seek investments from local, mainland and overseas investors, he added. He said he expected about 40 per cent of the investments to go to local start-ups, with the rest going to projects originating from mainland China or other regions that establish a presence in Hong Kong.