Macau legal and tax framework an advantage for startups

Luís Roquette Geraldes

Guest speaker at the Macau Young Entrepreneur Incubation Center (MYEIC) for a talk on financing startups, lawyer Luís Roquette Geraldes, a member of the corporate and commercial team of the law firm Morais Leitão Galvão Teles Soares da Silva & Associados (MLGTS) and head of Team Genesis on Venture Capital said to the Times, “Macau has very favorable conditions to become a startup hub.”

The legal expert noted that there are several factors that contribute to such an advantage. For example, “the Macau legal framework is a facilitator and also the cultural advantage, but above all the taxation system is the main incentive that can contribute as a significant incentive for the investors,” he said.

Another of the advantages highlighted by Geraldes to the Times was precisely on the geostrategic position of the region. “Just a few steps away [there are] great tech hubs such as Shenzhen and Hong Kong, which already have a great tradition and history in financing [solutions] and startups,” as well as other major startup world centers, such as Singapore.

In his opinion, Macau possesses this potential too due to “governmental [both local and central] interest in fostering these kinds of companies and, particularly in Macau, [because of] the interest in diversifying the economy.”

“Macau is the perfect test bench for startup companies related to the gaming industry,” he said. “I have no doubts that this will work.”

Questioned on what is missing for the development in the region of such a field, the legal expert said, “It is just a matter of time. New ecosystems need to mature first. In Portugal, we also took about eight years to develop and mature the ecosystem to the level that it is now.”

Besides the maturation, Geraldes also noted the importance of “putting Macau on the map of startups” and for that more than just money is needed.

“Create the Buzz. Put people talking about Macau as a startup hub,” he suggested, noting that when that happens, “it will develop very fast, I’m sure.”

In this context the furthering of links with neighboring regions and to the Asian continent in general would also bring added benefits to Macau.

During the session, the legal expert noted several relevant aspects that according to his experience are decisive in making a “startup idea work” and succeed.

Replying to a question from the audience regarding the difficulties of dealing with possible investors, he said, “you need to adapt and to adjust your speech to your audience, different kinds of investors [such as business angels or venture partners] search for different things and you must have different speeches for different types of investors.”

“Generally speaking, you better have different business plans regarding the type of investment you looking for,” he advised, adding, “in the case where one founder does not possess enough knowledge of the different ways and methods of financing or seeking investment, I would say maybe you need a co-founder that does; that speaks that language to be able to negotiate with the investors.”

On the topic of the importance of government intervention and the promotion or encouragement of startups locally, Geraldes said, “I think [Macau] is clearly pointing in the right direction and with the right attitude.”

In Geraldes words, “there is one thing that you need to make sure that you can create and that is a ‘buzz’, a PR [public relations] focused machine” that will contribute to highlight local status, “as you already do in other areas.” He noted that PR could play a huge role, giving the example of Portugal’s “Web Summit” that in his opinion, “made a landmark change.”

As for other advice, the legal expert recommended to “keep it simple” and not engage in very complex processes when doing initial rounds of investment.  In his experience, he has observed that badly structured initial rounds of investment are often responsible for the “killing” of startups in premature stages.

“The deals often involve more than one investor, which is normal. [But] what you need to make sure is that none of the investors by themselves have a veto right and you should clearly show from the start that you do not incentivize opportunistic behaviors [… such as] a misalignment of interests where [the investor’s] self-interests are put ahead of the company’s interests.”