Back to the Future – Learning from the last HK tech bubble

After Startup Saturday, I’ve had the opportunity to talk with a lot more of the people that were around for the frenzy of 2000-2001 for tech startups in Hong Kong. When a fund called TechPacific puts “Tell me your idea and we’ll try not to laugh.” on the side of a bus, that may be indications of a tech bubble. Even some of the established local businesses got caught up in the craze and changed their names to include “Cyber” to keep up with the times.

Back in 2000, before Web Wednesday or Tech Talk Tuesday, INI (Internet and Information) was started by 5 guys meeting in a bar once a week. Less than a year later, they would meet up with 300 of their closest friends each Tuesday. For $100 a head in a five-star hotel ballroom, they came to listen to such luminaries of the time such as the founders of Yahoo and Dell. They apparently had one thing right, by focusing on building a community, the money followed in stupid ways and copious amounts.

Out of that initial not-for-profit meetup, one of the key founders, transitioned it into a for profit venture, but not everyone was happy with how the transition was handled (remind anyone of a current mid-week event). In 2001, there was an incubator program that came out of this with $5 Million USD in funding that they burnt through in 2.5 years with little or nothing to show for it. Apparently, it was just as crazy here in HK as in the US, but it seems like there are fewer companies you can point to proportionally that made it through.

Ten years later, we are still living in the shadow of this bubble that burst so spectacularly and left investors keen on real estate and stocks. So, what should we learn from this and what is different this time around?

Let’s start with the playing field. Technology has moved on, the cost of the basic equipment for a startup company is far lower than before. Super communication and collaboration tools are either in our pockets or is free on any desktop with an Internet connection. So, it is practical to fund a startup for 3-6 months on $20,000 USD. Is this going to fund the next big thing? Well, perhaps not directly, but if those teams focus for that time and have a goal of having a working product within that time, it leads to decisions that produce what is now commonly called an Minimum Viable Product (MVP). By using those communication tools and just getting out the door, teams can and should collaborate with their customers to build something useful to them within the time they have. That in turn both builds a sustainable income and also builds up the team. If the next big thing is going to come out of a team, it is more likely to do so after they have some experience with building something together.

The fact is that many or most can come up with how to support themselves through 3-6 months or that same amount of work can be done at night and on weekends if you are determined enough. 

For those people in more traditional markets related to physical goods, there are perhaps both more limitations on turn around time and also initial investment costs, but consider the tools at hand and how to reach out to the market directly. There are quite a few local sites that are bare-bones and do a great job of connecting up global customers to locally sourced products.

So, basic differences:

1. Lower funding requirements.
2. Better and cheaper tools due to general tech developments in all fields.
3. Faster turn around for everything due to better tools and technology. 
4. More emphasis on connecting with the customers early to provide validation on an idea.

Thanks to Tony Chan of AP Dealflow for providing much of the history content for this piece.