Wednesday, July 30th, 2008

Review of panel discussion: What are the next investing opportunities in new media?

Something very funny happened before Damon, my trusted sidekick, and myself headed to Swissotel for the iJam networking session (announcing launch of iMatch) yesterday. We happily walked towards Raffles City and go up to the ballroom in Swissotel. What followed was a series of confused hotel staffs not having a clue of any IDA event when we couldnt spot nor sniff a single clue of any IT geeks. It turned out we were at the wrong Swissotel (as Damon put it,”Oh there are more than 1 Swissotel!” and to which I replied,”*gasp*”). We were supposed to be at Swissotel, Merchant Court. Nice.

Ok so lets move on to discuss more serious “Series” - Series A, B, etc funding. These are terms use for different stage of fundings for startups by Venture Capitalists (sometimes jokingly nicked Vulture Capitalist - credit to my portfolio management professor, whose identity i shall not divulge :). First of all, I must say that it was a fruitful talk which was worth all the hassle Damon and I experienced prior to it. The panel boasts of a excellent concotion of local and international VCs and Technology experts - notable attendees: Ms Lauren Liang, Mr Pierre Hennes, Ms Ong Siu Leng. While they offer some pointers which many of us would have already known, they reinforce some beliefs in myself and offer new perspectives to what VCs want to see in young startups.

Some important takeaways buried deep in my head:

1) Early stage VCs look not just for a great idea. The assessment team plays an important part.

• How creative is the team?
• How is the synergy and energy of the team?
• The character of the team: Are they determined enough to walk the talk throughout? (without falling for the temptation of bigger money and job elsewhere?)
• Keith: An academia pointed out in a research that a trait of successful startups is that it has more than 1 founder, between 2 to 5, while 3 is the optimal number.

2) Localisation or Globalisation? The panel is quite divided on this. However, they all agree that it is important to focus on a segment of consumers on whatever choice you make. More importantly, get your first dollar in quickly, at least to assure your backers.

• Keith: Bear in mind Singaporeans being Singaporeans, we are a very unique breed of citizens compared to many others in the world (just hear our accent, our English, our love for durian, our loyalty to the ruling party :P). E.g. We can largely generalise consumer habits of Malaysians and Indonesians, or Taiwanese and Japanese, but what works in an already small Singapore market more often than not will not work for many other countries. Be prepared to customize radically when scaling abroad.
  

3) Be prepared to sacrifice, even if it means you being the CEO. When big brother wants to bring in someone more qualified and experienced to be the CEO, you should let go.

• Keith: Which is why, please hedge yourself with an MBA education (:

4) VCs require that the team has enough stakes nonetheless, so to ensure they remain motivated and responsible for their gains and losses.

5) Cold Calling the VCs may work, but networking would speed things up to establish a relationship between the VC and the Startup team. No one said it better than Mr Pierres when he said it is “like a life long marriage”. Relationships, or guan xi always work like a charm.

• Keith: I have to admit that I’ve never enjoyed networking, so I always go in with a mindset of making friends for learning, rather than other tangible benefit. It helps.

6) LIVE: One of the panelist said a rule of thumb of a successful product encompass the following attributes: Lively, Interactive, Visual, Experiential.

7) Me-Too Products - VCs generally do not require startups to be a from-scratch-innovation based company. Me-Too products can equally be, if not, more successful and astute investments for them.

8.) Are Singaporeans really that un-creative and un-innovative? Mr Douglas Abrams from Expara disagreed, and had seen his fair share of innovative local start-ups. Singapore, while not comparable to Silicon Valley at the moment in terms of the eco-system of funding, has good potential with our good infrastructure, supporting government schemes and growing amount of wealth (especially private) in Asia.

• Keith: I suppose the link to how growing wealth in Asia equates investing in Singapore startup is this: 1. Singapore being a financial hub for Asia 2. It is easier to manage startups in Singapore if the money comes to Singapore 3. Thus, with 1 and 2, go for local startups.

9) The question of IPO came up when a gentlemen asked what are the other exit points other than IPO and M&A? I didnt really get the answer other than a brief remark on convertible debt aka convertible bond (which I don’t think have to be these 2 exit points anyway), a panelist cautioned startups not to be overly confident and declare “I will be IPO-ing in 2 years”. No one can guarantee an IPO.

10) This has to be the best advice all day: You will always need more money and time than you think. So plan carefully and do not overspend. The worst mistake that can occur to a startup is to hold multiple series for extra funding when they realised they do not have enough. A business should be focused on the product, and not funding at all times.

Please feel free to comment on any points (: