New technology investment opportunities are emerging in the Greater Bay Area (GBA), especially as geopolitical tensions run high between China and the US and push companies in the region to develop local skills and expertise, a senior executive from MTR Lab said.
“Obviously, there are geopolitical issues abroad happening right now, and traditionally, there might be parts of technology solutions that might have been sourced from overseas,” Michael Chan, managing director of MTR Lab, told AsianInvestor.
“Now, there is a huge opportunity for local startups to recreate what was sourced from external sources.”
Traditionally, a particular country might have been the best for a particular technology, yet with the increase in demand and more cash flows, companies in China can probably strengthen themselves and develop into equally good players, Chan said.
“I believe that will be a core theme in the start-up community, as different users go in for ‘in-sourcing’,” he added, referring to developing products and solutions locally as opposed to doing so overseas.
MTR Lab is a wholly owned investment entity of MTR Corporation, Hong Kong’s railways operator. The entity invests in technology and solutions with a focus on innovation and sustainability.
GBA is envisioned as an integrated economic area consisting of nine cities and two special administrative regions in south China, including Hong Kong.
Investment opportunities in the GBA is a growing theme among institutional investors and family offices AsianInvestor has spoken to in the past 12 months, especially as political relations between the US and China remain fraught.
Greater Bay Area Homeland Investments, a Chinese state-backed investor, and Hong Kong tycoon Adrian Cheng's C Capital, a private equity firm, have previously said they plan to invest in companies that can mitigate risks arising from China-US tensions.
Asian family offices and mid-sized institutional investors also showed strong interest in a GBA-focused special opportunity fund launched by state-owned Shenzhen Capital International and Value Partners last year.
INVESTING IN INNOVATION
While MTR Lab is Hong Kong-headquartered, it considers itself to be a company with global focus, although because of its presence in this part of the world, it places a little more emphasis on opportunities in the Greater Bay Area and China.
The company aims to be a platform for start-ups to showcase emerging technologies. “A company may have great technology, but no one knows about it or they don’t have a credible partner to work with. We are hoping to help by strategically plugging that gap,” Chan said.
“It’s not about offering scale as such; its more about helping companies try different application scenarios. The startups can, in turn, get some user feedback, which can be valuable for them,” he added.
Some of MR Lab’s investments over the past 12 months include local start-up Ampd Energy, a battery-powered energy storage system provider, which is expanding in the United Arab Emirates and the US, and alfred24, which specialises in automated parcel lockers and software solutions for locker operators.
BEST AND WORST OF TIMES
Nevertheless, the last 12 months have been trying times for start-ups and the venture capital industry.
VC investments and the total number of VC deals in the Asia-Pacific region fell in 2023, even as China accounted for seven of the largest ten deals in Asia, according to KPMG’s Venture Pulse Q4 2023 report.
VC investments totalled about $18.8 billion across 2,390 deals in 2023, even as valuations plunged, especially for late-stage deals, the report noted.
“I think this is the worst of times but also the best of times for venture capital and start-ups. The market has gone through a little bit of consolidation, which has weeded out the weaker ones. Valuations seem a lot more reasonable, although we are not looking for the cheapest deals,” Chan noted.
He said MTR Lab still gets up to 140 proposals in some months and the team has been busy assessing the proposals.
“One thing that we are very disciplined about is that we won’t waste time if we think the idea needs more development. We won’t waste half a year just dragging our feet,” he noted, adding that the investment entity aims to be quick as possible and transparent in its responses to proposals.
However, MTR Lab is unlike a typical venture capital fund, he noted. “We are responsible investors and while we want to ensure what we invest in has reasonable financial returns, what we are really looking for is an opportunity to partner with someone who can collaboratively help solve a customer pain point.”
The investment entity focuses on six key verticals under the overall theme of sustainability and smart cities.
There are six key verticals we look at under the overall them of sustainability and smart city. Three of these verticals are mobility related, including rail technology, mobility as a service as well as new mobility modes.
It also looks at financial and data services, real estate or construction technology and new retail.
“These areas are also synergistic with MTR operations and our ecosystem,” said Chan.