Tap existing culture with ‘operational empathy’
The late legendary management guru Peter Drucker once said, “Culture eats strategy for breakfast.” For Novo Tellus, whose entire team comprises entrepreneurs, these are words of wisdom they can fully appreciate. Quite often, venture capitalists are too impatient in trying to introduce changes to the companies they invest in by bringing in supposedly experienced managers to help the founders change.
“When people hand $20 million to a founder to, say, build your team, you start hiring this guy from a big name company, that guy from a big name company. But you don’t create a culture in six months by hiring six functional leaders, it just falls apart,” says Loke.
Loke knows that while the companies he invests in are not perfect, there’s at least a company culture to bind the people together and make them chase after the same goal. “When marketing hates engineering, who hates quality, who hates field service, that’s a horrible place, right? People don’t get along, they don’t work and the whole place fails.”
When Novo Tellus invests in a company, it tries not to shift its business direction too drastically. Loke takes pride in what he calls “operational empathy” where “we move at a speed that’s comfortable for our leadership partners or management partners. And we try to challenge them to do more”.
Most private equity firms, Loke says, have a 100-day plan when they take a stake in a company. For Novo Tellus, the first 100 days are used to build trust and understand the company. “Once you form a common understanding of why things are done, you can then at least challenge, what else can you do differently? And this has to be bought in [by management], Without buy-in, there’s no execution,” he says.
Among other traits, Loke looks for resilience too. He recalls some of his early investments made in Silicon Valley companies went sour after the dotcom bubble burst, including one which ran out of cash six months after he invested. He persuaded his partners to stump up another US$2 million. That company was eventually sold for US$300 million when they exited the company.
The way he sees it, that company, which he declines to name, was able to pull through and eventually thrive was because of “the benefit of the power of resilience”, with the company management appreciating the need to “readjust costs, tighten belts, hunker down” and to gear up for the moment they could get up again. “That is what I’m looking for,” says Loke.
The concept of resilience should apply to the company even after Novo Tellus leaves the scene. Novo Tellus exited its investment in AEM on March 26, 2018, although Loke, with his personal stake of 1.98%, is staying on as non-executive chairman.
He believes that CEO Chandran Nair, a former senior executive at ST Engineering, is shaping AEM up to be a very good MNC. “We look for great platforms that we can grow and will survive even after we leave the company or exit the company,” says Loke.