Edit : I made a mistake in Groupon multiple. Groupon trades at 2.5 times revenue not total sales transacted. Using sales transaction, Groupon trades at 1.4 times at current $12 shareprice of 8B market cap. So Dealguru sale at 50/38 = 1.3 times or so is quite fairly valued. It also means there is no obvious valuation upside for Dealguru holding on the ibuy shares.
This post follows from my post about Patrick Grove's Empire. Earlier this week, got news that iBuy ( a new vehicle which will list on ASX) has entered to buy DealGuru and 2 other deal sites in the region. The deal will form an instant A$70M revenue business and the CEO of the entity will be Patrick Linden from Dealguru.
This is again a good move from Patrick Grove of Catcha Group. He buys these companies via 1/3 cash and 2/3 share swap at 1 times past 12 months revenue and he will unlock value in their respective markets and then the ASX market will accord them a better multiple which will then result in win win for not just Patrick but for the guys who sold the business to him. Take note that Groupon is now valued at 2.5 times revenue past 12 months. So there is an easy 2.5 times capital gain here.
Whats more, because he intends to raise about 33M from IPO investors and probably some bond investors, this means he is using OPM for the combined entity. That is a cool Series B/C done via IPO route again! Really love the guy.
How about the guys who sold and what does it mean for the deal industry or ecommerce industry?
Well, i have only met Patrick Linden a long time ago before he started Dealguru. Came across as intelligent, nice and sharp person. Insead grad i think....
Anyway, he and his partner each own about 18% of the company, so they get S$2.25M cash first and end up owning about 4% of combined entity. I think it is a smart arrangement all ways. That way , they are committed to growing the business and if it grows 2.5 times, then Patrick and partner are looking at real money. For example, at present value, their stake is each worth about $7M give or that. But if share price increases 2.5 fold... then it is a deal worth about S$14M.
But they should take note that they need to replicate what iProperty did and they are up against much stronger players like Groupon, Taobao, Q100 etc. Basically there are so many big and small ecommerce players and deal sites are not focused yet.
So happy for Patrick and partner. And patrick linden has a new challenge to run as CEO with Patrick Grove as chairman. Rebate I guess will be happy since they own 62% and have a successful exit.
As for other deal site clones and other ecommerce players, this deal may not be that great. It offers a new competitor that is listed and regional. And it also values them at 1 time revenue which is quite a lot lower than the Series A rounds where i am hearing valuations of 1.5 to 2.5 or even higher valuations.
Feel free to comment and share!
Thoughts on startup scene in South East Asia. While effort is made to be accurate in terms of numbers, i may sometimes get the data wrong. My purpose is to share what i know and what i have learned over the past 23 years. Feel free to leave comments or to email me. And if you are keen to learn more about Angel Investing pls visit https://www.angelcentral.co/investors/membership
Tuesday, December 10, 2013
Monday, December 9, 2013
Patrick Grove's Empire.
Kudos to Patrick Grove again. He is truly a strong deal maker. For readers who do not know Patrick's background. I will cover the iBuy and Dealguru thoughts in another post. But first...
Patrick was from the first dot com boom and started this general portal called Catcha which was meant to be like Yahoo for SEA. They raised money and were all geared up for IPO. But market crashed in April 2000 and they missed the window. What happened next is quite a tough period as Patrick and partners bought out their investors and pivoted the business into an English magazine publisher based in KL. They grew that until some in 2007 or 2008 when he went back into the dot com area with his purchase of iProperty in malaysia and at the same time pushing the malaysian Catcha Media into becoming a reseller for MSN and other digital media properties.
What happened next is what i admire him for.
He somehow managed to string together a bunch of in principle aquisitions and concurrently IPO on ASX the iproperty group. Between 2008 to 2013, the company used Other Peoples Money from IPO, European investors and rights issues to expand regionally with mixed results. iProperty is super successful in Malaysia but has lost out to Propertyguru in SG. Current market valuation is A$355M or about S$400M. iProperty sales is at A$15M last 12 mths with a loss of 1.5M or so. Mostly winning in MY market.
He is a significant shareholder via Catcha Group which owns about 23% of iProperty. He is majority shareholder of Catcha group. So what he did is to structure the initial deal, build up a team of good executives from REA group (top Australian portal) and then get the business to work in this region. 1.5M loss is not a big deal if iProperty can continue to grow and scale. And their losses are reducing. So to outside investors, he has proven his ability to deliver to shareholders so far.
Also to note, this market valuation i am sure has helped Propertyguru get the price they wanted for their deal. So it is not always a bad thing that your competitors get good deals!
The next thing he did was to list the malaysia Catcha Media at a RM100M valuation. Much lower valuation since the market is KL and also magazine publishing is less sexy. In testament to his deal power, he has recently merged it with Says.com and has gotten the Says guys to try to grow this business well in MY. But i think the lesson is that KL investors value dot coms a lot less than in Australia. I believe investors right now are still valuing Catcha Media below IPO price.
The next deal he did was last year when he entered the car market but IPO yet another low revenue and profitless firm on ASX leveraging on his success with iProperty. iCarAsia is currently doing what iproperty did 5-6 years ago and trying to build up car portals in SEA. Market cap of A$71M on barely annualized 1.5M revenue!!!!
Whether iCarAsia can become another iProperty really depends on execution next few years. Will be interesting to watch.
So what he has effectively done is to seed fund privately and do his series A, B,C via the stock market. The ability to IPO at Series A/B round is where his magic is.
Most recently, he created a new company to enter ecommerce space via acquiring key deal sites in 3 countries. Will talk about iBuy in another post.
Patrick was from the first dot com boom and started this general portal called Catcha which was meant to be like Yahoo for SEA. They raised money and were all geared up for IPO. But market crashed in April 2000 and they missed the window. What happened next is quite a tough period as Patrick and partners bought out their investors and pivoted the business into an English magazine publisher based in KL. They grew that until some in 2007 or 2008 when he went back into the dot com area with his purchase of iProperty in malaysia and at the same time pushing the malaysian Catcha Media into becoming a reseller for MSN and other digital media properties.
What happened next is what i admire him for.
He somehow managed to string together a bunch of in principle aquisitions and concurrently IPO on ASX the iproperty group. Between 2008 to 2013, the company used Other Peoples Money from IPO, European investors and rights issues to expand regionally with mixed results. iProperty is super successful in Malaysia but has lost out to Propertyguru in SG. Current market valuation is A$355M or about S$400M. iProperty sales is at A$15M last 12 mths with a loss of 1.5M or so. Mostly winning in MY market.
He is a significant shareholder via Catcha Group which owns about 23% of iProperty. He is majority shareholder of Catcha group. So what he did is to structure the initial deal, build up a team of good executives from REA group (top Australian portal) and then get the business to work in this region. 1.5M loss is not a big deal if iProperty can continue to grow and scale. And their losses are reducing. So to outside investors, he has proven his ability to deliver to shareholders so far.
Also to note, this market valuation i am sure has helped Propertyguru get the price they wanted for their deal. So it is not always a bad thing that your competitors get good deals!
The next thing he did was to list the malaysia Catcha Media at a RM100M valuation. Much lower valuation since the market is KL and also magazine publishing is less sexy. In testament to his deal power, he has recently merged it with Says.com and has gotten the Says guys to try to grow this business well in MY. But i think the lesson is that KL investors value dot coms a lot less than in Australia. I believe investors right now are still valuing Catcha Media below IPO price.
The next deal he did was last year when he entered the car market but IPO yet another low revenue and profitless firm on ASX leveraging on his success with iProperty. iCarAsia is currently doing what iproperty did 5-6 years ago and trying to build up car portals in SEA. Market cap of A$71M on barely annualized 1.5M revenue!!!!
Whether iCarAsia can become another iProperty really depends on execution next few years. Will be interesting to watch.
So what he has effectively done is to seed fund privately and do his series A, B,C via the stock market. The ability to IPO at Series A/B round is where his magic is.
Most recently, he created a new company to enter ecommerce space via acquiring key deal sites in 3 countries. Will talk about iBuy in another post.
Monday, December 2, 2013
When to give up
I had a rather disturbing tea session with a passionate startup entrepreneur 1+ months ago. We chatted for about 2 hours and it was revealed that he has basically thrown in everything he has but the kitchen sink in terms of his personal resources and energy. The business has pivoted 2 times and he is hoping that 3rd time lucky this dec. Basically has enough cash for 1+ months of expenses left. Core team has changed a once over last 2+ years. And there is still no traction. He was almost in tears when he shared his experience and that is when i knew he was probably being very honest and perhaps it was a form of release to talk it out too.
Now I usually try my best not to tell people what to do because i believe there are many routes to success and sometimes there is no one size fit all answer for startup decision making. What i like to do is to share what happened to me and situations i know well and let the listening decide if i am relevant in what i am saying.
But in this case, i found myself quite sure he should give up. Here is my reasoning for when an entrepreneur should give up on a startup, take some time off, get a corporate job, regroup before deciding to startup again maybe 1or more years later.
If one or more of the below fit your circumstance, perhaps you should consider giving up.
1) KPIs for traction not happening despite 1 or 2 or more pivots. Usually a startup will set usage metrics for each month and key ones for every 3,6, 12 months. If you are not even remotely hitting these metrics (read 50% or more) in spite of spending on marketing and tech to iterate and improve, then perhaps the market is just not there as you envisage it.
2) Core team leaving in droves or all gone. Worse still, key founding partners change. This is a clear sign that the faith in the vision is gone. It can be due to (1), it can be due to your personal leadership style. Either way, it means you will have more problem getting the business growing. You will be spending time on people hiring, mgmt, on boarding and generally HR firefighting issues.
3) Pivoted more than twice with no results. And duration is more than 2 years. Personally, i would give anything up to 1.5 years for a startup to show some results. Results can be funding, revenue, traffic metrics etc. But i put it as 2 years as some people may be more patient than me.
It is also telling that in our digital space, 2 years is a very long time. eCommerce exploded in the last 2 years, so assumptions made in 2011 and probably being revised and pivoted now in 2013.
I know this can be contentious as there are companies that succeeded only after 2 years. But i think it depends on where you are at in (1), (2). If you are just getting by, some revenue, good team, then you have runway to hang on and try more times.
4) Mental and physical health facing major issues. If you are falling sick all the time, unable to concentrate, cannot sleep well, basically body going to hell and losing your mind, i think it is time to throw in the towel. Entrepreneurship is a great experience but not at the expense of your life. It is very selfish to expect your loved ones to suffer so greatly with you.
Feel free to comment and add on.
Now I usually try my best not to tell people what to do because i believe there are many routes to success and sometimes there is no one size fit all answer for startup decision making. What i like to do is to share what happened to me and situations i know well and let the listening decide if i am relevant in what i am saying.
But in this case, i found myself quite sure he should give up. Here is my reasoning for when an entrepreneur should give up on a startup, take some time off, get a corporate job, regroup before deciding to startup again maybe 1or more years later.
If one or more of the below fit your circumstance, perhaps you should consider giving up.
1) KPIs for traction not happening despite 1 or 2 or more pivots. Usually a startup will set usage metrics for each month and key ones for every 3,6, 12 months. If you are not even remotely hitting these metrics (read 50% or more) in spite of spending on marketing and tech to iterate and improve, then perhaps the market is just not there as you envisage it.
2) Core team leaving in droves or all gone. Worse still, key founding partners change. This is a clear sign that the faith in the vision is gone. It can be due to (1), it can be due to your personal leadership style. Either way, it means you will have more problem getting the business growing. You will be spending time on people hiring, mgmt, on boarding and generally HR firefighting issues.
3) Pivoted more than twice with no results. And duration is more than 2 years. Personally, i would give anything up to 1.5 years for a startup to show some results. Results can be funding, revenue, traffic metrics etc. But i put it as 2 years as some people may be more patient than me.
It is also telling that in our digital space, 2 years is a very long time. eCommerce exploded in the last 2 years, so assumptions made in 2011 and probably being revised and pivoted now in 2013.
I know this can be contentious as there are companies that succeeded only after 2 years. But i think it depends on where you are at in (1), (2). If you are just getting by, some revenue, good team, then you have runway to hang on and try more times.
4) Mental and physical health facing major issues. If you are falling sick all the time, unable to concentrate, cannot sleep well, basically body going to hell and losing your mind, i think it is time to throw in the towel. Entrepreneurship is a great experience but not at the expense of your life. It is very selfish to expect your loved ones to suffer so greatly with you.
Feel free to comment and add on.
Wednesday, October 16, 2013
Brandtology Deal Thoughts
(Made some amendments to data about Brandtology numbers below after reading FY2012 statements and also included more about people behind it).This is one of the stories which have been quoted quite widely in media and rightly so! Here is what i have gathered.
Eddie Chau and a few other founders which include Kelly Choo and Roger Yuen of Clozette started Brandtology back in 2008 with great foresight that with social media growing, there will be a strong demand for media monitoring of these platforms coupled with analytics tools. From what i can see, they raised about 1.75M in ordinary share capital and built up the business. Then in 2009, they got funded by Walden Seed Fund for 2M for a 25% stake. So just 1 year later, the firm was valued at 8M post money.
Eddie is a seasoned entrepreneur having already built up and sold e-Cop prior to this venture. His other more outward facing cofounder is Kelly Choo who is a frequent startup event speaker. Nice guy whom i met before as co-panelist. Roger Yuen is probably an investor with about 2.5%. I chatted with Roger in his office at Clozette. Nice "qianbei" who has been in tech much longer than me.
Brandtology was sold to Media Monitor a largish private firm based on out Australia for an undisclosed sum in Feb 2011. This is a short 2 year later. From what i can see, it is a partial sale of about 50% for the working shareholders and a complete exit for Walden. That makes sense since revenue for FY ending March 2010 was only 1.4M or so and clearly acquirers were buying a future story and they need the team and not the VCs. And so that readers do not think this is a skyhigh valuation deal, i believe in 2011, 2012 revenue probably grew dramatically because by FY2012, revenue is at 9.3M or some with 1.3M profit if i can recall what i read accurately. So about 5-7 times sales is not unreasonable.
Shows us that keeping management around and incentives via earnout equivalent structures probably makes a lot of sense and Brandtology current numbers look good. According to their site, they have 200 staff now. Win win all round. Media Monitor (now called iScentia) gets a good growing company whose revenue x8 in 2 short years, Eddie and shareholders got to exit 5-6M in total and still retain half their stakes for upside.
Of course, valuation must have been above 8M for Walden to exit. Sale valuation should be about 12-15M to give a min IRR of 25% for the 2 years. This is pure speculations since we cannot obtain actual sale value publicly. Also, shareholding for the company to me is quite reflective of this kind of deal. Eddie had about 42% stake after Walden came in. I always believe in the CEO/key entrepreneur/owner approach whom the buck stops at. That person needs about min 35% and up. His 2-3 other individual shareholders/founders like Kelly have much smaller stakes (5+%). Whether that incentivises them is another story but my take is that salaries can always help to mitigate a lower equity stake for the cofounders. But to me 5% is about bare min but we have to pay these co-founders properly or increase their stake with time.
What is interesting in this deal is that Media Monitor too has undergone much change. They themselves have been acquired by a PE fund and integrated together with a bunch of other media assets. It will be interesting to see how the PE guys play this one. IPO? Trade Sale? Time will tell. Hopefully the Brandtology team can participate one more time in that exit given that they kept about 50% stake.From what i can see, as of 2013, they are still holding the stake.
Eddie Chau and a few other founders which include Kelly Choo and Roger Yuen of Clozette started Brandtology back in 2008 with great foresight that with social media growing, there will be a strong demand for media monitoring of these platforms coupled with analytics tools. From what i can see, they raised about 1.75M in ordinary share capital and built up the business. Then in 2009, they got funded by Walden Seed Fund for 2M for a 25% stake. So just 1 year later, the firm was valued at 8M post money.
Eddie is a seasoned entrepreneur having already built up and sold e-Cop prior to this venture. His other more outward facing cofounder is Kelly Choo who is a frequent startup event speaker. Nice guy whom i met before as co-panelist. Roger Yuen is probably an investor with about 2.5%. I chatted with Roger in his office at Clozette. Nice "qianbei" who has been in tech much longer than me.
Brandtology was sold to Media Monitor a largish private firm based on out Australia for an undisclosed sum in Feb 2011. This is a short 2 year later. From what i can see, it is a partial sale of about 50% for the working shareholders and a complete exit for Walden. That makes sense since revenue for FY ending March 2010 was only 1.4M or so and clearly acquirers were buying a future story and they need the team and not the VCs. And so that readers do not think this is a skyhigh valuation deal, i believe in 2011, 2012 revenue probably grew dramatically because by FY2012, revenue is at 9.3M or some with 1.3M profit if i can recall what i read accurately. So about 5-7 times sales is not unreasonable.
Shows us that keeping management around and incentives via earnout equivalent structures probably makes a lot of sense and Brandtology current numbers look good. According to their site, they have 200 staff now. Win win all round. Media Monitor (now called iScentia) gets a good growing company whose revenue x8 in 2 short years, Eddie and shareholders got to exit 5-6M in total and still retain half their stakes for upside.
Of course, valuation must have been above 8M for Walden to exit. Sale valuation should be about 12-15M to give a min IRR of 25% for the 2 years. This is pure speculations since we cannot obtain actual sale value publicly. Also, shareholding for the company to me is quite reflective of this kind of deal. Eddie had about 42% stake after Walden came in. I always believe in the CEO/key entrepreneur/owner approach whom the buck stops at. That person needs about min 35% and up. His 2-3 other individual shareholders/founders like Kelly have much smaller stakes (5+%). Whether that incentivises them is another story but my take is that salaries can always help to mitigate a lower equity stake for the cofounders. But to me 5% is about bare min but we have to pay these co-founders properly or increase their stake with time.
What is interesting in this deal is that Media Monitor too has undergone much change. They themselves have been acquired by a PE fund and integrated together with a bunch of other media assets. It will be interesting to see how the PE guys play this one. IPO? Trade Sale? Time will tell. Hopefully the Brandtology team can participate one more time in that exit given that they kept about 50% stake.From what i can see, as of 2013, they are still holding the stake.
Sunday, October 13, 2013
How to get good advice/insights from others?
This is a tough question which I encounter quite often. Entrepreneurs frequently feel very lonely and we sometimes do not know how to even start handling the problems that are in front of us. Some entrepreneurs swear by having a formal or informal board of advisors. Others say getting advice is a waste of time. I will share my personal experience on this topic and readers can draw their own conclusions. I believe it is not a waste of time but we need to have the right mindset and approach. Learning this way frequently has high impact to my business and helps me be more confident.
1) My business never got a formal set of advisors. We did ask around back in 2001 to see if anyone would join us formally but in the end it did not work out. I remember asking a politician and a GLC MD this and they both turned us down on grounds that they were too busy. Now on hindsight, i think they were right to turn us down for varying reasons.
a) I did not attempt to align them at all. No talk of equity, no clear idea how they can add value. Not that i think it makes sense to offer advisors equity except in very special cases. But i did not know that then.
b) I like to think they liked us and were self aware. They new that their value add to our work was minimal. Both were not business owners or business coaches, so I think from their point of view, they also wondered what kind of advice or coaching could they value add with.
2) The next time i got great learning was in 2003/4 when i got to meet Mark Chang who founded Jobstreet. Obviously as competitors, he did not advice us anything but what i learned just interacting was how an entrepreneur should think and how a business is run. We must have spent at least 40 hours interacting with him.
This is an important learning point. Frequently, the best advice i have gotten is from just paying attention to what other people do and say. From there, i will notice key attitudes and mindsets they have which point the direction to where i should go. Most recently, we paid a visit to Patrick of catcha at his office and i went away with some good food for thought on the psychology of Snr Mgmt.
3) Another example of learning is when i visited eFusion office back in 2007 or so. Looking at how metric driven that business is (they had whiteboards lining almost all the walls of the office!), gave me the advice i needed. Of course, this was reinforced by what Sam shared and it pointed and confirmed for me that my business needs to be ultra metric driven. This was before it became a trend.
4) Advice can directly sought. I have experienced this in an impactful way. When i was selling the company , i got in touch with an old friend who has done a fair bit of M&A work and whom i knew was a brilliant fella (scholar, mckinsey etc). Because as entrepreneurs, it is usually the first time we are encountering many concepts and terms like earnouts, reps and warranties etc, it helps to level the playing field by getting experienced professionals on our side. Together with a good lawyer, both proved to be invaluable in understanding the entire due diligence process and in negotiating the S&P agreement.
But what they were of little help with was on mindset to have during this process. Our business had no VCs, shareholders were almost all family and 1 CTO old friend. What helped me was a group of business owners whom i meet regularly. Their sharing on similar situations and view points helped tremendously.
5) Advice & insights can also be garnered from reading online and print literature and connecting the dots with our own experience. Recently, i have been reading many HBR case studies and books by Harvard professors (my better half is taking a course there). I am the type of person who learns by reading, so i actually find that advice and insights can come very much to me via reading good quality books.
For example, "The Man in the Mirror" by Kaplan is really a good book that has much insight on leadership. And by connecting the dots with own experience, it is as good as speaking with many advisors in my opinion.
So looking at the above cases, there are a few learning points.
1) Advice seems to be best for me when it comes from fellow business owners who are more advanced along their company development. This is extremely important. Learning from the snr management team of an established business is different from learning from the actual owner. Esp if the snr mgmt in question does not own equity.
2) Advice or learned insights can come when there is a clearly defined problem which we actively seek relevant people to get their opinion on, or it can come from serendipity where i learn from osmosis when interacting with business owners.
3) Professionals can give great advice but only if they are in the field they are advising on and if we are asking the right questions. So stuff like mindset learning not so useful but stuff like what are industry norms for earn outs, or what is fair based on the thousands of warranties they have seen or how to do best SEO/SEM etc
4) The person giving advice and sharing matters a lot. You need to view what they say with the background of what they come from. Eg. an american CEO of a F500 company's views on M&A considerations is very different from a 10M businesses view. But the same CEO view on leadership and the exercise of it may not be that different. But if against a 100K startup, then it may be too alien again.
5) If you are the reading type, learning from written case studies or books can be an excellent way to learn too. Only gripe i have is that there are too few case studies written for startups and SMEs. Most are for big organizations.
Hope the above helps! Feel free to share your experience with getting entrepreneurial insights and advice.
1) My business never got a formal set of advisors. We did ask around back in 2001 to see if anyone would join us formally but in the end it did not work out. I remember asking a politician and a GLC MD this and they both turned us down on grounds that they were too busy. Now on hindsight, i think they were right to turn us down for varying reasons.
a) I did not attempt to align them at all. No talk of equity, no clear idea how they can add value. Not that i think it makes sense to offer advisors equity except in very special cases. But i did not know that then.
b) I like to think they liked us and were self aware. They new that their value add to our work was minimal. Both were not business owners or business coaches, so I think from their point of view, they also wondered what kind of advice or coaching could they value add with.
2) The next time i got great learning was in 2003/4 when i got to meet Mark Chang who founded Jobstreet. Obviously as competitors, he did not advice us anything but what i learned just interacting was how an entrepreneur should think and how a business is run. We must have spent at least 40 hours interacting with him.
This is an important learning point. Frequently, the best advice i have gotten is from just paying attention to what other people do and say. From there, i will notice key attitudes and mindsets they have which point the direction to where i should go. Most recently, we paid a visit to Patrick of catcha at his office and i went away with some good food for thought on the psychology of Snr Mgmt.
3) Another example of learning is when i visited eFusion office back in 2007 or so. Looking at how metric driven that business is (they had whiteboards lining almost all the walls of the office!), gave me the advice i needed. Of course, this was reinforced by what Sam shared and it pointed and confirmed for me that my business needs to be ultra metric driven. This was before it became a trend.
4) Advice can directly sought. I have experienced this in an impactful way. When i was selling the company , i got in touch with an old friend who has done a fair bit of M&A work and whom i knew was a brilliant fella (scholar, mckinsey etc). Because as entrepreneurs, it is usually the first time we are encountering many concepts and terms like earnouts, reps and warranties etc, it helps to level the playing field by getting experienced professionals on our side. Together with a good lawyer, both proved to be invaluable in understanding the entire due diligence process and in negotiating the S&P agreement.
But what they were of little help with was on mindset to have during this process. Our business had no VCs, shareholders were almost all family and 1 CTO old friend. What helped me was a group of business owners whom i meet regularly. Their sharing on similar situations and view points helped tremendously.
5) Advice & insights can also be garnered from reading online and print literature and connecting the dots with our own experience. Recently, i have been reading many HBR case studies and books by Harvard professors (my better half is taking a course there). I am the type of person who learns by reading, so i actually find that advice and insights can come very much to me via reading good quality books.
For example, "The Man in the Mirror" by Kaplan is really a good book that has much insight on leadership. And by connecting the dots with own experience, it is as good as speaking with many advisors in my opinion.
So looking at the above cases, there are a few learning points.
1) Advice seems to be best for me when it comes from fellow business owners who are more advanced along their company development. This is extremely important. Learning from the snr management team of an established business is different from learning from the actual owner. Esp if the snr mgmt in question does not own equity.
2) Advice or learned insights can come when there is a clearly defined problem which we actively seek relevant people to get their opinion on, or it can come from serendipity where i learn from osmosis when interacting with business owners.
3) Professionals can give great advice but only if they are in the field they are advising on and if we are asking the right questions. So stuff like mindset learning not so useful but stuff like what are industry norms for earn outs, or what is fair based on the thousands of warranties they have seen or how to do best SEO/SEM etc
4) The person giving advice and sharing matters a lot. You need to view what they say with the background of what they come from. Eg. an american CEO of a F500 company's views on M&A considerations is very different from a 10M businesses view. But the same CEO view on leadership and the exercise of it may not be that different. But if against a 100K startup, then it may be too alien again.
5) If you are the reading type, learning from written case studies or books can be an excellent way to learn too. Only gripe i have is that there are too few case studies written for startups and SMEs. Most are for big organizations.
Hope the above helps! Feel free to share your experience with getting entrepreneurial insights and advice.
Thursday, October 3, 2013
Current Record Holder for Best Multiple in an Acquistion - Hungrygowhere
Decided to write this article after reading this article on techinasia.
Deal as we know it. InSing bought GTW Holdings who owns Hungrygowhere and TableDB back in mid 2012. Great deal for NYPS, CHS class mate Dennis, UofMich school mate Hoong Ann and last partner Yung Yih. They put in a lot of pain and effort to build up the business. I met the 3 of them periodically from the day they started back in 2006/07and it is clear that they went though hard startup times like anyone else. So I am happy for them that the deal was done and that their effort was rewarded.
Deal details based on public information :
1) Sold for S$12M cash to Singtel
2) Entity integrated into InSing under Singtel Digital Media.
3) 3 main founders with 2M investment from Walden. Each of 3 main founders had about 24% stake so about 2.88M each (nice number).
4) Best deal ever in SG based on historical revenue multiple of about 16 since in FY 2012
Consider that Sgcarmart sales is only 7.5 times revenue and they had profit margins in the 30+%!
Rationale for Deal?
Singtel POV makes some sense. Great traffic on the topic of F&B. I think it Singlehandedly gives InSing good traffic moving forward if they do not screw up running HGW. There is further upside, if they can implement TableDB well. Everyone can see how strong OpenTable is as a NASDAQ listed business in USA. I also believe there was a strong acquhire element here. We may feel 2.88M is alot, but if we think that a fresh graduate scholar costs an organization about $300K and 3 years to wait... then to get these 3 founders is quite ok?
HGW POV makes great sense though i would personally feel a little early. There was probably room to grow revenues and hence profits many folds more and build the local and regional story a bit more. TableDB also was just started and so has a lot potential. But as I always believe, only the management and founders know the full details and to take money off the table will never be totally wrong.
Deal as we know it. InSing bought GTW Holdings who owns Hungrygowhere and TableDB back in mid 2012. Great deal for NYPS, CHS class mate Dennis, UofMich school mate Hoong Ann and last partner Yung Yih. They put in a lot of pain and effort to build up the business. I met the 3 of them periodically from the day they started back in 2006/07and it is clear that they went though hard startup times like anyone else. So I am happy for them that the deal was done and that their effort was rewarded.
Deal details based on public information :
1) Sold for S$12M cash to Singtel
2) Entity integrated into InSing under Singtel Digital Media.
3) 3 main founders with 2M investment from Walden. Each of 3 main founders had about 24% stake so about 2.88M each (nice number).
4) Best deal ever in SG based on historical revenue multiple of about 16 since in FY 2012
Consider that Sgcarmart sales is only 7.5 times revenue and they had profit margins in the 30+%!
Rationale for Deal?
Singtel POV makes some sense. Great traffic on the topic of F&B. I think it Singlehandedly gives InSing good traffic moving forward if they do not screw up running HGW. There is further upside, if they can implement TableDB well. Everyone can see how strong OpenTable is as a NASDAQ listed business in USA. I also believe there was a strong acquhire element here. We may feel 2.88M is alot, but if we think that a fresh graduate scholar costs an organization about $300K and 3 years to wait... then to get these 3 founders is quite ok?
HGW POV makes great sense though i would personally feel a little early. There was probably room to grow revenues and hence profits many folds more and build the local and regional story a bit more. TableDB also was just started and so has a lot potential. But as I always believe, only the management and founders know the full details and to take money off the table will never be totally wrong.
Sunday, September 29, 2013
5 Must Haves For Superior B2B Selling
As entrepreneurs, all of us are deeply involved in the sales process. Many successful entrepreneurs believe that selling is the key skill to master. Whether it is convincing investors, or clients or internal staff, we are always selling the dream and the potential of our business. So what is required to sell well in a B2B environment? I have it distilled my 13 years experience to a few key points below :
1) Belief in your company and goal - I have an unshakable conviction that what my company offers works and that clients should buy it. This allows me to be authentic when pitching. Whether it is to investors, staff, cofounders or clients. And people can smell authenticity and confidence from a mile away. It helps tremendously with credibility building.
2) Belief in value i personally offer. I believe i add value to the people i interact with. This may sound very egoistical, but what it means is that i genuinely feel that their time is well spent on interacting with me. For a client, it is because i know my product and my industry well enough to add value to their business. For staff, it is because i can help them do their job better. And i realize that because of this belief, i am genuine when dealing with people and i do not come across as just trying to sell them something.
Another way to see this is that i try to always make win win partnerships. Since i add value, then it makes sense that everyone should spend time and work with me since it is to their benefit too.
3) Persistence. Ask any sales guy and they will tell you this matters a whole lot. Sometimes, it just takes that 1 more knock or call to get a client interested in a meeting. When do i give up? Only when there is a lower lying fruit to go after. If not, i dont give up. And even then, I will pass the lead on to someone else or work on it again some time later. Of course, i don't mean to blindly keep bugging people when i say this. Use your common sense.
4) Being intellectual. Who says sales jobs are for non-academically inclined people? We need to apply intellectual rigor to the sales process. Understand what the client needs are, what their industry is about, current issues and approach from that angle. This is especially important the higher up the corporate ladder we sell.
Better yet, don't just apply needs based consultative selling. Apply genuine insights from what we learned and use it to add value to the client. A good example is the difference between a super real estate agent and an average one. The former asks all the right profiling questions, knows all about the condo/market in question and applies it to find suitable buyers for the client. Even better, the former is able to recommend correct pricing and timing of sale due to insight on the market. We always hear about owners willing to pay more to get the right agent representing them. Why do you think this is so?
5) Selling as a Company. Sales is not just a sales person's job. It is the entire company's job. A client engages with not just our sales staff but also our finance, operations and customer service people. Sometimes, they interact with our marketing staff and even our tech people. So we need to make sure that all our staff have the right client centric mentally when providing service. And we can go further than that. Why not get non-sales staff to attend sales meetings with clients. Not only do they give an added dimension to the company, they also pique the clients interest and help us walk the talk that our company is client centric.
Many companies are already doing this. It is common for magazine publishers to have their editorial staff join in sales meetings to better understand advertiser need. Or for tech consultants to join sales on pre-sales client meetings to answer more technical questions and to understand what clients are looking for.
The spinoff benefits are many. Better sales/ops relationships, quicker product improvements, better client understanding, multiple touchpoints/relationships with clients etc.
Notice i did not talk about negotiation skills. I believe if we apply the above points well, clients will pay us what we want. Feel free to share your experiences in selling!
1) Belief in your company and goal - I have an unshakable conviction that what my company offers works and that clients should buy it. This allows me to be authentic when pitching. Whether it is to investors, staff, cofounders or clients. And people can smell authenticity and confidence from a mile away. It helps tremendously with credibility building.
2) Belief in value i personally offer. I believe i add value to the people i interact with. This may sound very egoistical, but what it means is that i genuinely feel that their time is well spent on interacting with me. For a client, it is because i know my product and my industry well enough to add value to their business. For staff, it is because i can help them do their job better. And i realize that because of this belief, i am genuine when dealing with people and i do not come across as just trying to sell them something.
Another way to see this is that i try to always make win win partnerships. Since i add value, then it makes sense that everyone should spend time and work with me since it is to their benefit too.
3) Persistence. Ask any sales guy and they will tell you this matters a whole lot. Sometimes, it just takes that 1 more knock or call to get a client interested in a meeting. When do i give up? Only when there is a lower lying fruit to go after. If not, i dont give up. And even then, I will pass the lead on to someone else or work on it again some time later. Of course, i don't mean to blindly keep bugging people when i say this. Use your common sense.
4) Being intellectual. Who says sales jobs are for non-academically inclined people? We need to apply intellectual rigor to the sales process. Understand what the client needs are, what their industry is about, current issues and approach from that angle. This is especially important the higher up the corporate ladder we sell.
Better yet, don't just apply needs based consultative selling. Apply genuine insights from what we learned and use it to add value to the client. A good example is the difference between a super real estate agent and an average one. The former asks all the right profiling questions, knows all about the condo/market in question and applies it to find suitable buyers for the client. Even better, the former is able to recommend correct pricing and timing of sale due to insight on the market. We always hear about owners willing to pay more to get the right agent representing them. Why do you think this is so?
5) Selling as a Company. Sales is not just a sales person's job. It is the entire company's job. A client engages with not just our sales staff but also our finance, operations and customer service people. Sometimes, they interact with our marketing staff and even our tech people. So we need to make sure that all our staff have the right client centric mentally when providing service. And we can go further than that. Why not get non-sales staff to attend sales meetings with clients. Not only do they give an added dimension to the company, they also pique the clients interest and help us walk the talk that our company is client centric.
Many companies are already doing this. It is common for magazine publishers to have their editorial staff join in sales meetings to better understand advertiser need. Or for tech consultants to join sales on pre-sales client meetings to answer more technical questions and to understand what clients are looking for.
The spinoff benefits are many. Better sales/ops relationships, quicker product improvements, better client understanding, multiple touchpoints/relationships with clients etc.
Notice i did not talk about negotiation skills. I believe if we apply the above points well, clients will pay us what we want. Feel free to share your experiences in selling!
Sunday, September 15, 2013
Contribution to Singapore Conversation
I wrote this for Straits Times back in late 2012. Editor told me to that it covers too many topics and does not dig deep enough into any specific topic. She suggested that i instead write about my entrepreneurship journey. That is how this article came about!
But since this is my blog, i reproduce the old article here :)
My Vision for Singapore
Singapore in 2030 is an economically thriving, well educated, inclusive and compassionate
nation. We are a top tier global city well known for our strengths in areas like wealth
management & banking, system of governance, high density population living, transportation
hub, tourism, high technology industries etc.
Our population is confident with our diversity. We are multi-cultural, multi-religious and multiracial.
We live together in harmony and respect. We have a common set of values that drives
and unites us and this includes hard work and meritocracy tempered with egalitarian ideals,
tolerance of diversity underpinned by broad based education and a rootedness to our nation
and community built on a sense of common destiny and history.
While the vision is easy to articulate it is the details that matter. Below some specific areas
which I would like to see happen.
Egalitarian Society
We recognize that not all people are created equal, nor are they given equal opportunity due to
different genetic and environmental factors. We need to implement policies that ensure that
our less well to do citizens do not become a permanent underclass. We should be willing to
explore more subsidies for lower income healthcare, housing and education. We should revisit
our policy on the minimum wage, capital gain taxes and estate duties on the top 1%
periodically. We should also be willing to subsidize healthcare and education for the underclass.
The trick is in the balance. I do not advocate a welfare state or taxation system which
discourages enterprise and which erodes human drive. But we need to set a tracked metric to
monitor mobility between the income classes and to sometimes send a signal that Singapore is
a nation and not a corporation. For example, a modest 5-10% estate tax on estates values
above US$10M would give a good signal that we care about redistributing wealth as a principle
but it will not hurt the bulk of the people nor will it result in massive evasion since the rate is
low.
On the topic of transfers, I feel it is better to raise wages at the bottom end than to just give
more transfers which is akin to welfarism.
Politics
Singapore is a representative democracy. We have a dominant one party government and it has
served us well with some missteps along the way. I would want to see more communication
and engagement between the existing government, civil service and the people when it comes
to strategic issues and occasionally even for day to day implementations that affect many.
Some examples include foreign population numbers, housing policy etc.
I would love to see more diverse, talented and ethical individuals answer the call of politics. For
starters, the dominant party should make a serious attempt to woo talent from outside the
military, grassroots and civil service spheres. It is not about money, it is about having a vision
that inspires top talent. This will help prevent allegations of groupthink and perhaps even end
up revitalizing and changing the image of the ruling party. We should seriously consider why
our current political service is unable to match or beat the allure of a career with Google (Do No
Evil) when the results of political service has as much if not more impact on people than Google
does.
Population
For Singapore to be a thriving city, we need a strong domestic economy. While current
sentiment is for population to be capped, we should be broad-minded enough to periodically
review this number and make adjustments as infrastructure and new technologies become
available. I see a large population possible in Singapore if we are creative in our land-use and if
we are able to build a harmonious consensus for high density living. The ability to adapt and
thrive in a high density environment can even be exported worldwide.
We have an ageing population. Let us make sure our healthcare, transport and housing sectors
are upgraded to adjust to our increasing number of older citizens. But let us not also underestimate
the value of our elderly. This is the same population which has brought Singapore
from 3rd to 1st world. I believe strongly that my parent’s generation will continue to add great
value to Singapore as business advisors, family care-takers, capital owners, evangelizing tourists
and more!
Immigration should be used sparingly as a complementary policy to encouraging child birth and
not as a replacement policy. Singaporeans will happily have more children if they believe that
Singapore is a great place for rearing children and that Singapore is not a stressful place to live
in. We need to educate a population that believes in itself, that is confident and that knows
how to maintain a good work life balance. This brings me to the most important area to we
need to work at.
Education
Our future is in our people. We need to ensure that each Singaporean is trained to think
critically as a citizen and individual. Our education system has to be fine tuned constantly to
move with the times. Independence and creativity has to be encouraged even if means we have
mavericks pushing our social boundaries often. I would much rather prefer a noisy marketplace
with competing ideas than an apathetic nation of complainers.
For our national discourse to be effective, the learning of philosophy, national history and
economics are actually rather critical subjects which are omitted in our schools. They should be
mandatory learning at secondary level and up. Do away with early streaming of children if
possible and expose them equally to all subjects. Do a detailed and transparent study tracking
GEP/Top student career outcomes and evaluate with a critical eye. If something needs to give
way, then let it be our obsession with ever better academic grades. Seriously, I do not for one
moment think the current generation of straight A students are any wiser or smarter than the
generations before. They just study a lot more.
A thinking population with a well rounded education in the social sciences, arts and sciences is
our best bet against any future economic, social or political challenges Singapore may face.
Economy
We need more local champions whether government owned or private citizen owned. We need
our Nestles, IKEAs and Asus. This can only happen if a sufficient number of top talent in
Singapore choose entrepreneurship as a career. SPRING , ACE and all the other initiatives are on
the right track. We must continue to encourage entrepreneurship and continue to fund coinvestment
schemes until a critical mass is achieved in multiple industries.
There is a fundamental difference between an MNC who is here because of tax benefits and
infrastructure and a locally owned MNC or SME who is here because the owner is Singaporean.
The latter will stay through thick and thin as the decision making includes emotional ties. The
former will leave when the going gets too tough and profits go down. A good litmus test will be
the current manpower policy shifts. As a local business owner, I understand the need to raise
productivity and hire more locals. I too want to pay locals at the bottom more. They are my
fellow Singaporeans.
Community
We need to have an integrated and harmonious society. Current laws on racial or religious
speech, housing quotas should remain. But the solution lies not with rules, laws, harsh
punishment and enforcement. We need more integration of our peoples.
National Service is the great leveler and nation builder. I am a strong advocate to continue NS
for our young men just purely on this basis alone. Perhaps we can consider a similar but shorter
1 or half year stint for our young women too. SAP schools should have a quota of non-Chinese
in them so that racial integration starts in those key formative years. Having gone through a
SAP school, I think this is one area which if implemented will create even more well-rounded
students.
Summary
The Singapore I envision is a confident, compassionate and top tier nation. We build on our
strengths and play a valuable role on the world stage disproportionate to our population size.
Our people lead fulfilling lives in the spheres of work they choose and our children and elderly
are well looked after. For this to happen, I strongly believe the points I raised need to be
looked into. Not everyone will agree and I hope opponents to my views will add their voice and
reasons to this discussion.
But since this is my blog, i reproduce the old article here :)
My Vision for Singapore
Singapore in 2030 is an economically thriving, well educated, inclusive and compassionate
nation. We are a top tier global city well known for our strengths in areas like wealth
management & banking, system of governance, high density population living, transportation
hub, tourism, high technology industries etc.
Our population is confident with our diversity. We are multi-cultural, multi-religious and multiracial.
We live together in harmony and respect. We have a common set of values that drives
and unites us and this includes hard work and meritocracy tempered with egalitarian ideals,
tolerance of diversity underpinned by broad based education and a rootedness to our nation
and community built on a sense of common destiny and history.
While the vision is easy to articulate it is the details that matter. Below some specific areas
which I would like to see happen.
Egalitarian Society
We recognize that not all people are created equal, nor are they given equal opportunity due to
different genetic and environmental factors. We need to implement policies that ensure that
our less well to do citizens do not become a permanent underclass. We should be willing to
explore more subsidies for lower income healthcare, housing and education. We should revisit
our policy on the minimum wage, capital gain taxes and estate duties on the top 1%
periodically. We should also be willing to subsidize healthcare and education for the underclass.
The trick is in the balance. I do not advocate a welfare state or taxation system which
discourages enterprise and which erodes human drive. But we need to set a tracked metric to
monitor mobility between the income classes and to sometimes send a signal that Singapore is
a nation and not a corporation. For example, a modest 5-10% estate tax on estates values
above US$10M would give a good signal that we care about redistributing wealth as a principle
but it will not hurt the bulk of the people nor will it result in massive evasion since the rate is
low.
On the topic of transfers, I feel it is better to raise wages at the bottom end than to just give
more transfers which is akin to welfarism.
Politics
Singapore is a representative democracy. We have a dominant one party government and it has
served us well with some missteps along the way. I would want to see more communication
and engagement between the existing government, civil service and the people when it comes
to strategic issues and occasionally even for day to day implementations that affect many.
Some examples include foreign population numbers, housing policy etc.
I would love to see more diverse, talented and ethical individuals answer the call of politics. For
starters, the dominant party should make a serious attempt to woo talent from outside the
military, grassroots and civil service spheres. It is not about money, it is about having a vision
that inspires top talent. This will help prevent allegations of groupthink and perhaps even end
up revitalizing and changing the image of the ruling party. We should seriously consider why
our current political service is unable to match or beat the allure of a career with Google (Do No
Evil) when the results of political service has as much if not more impact on people than Google
does.
Population
For Singapore to be a thriving city, we need a strong domestic economy. While current
sentiment is for population to be capped, we should be broad-minded enough to periodically
review this number and make adjustments as infrastructure and new technologies become
available. I see a large population possible in Singapore if we are creative in our land-use and if
we are able to build a harmonious consensus for high density living. The ability to adapt and
thrive in a high density environment can even be exported worldwide.
We have an ageing population. Let us make sure our healthcare, transport and housing sectors
are upgraded to adjust to our increasing number of older citizens. But let us not also underestimate
the value of our elderly. This is the same population which has brought Singapore
from 3rd to 1st world. I believe strongly that my parent’s generation will continue to add great
value to Singapore as business advisors, family care-takers, capital owners, evangelizing tourists
and more!
Immigration should be used sparingly as a complementary policy to encouraging child birth and
not as a replacement policy. Singaporeans will happily have more children if they believe that
Singapore is a great place for rearing children and that Singapore is not a stressful place to live
in. We need to educate a population that believes in itself, that is confident and that knows
how to maintain a good work life balance. This brings me to the most important area to we
need to work at.
Education
Our future is in our people. We need to ensure that each Singaporean is trained to think
critically as a citizen and individual. Our education system has to be fine tuned constantly to
move with the times. Independence and creativity has to be encouraged even if means we have
mavericks pushing our social boundaries often. I would much rather prefer a noisy marketplace
with competing ideas than an apathetic nation of complainers.
For our national discourse to be effective, the learning of philosophy, national history and
economics are actually rather critical subjects which are omitted in our schools. They should be
mandatory learning at secondary level and up. Do away with early streaming of children if
possible and expose them equally to all subjects. Do a detailed and transparent study tracking
GEP/Top student career outcomes and evaluate with a critical eye. If something needs to give
way, then let it be our obsession with ever better academic grades. Seriously, I do not for one
moment think the current generation of straight A students are any wiser or smarter than the
generations before. They just study a lot more.
A thinking population with a well rounded education in the social sciences, arts and sciences is
our best bet against any future economic, social or political challenges Singapore may face.
Economy
We need more local champions whether government owned or private citizen owned. We need
our Nestles, IKEAs and Asus. This can only happen if a sufficient number of top talent in
Singapore choose entrepreneurship as a career. SPRING , ACE and all the other initiatives are on
the right track. We must continue to encourage entrepreneurship and continue to fund coinvestment
schemes until a critical mass is achieved in multiple industries.
There is a fundamental difference between an MNC who is here because of tax benefits and
infrastructure and a locally owned MNC or SME who is here because the owner is Singaporean.
The latter will stay through thick and thin as the decision making includes emotional ties. The
former will leave when the going gets too tough and profits go down. A good litmus test will be
the current manpower policy shifts. As a local business owner, I understand the need to raise
productivity and hire more locals. I too want to pay locals at the bottom more. They are my
fellow Singaporeans.
Community
We need to have an integrated and harmonious society. Current laws on racial or religious
speech, housing quotas should remain. But the solution lies not with rules, laws, harsh
punishment and enforcement. We need more integration of our peoples.
National Service is the great leveler and nation builder. I am a strong advocate to continue NS
for our young men just purely on this basis alone. Perhaps we can consider a similar but shorter
1 or half year stint for our young women too. SAP schools should have a quota of non-Chinese
in them so that racial integration starts in those key formative years. Having gone through a
SAP school, I think this is one area which if implemented will create even more well-rounded
students.
Summary
The Singapore I envision is a confident, compassionate and top tier nation. We build on our
strengths and play a valuable role on the world stage disproportionate to our population size.
Our people lead fulfilling lives in the spheres of work they choose and our children and elderly
are well looked after. For this to happen, I strongly believe the points I raised need to be
looked into. Not everyone will agree and I hope opponents to my views will add their voice and
reasons to this discussion.
Friday, September 13, 2013
Ethics while running a business
My topic today is about Ethics and the various experiences I have witnessed that illustrates these points. I believe as entrepreneurs, we will encounter many circumstances which test us and it is up to us how we react. How we react will determine what kind of a person we are. I am a firm believer in living a good and moral life and in the innate goodness of man. When I die, all I achieve is worth nothing as I cannot bring it along. So i would want to die knowing i did right at best as I can.
For me, it also helps tremendously that my cofounder and life partner is even more clear on ethics than I am. So with us reinforcing each other, it helps a lot.
1) Overpayment. You will be surprised that some clients procurement will make mistakes and overpay us for an invoice. Figure can range from hundreds to $10K! Our policy is to always notify the client nicely and pay back.
2) Honoring our mistakes. You or your staff will sometimes make mistakes too and basically misquote to the client. My policy is to always come clean and admit it is a misquote. And we will try our best to either honor that misquote or at least give a sweetener to show that we know we made a boo boo.
I have been on the other receiving end of this before. I had an association who owed us money. And the Executive Director had the cheek to call us down and say that his manager (who had left) signed the contract and used the services without his knowledge. I told him that even if this was true, he still owed us the money (about $4000) since i had a manager's signature in black and white. This guy actually threatened me (back then 27-28 year old) and told me that he will not pay. In fact, if we do not back off, he will complain about us to his university contacts who were my partners.
I felt so bad at that time because i could not believe i was being threatened because his organization made a mistake. (and that is assuming he was not lying). Managed to resolve this by basically giving him face and accepting half payment and the other half in contra. And i think he agreed simply because i played on his ego. In front of his staff, i counterproposed and told him we are already giving in and he should not bully a startup. But i left the room with 2 thoughts.
First, i wrote off that man and never thought well of him subsequently. Anyone who does not honor their word and who tries to bully because they can does not deserve any respect from anyone.
Second, I resolved to never do that to another person. We will honor our word even if it costs us.
3) Conspiring to cheat. Early in my business, i had a potential acquirer who was running a decent sized executive search firm. Founder claimed to be a Goldman Sachs MD. At that time naive me thought that an MD was a big shot. Now i know it is just a middle ranking position in IB. Pays about US$600K a year all in. Its the partners that earn the real money. Anyway, this guy pretended to be all interested in investing in us and naive us believed him as he had a fancy car and office.
After a bit of discussion, this guy called us and said they will invest. My partner and i were so happy we bought an $800 spa espirit spa package as a reward. Next thing we knew, they wanted our jobportal functional specs and made copies of it. After that, we never heard from them and they later when chased, said change of mind. Couple of months later, they launched a job portal. Of course it died a few years later. It was run by his mistress.
This experience taught me to be a lot more careful about people. Luckily my line depends on execution and day to day effort. Not some incredible piece of IP. It also taught me that i will never want to do that to another person.
Nowadays i take extra care to always declare conflict of interests and to always make sure i am transparent in my dealings. Many times i have had people come to me for investments who are in my job portal or related space. I always take care to tell them not to reveal anything that is proprietary and to remind them that i run a job portal which may be a competitor to them.
4) Dishonest to investors/cofounders. I think trust between cofounders is most important. Even if intentions are the best, there are already sure to be areas of conflict over roles, compensation, alignment of interests etc. But it gets worse if cofounders consciously do something that affects the basic trust. For me, if someone is willing to work with me and embark on a major risk like a new business, then he or she deserves my trust and faith unless proven otherwise. And i will feel very betrayed if my cofounder does anything to betray that trust. In fact, i think if it happens, i will probably start to work out how to disengage the offending co-founder already.
For investors, i have heard and witnessed startups who are really selfish. They signed on an investor for a venture which requires them to work full time on it and by extension that means to put in their full 110% effort like any startup. However, with a bit of setback or perhaps out of greed, they start to create a business plan for another new venture and basically try to raise funds for that. I don't know if it is naivety or stupidity but which VC will fund a founder that is unable to focus and who is perfectly willing to screw their original set of investors? And word does get around in our industry. SG is really small.
5) Sweat the small stuff. It is easy to cheat your own company. All you need to do is to claim entertainment expenses that aren't strictly entertainment, or pay your personal mobile, petrol bills via the company. My stand is that this is fine if you own 100% of it since technically that is your own money. But if you have external investors or other cofounders who are not aware of this, then it is their money you are stealing. It is better for cofounder dynamics to be transparent and just work it in?
From investor angle, most investors will not sweat the small stuff and will not begrudge you some extra claims that are actually for personal use. We rely on your personal integrity and how you view things. Strictly speaking, the shareholder agreement will say that your annual compensation cannot exceed $XXK without their agreement and so you can declare such items to be part of your legal compensation. So do that.
6) Sales people who lie. Wow! I have seen so many examples of this. Basically it is quite common to hire sales staff who seem to view ethics as something that one can be creative about. You can create the best commission systems to tie reward to actual performance but there will be sales staff who will spend time and effort to game the system. And this includes outright conspiring with the client if they have a good enough relationship.
My philosophy in office is to accept no unethical behavior. If we can prove that you tried to cheat us, we will terminate on the spot without recourse and i will be happy to tell all subsequent background checking employers the reason for termination. I dont care how much money you bring in for the company. I strongly suggest readers do the same, life is too short to have to hang around cheaters.
I am sure you will encounter many more experiences that will test you. So try to do the right thing!
For me, it also helps tremendously that my cofounder and life partner is even more clear on ethics than I am. So with us reinforcing each other, it helps a lot.
1) Overpayment. You will be surprised that some clients procurement will make mistakes and overpay us for an invoice. Figure can range from hundreds to $10K! Our policy is to always notify the client nicely and pay back.
2) Honoring our mistakes. You or your staff will sometimes make mistakes too and basically misquote to the client. My policy is to always come clean and admit it is a misquote. And we will try our best to either honor that misquote or at least give a sweetener to show that we know we made a boo boo.
I have been on the other receiving end of this before. I had an association who owed us money. And the Executive Director had the cheek to call us down and say that his manager (who had left) signed the contract and used the services without his knowledge. I told him that even if this was true, he still owed us the money (about $4000) since i had a manager's signature in black and white. This guy actually threatened me (back then 27-28 year old) and told me that he will not pay. In fact, if we do not back off, he will complain about us to his university contacts who were my partners.
I felt so bad at that time because i could not believe i was being threatened because his organization made a mistake. (and that is assuming he was not lying). Managed to resolve this by basically giving him face and accepting half payment and the other half in contra. And i think he agreed simply because i played on his ego. In front of his staff, i counterproposed and told him we are already giving in and he should not bully a startup. But i left the room with 2 thoughts.
First, i wrote off that man and never thought well of him subsequently. Anyone who does not honor their word and who tries to bully because they can does not deserve any respect from anyone.
Second, I resolved to never do that to another person. We will honor our word even if it costs us.
3) Conspiring to cheat. Early in my business, i had a potential acquirer who was running a decent sized executive search firm. Founder claimed to be a Goldman Sachs MD. At that time naive me thought that an MD was a big shot. Now i know it is just a middle ranking position in IB. Pays about US$600K a year all in. Its the partners that earn the real money. Anyway, this guy pretended to be all interested in investing in us and naive us believed him as he had a fancy car and office.
After a bit of discussion, this guy called us and said they will invest. My partner and i were so happy we bought an $800 spa espirit spa package as a reward. Next thing we knew, they wanted our jobportal functional specs and made copies of it. After that, we never heard from them and they later when chased, said change of mind. Couple of months later, they launched a job portal. Of course it died a few years later. It was run by his mistress.
This experience taught me to be a lot more careful about people. Luckily my line depends on execution and day to day effort. Not some incredible piece of IP. It also taught me that i will never want to do that to another person.
Nowadays i take extra care to always declare conflict of interests and to always make sure i am transparent in my dealings. Many times i have had people come to me for investments who are in my job portal or related space. I always take care to tell them not to reveal anything that is proprietary and to remind them that i run a job portal which may be a competitor to them.
4) Dishonest to investors/cofounders. I think trust between cofounders is most important. Even if intentions are the best, there are already sure to be areas of conflict over roles, compensation, alignment of interests etc. But it gets worse if cofounders consciously do something that affects the basic trust. For me, if someone is willing to work with me and embark on a major risk like a new business, then he or she deserves my trust and faith unless proven otherwise. And i will feel very betrayed if my cofounder does anything to betray that trust. In fact, i think if it happens, i will probably start to work out how to disengage the offending co-founder already.
For investors, i have heard and witnessed startups who are really selfish. They signed on an investor for a venture which requires them to work full time on it and by extension that means to put in their full 110% effort like any startup. However, with a bit of setback or perhaps out of greed, they start to create a business plan for another new venture and basically try to raise funds for that. I don't know if it is naivety or stupidity but which VC will fund a founder that is unable to focus and who is perfectly willing to screw their original set of investors? And word does get around in our industry. SG is really small.
5) Sweat the small stuff. It is easy to cheat your own company. All you need to do is to claim entertainment expenses that aren't strictly entertainment, or pay your personal mobile, petrol bills via the company. My stand is that this is fine if you own 100% of it since technically that is your own money. But if you have external investors or other cofounders who are not aware of this, then it is their money you are stealing. It is better for cofounder dynamics to be transparent and just work it in?
From investor angle, most investors will not sweat the small stuff and will not begrudge you some extra claims that are actually for personal use. We rely on your personal integrity and how you view things. Strictly speaking, the shareholder agreement will say that your annual compensation cannot exceed $XXK without their agreement and so you can declare such items to be part of your legal compensation. So do that.
6) Sales people who lie. Wow! I have seen so many examples of this. Basically it is quite common to hire sales staff who seem to view ethics as something that one can be creative about. You can create the best commission systems to tie reward to actual performance but there will be sales staff who will spend time and effort to game the system. And this includes outright conspiring with the client if they have a good enough relationship.
My philosophy in office is to accept no unethical behavior. If we can prove that you tried to cheat us, we will terminate on the spot without recourse and i will be happy to tell all subsequent background checking employers the reason for termination. I dont care how much money you bring in for the company. I strongly suggest readers do the same, life is too short to have to hang around cheaters.
I am sure you will encounter many more experiences that will test you. So try to do the right thing!
Tuesday, September 10, 2013
Honing our bullshit meter
I am writing this post because i realize there is quite a lot of bs running around in our industry and in the business world in general. Many businessmen somehow seem to believe that they need to "talk big" and make their business sound bigger. Many reasons for this. Personal face thing, help them sell more, help them recruit people better etc. While i feel that some bs is needed especially for the latter 2 reasons, standing from the listener point of view, we need to hone our bullshit meter well. I think i have a decent BS detection system developed over the last decade. I share some thoughts here :
1) I cannot understand what they do. I believe i am a rather smart guy business/academic wise. So if i cannot understand what the business does and how it makes its money, chances are it is all BS and the speaker is being deliberately obscure to mask a lack of business model. No founder is that bad at explaining what their business does.
2) Evasive or muddled about details. When asked about headcount, sales numbers, location of office, dont give any detail but instead continue to talk big about what they do. Or they give some general statistic. For example, 1.99 shop lady used to have a headline i noticed that says she built a $30M in sales business. That sounds great! Except if you read the small print, it is $30M over lifetime of business! Online, i read an article about Mindvalley that does the same time. We all know $10M in sales in 1 year is impressive. $10M in sales since inception over 6 years is much less so.
3) Unbelievable or constantly updated Linkedin recommendations & updates etc. Anyone who is running or has run a growing business knows that we spend all our time figuring out how to grow more. So if someone is spending loads of time making themselves sound good on linkedin, i kind of feel they probably dont have much going on inside.
In fact, an extension of this is people who attend so many startup conferences. You should be spending time on your business to make money. Don't waste time meeting too many fellow startup entrepreneurs. It is like blind leading the blind. Talk to people who have succeeded in any business to get the right mindset and for industry knowledge to success stories from your industry.
4) Expenditure don't gel with claimed profile. Many examples of this.
Eg 1: Guy who claims to have exited 1,2,3 businesses and yet need to raise a 300k seed round. We need to get it straight.... if we transferred ownership of our internet business to another firm for 50k or 100k or even 200k, it is because our business failed. When we start Internet companies, the exit has to be at least 7 digits to even vaguely be called an exit. So rather than say I sold it off, I would respect the person who says the business failed and I managed to at least recover 100k for my investors through an asset sale. Then learn from the failure. Who are we fooling if not ourselves?
Eg 2: guy who claims business is doing very well but has little headcount, or need to raise capital, or somehow just seems to concerned with small things for the picture to be right. A general point from personal observation and I could be generalizing. But most people i know who really have made their money really do not sweat the small stuff.
5) name droppers. There are some people I meet who seem to know everyone! And they are hoping by association it makes them sound good. Yes, networking helps and if u do it well, can open some doors. But incessant name dropping just reeks of insecurity.
Readers do feel free to add your personal encounters. I am sure there are many. Bottom line, I hope fellow entrepreneurs can be more honest. You don't need to bullshit to succeed in business. You just need a great product, marketing and loads of paying clients on a profitable basis. Let your revenues and profits do the talking. If we look carefully at the real successes today, there are mostly below the radar. Food for thought.
1) I cannot understand what they do. I believe i am a rather smart guy business/academic wise. So if i cannot understand what the business does and how it makes its money, chances are it is all BS and the speaker is being deliberately obscure to mask a lack of business model. No founder is that bad at explaining what their business does.
2) Evasive or muddled about details. When asked about headcount, sales numbers, location of office, dont give any detail but instead continue to talk big about what they do. Or they give some general statistic. For example, 1.99 shop lady used to have a headline i noticed that says she built a $30M in sales business. That sounds great! Except if you read the small print, it is $30M over lifetime of business! Online, i read an article about Mindvalley that does the same time. We all know $10M in sales in 1 year is impressive. $10M in sales since inception over 6 years is much less so.
3) Unbelievable or constantly updated Linkedin recommendations & updates etc. Anyone who is running or has run a growing business knows that we spend all our time figuring out how to grow more. So if someone is spending loads of time making themselves sound good on linkedin, i kind of feel they probably dont have much going on inside.
In fact, an extension of this is people who attend so many startup conferences. You should be spending time on your business to make money. Don't waste time meeting too many fellow startup entrepreneurs. It is like blind leading the blind. Talk to people who have succeeded in any business to get the right mindset and for industry knowledge to success stories from your industry.
4) Expenditure don't gel with claimed profile. Many examples of this.
Eg 1: Guy who claims to have exited 1,2,3 businesses and yet need to raise a 300k seed round. We need to get it straight.... if we transferred ownership of our internet business to another firm for 50k or 100k or even 200k, it is because our business failed. When we start Internet companies, the exit has to be at least 7 digits to even vaguely be called an exit. So rather than say I sold it off, I would respect the person who says the business failed and I managed to at least recover 100k for my investors through an asset sale. Then learn from the failure. Who are we fooling if not ourselves?
Eg 2: guy who claims business is doing very well but has little headcount, or need to raise capital, or somehow just seems to concerned with small things for the picture to be right. A general point from personal observation and I could be generalizing. But most people i know who really have made their money really do not sweat the small stuff.
5) name droppers. There are some people I meet who seem to know everyone! And they are hoping by association it makes them sound good. Yes, networking helps and if u do it well, can open some doors. But incessant name dropping just reeks of insecurity.
Readers do feel free to add your personal encounters. I am sure there are many. Bottom line, I hope fellow entrepreneurs can be more honest. You don't need to bullshit to succeed in business. You just need a great product, marketing and loads of paying clients on a profitable basis. Let your revenues and profits do the talking. If we look carefully at the real successes today, there are mostly below the radar. Food for thought.
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