And despite the broader market headwinds, 70 per cent of investors in listed tech companies plan to maintain their tech sector weightings, while 16 per cent intend to increase their stakes, according to the HSBC survey.
Many VC experts remain optimistic that entrepreneurs with the right ideas and plans, especially in advanced technologies – including artificial intelligence (AI), where computer systems can copy intelligent human behaviour, industrial data, and robotics – offer enormous growth potential.
AI tops the agenda of many conversations, especially generative artificial intelligence (gen AI), which leverages machine learning to create new content and accomplish an increasing number of tasks.
In collaboration with HSBC Innovation Banking, HSBC Global Private Banking curated a three-day “All-in on Innovation” programme from May 15 to 17 in California, the United States, offering ultra-high-net-worth (UHNW) clients in Asia, who are passionate about the technology sector, a great opportunity to connect with top venture capitalists, promising start-ups and like-minded entrepreneurs. They were given insights on how to thrive in the era of rapid technological change and gain inspiration from tech innovation.
Lok Yim, regional head of Global Private Banking, Asia-Pacific, HSBC, said: “We are pleased to partner with HSBC Innovation Banking to curate this exclusive platform for our UHNW clients to exchange ideas with like-minded investors and draw inspiration from the authentic ingenuity that defines the tech community.
“Our clients choose HSBC because of our profound understanding of the market and our alignment with their sophisticated personal and business needs. This programme epitomises our unparalleled expertise in offering services beyond private banking.
“By tapping into the extensive knowledge and network within HSBC Group, which spans commercial banking and investment banking on a global scale, we demonstrate our commitment to catering to every aspect of our clients’ financial journey.”
Past tech advances show history repeats itself
Many insights were shared and ideas were exchanged during a series of keynote speeches, presentations and panel discussions.
History has shown economic cycles and technological breakthroughs tend to be in locked steps, with the latter serving as an “inflection point” to propel a whole new set of entrepreneurs and a whole generation of companies to success.
One speaker, Scott Kupor, investing partner of US private capital firm Andreessen Horowitz, said current economic conditions and the advent of AI and deep tech, such as big data, machine learning and robotics, bear great similarity to past events such as the launch of Netscape, producer of the world’s first commercialised web browser that went public in 1995, the introduction of the social networking service Facebook in 2004, and the maturation of Software as a Service cloud computing. All these innovations emerged on the back of major market corrections.
Another speaker at the event, Elias Torres, a serial entrepreneur, who is the founder and CEO of the technology firm Novy.ai, is a case in point. He shared how he has been able to employ the new-found power of AI to help his clients increase productivity and drastically improve customer experience while keeping costs in check – things that are especially important during times of economic challenges.
Financial data and software company PitchBook reported in January that a record US$29.1 billion in funding was spread across 691 generative AI deals last year. This represented a 268 per cent increase in deal value over 2022’s total.
Challenges can help identify next unicorns
Unfavourable business conditions mean that most new companies will choose to remain private, while those that are looking for funding will need to really stand out from the crowd.
However, budding entrepreneurs could actually use these tougher times as an opportunity to see whether they have what it takes to succeed, said Michael Kim, founder of VC firm Cendana Capital, which works with select global seed and pre-seed funds.
Referring to the peaking of VC in tech start-ups in 2021 and 2022, he said he saw many new companies being able to raise a lot of funds, but they were not businesses that had the substance to become successful and profitable.
“You had a lot of people starting companies, [but] they were not necessarily the ones that were passionate, the ones that would walk through walls to get their companies alive,” he said.
Essentially, the success of a company depends on what it can offer, and start-ups with the most potential are those with ideas that can make an impact.
Peter Hébert, co-founder and managing partner of Lux Capital, which invests in hard science and advanced technology companies, said that Kurion, a small business venture it had supported, played a vital role in helping to resolve one of the world’s biggest crises – the 2011 Fukushima disaster.
A 9.0-magnitude earthquake off the northeast coast of Japan triggered a tsunami and meltdowns at a nuclear power plant.
He said in only eight weeks, the nuclear waste clean-up company designed, built and delivered an external reactor water cooling system to lower the temperature of the molten reactor without the deployment of helicopters and trucks, while safely decontaminating the water.
Kurion has since been bought by Veolia, a French transnational company which specialises in water and waste management and energy services.
Michael Romano, chief business officer of the VC firm, Lightspeed, said: “If you look at the percentage of technology as it relates to the top five companies in the S&P [stock market index] … technology and tech-enabled companies – many of which were originally venture-backed – are increasingly taking up a larger percentage of the total share.”
Another recent development is that a growing number of family offices – privately held companies that handle fund and wealth management for high-net-worth families – are taking an interest in VC funds that support transformative technologies. These institutions tend to be more liquid and their wealth allocations are based on the founder’s vision and passion.
Professional services company PwC reported last year that almost one-third of the capital received by start-ups worldwide in 2022 came from family offices. Although these institutions are exercising caution in funding nascent businesses because of the continuing market uncertainty, they remain an important source of capital in the start-up ecosystem.
Identifying the right start-ups to support requires specific expertise that a family might not have, so there are strong advantages in choosing a VC fund that has a clear mandate, dedicated staff and procedures to achieve an agreed goal.
“If you don’t have the ability to build an internal team that has expertise, and are looking for the best venture partners, I will seek an experienced fund to funds [which] could guide you to put [in] a small amount, if that’s what you want to do – and learn from them,” Sherry Lin, senior adviser to US family office Argentum Peak, said.
David Sabow, head of Innovation Banking, HSBC USA, said: “Venture capital is increasingly a global story. Not only have global markets significantly increased their share of VC investment over the last five years, the sources of capital supporting the VC asset class have increasingly come from every corner of the world.
“As one of the largest international banks in the world, HSBC is uniquely positioned to connect family offices, sovereign wealth funds and institutional investors with the general partners funding the next wave of global transformation. Our Innovation Banking teams in the US, UK, Tel Aviv and Hong Kong deliver globally-connected, specialised banking experts to support a broad range of innovation businesses and their investors.”
The event also included two immersive tours in Palo Alto to Playground Global, an early-stage investment company known for nurturing groundbreaking ideas, and Stanford Medical Centre, part of Stanford University, where participants witnessed life-saving transformations through AI-powered medical operations.
Maggie Ng, general manager and head of Wealth and Personal Banking, Hong Kong, HSBC, said: “This thought leadership programme is our latest initiative to connect our private banking clients with the realm of frontier technologies and innovations which drive growth in every industry.
“Drawing on resources from HSBC’s global network, this immersive tour is carefully designed to provide valuable insights from visionary venture capitalists and start-up entrepreneurs, inspiring our UHNW clients on their wealth journey. It complements our established service approach, which is based on insights, knowledge, and professional expertise.”
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Issued by The Hongkong and Shanghai Banking Corporation Limited