Imagine graduating from university with first-class honors and the highest GPA, only to launch a business that later fails. For many individuals, especially those who can expect to earn high salaries in the corporate world, entrepreneurship can be a significant opportunity cost that comes with greater risks.
However, this doesn’t stop entrepreneurs, particularly those who are impact-driven, from innovating solutions to social issues. For them, risks and failures are crucial chapters for growth. As challenges inevitably arise during their journey, they overcome them through risk management strategies and reflection on their failures. Throughout these experiences, entrepreneurs become more comfortable with failure.
It is essential to cultivate this resilient mindset in young people before they make the school-to-work transition, to equip them with the knowledge, skills, and mindset to transform failures into opportunities for learning. With this purpose in mind, our Impact Lab Course conducted a seminar for students on the topic of “Learning from Failure” on 24 March 2025, facilitated by Lucia Loposova, Demonstrator of the award-winning Impact Lab Course, and David Bishop, the Co-Founder and Director of the Foundation for Shared Impact (FSI).
Understanding Startup Failures: Global Insights and Local Perspectives
Lucia kicked off the seminar with an ice-breaking Mentimeter game, where she asked students to rate the top reasons behind startup failures. While the students believed that a flawed business model would rank as the primary reason, studies suggest otherwise.
According to statistics from CB Insights – a research firm that analyzes private company data and market trends to uncover investment opportunities – the top three reasons why startups fail are:
- Run Out of Cash / Fail to Raise New Capital
- No Market Need
- Got Outcompeted
While this offered a general overview of the major risks leading to startup failure, Lucia emphasized that geographical differences create unique challenges for entrepreneurs. Focusing on the business landscape in Hong Kong, she identified five specific barriers contributing to startup failure: high costs, limited funding, legal and administrative complexities, inadequate human capital, and a cultural resistance to innovation.
High Cost
Starting a business in Hong Kong can be challenging, primarily due to high costs. While the city offers a high quality of life and has a relatively easy business setup process, higher labor costs combined with prohibitive rental expenses can quickly drain a startup’s limited budget. “I can tell you that when I do the budgets for some projects of my company, GREEN Hospitality, the salaries are like 90% of the budget,” Lucia remarked, highlighting the need to consider these costs during financial planning.
Funding
Access to pre-seed funding or angel investment is limited, making it challenging to secure capital for building prototypes, which new businesses typically need to develop, alongside a customer base, before obtaining further funding. This poses a significant challenge for aspiring or early-stage entrepreneurs, for whom financial resources are particularly important during the initial development phase of their businesses. Also, private investors in Hong Kong tend to be conservative, preferring to invest in established projects with proven returns, which further limits opportunities for innovative startups to access pre-seed funding.
Legal and Administrative Complexities
While setting up a company in Hong Kong has become easier due to its growing economy and prevalence of free markets, legal and administrative complexities remain. Opening a bank account and filing documents can still be challenging, requiring extensive paperwork. In the past, it could take over six months to open a bank account for certain businesses, significantly delaying operations. However, the government is working on digitizing processes, which may lead to improvements in the future.
Human Capital and Cultural Resistance to Innovation
Hong Kong faces challenges in human capital, particularly in fields like engineering and IT, which are vital for innovation. There’s also a cultural resistance to change, with rigid structures and hierarchical models dominating companies. “There are a lot of hierarchical structures in companies here in Hong Kong, and there’s a certain way to behave and do things. This can strip us, impact-driven entrepreneurs, of the opportunity to be more creative, perhaps limiting our ability to do something out of the ordinary,” Lucia noted.
How To Manage Risks and Learn From Failure: Case Studies
After Lucia provided an overview of the challenges of starting a business in Hong Kong, David took students on a deep dive into cases that illustrate the volatile nature of starting a social impact business. He kicked off the session with a witty remark, “I cannot express how bizarre my life has become since I stumbled into the social impact space,” which set the tone for the failure stories that followed.
David also debunked common myths about success indicators in social enterprises, stating, “If you work in the social impact space, whether in Hong Kong or elsewhere, you’ll quickly realize that traditional markers of success don’t exist.” He then proceeded to discuss the three cases in detail.
Project Evergreen
This innovative project aimed to establish a revolving green loan fund to promote energy efficiency at The University of Hong Kong (HKU) by funding the transition to modern, efficient technologies. Unfortunately, it failed. David expressed that he was just as frustrated as he was embarrassed that this wonderful project didn’t come to fruition.
While several factors contributed to this failure, the primary reason was the lack of financial incentives for key stakeholders, such as the university departments that did not directly pay the electricity bills. Not being financially incentivized to minimize energy expenses, university departments opted to maintain the status quo by using outdated technologies instead of exploring cost-effective, sustainable solutions.
Despite its initial failure, David stated that he is working to restore Project Evergreen through his personal projects and is hopeful that it will succeed. “I’m currently trying to revive it, so maybe five years from now we’ll be talking about this as a delayed success.”
Social Impact Public Offering
David and his former students initially developed Social Impact Public Offering (SIPO) to create a new financing model for social enterprises, blending elements of crowdfunding with shareholder-like rights. The goal was to provide a transparent funding mechanism for organizations stuck between the traditional profit and nonprofit financing sectors.
However, SIPO faced significant challenges, including a lack of capital and market demand, leading to its failure. However, they pivoted from the underlying premise of SIPO to establish the Foundation for Shared Impact (FSI), which facilitates broad cross-sector collaboration and free sharing of resources, knowledge, and information to effectively address social issues. FSI has since emerged as a consequential player in the social impact space, demonstrating how learning from failure and redirecting the trajectory can lead to the birth of impactful organizations.
Learning from David’s Journey
Afterwards, students engaged in a breakout discussion session to come up with a risk management framework for the business case of failure of their preference.
Sumyyah Ahmed, a Business Development Intern at GREEN Hospitality, reflected on the seminar, “I was deeply inspired by David’s life stories and his journey to create a meaningful impact.”
She also noted how David’s stories emphasized the importance of perseverance and teamwork in overcoming setbacks. “One quote that resonates with me is, ‘Nothing worth having comes without a fight.’ This sentiment was reinforced as I engaged with my fellow students to tackle various challenges in our own unique ways. Our collaborative efforts highlighted the power of teamwork in achieving results. It’s a reminder that together, we can navigate risks and create positive change.”
Final Thoughts
Running for more than a decade now, the Impact Lab Course stays true to its founding mission of offering a safe environment for youth to learn from failure. Reach out to us at education@shared-impact.com if you would like to join us to nurture the effective leaders we need to build a better tomorrow.
*This blog post was drafted by Hsu Latt Shwe Yi, Communications and Marketing intern at the Foundation for Shared Impact (FSI) during the Spring 2025 semester of the Impact Lab Course.
