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FEBRUARY 7, 2000 VOL. 155 NO. 5

Cozy Up with The Incubator
A Hong Kong financier and his British partner hope to nurture the next big things

Step into Robert Kenny's office in Hong Kong's gritty Wanchai district and you might find him idly flipping a Frisbee. It's his way of making money on the Internet. "I'll do whatever it takes," says Kenny, a 32-year-old Briton whose company, Incubasia, nurtures young Internet entrepreneurs in a kind of upbeat corporate hatchery. "It can sometimes be a lonely experience being an entrepreneur," says Kenny. "If playing with Frisbees inspires our clients, then a Frisbee it is."

Kenny's firm is known as an incubator, critical to the development of Internet businesses. Think of such companies as corporate foster parents, nests where experts cultivate "Netrepreneurs" so they can make it on their own. Strong on tech but sloppy on marketing? Probe the incubator's contact book. Big on vision but clueless on execution? An incubator can find a manager suited just for you.

Cover: Dotcom Mania
As Asia's Internet start-ups race toward lucrative listings, investors have dollar signs in their eyes
First, Create the Hot Start-up:'s founders think they can make their red-hot site 'sticky' and profitable
Then Pray for The Angel: After a midlife career change, investor Jim Mellon is looking for a few good ventures
Next, Call in The Venture Capitalist: AsiaTech takes high-stakes gambles on Internet firms
Cozy Up with The Incubator: A Hong Kong financier and his British partner hope to nurture the next big things
Now You Are Ready for The Listing: Hong Kong debut endures rough ride on the market
Or, You Can Just Sell Out: Eschewing an IPO, an Indian entrepreneur gives up his portal for a quick pot of cash

Beijing Tries to Build Barriers
Regulating the Internet

Viewpoint: New Eras All Too dot.common
What's pumping up Internet-company valuations? Hot air

Viewpoint: The Sound of Asia Booming
In this online exclusive, Bob Davis, president and CEO of Lycos, gives his take on the growth of Asia's Internet economy

The Internet's most successful and best known incubators tend to be American. CMGI Inc. of Boston, Guy Kawasaki's in Silicon Valley and Bill Gross' in Pasadena, California have fostered more than 150 Net start-ups among them, hitting pay dirt when their young charges list on NASDAQ. CMGI, which has partnered in Asia with Hong Kong businessman Richard Li's Pacific Century group, has been called the Warren Buffett of the Internet, a nod to the Omaha-based investment master. It's not an idle comparison: CMGI now boasts a market capitalization of about $26 billion.

Kenny, who studied management and mathematics at Cambridge University, knows what it's like to nurture Internet start-ups. His Taiwanese-American wife is co-founder and CEO of, whose website dispenses sexual and love-life advice to forlorn Chinese romantics. Indeed, Incubasia is also its own start-up. It recently secured $10 million in "angel" money to pay the bills and invest in other start-ups.

Kenny co-founded Incubasia last September with Jonathan Cheng, a well-connected 29-year-old Hong Kong financier. Cheng, who earned an M.B.A. in Canada, sees himself as a pioneer in Hong Kong's Internet crowd, having already financed or founded four start-ups. There are two other firms now in the Incubasia hatchery, a classified-advertising website and a company that is developing its own version of instant-messaging technology.

Kenny says Incubasia is planning to nurture between 15-17 new firms over the next year and a half. "We are looking for start-ups who take a global view of the markets," he says, "whatever sector it is." That might seem like an ambitious agenda, but in a typical week, Cheng and Kenny vet roughly half a dozen business ideas. Clients are welcome to move into Incubasia's office and help themselves to logistical support (including free Frisbees). The founders also provide expertise and up to $500,000 in financial assistance. And they specialize in one of the Internet's most treasured commodities--hype. "Our job is partly to be the evangelist for start-ups," says Kenny. "We have to get the message out." In return, Incubasia receives an equity stake in each company, usually between 33% and 50% of the start-up's capital. Within a year, armed with business and technological know-how, clients are expected to leave the nest and set up on their own.

Not every start-up wants so much hand-holding. Some clients prefer money to logistical support (just as some incubators prefer fees to equity). But Kenny and Cheng argue that the services incubators can provide are essential. "We could make the difference between whether a start-up fails or succeeds," says Kenny. "Our interests are aligned with the 'incubatee.' We don't do well unless they do well." Befitting the lean, mean culture of the Net, Incubasia is a mere four-person operation. But its 280-sq-m office space is sufficiently large to accommodate clients who decide temporarily to move in. To help cope with the long hours, Cheng had a baby room built in the office for his seven-month-old child. "Previously, I didn't have the luxury to do something like this full-time," he says. "Now there's enough interest in the marketplace." Luckily for Kenny and Cheng, that interest is lining up outside their door.

Reported by Wendy Kan/Hong Kong

First, Create the Hot Start-up
Then Pray for The Angel
Next, Call in The Venture Capitalist
Cozy Up with The Incubator
Now You Are Ready for The Listing
Or, You Can Just Sell Out

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