“Being a Venture Capitalist in Singapore”
Recently I had the opportunity to submit my thoughts about venture capital and the startup ecosystem in Singapore at Underage Investor. If you’re a student or just someone who’s curious about things pertaining to finance – investing, on the job stories, etc – hop on over and take a look. I will be contributing to the blog about once a month so keep an eye out!
I reposted the article I wrote below. Enjoy:
A few weeks ago, Max wrote about his experience as a venture capital intern over in San Francisco and he touched upon doing research about emerging markets. Thanks to Safeer, I thought I might take the time and discuss what it’s like being a VC analyst in Southeast Asia – Singapore, specifically. In recent years, we’ve seen a huge growth in investors’ interests in “untapped,” “developing,” “frontier” and markets; but what exactly does Southeast Asia look like beyond the rural scenes in documentaries and 7% GDP growths? I’ll try my best to paint a picture of what the region looks like from the perspective of a VC analyst.
To put things in context, let me talk a little bit about the firm and internship. Since end of May (early June), I’ve been working at Golden Gate Ventures, a seed fund based in both Silicon Valley and Singapore. We’re industry agnostic with a primary focus in consumer internet start-ups (marketplace, mobile payment, SaaS, analytics and the likes) across Southeast Asia, HK, Taiwan and North America. The partners are serial entrepreneurs and investors with a ton of experience so we have a very start-up feel operation – no suit and ties. Since the day-to-day grind of due diligence, financial analysis and market research is pretty much the same across the board, I won’t bore you with those details. Instead, I’ll try to highlight the experience of working in a non-US marke and later on, the kind of start-ups you see here. For someone who has a technical-business background and a need to leave the terrible traffic of Los Angeles this summer, this internship has been an amazing experience. So here goes.
I get into the office around 9-9:30AM and I get off around 6:30-7PM. Additionally, on Tuesday evenings, one of the founders run Founder Institute, an incubation program, here in Singapore and I go sit in/help out with that operation. Yes, we start a little later than in the States as we are not bound by particular markets – last summer I worked in private equity in LA and went to work at 6:30-7AM daily to match East Coast investment banks and companies. One of the most important tasks as a VC is to have a good grasp on the market pulse – to do this, I spend my mornings reading up on overnight news, Twitter chatter and other tech blogs.
The Due Diligence: Asymmetric Information.
It’s been said, by many wiser VCs, that this career path is potentially a “lonely” one. I attest there is some truth to this and that the lonesomeness is really just one of independence – for me, I really like it since I get to focus on what I’m working on without the distractions of constant team meetings and whatnot. Whether it’s a due diligence report, financial analysis or research project, I always have something I have to work on. These past few days, I’ve been conducting due diligence on a Japanese mobile analytics start-up that we might be interested in. Due diligence here is interesting as there’s a huge lack of readily available information in this region. In contrast, in America, if I wanted “good” information on comps, I could pull up Angelist or Capital IQ and derive excel sheets worth of data. In Asia, information is scattered – we have to often do due diligence on the information itself.
While Singapore is the portal to rest of Southeast Asia (as one of the associate calls it, “Asia-lite”), it’s really not representative of the rest of the countries here. In general, media has a habit of lumping all the various countries in Southeast Asia together into a homogeneous “region” – one massive consumer landscape that could be tackled in the same way companies go about dominating America from East to West. The reality is that kind of holistic approach simply won’t work here – at the very least, an American solution that works in Singapore probably won’t work in Indonesia, Malaysia, Thailand, Vietnam and the Philippines – let’s not even talk about Myanmar. The socioeconomic landscape, the consumer habits, logistic infrastructures are just too different for a “one stop shop” solution – in Singapore, internet penetration stands at about 75% while in Indonesia, this number goes down to just 9%. For the internet entrepreneur who wants to capture the two markets will have to put together two separate game plans. As a VC, our job is to figure out how feasible (and how quickly) the strategies would be. If it’s too difficult or impossible, we probably won’t want to invest.
As such, I’ve spent a good portion of my summer putting together proprietary research for the firm.
The Booming Ecosystem: Coming Soon.
Perhaps the most exciting part of being a VC is interacting with entrepreneurs. This summer, I’ve had the opportunity to meet and sit in on a lot of entrepreneur pitches. As many finance blogs have pointed out, venture capital is an apprenticeship business and you learn most by spending time with the experts. I spent the whole day yesterday listening to pitches with one of the partners and studying how he advises the entrepreneurs. No number of business classes really prepares you for actual execution of those strategies – the VC “intuition” is really a simplified way of describing years of experience and pattern learning.
What do the start-ups in Southeast Asia look like? In general, they’re not as competitive as the Uber(s), Twitter(s) and whatnot we’ve seen too many of in the Valley. While there are some strong global start-ups here (German incubator,Rocket Internet, has some presence here) and our firm has invested in some very promising ones, most of the products and services that this ecosystem regularly pumps out are “clone” ideas. Remember when setting up your own eCommerce store before Shopify was the coolest thing in tech? Many entrepreneurs here are readily working on marketplace and eCommerce solutions that we had seen in the Valley circa 2007 (or even earlier!) – or mini-Amazon(s) that are looking to be acquired by the real thing. Most start-ups aren’t that feasible and their ideas target too niche of markets. In this region, a great investment exit is valued at about $50M. Compare this to the Valley, that’s almost “chump change.” In short, most ideas are terrible.
To be fair, it’s a matter of timing and landscape. As one of the partners pointed out to me, “in the Valley, if someone from Instagram wanted to do videos, they will jump out and make – Vine. Here, nobody has worked at IG so they can only base off of what Vine looks like.” In 5 or 10 years, this region will be drastically different and the ideas, hopefully, will be a lot more innovative. I believe that to be true – there are lots of hungry entrepreneurs. Furthermore, even back in California, for every great entrepreneur there are a thousand crappy ideas that won’t survive the scrutiny of the marketplace. To take a concept from the PE world, you don’t need to be “innovative” to make money.
I could write about venture capital, start-ups and fundraising for days on end but I’ll stop around here. If you want to know more, shoot me an e-mail or check out my blog. The takeaway is this – if you really love start-ups, technology, an independent work environment where you need to have your sh*t together and long-term investments, you might want to consider finding your way to venture capital. It helps to have some actual experiences in start-ups and be able to see beyond simply the numbers – in this particular investment segment, financial numbers provide only the bare minimum to the success of a company. It’s a great place to meet lots of very ambitious people, bathe in their energy and be involved in their successes. Good luck.