Views from venture capitalists
On this note, BizHive Weekly takes key insights from renowned investors at an Investment Outlook forum during the Borneo Entrepreneur and Investment Convention ( BEIC) recently held in Kuching.
The panel features panelists all involved in venture capital. They include TBV Capital Sdn Bhd managing partner Andrew Tan, Janson Group chief executive officer (CEO) and founder Dr Janson Ang, KK Fund Pte Ltd founder and general partner Koichi Saito and Captii Ventures Pte Ltd associate director Low ZhenHui.
The forum touched on topics ranging from their take on investment opportunities in today's economy to the criteria for startups which are hoping to get allocations from venture capital funds:
Q: Where do you see investment opportunities in today’s economy?
Janson: I personally roll my profits into different diversifications of business. I believe in ' splitting my eggs into different baskets', so I heavily invest back whatever that I have gained from any of my businesses into more businesses.
This is one of the growth engines that I strongly believe in. On top of that, I also look into landbanks for acquisitions. I like to buy things cheap, keep it for long term, sustain it and probably cash out.
These are some of the two modules that I always believe in: reinvestment and also buying something or purchasing something that has long term values in the long run.
Andrew: The biggest opportunity now is the smartphone. This is where your biggest asset is. To me, it is simple, the biggest asset now is what I call ‘attention'. Attention is the new currency.
Whatever you could get people's attention, that is the best opportunity. We are spending too much time on smartphones and this is changing our lives on a daily basis – and this is where your business should be. That is where I see the opportunity.
Koichi: For us doing online financial technology, opportunities are in fintech and logistics. In fintech, especially, we are looking at online banking, online insurance and also the logistics. With these, the infrastructure in Southeast Asia is very much immature and that means there is an opportunity. We are looking at investments in that space.
Q: KK Fund recently did a joint venture with Sunway Group to create a new venture fund called the Sun SEA Capital. This Sun SEA Capital has a planned fund size of US$50 million which will invest in Southeast Asia and Hong Kong startups. How do you identify what to invest and what not to invest?
Koichi: As you know, Sunway Group is a huge conglomerate in Malaysia and they have a lot of offline businesses or traditional businesses such as a hospital, retails, hotels, and even an amusement park.
We would like to leverage on Sunway's assets into the startups. We are looking at O2O — offline to online, or online to offline. This is the same also with healthcare; as Sunway has a hospital so we would like to leverage the healthcare space with Sunway. The healthcare, O2O and retail (divisions)... so we are looking at startups that are related to the Sunway Group's business.
Q: What is the criteria for startups to be selected to get these investments?
Koichi: We are looking at founders' capabilities, we are always looking for good founders, but people ask me what I mean by a good founder? First of all, in the beginning, founders don't have anything but network and expertise in the industry from their past experiences.
Thus, the new venture should be related to their past experiences. Plus, if they have family business background, that would be a huge advantage. We call it an ' unfair advantage' in the industry.
Th e second thing we look at is commitment. Some founders ask me, ‘I am raising money, but we have three businesses, A, B and C, are you interested in one of them?' No. Founders should focus on only one business and they should put their whole mind into one project.I would like to see commitment in that respect. Q: As an observer of the market in Southeast Asia, I believe you have highlighted a few markets in the region as growth opportunities? Can you share your thoughts on that? ZhenHui: I think for us, because of our few years of experience investing across Southeast Asia, swe always end up looking back to Indonesia and Vietnam being highly attractive markets, especially when it's aligned with our investment mandate in fintech.
The population of these markets are huge: three times and nine times respectively for Vietnam and Indonesia compared to Malaysia. What makes them a lot more attractive are the high number of underbanked or unbanked populations in these markets.
For instance, we are talking about maybe sub-10 per cent or single- digit percentage credit card penetration rates in both of these countries. Even only one out of three people may have bank accounts in these countries.
This is a stark contrast with Malaysia whereby maybe about 80 per cent of the population have a bank account.
The winners that we see coming out of these markets would be players who are comfortable moving out of the cities where most of the urban populations are not what they are looking for.
They have got to go out to the tier two, tier three cities and the
towns where people don't even have access to banks, much less banking products and offer them the services that they need like lending or even a way to transfer money to one another.
This is where e-wallets come into play. The companies that can execute fast, scale quickly and capture the market — they are the ones who will emerge as winners in coming years.
Q: Previously, you’ve all dabbled in property and several sectors. How did you know to id en if yin vestment opportunities in these sectors and why did you go into these sectors in the first place?
Andrew: drew: I don't actually know what to invest — it is really a lot about the business acumen. To me, I focus a lot on trend, what is moving in the market. I see business from a very different angle, every business is on a ‘four-season' basis. There are times when it' s spring, autumn, winter or summer — for every different season of the business I will be doing something. Even in the same industry, I will do different activities.
For example, when my business is getting a lot of attention, I will heavily promote my business to the market and start closing sales. When times are bad, when it's ‘winter', during hibernation time, I start to work on my system, my database, and I try to follow up on things.
Then, when the business goes into the ‘autumn' season, I focus on preparing for my next campaign launch, for my next promotion, identifying the people that I am targeting.
During the ‘springtime', I am ready to promote heavily in the market.
To be honest, I have failed 95 per cent of my businesses. But the key thing is, everytime I go to ‘war', I come back 100 per cent safely.
There's no right or wrong. It's just that it takes a lot of hard work. If I set my goals, my vision would dictate my actions, I do not let my emotions take control of my actions. Things that I have invested in, I just give all out, I work with people around me. I am blessed to have a big team, teamwork is the thing that made me what I am today.
Janson: I strongly agree with what Andrew mentioned. When it comes to a business — whether it's a potential business or not — sometimes it is not easy to value. It is based on guts, feelings, sentiments and emotions. If you think it is good, it is good. If you think it's not so good, then don't take the risk. Basically, it is just that.
But of course, being an entrepreneur myself, we do exercise through this experience from the given time of all knowledge that we should be able to analyse whether this business can bring us to a further level or not, how is the scalability in terms of the business structure and the business model?
With all this aspects ( taken into consideration), it gives you a better indication of whether this opportunity is deemed fit for you or not.
That's where you decide, ‘what next?' and ‘how next to go about doing it?' It's very much basically up to you, because you're going to invest in this. You feel that it's highly potential, how you want to scale it and everything is very much determined by your own nature.
Q: With changing technology trends, what are your thoughts about the way this influences consumer trends?
Koichi: It's very obvious that people are starting to buy anything online but in Southeast Asia, I still believe the impact of offline is huge. I believe that most businesses cannot compete only online so companies should have close relationships with the offline businesses or traditional businesses.
That is why I am very excited with the fund with Sunway Group. Startups should leverage the big offline players and they should work with the offline players. In Southeast Asia, we still need some offline connection.
Andrew: Consumer behaviour is changing every single moment. I personally feel that 10 years down the road, I think 30 per cent of the kids will grow up with artificial intelligence (AI).
Whether you like it or not, AI will be part of your life. I think AI is going to influence people's lives, you need to start to look into smart homes or smart cities.
Kids will be exposed from talking to Alexa (Amazon) and Siri ( Apple), they will start getting into that kind of mode and this is what I look at where the future is heading to.
ZhenHui: To echo what Andrew has talked about, AI being the next step forward and what we see for financial technology in a market like Malaysia where people are pre-plugged into the banking system, the next step forward would be in the growth of value or investments.
And that's where we think AI is going to play a very important role because there is only so far that human experience and knowledge can take us but there's always the room for error and that can be refined with AI basically.