Exclusive Interview with Joe Vasquez
Recently-acquired Runway sees China Chance for Start-ups
The recent acquisition of Runway, a San Francisco-based “innovation hub”, by a mainland China real estate developer, gives Runway a competitive advantage in the field of company start-up support.
That is the view of Joe Vasquez, co-director of Runway Incubator and co-founder of Michelson Runway Accelerator, the businesses that form the Runway group. All the equity of the Runway group was acquired in July.
Runway’s website describes the group as offering a “co-working space and innovation hub bringing together entrepreneurs, start-ups, venture capital firms, mentors, Fortune 500 companies, and industry experts”. The consideration involved in the acquisition by the Chinese entity has not been made public.
Runway’s co-working space currently occupies approximately 30,000 square feet. “We have anywhere between 60 and 75 early-stage technology companies,” Mr Vasquez told Innovation Hong Kong in an interview. Most are in software, covering segments including the Internet of things, virtual reality, and E-commerce. A few are in digital hardware.
The Michelson Runway Accelerator component of the business is focused on educational technology, stated Mr Vasquez, explaining the distinction between an ‘incubator’ and an ‘accelerator’.
“Incubators tend to have some element of investment, but it’s more about incubating the initial idea and creating some type of product,” he said. “Accelerators tend to be a little bit later-stage: maybe ‘seed’; maybe series ‘A’ [capital-raising level] – where you are in essence accelerating a pre-existing company, with a three- or four-month programme.”
Asked whether start-ups working with the Runway group might get easier access to the China market following the deal with the Chinese firm, Mr Vasquez said: “That is one of our strongest competitive advantages over most of the major players in San Francisco and the United States. The acquiring business has great government relationships inside and outside China… by virtue of working with this company, we have been able to take advantage of some of those great relationships.”
He added: “The acquisition was relatively recent, so we are formulating specific programmes for our start-ups and our corporates [partners] to get more access to China. We haven’t put anything into place just yet.”
“We have introduced several start-ups to the Chinese entity for partnership opportunities, investment opportunities. But I think it will be some time before we start to see the fruits of those engagements,” the entrepreneur noted.
Many of the leaders at Runway’s start-up firms already have exposure to cultures beyond North American shores. “Around 40 percent of our founders are from outside the United States. It’s that diversity of people, ideas and thought that allow us to fundamentally think about the world in a completely different way,” the innovation hub leader stated.
He explained the Chinese company’s thinking regarding the deal.“It is doing a lot of innovative work in early-stage start-ups and trying a whole wealth of initiatives in different types of industry. It acquired Runway to serve as one of its more innovative arms, to work with start-ups, to build bridges between China, the United States, and the rest of the world,” said Mr Vasquez.
The Runway group also advises established corporations on how they might pursue innovation. Recently-acquired clients in this area included Fujitsu Ltd, a Japanese multinational information technology (IT) equipment and services company; and NTT Data Corp, another Japanese IT business, said Mr Vasquez.
Innovation Hong Kong asked the entrepreneur whether in his experience some Western companies feared collaboration with Chinese firms would jeopardise their intellectual property rights or put them at risk of corporate espionage.
He said: “Yes, unfortunately. This narrative is being pushed by the media, it is being pushed by our [U.S.] government – it is being pushed by a lot of people – that certain countries and certain corporations, should be viewed with sense of scepticism. Do I think it’s fair? Do I think it’s right? I don’t think I’m in a position to say. But the people and entities that I have interacted with in China have been operating in good faith; have been extremely hard working and supportive; and there’s a sense of true partnership. I don’t really think that fits with the [anti-China] narrative that’s being pushed.”
While in Hong Kong, Mr Vasquez attended the StartmeupHK Festival 2018, an initiative of InvestHK. Another reason for his visit to Hong Kong was to “build a stronger bridge with the United States,” he stated. During the trip, Mr Vasquez met David Chung, Hong Kong’s Under Secretary for Innovation and Technology. The city’s government is seeking to revamp the structure of the local economy and encourage greater appetite for entrepreneurial risk.
A topic of conversation during the meeting was culture change, Mr Vasquez noted. “I love this city, the people. I do notice there is a little bit of an aversion to risk, as compared to Silicon Valley.” He added Hong Kong was a “very corporate-dominated environment,” citing the high number of international banks and other finance houses based there.
“They are well-paying jobs that are pretty secure and relatively easy to attain… I think a lot of people are comfortable with what they know: and the status quo is often the most comfortable thing for people…”
The entrepreneur however noted that in order to create new and innovative technologies, a creative mindset is needed. “Education is a great way and a great tool, to help people fundamentally change and think in unique and different ways,” said Mr Vasquez.