Hong Kong Science and Technology Park’s (HKSTP) Incu-Bio Program is a technology incubator designed to help biomedical startups move from R&D toward commercialisation by providing infrastructure, funding and mentoring support. Since its launch in 2010, over 3,500 startups have graduated from the program, as it continues to help bring cutting edge medical tech to the market. This article will cover eligibility, assessment, funding support, and audit duties that applicants will encounter before and upon successfully entering the program.
Eligibility Criteria
Your company must be a Hong Kong-registered and incorporated technology start-up incorporated no more than two years before the application date that operates in biomedical fields such as diagnostics, therapeutics, medical devices, regulatory work, or medicine use.
Subsidiary companies, particularly those with foreign parent companies, will be expected to show how they differentiate from their parent companies.
In addition, your company will be expected to meet the following operating requirements throughout the program.
Table 1 – Eligibility Criteria
| Eligibility Criteria |
|---|
| Founders hold at least 33% of paid-up share capital |
| At least two full-time staff must hold valid licences to work in Hong Kong |
| At least 50% of full-time staff must be engaged in R&D and based in Hong Kong Science Park |
| Retail activity is not allowed at HKSTP premises |
| R&D staff must demonstrate competency and skills in lab operations where applicable, and comply with all relevant safety standards |
The Application Process
The application process begins when an authorised representative fills in the Form with the required supporting documentation. Additional information may be requested by the Hong Kong Science & Technology Park Corporation (HKSTPC), which must be provided within two months, or else the application will be treated as withdrawn.
Once HKSTPC is satisfied with the application, you will receive acknowledgement within ten days of the last receipt that includes your reference number, contact details, and an approximate processing timeframe.
Pay particular attention to staying truthful in your application, as misleading or inaccurate information may be investigated.
The Assessment and Approval Process
Your application will be required to score a cumulative 65 out of 100 in five areas, and may be required to present to an assessment panel of independent experts who will judge and question aspects of your application.
Conflicts of interest with any panel members should be disclosed to HKSTPC early to avoid probity issues down the line.
If your application is successful, your company will become an incubatee and gain access to a co-working space, lab support and services, and access to financial support from HKSTPC.
Table 2 – Assessment Weighting
| Assessment area | Weighting | What HKSTPC looks for |
|---|---|---|
| Innovation and Technology | 30% | A unique, innovative, disruptive, technically sound product or service, supported by a clear IP position or strategy |
| Business Model | 15% | An important unmet need to be addressed, a well-defined market, clear market demand, your competitive edge, and scalability of the product / service. Your understanding of the barriers to entry may also be tested. |
| Team/Personnel Competence | 20% | Your team should show technical, business, management, and developmental capability, plus useful partnerships that could expedite the product’s time to market. |
| Risk Assessment | 15% | An understanding of the relevant medical ethics, bioethics, safety, technical, operational, financial, and key-partner risks, with clear mitigation plans to address them with |
| Four-year Milestone Plan | 20% | A realistic roadmap of technology and market development deliverables across the program period |
Progress Monitoring During Incubation
Even after successfully entering the incubation program, you will be continually monitored by HKSTPC to ensure that your company is carrying out activities and meeting milestones committed in the application, with evidence to back it up. Proof can be in various forms, such as on-site visits, progress reports, patent registrations, increases in staff count, or audited financial statements.
In addition, your company will need to attend eight milestone review meetings across the four-year program, with the first meeting held three months after joining and subsequent meetings held every six months.
If your company misses any of the committed milestones without a valid explanation, HKSTPC may terminate the Licence Agreement and Funding Agreement, while a valid explanation of missed milestones may force your company to undergo a performance improvement plan.
This is where you will need to prepare a revised plan for improvement for the following three months with approval from HKSTPC. If your company still fails to meet the targets set by the revised plan, HKSTPC will withdraw all support and require your company to vacate the premises immediately.
Any changes to the business proposal outside of undergoing a performance improvement plan, including changes to key team members, deliverables, milestones, R&D scope, or business scope must gain pre-approval from HKSTPC before implementation.
HKSTP Funding Support
The maximum funding support across the four-year incubation period is HK$6,000,000, subject to HKSTPC’s discretion, and is divided into three types, covering use cases for R&D, administrative expenses and certifications.
Table 3 – Funding Support
| Funding type | Maximum amount | Payment proof position | Main use |
|---|---|---|---|
| Financial Subsidy | HK$2,000,000 | No payment proof required | R&D development support, subject to milestone review |
| Upfront Grant | HK$2,000,000 | Pre-approval and payment proof required | Subsidy for eligible supportable costs |
| Regulatory Affairs Funding Support | HK$2,000,000 | Reimbursement and payment proof required | Regulatory activities such as IND filing or certification |
Financial Subsidy Funding
The Financial Subsidy is primarily earmarked for R&D and caps out at HK$2,000,000, paid to your company in eight equal installments of HK$250,000 each time you meet a milestone. Although this subsidy does not require payment proof to be released, the amount should still be recorded in your company’s audited financial statements.
Upfront Grant Support
The Upfront Grant is also capped at HK$2,000,000 and disbursed in eight equal installments of HK$250,000, used to subsidize 75% of supportable costs incurred during the program, shown in the table below.
To help ensure that you’ll get your funds, your company should submit a wish list and supporting documents such as quotations or tender proposals of what you need. If HKSTPC is satisfied with your progress and reasons, the installment may be released.
After the grant is released, your company must submit a claim form and supporting documents within three months of buying the relevant items as proof that the grant was used for approved supportable costs. If the claim shows that less than 30% of the released Upfront Grant remains unspent, HKSTPC may allow the remaining amount to be carried forward to offset the next grant. However, if 30% or more remains unspent, HKSTPC may stop further Upfront Grant payments until your company provides the required documents or receives written approval.
If your wish list for a milestone is worth under HK$250,000 in value, the unused part can be carried forward to later milestones until the end of the fourth year, which means the final milestone may include HK$250,000 plus earlier carried-forward balances.
For example, if your company submits an approved wish list for HK$184,000 at one milestone, the unused HK$66,000 can be carried forward, and at a later milestone your company may apply for the usual HK$250,000 plus the carried-forward HK$66,000.
Table 4 – R&D Expenses Eligible for Upfront Grant Funding
| R&D Expenses | Limits and Conditions |
|---|---|
| R&D staff salary and student internships | HK$120,000 max funding per milestone. Shareholders and directors not included. Salaries must be reasonable and market-based. Unused balances cannot be carried forward. |
| R&D or laboratory equipment | Equipment must be located at HKSTPC-assigned premises and may be inspected. Prior written approval is needed before disposal or transfer. Equipment purchases should be made in the first two years of the program. |
| R&D or laboratory consumables | – |
| IP licensing or IP development | – |
| Public trial and certification | – |
| Other R&D expenses agreed by HKSTPC | Services provided by HKSTPC go here. |
Table 5 – Non-R&D Expenses Eligible for Upfront Grant Funding
| Non-R&D Expenses | Limits and conditions |
| Business consulting | HK$500,000 max funding |
| Sales and marketing | HK$500,000 max funding |
| Professional training | HK$100,000 max funding |
| International travel for scientific conferences | HK$100,000 max funding. Expenses for two participants are eligible, limited to economy class, a reasonable hotel, and incidental expenses. Arrival and departure dates cannot exceed 2 days before and after conference dates. Permission is needed to exceed this limit with written justification. |
| Accounting and auditing | HK$300,000 max funding |
| Legal services | HK$500,000 max funding |
| Other operational expenses agreed by HKSTPC | HK$200,000 max funding |
Regulatory Affairs Funding Support
The Regulatory Affairs Funding Support is used to subsidize IND filing or applying for certification, such as CE marking in the European Union and submissions to regulatory agencies such as the EMA, FDA, or NMPA.
This is separate funding that your company can apply for, with eligibility and application details available on request.
For overseas founders, this category is useful for preparing your Hong Kong company for cross-border regulatory work.
Office Rental Subsidy
Office rent for new incubatees are completely subsidized for the first year, and get 50% off the headline rate from the second to fourth years.
Additional Guidelines on Funding Support
Some additional things to note about how funding is disbursed:
- Funding is disbursed only when HKSTPC is satisfied with your company’s progress at any given milestone.
- Your company cannot receive double payment for the same part of an expenditure item from another Hong Kong Government funding source unless HKSTPC gives prior written approval on a case-by-case basis.
- Your company must declare other funding sources in its expense claim form, and any unused funding balance is forfeited when your company graduates or is terminated from the program.
- Single purchases are prohibited from being split into smaller invoices.
- If a company cannot follow the procurement process or wants to buy everything from one specific company, organisation, or person, it must provide details, sufficient reason, and explain their relationship with that supplier in order to obtain approval.
Table 5 – Procurement Quotation Requirements
| Aggregate procurement value | Quotation Requirements |
|---|---|
| HK$10,000 or above | Written quotations from at least 2 suppliers |
| HK$50,000 or above | Written quotations from at least 3 suppliers |
| HK$500,000 or above | Written quotations from at least 5 suppliers |
| HK$1,000,000 or above | Open tender |
Accounting and Auditing Responsibilities
Your company will be required to engage an independent practising auditor or audit firm to prepare an Auditor’s Report and Statement of Expenditure in the format prescribed by HKSTPC, including maintaining proper books and records for expenditure paid with funding support so auditors can carry out the assurance work HKSTPC requires. This will culminate in audited financial statements and, if required, an Audit Report within 90 days after the financial year-end date, confirming that the disbursed funding has been spent as expected.
If your company cannot appoint an accounting or auditing firm, HKSTPC will make the appointment, deduct the related expenses from funding support, and allow refusal only where your company has valid reasons.
Setting up your accounting from the beginning of the program is vital for keeping your expenses organised, saving you and your auditor time and headache when building the audit report.
Summary
HKSTPC’s Incu-Bio program is excellent for getting your medical technology off the ground, but also comes with strict procedures that must be adhered to to maintain the flow of funding and support to your startup. Having clean and organised financial records will also go a long way to impressing HKSTPC and getting through the program. If you’re looking to set up your accounting for the first time or need an auditor prepare financial reports, drop us a message and we’d be happy to help!
