Apps up­end­ing the world of com­mod­ity trad­ing

Bangkok Post - - ASIA | FOCUS - By Jas­mine Ng and Yoolim Lee in Sin­ga­pore

Even in Asia, where busi­ness is of­ten a fam­ily af­fair, the Sin­ga­pore-based tech startup SourceSage is un­usual.

Co-founder Jian Min Sim, 29, has all the hall­marks of the young en­tre­pre­neur — a for­mer ma­chine-learn­ing re­searcher with a mas­ter’s de­gree in en­gi­neer­ing from Ox­ford Uni­ver­sity. His part­ner, though, is his fa­ther, 63-year-old John Sim, who has three decades of ex­pe­ri­ence buy­ing and sell­ing com­modi­ties.

To­gether, they are try­ing to shake up one of the world’s more opaque trad­ing busi­nesses, start­ing with the US$19-bil­lion oleo­chem­i­cals in­dus­try, which turns liq­uids de­rived from palm oil into in­gre­di­ents for de­ter­gents, soaps and per­sonal-care prod­ucts.

The startup, launched in 2015, pro­vides mar­ket in­for­ma­tion and con­nects buy­ers and sell­ers of raw ma­te­ri­als. The son plots strat­egy as chief ex­ec­u­tive of­fi­cer. The fa­ther de­vel­ops the firm’s bro­ker­age and trad­ing busi­nesses. It’s al­ready turn­ing a profit, the part­ners say, and counts the com­mod­ity gi­ants Cargill Inc and Wil­mar In­ter­na­tional among 10,000 clients in 102 coun­tries.

“They had an un­fair ad­van­tage, com­ing from the in­dus­try in­side, as op­posed to peo­ple with a good idea based on what they read some­where,” said Paul San­tos, manag­ing part­ner at Wave­maker Part­ners, which has in­vested in SourceSage. “They had a con­vic­tion that this in­dus­try was re­ally messed up and needed a trans­for­ma­tion.”

For Jian, as he’s known among friends, his fa­ther is usu­ally the first per­son he sees ev­ery morn­ing and the last per­son he talks to be­fore go­ing to bed. The duo can’t re­mem­ber a sin­gle day last year they didn’t see each other and talk shop.

“Once he re­tires, his knowl­edge would be gone for­ever,” said Jian. “I wanted to cap­ture that, digi­tise it, and im­mor­talise John Sim as a brand.”

Many phys­i­cal com­modi­ties mar­kets are ripe for dis­rup­tion us­ing tech­nol­ogy. Un­like stocks, where prices are typ­i­cally de­ter­mined on highly reg­u­lated ex­changes, most niche com­modi­ties have avoided in­tense reg­u­la­tory scru­tiny be­cause of their rel­a­tively smaller value and the wide geo­graph­i­cal spread be­tween pro­duc­tion, ship­ping, pro­cess­ing and end-users.

SourceSage joins a grow­ing list of star­tups that are try­ing to shake that model up, mostly by tar­get­ing spe­cific com­modi­ties in a coun­try or re­gion, such as mys­teel. com (steel) and zhao­su­liao.com (plas­tics) in China, or Far­mLead (crops) in North Amer­ica.

The Sin­ga­pore startup gath­ers and ver­i­fies com­mod­ity prices from on­line and off­line sources and dis­trib­utes real-time data as well as weekly mar­ket anal­y­sis via its ap­pli­ca­tion, web­site and ter­mi­nal. The chat­bot Amanda helps users nav­i­gate the app. They can search data on chem­i­cals, oil and fats, oleo­chem­i­cals, petro­chem­i­cals, freight and lo­gis­tics and steel and iron ore, the app shows.

The com­pany hires i nde­pen­dent re­searchers for mar­ket re­ports, some from ma­jor price re­port­ing agen­cies such as S&P Global Platts and ICIS. Bloomberg LP, the par­ent of Bloomberg News, com­petes with Platts and other com­pa­nies in pro­vid­ing com­mod­ity-mar­ket news and in­for­ma­tion.

“It’s a ro­bust tech­nol­ogy plat­form that’s user-friendly and easy to nav­i­gate,” said Sathia Varqa, the co-founder of the news and data pub­lisher Palm Oil An­a­lyt­ics, who uses the app daily to reach SourceSage’s palm-oil re­lated com­mu­nity.

Still, SourceSage is a min­now in the global com­modi­ties mar­ket and Jian doesn’t see it as a ma­jor com­peti­tor to the es­tab­lished price-re­port­ing gi­ants. Rather, he en­vi­sions it as a plat­form for smaller play­ers who can’t af­ford to pay a lot for mar­ket in­for­ma­tion. He sub­scribes to man­age­ment guru Clay­ton Chris­tensen’s the­ory that dis­rup­tive in­no­va­tion starts at the low end of the mar­ket.

The startup charges cus­tomers a sub­scrip­tion fee, which starts from $800 per month for in­di­vid­u­als, and be­tween $3,000 and $25,000 for com­pa­nies. It also makes fees from bro­ker­age ser­vices. Even­tu­ally, it seeks to de­velop a com­modi­ties ex­change plat­form.

The fa­ther and son defy other startup stereo­types, too. In a packed of­fice of young staff in T-shirts, Jian wears a suit and calls his dad by his first name in pro­fes­sional set­tings. John is more ca­sual and jokes about how he’s los­ing his grey­ing hair be­cause of the stress of run­ning a startup at his age.

“This com­pany is a rare bal­ance of pru­dence and am­bi­tion,” San­tos said. “Jian is mild-man­nered, so it’s easy to over­look that there is grit and steel be­neath that drives him.”

John Sim be­gan his ca­reer at Exxon Mo­bil Corp in 1985, work­ing in a va­ri­ety of roles be­fore mov­ing to Salim Oleochem­cals in 1990, un­der the In­done­sian ty­coon An­thoni Salim. He joined P&G Chem­i­cals be­fore set­ting up his own shop, In­te­grated Chem­i­cals Pte, which matches pro­duc­ers with buy­ers glob­ally. John said he was quite con­tent run­ning his small, prof­itable busi­ness.

While build­ing P&G Chem­i­cals’ sup­ply chain in China, John met ju­nior man­agers at chem­i­cal fac­to­ries, many of whom be­came wealthy af­ter tak­ing over state-owned fac­to­ries.

“They re­mem­bered him as some­one who helped them, and they be­came our clients,” said Jian.

Other con­tacts John made dur­ing his ca­reer who have since be­come cus­tomers of the startup are Nadir Go­drej, manag­ing di­rec­tor of In­dia’s Go­drej In­dus­tries Ltd, and Tat­suya Imou, the CEO of Kenko Corp in Japan.

Fa­ther and son weren’t close when Jian was grow­ing up. John says he was a typ­i­cal Asian fa­ther of his gen­er­a­tion, busy build­ing his ca­reer and with lit­tle rea­son to talk to his son other than about his grades. He never ex­pected his son to fol­low in his foot­steps as he fig­ured it was an an­ti­quated in­dus­try.

One day in 2013, John asked his son to set up a web­site for his trad­ing com­pany. Jian re­sponded: “Why bother with a web­site when mo­bile apps are go­ing to be the fu­ture?”

John scrib­bled his work­flow on a piece of card­board and passed it to his son. They be­gan talk­ing about the “pain points” in the in­dus­try — how use­ful it would to have cheap, re­li­able, real-time data and a plat­form for buy­ers and sell­ers.

When Jian re­turned home af­ter study­ing over­seas, their re­la­tion­ship blos­somed. In 2015, they started SourceSage with S$50,000 ($38,000). Fur­ther back­ing came from the ven­ture cap­i­tal firms Wave­maker Part­ners and iGlobe Part­ners. Now SourceSage is in talks to raise $10 mil­lion to ex­pand.

Jian said work­ing side-by-side with his fa­ther has taught him many lessons, in­clud­ing the value of per­sonal con­tacts — meet­ing peo­ple face-to-face, rather than via Skype, and re­mem­ber­ing to take a small box of their favourite cook­ies when he vis­its.

“Not many peo­ple get to work with their par­ent in that prox­im­ity and in­ten­sity,” he said. “I rec­om­mend it.”

“Once [my fa­ther] re­tires, his knowl­edge would be gone for­ever. I wanted to cap­ture that, digi­tise it, and im­mor­talise John Sim as a brand” JIAN MIN SIM SourceSage co-founder

SourceSage has suc­cess­fully har­nessed the dig­i­tal skills of Jian Min Sim and fa­ther John Sim’s decades of ex­pe­ri­ence in the com­modi­ties trad­ing busi­ness.

SourceSage bills it­self as the “Ama­zon of mar­ket in­for­ma­tion” and counts the global com­modi­ties gi­ants Cargill and Wil­mar among its clients.

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