How do you capture the attention of venture capitalist? Learn first-hand from Dr Lim Kuo-Yi, the ingredients to building a successful start-up business, that is attractive enough to get investor funding.
Dr Lim Kuo-Yi is the Founding Partner at Monk's HIll Ventures, an early-stage technology venture capital fund focused on Southeast Asia. Prior to Monk's Hill Ventures, Kuo-Yi was the CEO of Infocomm Investments, a $200M venture fund based in Singapore investing in technology start-ups globally. Kuo-Yi started his career as a consultant in the Boston Consulting Group based in Boston, MA. Kuo-Yi is a graduate of MIT with the bachelor, master's and doctorate degrees in electrical engineering.
Kuo-Yi: As a venture capital investor, we obviously look for companies and people to invest in and work with. We spend a lot of time building relationships. The venture capital business where you invest in a business is really about the people that are behind the business. So we spend a lot of time just working with people, knowing people. I drink a lot of coffee. You know, it’s an occupational hazard to be drinking a lot of coffee every day. I think the typical reason why a start-up company fails from the first 6 to 12 months is because of the people. It’s a lonely business to be a founder.
Even with 2 or 3 guys working together to start a company , when time is in the road, when you run a business, you realise: Wow, it’s not that sexy or romantic. That’s when you start having issues and tensions and pressures. So we spend a lot of time understanding the people before we decide to invest. That’s what we do as a VC, a typical day where you are involved in a lot of internal conversations about teams we have met, spending a lot of time going out there meeting companies for the first time or the tenth time, before we decide whether we want to work with them on long term.
Interviewer: Cool, I’ve always wondered what VCs do.
Kuo-Yi: I will play games, because you know, we got to learn how to the play games when we invest in a company. No, I’m just kidding.
Interviewer: Have you noticed that right now in the whole start up industry, a lot of investments and acquisitions are mainly in the info-tech area, the technology area. What do you think would be other areas VCs like yourself would be interested in?
Kuo-Yi: We typically look at areas of opportunities, how big the problem is and how badly do people need a solution to that problem. In a venture capital world, we call it a solution that is a painkiller or a vitamin pill.
Is your solution a painkiller or a vitamin pill?
Kuo-Yi: What’s the difference? A vitamin pill - if I don’t take it today I won’t die from it, but if I don’t take the pain killer I would really hurt from it for a long time. So we would look at places where there is opportunity and if there’s a need for pain killer. In Southeast Asia, that’s where we are focused on. I realized that a lot of the problem is very regional and very local and in emerging market. Think of ecommerce delivery, in Singapore your address is Blk 1xx Ang Mo Kio St 13 Unit 05-11. Its easy. If you deliver a package in Jakarta, the address is house on this jalan something something, next to a tree, on top of the store that sells satay. That is the challenge in emerging markets here. You have issues that you take for granted in the country like Singapore that needs to be solved. So we are looking for guys that are solving marked problems that’s immediate, there’s got a lot of impact and that could create a huge value in terms of revenue, money, all of that in general.
Interviewer: That brings us to a related question. In your data base, I have read that there are over a thousand start-ups in your data base. I can’t imagine how you sieve out the ones that would have value, like the ones that you have mentioned. How do you do that with a few thousands start-ups in your data base?
On the average I receive about 10 to 20 business plans a week. So imagine if you multiply that by about 50 weeks, that’s about a thousand a year
Kuo-Yi: I think it’s a difficult problem. The dirty little secret about the venture capital businesses is that we don’t scale very well. I get 24 hours a day, you have family, you have life, things that you want to do and you’re doing business plans every day. On the average I receive about 10 to 20 business plans a week. So imagine if you multiply that by about 50 weeks, that’s about a thousand a year. It’s tough and I would say we are still struggling with it. We tried to find patterns, we tried to find framework criteria and very quickly filter things out and zoom in to the ones that we think are going to be interesting. I obviously get it wrong a lot of times but we will try to get it right as much as we can.
We really get engaged and understand the business after multiple meetings with the same team. I would have known the business owner, the founder about 6 to 9 months before I invest. So the first coffee is telling the ideas of the business, then catch up again. Hopefully he has built something that we can talk about. That happens about 2 months later. 6 months later, he has built something, he has launched something, and he has his first 10 customers. Interesting, how was it like? Then talk about the 6 months and what he learned from that. You begin to understand the passion for the business and be comforted that the person is really into the business. That’s when you began to get a sense that “this is the right one to bet.”. It’s tough, I don’t have a good answer and I think everyone is trying to figure out a good way to do it. But it’s one of the on-going challenges for VCs.
Interviewer: That explains the amount of coffee you have been drinking.
Kuo-Yi: And the number of hours we have to stay awake.
Interviewer: Is there a café near your office? If not, I want to start one. It’s quite a good business.
Kuo-Yi: My personal assistant has a list of cafes I like to go to. All round the country and even the cities. Philippines, Jakarta, all this kind of places.
Interviewer: Recently in Singapore, we have seen a few high profile funding. Most recently, Grab Taxi, grabbed a lot of attention. I think some of you would have used it, personally I would use grab taxi as well. Do you think that’s repeatable in markets like Singapore? Obviously Grab Taxi’s market is a lot wider. Do you think it’s a repeatable success from this part of the world?
Kuo-Yi: I think so. I mean look at South-East Asia, any guess for the population for the South-East Asia? The size is about 600 million. If you think about the people who are in the middle class, able to spend a couple of thousand dollars for a tour or experience going somewhere, spending - it’s about 60 million people. To give perspective, the population of United Kingdom is 60 million. So it’s pretty sizable. Imagine that you can build a business there, the entire UK is willing to use it and spend money on it, it is a multimillion and possibly billion dollar business. So is Grab Taxi a fluke? I would say no, because the market is right, the people are spending, the people are using it.
Grab Taxi is probably one of the best examples of how much it cost to build a product - not a whole lot. But it’s the right time and the right place. So it’s absolutely possible to do that in South-East Asia, in Singapore, in Malaysia.
Interviewer: If I was 20 years younger, I will be asking this question. How do young entrepreneurs position or poise themselves, to attract your attention?
Kuo-Yi: Reach out. Network, go to meeting sessions like this to get connected.
Reach out and find the best way to articulate your business
Kuo-Yi: I’m not the only VC in town, there are many VCs around. But let me step back and say one thing, getting funding from a VC is not a mark of success. I repeat, If you get money from a VC, it does not equal success. There are many ways to fund and grow your business. If you have a business idea, and the VC says it’s not the right one for them, it doesn’t mean you’ve failed. It just means that you’re not the right investment type for the VC. So that shouldn’t be your goal, find the best way to articulate your business - why is it interesting, why do you think it would become big in a near term, I suppose to 10 years from now and I suppose you will get a VC’s attention.
Interviewer: I think another burning question from young entrepreneur is this - from your own experience, what’s a good business pitch or what’s the best business pitch you have ever come across?
Now, I said two things, market opportunity and the team to do it. I said nothing about the product, nor the technology, why?
Kuo-Yi: I think that the best business pitch is very succinct. It talks very specifically about the size of the opportunity, why is it big, what are the reasons as why it’s big fast, the main reason drivers. Then why is this person in the team, the best team to address it. Now, I said two things, market opportunity and the team to do it. I said nothing about the product, nor the technology, why? Things will change. We believe that if we meet good people going after a big opportunity, they will be successful, they will figure out the right product for it, the right data base if they have the base fir it and address it. So the best pitch for me is, opportunity and why am I the right person to do it.
Interviewer: You mentioned succinct. Elevator pitch, do it within 10 floors when the elaborator goes. Is that absolutely true?
Kuo-Yi: I think the idea is to really be clear and right. If you need to talk a lot in circles and with 5 power points before you make the point, I think you have lost the plot to the deal. It also reflects on your understand of the problem. It’s part of the deal, to be able to nail down in very simple sentence. So if you have not thought enough about it, you are probably not able to articulate it very well. So reflect on that.
Interviewer: Right. So it’s my café idea good enough? Cause it’s only one sentence.
Interviewer: What is a bad pitch?
An idea needs to see sunlight,
its the best disinfectant for bad ideas.
Kuo-Yi: A bad pitch is to come to me and say “oh I want to share an idea with you, but I cannot tell you right now because if I tell you, I’m afraid that everyone else would know or copy me”. An idea needs to see sunlight, its the best disinfectant for bad ideas. You need to bring it out and talk to a lot of people. Strengthen it, get feedback, stress test it, really get confident and talk about it right. To keep ideas to yourself because you are afraid that people will copy, is just absolutely wrong. You know, ideas are not the only reasons why the business is successful. So go out there, talk to people bounce your ideas off, share it broadly, write a blog about it and get feedback.
Interviewer: 2 years ago, in an interview with E27 in Thailand during your travel there, you mentioned (quote) “The advice to young start-ups is keep hassling and you have to keep the pressure on yourself to move faster.” Do you want to elaborate a little further on that?
Kuo-Yi: I think it’s really capturing a few elements of what it’s like to be a start-up founder. I mentioned one, it’s relatively lonely - thinking about a lot of problems, thinking about it a lot of time. Hopefully co-founders and good friends are in there with you. It takes a lot of energy, requires you to have this dynamo internally to keep yourself going because every day is a full day and it’s 24/7. You have to be able to keep your energy up and keep yourself going. You have to be yourself and courageous and look deep internally to find the will power to do it. It’s easy to say, but you need to be able to do that.
Hassling, because if your business is worth doing, guess what, there will be a few other people doing it at the same time. So you got to just keep running, because at any time you stop, someone is going to be beside you or right ahead of you. It’s pressure, but when you’re doing a business, you really feel strongly and really love, trust me, you will wake up every morning, jump up off the bed at 6 in the morning and say “I’m ready to fight another day”. It’s a fantastic feeling and you should try it.
Interviewer: There are some well-known platforms for start-ups to present themselves. You mentioned sessions like this as well, where start-ups get opportunities to network, to meet people. What other avenue would you recommend for those who have some ideas ready and want to present themselves?
I think one thing that is great about Singapore is …there is never a shortage of chance to run into people and share ideas.
Kuo-Yi: I am more focused on the IT. In the IT world, there are things called hackathons, these are the things that you spent 24, 48 hours in a room with a bunch of people who are building a product and try to build it in 48 hours, 72 hours. You have business people, ideas, you have technical guys who can build things to solve problems. After three days, the place begin to smell pretty bad, the guys don’t sleep and they don’t shower, they don’t brush their teeth, but these are great places to really find your team and get engaged with both investors as well as potential teammates. I think one thing that is great about Singapore is that there are a lot of meet-up sessions - both technical and well as business driven, almost on a monthly basis. So there is never a shortage of chance to run into people and share ideas.
Interviewer: Let’s talk money now. Besides looking for VC like yourself, what are the other avenues for start-ups to look for funding. What are the avenues available right now?
Kuo-Yi: The most common initial tranche of funding is what we called an “FFF”. Friends, family and fools. You go to your friends, you go to your family, and you go to a guy that go “Eh, that sounds good so I’m going to give you money”. So that’s how things start. People who believe in you, who really think you can crack it. So friends, family and fools are usually the first round for a lot of people. I think for Singapore, it’s the ability to get government funding, e.g. SPRING funding. You can at least get some initial capital to get off the ground before you start talking to angel investors, who are individuals who will to put some money - 10, 50, 100 thousand in each company progressively, before you talk to VCs like us.
Interviewer: Just few days ago, I read in the papers that Singapore Exchange (SGX) decided to partner with Clearbridge Accelerator to look at possible funding of small businesses and enterprises. What’s your view, is that going to open up a very different playground for young entrepreneurs and hopefully businesses in Singapore?
Kuo-Yi: It’s definitely promising. I think the Crowdfunding platform and Kickstarter etc, have demonstrated its possible for interesting projects to get funded and the internet has provided the ability for people from around the world to see the idea, like it and give you the funds to do it.
March 16, 2015