The Innovation and Technology Venture Fund (ITVF)

Objective: The Government has set up a HK$2 billion Innovation and Technology Venture Fund (ITVF) in 2017 with a view to attracting more venture capital (VC) funds to co-invest in local innovation and technology (I&T) startups in Hong Kong.

Details:

ITVF- Key Features of Co-investment Model

• The ITVF, through a special-purpose vehicle “The Innovation and Technology Venture Fund Corporation” (ITVFC), will co-invest with VC funds selected as Co-investment Partners (CPs) in eligible local I&T startups (investee company).
• Target to co-invest in eligible local I&T startups.
• Co-invest at a matching ratio of approximately 1(ITVF): 2 (CP).
• ITVFC’s matching investment ceiling:
  1.Aggregate amount of matching investments with a CP not more than HK$400 million;
  2.Aggregate amount of investments in an investee company not more than HK$50 million; and
  3.For each co-investment in an investee company, the matching investment shall constitute not more than (i) 40% of the original total target investment amount sought by the investee company, or (ii) HK$30 million, whichever is the lower.

ITVF Enhanced Scheme – Key Features of Fund Manager Model

• Selected fund manager shall be responsible for setting up a limited partnership fund under the Limited Partnership Fund Ordinance (Cap. 637).
• Target to invest in startups of three strategic industries, including:
  1.Artificial intelligence and data science;
  2.Life and health technology; and
  3.Advanced manufacturing and new energy.
• The Government, as one of the Limited Partners of the funds, will commit HK$1 to the funds for every HK$3 of investment raised from the market by the fund managers, with Government’s contribution ranging from HK$150 million to HK$250 million for each fund.

Investment requirements:

• For each fund manager:
  1.100% of the fund must be invested in companies in relation to Hong Kong I&T eco-system;
  2.At least 50% of the fund must be invested in Hong Kong companies or non-Hong Kong companies with I&T related establishment in Hong Kong; For each investee company:
  3.Each investee company of the fund must agree to spend at least 50% of the fund’s investment amount in relation to its operation in Hong Kong such as hiring of talents and procurement of goods and services.

Eligibility:
An “eligible local I&T startup” must meet the following criteria: –

• it or its wholly-owned Hong Kong company was incorporated under the Companies Ordinance within the last seven years and with one of its offices (headquarters or regional office) or its main business operation or its key management or leadership team being located in Hong Kong;
• it or its subsidiar(ies) (if any) have been engaging in I&T business, covering any part of the research and development or production chain in Hong Kong; and
• it and its subsidiar(ies) (if any) have a total number of employees (including Hong Kong, Chinese Mainland and overseas offices) being less than 250.

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