Grab ruling by Competition Commission

My thoughts on the CCS ruling :

1) if laws are broken, then fines are needed to have the right signaling effect. Companies and people must know that we take our laws seriously and that we are committed to building an economy with competitive markets that keep innovating and improving products and services for our consumers.

2) anti competition laws are in place to ensure markets are competitive so that consumers benefit. This means new players can enter and compete fairly. It does not mean all big dominant entities must be regulated. 

A sign of unfair markets will be exclusive tieups with customers or with key production supply fa actors. Another sign will be increasing sustained profits due to price increases and accompanied by a lack of innovation or improvement in offering. Another sign is the successful use of mandatory bundling to enter new markets. 

3) under this lens, it is clear grab and uber have broken laws and so deserve to be fined. But it is less clear if they are anticompetitive yet. A few reasons for this statement. Using the 3 signals mentioned above: 

a) exclusive tieup with drivers. Grab did try to do this and this is unfair as it will prevent new entrants signing up drivers and it is right for ccs to regulate this.  So on this count, it seems grab was trying to be anti-competition.

b) raising prices. grab is not even profitable let alone consistently profitable. I would argue that the cheap prices offered previously is a loss marketing approach made possible by private venture capital. It is common for 2 sided network effect markets to make big losses and scale until reasonable share is achieved. Then the player changes pricing to make profits. This is the nature of many tech companies and it would be unfair to fixate on the discounts and old pricing.

In terms of innovation, I would argue grab is still innovative and constantly improving their product and adjacent products. It’s early days esp since they are not profitable to look for evidence of anti-competitiveness behavior.

So on this count, I would argue grab is far from anti competitive and is merely doing what is needed as a business. And they are still improving their product which benefits consumers.

c) as for mandatory bundling. Grab is trying to be a platform for many other markets. Epayment, food delivery etc. but all these areas have strong competitors. I would argue grab is nowhere near market dominance in these areas.

4) Finally, there is also the issue of definition of market. By defining the market as private car hire only, it excludes taxis and other forms of consumer transportation. I would argue grabs funding and vision is about the entire consumer transportation market and not just private car hire. 

All in, my view is that ccs is right to enforce our laws, is right to control exclusive arrangements by grab but should not try to read too much in pricing yet until multiyear, growing profits start appearing with little product improvement. CCS should also keep an open mind to possibly consider taxis and other forms of transport as grabs competitors.

How to handle investors on your cap table

Over the years, in addition to running our own businesses, we have also invested in about 24-25 startups where Shao Ning & I play different roles. Board member, Advisor, Angel Investor, Syndicate Lead Investor, Joint Venture Investor and even chairman type investor. Two main factors are at play - the shareholding we own and the role we play for the startup.

We have also realized that different founders handle non full time shareholders very differently and the standards vary. Below are some guidelines on what we would think founders should consider and do for the various types of shareholders.  

1) Key Mindset

The key mindset is that your shareholders are your supporters. Get to know each of their motivations for investing and also their strengths in terms of how they help you. Then make full use of it. Remember that most people prefer to be told what is happening and investors do expect startups to face lots of problems. So don't avoid updating bad stuff or problems. 

Of course, be prepared for all types of feedback and help. Some will be good, some not so good. But remember you are the boss. So don't be afraid to ignore advice given but of course, you better hopefully be right to ignore the advice.

2) Compliance with all legal requirements

Management should always be clear on the company constitution and shareholder agreement terms. Should also ensure that all shareholder rights are complied with. Eg. if a mgmt decision requires a Board or Shareholder approval, it should be sought. An email explaining the reason for the action and also giving enough time to ask questions and approve. It is also helpful if the board has already agreed to the decision. 

The other key factor here is information rights. AGMs, audited annual numbers are usually bare requirements which all shareholders should be privy to. Some shareholder agreements will require more regular updates and some state that board minutes must be shared. Make sure these are all done.

2) Regular updates (even if not legally required)

Depending on the role and shareholding, it is best practice to keep your shareholders updated on how the business is doing. It also depends on the understanding you have with each shareholder. By and large....

a) Monthly updates with commentary & P&L, Cash for all board members and lead investors in current round and maybe even past round lead. Likewise JV partners for sure will want this. Usually do not need to update individual smaller shareholders (own <5%) but you may want to send this update to shareholders who have demonstrated value to you via experience or contacts.

b) annual shareholder meetings and report. Does not hurt to write a longer commentary to summarise year and plans for next year and circulate to all shareholders. All shareholders will appreciate this rather than just a AGM and audited accounts. You can even host a simple gathering for shareholders annually.

3) Corporate Actions 

This is trickier to do well. Founders must remember you wear 2 hats. One as mgmt and board director, another as shareholder. There are many types of corporate actions that i have seen being handled less than ideally. The key problem is usually lack of information and notice given. Then some smaller shareholders may feel being pressured or rushed or worse still being taken advantage of!

a) Share transfers/sale to 3rd party. 

Once the company is notified of this, it should immediately act according to shareholder agreement and notify all shareholders of price and quantity if there are ROFR clauses.  Also check if tag alongs will be triggered, if so ssulders should be notified not just about ROFR and prices, identity of buyer and seller but also reminded of their rights.

As a founder, you usually are not allowed to sell or tag, and your role is more to facilitate. It is usually helpful to state reason for sale and identity and intentions of the buyer.

Eg. founder parents selling part of stake to new or existing shareholder because they were earliest money and now need to retire.

b) New round of investment

Board will usually discuss and approve this activity, so major shareholders will know about this. Smaller shareholders should also be informed once a term sheet is signed. They should be aware of terms and also of their rights. Usually is pro-rata. It is best practice to share the terms and then ask each shareholder to reply if they intend to keep pro-rata.

The trickier part is here is how to handle terms which require old investors losing board seat and new share class having much superior rights to old share classes. You need legal advice for sure but you should also keep your old investors updated on all the "asks" by the potential investor. Some key areas of contention usually revolve around those where founders/mgmt are not so affected but older investors are disadvantaged.

- board seats & composition

- Redemption clauses for new investor 

- Liquidity Preferences, Coupons which only accrue to new investor

- Any special rights  (ROFR, Drag, even information) that accrue only to new investor

Be sensitive and never try to make your old investor feel you are so eager to do the deal and happy to ignore their rights. This is not only bad move (as they can probably block the deal) but also quite ungrateful to not consider your oldest supporters. 

c) Sale of company

This is a happy event. Again once term sheet signed, all shareholders must be notified of price, buyer and intentions and timeline projected. Keep shareholders updated on the sale process. Eg. timelines, due dilligence etc. If you do close the sale, do remember to call each of them to thank them for support or hold a thank you session for everyone.

d) Closing down of company

Reverse of above point but it happens. Doing this well is also a mark of a good founder. If you have been updating shareholders, it will not come as a surprise. Share thinking, timeline and be open to shareholders suggesting ways to keep things afloat. Sometimes, a hail mary may appear and a shareholder finds a way to get more money in or even to sell the company. 

This is a very tough thing to do. I find most founder run away and avoid shareholders. This kind of behavior is doubly wrong. Investors understand startups fail, so handle this episode well and depending on why startup failed, investors may still continue to support you. And plan finances properly so that the company can be closed down without debt. This is only ethical. It is morally wrong to continue to incur large costs when it is clear you are closing down.

4) Entanglement with govt, lawsuit

If the company has broken a law or is being sued, there is a responsibility to notify your board and act to remedy right away if it is with govt. Commercial lawsuits are a bit different and more nuanced as it it depends on whether the suit was frivolous or has merit.

5) What about confidentiality? 

I know some startups are worried that their investors have similar investments or worse still are not ethical and share the data they send to competitors. This is very possible as there are all sorts of investors out there. There are a few ways to mitigate this.

a) Shareholders agreement should have confidentiality clause. So there is legal recourse if need be.

b) Send what they need to know. Its usually very top level financials and general commentary. You dont have to give any client names, contract sums or marketing/sales funnel details. 

c) Don't take money from possible competitors and don't take money from VC who support multiple startups in same space and geography.

If you really have doubts about a shareholder, just revert back whatever legally required and dont share more. 

I hope the above is useful to founders and management. There is a lot that can be improved in the area of communications and expectation setting. If you find this useful and want to join a community of serious angel investors and get good dealflow, come register at http://www.angelcentral.co/membershipdetails

Life post retirement after 4 years

Please read my last 2 updates to get correct context.

http://limdershing.blogspot.com/2016/11/so-how-is-retirement-after-25-years.html

http://limdershing.blogspot.com/2015/01/so-how-is-early-retirement-at-39.html

So it has been almost 2 years since last update. During this period, I have actually gotten a fair bit busier. Here's a quick summary.

Family

======

Family front nothing much has changed, kids are 2 years older. Finding that i have to adjust my behavior when it comes to handling the 2 teenage boys vs the 2 young ones. Kids are a wonderful joy. Dad is still going strong and we spend quite a fair bit of time with him. Also put in effort to travel with entire extended family once a year for 3 weeks. 

Work

=======

Previously, i took on all types of work in equal proportions. Volunteer work with govt, startups, angel investing and also management of own portfolio. I found it not deeply fulfilling in the end because there is no central theme and there is nothing to bite deeply into that also allows me to engage with  people and have some form of control.

The main theme last 2 years has been that I ended up taking on helping startups as an investor and helping other investors as a central activity. Shao Ning & I invested in another 8 startups, trained 150 angels, and also continued to be strong proponents for giving back to the tech and startup ecosystem.  We also got inspired by other seasoned angels and decided to aim for 100 angel investments by the time we hit 65. And finally, early this year,  together with Shao Ning as the leader and another partner, we incorporated AngelCentral as an entity to get more angels onto this journey. Can read the AngelCentral background story below.

http://limdershing.blogspot.com/2018/03/angelcentralco-is-up-and-running.html

As a consequence of setting both the 100 startup investment and AngelCentral targets, I now find i am busy with work maybe 65% of my time and family and personal take up the remainder 35%. Also, my work is now far more concentrated and i am happy that way. So no more hoping for a second career as a novelist or volunteer. My 65% work time is now roughly : 

40% angel investing or AngelCentral work

10% Advisory roles with 2 venture type funds

10% Volunteer work with ITE, PEP, SWCDC, ACE forums etc.

5% Portfolio management

First 2 are all to do with tech and startup ecosystem.  So it becomes a nice meaty role where my wife and i are focused on investing and helping early stage startups and investors. Right now we have done almost 30 startup investments and early stage funds. By having significant skin in the game, it aligns things for us. On paper looks good, but i am reminded even Series B or C startups can fail and end up returning pennies on the dollar.  

So we are careful with rest of portfolio. To free up time and bandwidth, I tweaked portfolio approach to trade a lot less and build a core equity in ACWI index instead and have a decent amount of fixed income. 

Volunteer work remain the same amount. I tried to be open and so ended up taking on role in helping promote Skillsfuture with SWCDC and also promoting enterprise in govt PEP panel. Both have been fun so far and hopefully useful to society. But they are definitely not hands on roles.

Personal

========

I still am a lot more relaxed than during JobsCentral days. Also a lot fitter. Hardly fall sick nowadays. Had a health scare during my recent treadmill test but all is fine now. Wrote a post on feelings on FB. Short story is that health is most important - the rest is just us trying to have fun in this game of life. Exercise routine is about 6 times a week, 45 minutes per day. 3 days yoga with some cross training and 3 days jogging with some weights.

Travel quite a lot still. About 80 days per year. Its still something very interesting for me as i find new environments stimulate the mind very much. 

In summary, happiness wise is slightly better than 2 years ago update because i feel more purposeful and engaged with the startup work. There is an identity as a full time angel and ecosystem builder via AngelCentral.  At the same time, still keep balance for volunteerism, family and personal health.

Financial Comparison Sites

Compare88 has just raised 28m usd series C.

This is quite instructive for investors as a case study validating the strategy of picking markets that are ripe for disruption and large enough.

Back in 2012, we saw quite clearly that a financial comparison play would make sense in asean, esp sg. Banks were already paying way more than 100m a year to acquire loan customers and credit card customers in sg alone! Also moneysupermart in uk was already large, profitable and listed.

The thesis was to then compare the various nascent players back then and back the team we like most and which was looking for funding. I picked imoney in the end. 6 years on.

1) imoney dominant in Malaysia. Moneysmart in sg and compare88 in indo. Battle in PH ongoing.

2) all raised in excess of 10m. All have strong growth trajectory.

3) what did not turn out was to have the local strong player successful open another core market. So this part of picking best team and having them dominant region may not be so easy.

4) for early investors. All would have made money.

Takeaway: pick right space makes a lot of sense. Team really matter but be realistic that it could be local domination only. I suspect it is due to funding ease which creates a lot more credible competition.

Disclaimer: we are/were investors in jungle, Monkshill and imoney.

Feature on Money FM & Straits Times - It Changed My Life

Shao ning & I decided to do a bit more publicity about Angel Investing and how we are helping the ecosystem with AngelCentral. To that end, we did a radio interview with MoneyFM and also a full page story sharing how we ended up with Angel Investing as our new work since retirement in 2014.

You can read about the interview at :

Transcript of our interview with MoneyFM

And also the full article on Sunday Times at :

Sunday Times - It Change My Life

So if you are keen on angel investing and want to know more, visit http://www.angelcentral.co to find out. Next Angel Investing Workshop is on 18th August Sat 9am to 1pm.

And to close the loop on the article with regards to donating the price of the watch I ended up not buying. Below is my income tax assessment that shows the tax deductible donations in excess of $60k to registered charities.

Investing in ICOs - Accounting Angle

Was chatting with Ning about ICOs and we got stuck at accounting post ico. So did some research and below are some comments and link to good article.

1)  equity type tokens are cleanest but they are regulated by securities laws. So few ico do this. 

Utility tokens are liabilities and from investment standpoint it would appear that if token price plunges, its actually good for equity owners. Whereas if token price goes up a lot, equity holders get wiped out. Of course if we hold mix then we can have some inbetween configuration.

2) the above means it will be a nightmare to value the company in future and that creates big barrier for future round equity investors.

3) audit and ipo becomes very tricky and expensive. I think pre ipo auditors and accountants will need to charge a lot just to figure all this out properly.

4) using utility tokens to pay staff and founders is just the same as paying staff via an asset the company owns. 

Knowing above, I think it is risky and more complex to invest in the equity round of a pre ico startup. Basically need to expect more costs and less access to fiat capital in future rounds. But in exchange a successful ico gives you a lot more cash than a Vc round at similar stage. Of course, the ico still needs to execute well like any startup!

Side note : ico valuations are high because of crypto whales who made 100-1000 times returns via crypto bull. But that’s over for now. Believe it will come down. So I don’t think it’s a smart time to change fiat to crypto now.

https://medium.com/@gregorysimon/the-impending-risks-of-ico-accounting-has-avoiding-treating-initial-coin-offerings-as-equity-b23150f08ae0

How should Angels behave?

After interacting with numerous VCs, Angels and Founders, i realize that while there has been much improvement in the quality of our founders and some improvement in the VC quality, there is much lesser improvement in the Angel scene.  That is one of the reasons why we started AngelCentral.co - to build a community of competent and effective angels in ASEAN. So here is a list of key things Angels should do both pre and post deal. Actually many of the points apply to early stage VCs too.

1) Respect the founders!

Remember that the real stars of the show are the founders. Bearing this in mind helps with many decisions and where in doubt defer to the founders who are taking the most risk and pain. So any behaviour that is contrary to this is a big no no.

Eg. i have attended angel pitches where angels are eating dinner and not taking founders seriously during pitches. Or angels that badger founders over every small detail to the extent the angel is causing the founder stress. 

A good angel supports the founders as their earliest cheer leader. We help with thoughtful experience sharing, sometimes emotional burst outlet and can be a sounding board for the founders until they scale the business and raise professional money. 

2) Keep terms simple

Some angels try to add too many terms. Here are some i have seen :

a) Tranches. Some angels try to mitigate their risk by investing half first and half later upon certain milestones. While this is fine in principle, it would be easier to invest half now and have a pro rata right to invest next round. That frees the founders up to choose best investors and also frees your capital up too. We too, have been guilty of this in our earliest deals but have stopped since then. 

b) Board seats.  Don't insist on board seats unless you add good value and the founders want you.  I have heard of at least 2 good founders with successful companies that have to spend time and energy to kick out their earliest investor who has a board seat. What a waste of effort.

If the concern is on keeping up to date about the company, ask for information rights for the first few rounds. Information rights allow you to keep track of the company and so you can make better decisions subsequent rounds.

c) Nitpicking on agreements

We are not lead investors, we are angels who follow rounds or who do the earliest rounds. As such a simple preferred share structure or convertible note with cap will do.

What you do need to ask for as an Angel is pro-rata rights and information rights. The former so that you can continue to invest in successful startups as it is core to a successful angel portfolio that you maintain ownership as much as possible in winners. The latter so that you can value add with sharing, network and so that you can track how the startup is doing. This is critical and as an Angel you need the founders to agree to give you these terms for at least the next 1 or 2 rounds. Walk away from deals and VC leads that don't offer this. 

3) Be quick 

One of the key advantages of  Angels is that we move fast. A rule of thumb should be to make soft commits (agreeing to an investment pending lead investor and min capital raised) within 1-4 weeks of listening to pitch and receiving information. Most angels do this well. Also be quick to sign subscription and shareholder agreements. In terms of wiring money, do so once lead has done so.  No need to be the first here just in case lead investor pulls a fast one. 

Its the post investment phase that is less ideal. Post investment, you will need to sign resolutions, AGMs, exemptions etc. Please take this seriously and sign them promptly once you are satisfied the content is fine. Do not be an obstacle and make decisions on corporate actions quickly. 

4) Be useful

This is understand but its not easy to do well. We have over 20+ startup investments and i have found that the best way to be useful is to highlight from experience. Eg. many b2c startups severely underestimate the challenge of overseas expansion. They usually aim for 3-4 countries using Series A funds. Our JobsCentral and portfolio experience has been that its better to expand to just 1 more country first and base country mgmt depth better be strong!

Another area to value add can be in terms of network. Potential clients are best. Followed by potential investors. But make sure the contact is the right one! Don't try to be useful but end up wasting founder time.

Strategic or functional value is also good. We have shared in depth on topics like How to use Culture in Workplace, Sales Team management and metrics, Joint Venture overseas etc. All these help your founders learn faster and execute better!

5) Have right expectations!

Depending on the value of the angel, it is reasonable to expect that after the initial startup phase and once the startup has grown and raised more capital, angels play a much less important role. So unless you can continue to value add significantly in terms of network, capital or experience, it is reasonable to expect to be less engaged as time goes by. For myself and Ning, we know we are valuable knowledge/experience wise for startups up to maybe 10M gross profit and with about 100-200 headcount. Capital wise, we are usually following up to Series A round. Once beyond that, we are happy if the founders find time to meet us once a year just as friends, some updates and of course, we hope for the big exit when the startup finally has a liquidity event. Then actually, we may become useful again if the founders want to become investors! 

Of course, some of you may be strategic angels who run huge family businesses. In this case, you just need to have founders value you accordingly. Its either capital, network or knowhow. Show your value and insist on the rights that should be accorded to your value.

If you  like what you read, please visit http://www.angelcentral.co to sign up as an Angel today!

AngelCentral.co is up and running!

Some readers may know that Shao Ning & I have been actively organizing pitches and training Angel Investing workshops since late 2016. And just last month, we incorporated AngelCentral as an entity. Here's the journey and thought process - its almost like any startup story!

The AngelCentral Story

Ning & I have been angel investors since 2012 or so. We saw this as a way to give back to ecosystem and also to make use of our knowledge having built JobsCentral. Needless to say, we made many, many rookie mistakes of bite sizing, over optimism, poor due dilligence etc. By 2015, we worked out a methodology and start picking much better. If we just look at our last 15-20 picks since 2015, we are at 3.3X or about 68+% IRR (as of end July 2019) Only 1 failure with 1 exit and the rest either uprounds or new. We are now committed Angel Investors and have set for ourselves a 100 startup investment goal over the next 20-25 years.

We thought we should share our learning via Angel Investing Workshops. In 2017, we ran a total of 6 workshops and trained over 120 angels. Then, we thought since we met about 100+ startups annually, we can help organize pitch days for those whom we thought were good. Last year, we ran 6 pitch days for 19 startups and we had S$3+m in capital commitments.

Moreover, on a more macro level, we know that there are insufficient well trained angels in the region. Add on to the fact that tech businesses are booming in ASEAN and we have a classic growth area. Though i must say if we do our market sizing properly, the revenues at scale are not large.

However, we still feel this space needs help and from our pitches and workshops, we realize that we have tested out our MVP and it works very well for both startups and angels. So the next step is to actually start charging users and building a team.

Launching AngelCentral.co

Shao Ning as the boss/driver, came up with a vision and business plan for AngelCentral. AngelCentral's goal is to build a community of competent and effective angels in ASEAN. We will do so by offering quality deal flow and by creating learning platforms to widen investor knowledge. She then roped in Teck Moh who is a co-investor with us on some startups and whom we share similar investing philosophy.

Next, we all approved the budget and decided to invest S$200K of our own money to see if we can build up AngelCentral to be a sustainable enterprise.

First Month of Operations

AngelCentral incorporated in early Feb and since then we launched our membership tiers. Testing out a MVP really matters and accumulating goodwill initially helps. Within 1 month, we now have over 30 paying angels and corporates/VCs. We also organized our first well attended pitch day for 5 startups on Feb 23rd and have received 30+ decks from startups.

The hardest part turns out to be on the administrative and technical bits as we needed to build up the web site and forms. I must say the stack of tools available are amazing and much better in UI and features than what we had back in 2000 (basically non-existent).

We are also recruiting interns and key staff to help drive AngelCentral. So if you are keen on the topic of early stage investing and have great project management skills, email dershing@angelcentral.co with your CV.

Moving Forward

We have a goal to grow our membership base, double the pitches and funding amount in 2018. We also want to help educate angels with deep dives into legal and sector specific areas. Finally, we also want to provide syndicate structures so that Angels can invest together and with lesser bite sizes. If we succeed, we would have done our part to make AngelCentral more sustainable and also help improve our early funding climate.

So if you are an angel or a startup, do take a look at what AngelCentral can offer you!

For Angel Membership- https://www.angelcentral.co/angelinvestment
For Angel Education - https://www.angelcentral.co/learningevents
For Startups - https://www.angelcentral.co/startups