The 9.2 percent youth jobless rate in Hong Kong in April is worrisome. These jobless youths may appear to be content, but many are feeling lost after the devastating social unrest of 2019 was immediately followed by the deadly COVID-19 pandemic. But there is hope. 

Because entrepreneurship has been in Hong Kong’s DNA since the early years, the media should showcase successful startups that raised funds through crowdfunding platforms such as Kickstarter, Indiegogo, and Patreon. Young people can learn from each other about starting a business by raising funds on these platforms, and it can rekindle Hong Kong’s “can-do” attitude.

The future looks bleak in the minds of many youngsters. They are also dispirited by losing out to foreigners or mainlanders in the job market. University graduates in Hong Kong take home less than their counterparts 30 years ago, and 1 in 6 ends up in unskilled jobs.

Some youths are contemplating whether to emigrate to the United Kingdom and other developed economies, while others are struggling to find a way forward. To encourage and support young people to pursue careers in the mainland cities of the Guangdong-Hong Kong-Macao Greater Bay Area, the Hong Kong government has offered subsidies to enterprises employing university graduates from Hong Kong to work on the other side of the Greater Bay Area and earn a monthly salary of no less than HK$18,000 (US$2,318). 

Mainland cities in the Greater Bay Area have much to offer: a booming economy with a GDP of US$1.7 trillion, an efficient transportation system connected to Hong Kong, and leading technology companies such as Tencent and DJI. However, the take-up rate was not encouraging: Among 2,000 jobs offered by 275 businesses on the mainland side of the Greater Bay Area, only 6,000 Hong Kong youths applied.

Other than migrating or working on the mainland side of the Greater Bay Area, there is a third option: start an innovative business in Hong Kong. Because the youths lack proven records, it is difficult for them to raise funds from private investors. Besides Hong Kong’s Innovation and Technology Fund, many crowdfunding platforms have helped entrepreneurs in Hong Kong to turn their creative ideas into innovative products by raising money from potential customers without leaving the city.

For example, as of May, Kickstarter raised over US$5.2 billion with over 19 million backers supporting over 201,000 projects. A recent report stated that in 2019, over US$30 billion was raised through crowdfunding campaigns on different platforms globally to fund over 6 million projects. 

Besides donation- or equity-based crowdfunding, rewards-based crowdfunding project campaigns are the most popular. In a rewards-based project campaign, the entrepreneur (creator) sets a target amount to be raised before a pre-specified deadline by offering customers (backers) a menu of rewards based on different pledge levels. For example, consider a project campaign for a special T-shirt made out of natural fibers; the creator will reward a backer one T-shirt for pledging US$80, and two T-shirts for pledging US$144. The project is funded only when the total pledge amount exceeds the target by the deadline. In that case, the creator collects the funds, pays a 5 percent service fee plus 3 percent processing fee to the platform, and proceeds to produce and deliver the rewards to the backers as promised.

A rewards-based crowdfunding campaign essentially pre-sells a product to potential backers, and the creator will produce and deliver the product only after its goal is reached. Therefore, it shifts the financial risk from creators to backers. This explains why most campaigns fail: Kickstarter’s failure rate of fully funding a project is 62 percent in 2021 whereas Indiegogo’s estimated failure rate was around 83 percent in 2016.

To increase the campaign success rate, creators should take the following steps to engage, entice, and involve backers.

First, the creator needs to describe what is unique about the product to get potential backers’ attention. For example, after developing a prototype, a Hong Kong team launch a Kickstarter campaign to presell an AI-powered and auto-tracking phone mount, OBSBOT Me. By mounting your phone during your livestreaming, vlogging, or video call sessions, the phone will rotate automatically by following your movement through its sophisticated auto-tracking function.

Second, creators should offer early-bird discounts to get pledges from early backers. More importantly, early backers can provide feedback for the creator to modify and improve the product design to attract more backers later in the campaign. For example, OBSBOT Me offered a discount up to 47 percent off the regular price for early backers and received 199 suggestions including the capability for the mount to track more than one person during a recording session. The OBSBOT Me campaign with a US$50,000 goal was a huge success: It raised over US$400,000 from over 3,000 backers before the deadline.

Third, crowdfunding campaigns enable creators to solicit genuine feedback from early backers who are essentially investors. This form of co-creation can attract more backers to support the campaigns because they are involved in the design of the product that they will receive after the campaign. For example, when the creator launched a campaign with a 50,000 pound (US$69,850) target for a navigation device for cyclists, some backers suggested an extra wristband so that the device could be worn by hikers as well. The creator adopted this comment and modified the design, resulting in a successful campaign with over 63,000 pounds pledged.

Crowdfunding campaigns can enable Hong Kong youths to start an innovative business by raising funds from the crowd without leaving Hong Kong — a city that they truly love and can help re-energize economically with potential successes that rival their forebears’!

The author is a distinguished professor at the Anderson School of Management at the University of California, Los Angeles.

The views do not necessarily reflect those of China Daily.