Macau | Conquering local market and catching the eye of a Chinese partner, best exit strategy for local startups – Investor

Macau (MNA) – According to the founding Partner of Macau Envision Accelerator, Raymond Lao, the small size of the Macau market is an advantage for local startups, which would require less capital to conquer market share, while possibly catching the eye of a Chinese investment partner.

“Macau is so small that you won’t need so much capital to penetrate the market, less than in Hong Kong, Singapore or Beijing where you need tens to hundreds of millions just to make yourself known. Here in Macau a few per cent of that and the whole city will know what you are doing and if you are doing it well,” the venture capital expert told Macau News Agency (MNA) at the Macau International Startup Week 2018.

After  acquiring market share, a local startup could then maybe proceed with a merger & acquisition exit or enter into an equal partnership with a “Chinese giant” in order to learn from that company or use its resources.

“Let’s say you’re doing as a startup here [something] like food delivery app Aomi, basically a localised version of Chinese company DianPing […]. If Aomi was in China it wouldn’t really exist; the competition is so furious and the industry is so settled already. But Aomi is from Macau and this will provide it with a safety charm, which the giants in China can’t compete with,” Lao opined.

Mr. Lao suggested Macau Government subsidies to assist local startups in establishing equal partnerships with a large Chinese company giant and through this foster great accelerating growth in local startups, which could learn how these companies market their product and lower operating costs.

“Macau is on the way to diversifying its industries and it’s a great time for startups to come up because in the Greater Bay Area concept Macau lacks a series of connections with other cities in terms of industrial fundamentals […]. If you do well enough in Macau there’s a future potential of either investment or government help to go to China because Macau needs these kind of [flagship] companies,” he added.

The Macau Envision Accelerator was founded last year by Mr. Lao, and currently houses some 10 startups, both Chinese startups via part of Envision Capital – a partner of the space – and Macau startups.

“We connect very closely with Beijing Envision Capital, so we have capital backing us and we have some deals form China where we have already invested, while checking business opportunities in Macau […] Ou local startups come from diverse industries such as media, advertising, apps, events, conventions and exibithions,” Lao stated.

Macau Envision Accelerator has also recently partnered, China’s largest platform for online creative services, which will allow the space startups to have access to the platform’s more than three million users, most small service providers, and get assistance in areas such as design, promotion and sales, from business cards to company logos.

Having initially studied finance in Macau and the United States, Lao has extensive experience in private venture capital investment in China, especially in post investment management.

“I’ve seen entrepreneurs and startups almost every day, sometimes we see 200 or 300 startups per year, and put our money only into two or three,” he told MNA.

According to Mr. Lao, local startups are still wary of receiving investment in exchange for shares in their company, with the venture capital expert believing that while in China investors have many roads from where they can get returns on their early stage investments, these are absent in Macau.

“In China there’re many different ways to do it; there can be a merger or acquisition from a larger company – there’s also the chance of an IPO if you do well, and at the very least there’s a certain liquidity whereby you can sell your share to private owners if they’re interested in the company. Here in Macau when you put some money into a company and you want to exit it’s rather hard,” he said.

“There doesn’t seem to be a past record of  such past transactions; it really hinders the confidence of investors since they don’t know how long the money will be in this company because they also need cash flow.”