Entrepreneurs beware of DIY Investing!

I have  people who ask me this question. They think that because i started a business, sold it and because i make private investments that there is something special or unique about how i invest my assets. Let me be the first to say that the traits required to be a good investor are very different from those that entrepreneurs have. And i think i am still learning from the market and about myself all the time.

By default, entrepreneurs are high risk takers who control the risk by knowing everything there is to know about their business and industry. We deep dive into every aspect of our work so that we are able to control risk and maximize our returns. Even when our business has grown a lot, we continue to invest more into it and take further risk by going overseas or into adjacent markets. Frequently, the company we own is most of our net worth.

Furthermore, Entrepreneurs are also highly passionate people and you will hear many successful ones who advocate a combination of gut and metrics to make major decisions.

Good investors on the other hand, diversify. They minimize risk by not concentrating in one area and by proper portfolio allocation. And it is also humanly impossible for them to know with any depth any particular industry which they are invested in. They frequently outsource and use professional managers to help manage their money. Decisions are made based on numerical allocations and frequently a fixed methodology for deciding when to buy or sell. Investors who employ their gut tend not to do well. 

My personal experience is that the above descriptions are totally true and one can lose a fair sum of money if one does not understand the very different traits required. I lost close S$100K or 100% of portfolio during the 2000 dot com crash because i had over-concentrated my positions in technology stocks. Then more recently in 2010, i experimented with options without clear knowledge of how volatile they can be and lost another S$100K on these simply because i could not cut my losses and applied the dogged perseverance entrepreneurship trait to options!

From the above lessons, i learned that it is best for me and perhaps for entrepreneurs like me to stick to passive portfolio decisions and outsource the active selection decisions to good fund managers. 

What this means is that we should make the decision on how much to keep in cash, how much to invest in stocks, fixed income and properties. But when it comes to the actual stock or fixed income picks, either buy ETFs which mirror the market or buy a few different mutual funds. Use dollar cost averaging strategies if we get more cash and rebalance the portfolio periodically every 3 to 6 months. 

If the urge to take risk or to make decisions is too strong and if we have an interest in trading, then set aside a small percentage of assets - say 5% to make speculative trades on equities, options or bonds. The above philosophy has worked well for me and i hope it will work readers too. 

How to think about Revenues and Costs in a startup

Over the years, i have been both running internet business and investing in internet businesses. In both cases, management will always have a profit and loss projection for the year. I have seen enough internet P&Ls and tracked enough such P&Ls that i have come to some conclusions for our region. Here are 2 major  :

1) Revenue projections are almost always optimistic.

I have must seen and helped or tracked more than 100 internet businesses by now based in SG and MY. Of these, only a handful have revenue projections that are largely achieved. And these are usually achieved due to market conditions being extremely favourable. A good example is Groupon SG and MY which rode the adoption of ecommerce in a big way. Or job portals and property portals which rode the economic growth and property market growth. Of course execution matters equally too. Usually companies that achieve their projections are those who executed very well on a day to day sales and operations basis and which are also aided by market trends which added wind to their sails.

What about the rest? Most of the other startups fall short of their projections. A common mistake is to assume a certain conversion rate for platform plays without taking into account that as one scales up, the conversion rates could change for the worse. For sales team plays, a common mistake is to assume scalability of sales staff without taking into account the fact that it takes time to train up a sales staff and that attrition for corporate sales startups is pretty high. Also sales management is not something easy to get right from the start.

Another common mistake is to assume revenue from new markets based on old market assumptions. I have seen many business plans where SG makes X revenue and the assumption is to grow MY and ID at the same pace as SG. This is quite dangerous. Many reasons. One is that core team that made it work is still in SG and not the new country. Another reason is that SG core assumptions are significantly different from new market. Another close parallel of this is assuming in your projection that you can sell a complementary  product as easily as your core. For example, an ecommerce company thinking that it can branch out and sell to the same clients advertising media.

2) Costs are usually at projections or worse above projections.

On the other side of the income statement, most startups manage to spend what they say they will spend. Unfortunately, when coupled with (1), this means many startups fail to hit their EBITDA goals. While not damning if they are growing fast enough, some startups do get caught and run out of cash.

Implications of the above 2 observations.

If the above 2 are usually correct, then it means that startups should always have a ultra conservative plan which requires them to project revenue at the worst case scenario and then spend at the worst case scenario. And be reactive enough so that if revenue comes in as expected, then ramp up the cost to match it. But never let cost ramp up in anticipation of revenue.

Now i know some people will say that is extremely conservative and startups that practise what i just suggested probably cant scale up super fast. Also, some people may also wonder how such a startup will get funded. I have 2 answers for this.

First, use your average to optimistic scenario for fund raising but use your conservative one once you get funding. This will solve your funding valuation issue and investors usually dont mind if the entrepreneur is more careful with their money.

Second, it really depends on market adoption or revenue growth. If market are growing like crazy (read over 100% per year), then yes, by all means ramp up the costs. But if market is still those that require you to educate clients (like job portals during the 2000-2003 days)... then perhaps it makes sense to pace costs to revenues.

Feel free to comment!

Last of the ASEAN job portals exit, A New Era Commences

AMENDMENT : Read more about the deal. Jobstreet bought all minority stakes in PH, VN and ID before selling the entire 100% entities to SEEK.  Valuation ranges from 3+ to 8 times sales. Depends on market dominance and EBITDA margins i guess. Anyway good deal for everyone but it means my numbers below for key founders need to drop by about 7-8%. 

Also Seek has a clause to keep Suresh as employee. Wonder how that discussion went. With about 20M USD, Suresh can easily go retire too. Wonder how he will feel running a company that he no longer has a stake in. Maybe he is viewing the overall Asia job and compete with Adrian who is running JobsDB from HK.... even then, at most they pay 1M a year......about same as what his portfolio can return.....


Disclaimer : I am currently still working as a Regional MD with CareerBuilder which acquired JobsCentral back in 2011.

In today’s world of social media, big data, ecommerce and mobile plays, job portals sometimes feel pretty old school as they have been around since 1997 in this region.  However, looking back at this industry’s history, I find it is a good case study of how a disruptive technology grows in a blue ocean and how widespread adoption of the a business model changes the growth and expansion dynamics of the business.

The news of the week is that the last of my competitors – JobStreet has been sold  for about US$520M to SEEK and at a valuation of about 21.6 times EBITDA for 2013 and 10 times sales.  This is a fair valuation as it is 15-20% better to what SEEK paid for JobsDB just 2 years ago. This is a function of market bullishness now rather than anything else. Business wise, the merger makes sense since the JobsDB and Jobstreet business do not overlap much except in Singapore. Someone did ask me why pay 10 times sales for a relatively matured business. I would say that it is not so much 10 times sales but rather paying 21.6 times EBITDA. Jobstreet has a very enviable 40+% EBITDA margin and shown over the last 5-6 years that they can maintain that kind of profitability level. The worse they did was about 30% back in the GFC.

I have much respect for Chairman/CEO and main shareholder Mr Mark Chang who has a 9.9% stake in the company and who now gets to pocket about S$66M for a good job done over 15 years.  I respect him for his ability to manage costs well, share his capital gains with fellow management and to patiently plug at building the business so that it reaches it's current scale. His fellow management team will get a good exit that will allow them to retire if they want. Albert- CTO owns about the same as Mark, Suresh – COO about 3.9% and Greg – CFO about 2.7%. They are all on average 48 years old and up.  His institutional investors too must be very happy with this exit as one year ago their listed valuation on Bursa was only half what SEEK is paying now.

If I have to speculate why they decided to sell when it seems they still have a good 10 to 15 years to work if they wanted, I would say it is a function of things.

First, SEEK has been a major shareholder owning about 20+% of Jobstreet. This would have been fine until SEEK acquired majority of JobsDB. One can imagine how awkward their board of director meetings must have been.

Second, winds of change are coming to this industry. Job Portals in the USA are being challenged by social media players like LinkedIn and HR is exploring owning their own career sites and taking more charge of their own recruitment and branding. As such,  job portals are increasingly challenged to develop more products and services that go beyond the core portal platform to better address and take advantage of these new trends.

Third, globally job portals are consolidating with now about 6 players worldwide who are worth over 1B USD. Jobstreet as a middle sized player in the region will find it increasingly challenging to keep up technologically with the global players.

So what next? Job Portals are a formidable business. In the region, they are worth over S$200M in annual sales and make EBITDA of about 25-35%. This makes job portals probably the most profitable of internet companies in the past 5 years. And they are really an ASEAN industry with multimillion dollar market sizes in SG, MY, VN, TH, PH and ID. 

They have tons of valuable data on employment and candidates, have large reach into HR community and have the technological and marketing resources to bring them all together. It will be interesting to see how these global players morph themselves in the years ahead.  But one thing i know for sure, don't write them off! 

When to raise outside capital & what kind of dilution is ok.

Have been talking to quite a few entrepreneurs lately and i realize that many have very mixed views (rightly so) about raising capital from (semi)/ professional investors. Some also never seem to have thought about dilution and seem to have an almost ambivalent attitude about ownership.

So i thought i will pen down my thoughts on these issues both as an entrepreneur who tried to raise money before and as an investor in startups. DISCLAIMER : REGIONAL CONTEXT ONLY.

There is actually only 1 good reason why a tech startup raises money.

Company needs the cash to grow in SG or to expand into overseas markets which current organic cash flow projections cannot meet. Growing can be by organic or acquisition route. Usually your 5 or 3 or 2 year P&L projection shows great revenue growth but you need to spend money to get there and you are negative cashflow for a good period. Then you need funding to tide all that negative cashflow and then some. The extra is buffer.

So if you find that you are in the lucky situation where you are already profitable and cashflow positive. And you actually do not have a burning vision that you cannot execute due to lack of money, then perhaps you should not be fund raising. Even though usually, this is when VCs and investors and brokers will bug you the most to raise. They will tell you stuff like money in the bank is king, having a buffer is always good, you never know, how much network and strategic help they can give etc etc.

They are not wrong. But you need to weigh that against the distraction of fund raising, the distraction of dealing with investors, the value of network and also whether you actually need the money. I have known of at least 2 big internet companies who raised 800K and 1+M each and they actually almost did not touch the money at all until exit!

To be fair, I am not including the strategic help which a good investor can offer and that is valuable. This cannot be underestimated and i think if you find an investor who really helps and cares, then the story is different.  For these cases, i have seen people do convertible notes so that valuation is higher later or just raise less money. You still get the help and network but dilute less.

How about dilution? How much is too much or too little for our tech space today?

It really depends on each entrepreneurs goal. But by and large, most entrepreneurs are highly competitive people who benchmark a lot. I think they also want to win and there are many measures of winning. It can be to control the biggest company by revenue or profit or user traffic etc. It can also be a combination of those factors.

1) My first non-contentious observation in SG is that it will be best to bootstrap and skip the angel round. Lets say we have a 2-3 founder team. They run through  100K to build their prototype and a further 50K to market the prototype and raise money. At this stage they still own 100% of the company.

So they raise the Seed round to hire a few pax, market more, build out software more. Lets say they raise 500K at 1.5M premoney. So now, the founders own 75% of the company. With this 500K, they build out SG and after another 1 year want to expand overseas and drive to SG profitability. Now in SG, it is usually a 1.5 to 2.5M raise. So lets say 2M raised at premoney 8M, now founders are down to 60%.

Wait, there is now employee option pool which varies from 5-10% usually paid jointly or out of founder pool. So lets say founders down to 55%.

This is where we depart from USA since our ASEAN market is a lot smaller. With this 2M raised, the tech company needs to grow into exit event.   An exit event can be an IPO or a trade sale. There are some fewer cases of raising Series B to expand even further but most of the SG stories exit already - Hungrygowhere, Tencube, Brandtology, Groupon, Dealguru, sgcarmart, Travelmob, Asian food channel all exited after raising 1-2+M. The only ones i know who raise Series B or equivalent is Propguru and Reebonz. Maybe readers can add.

So back to the optimal stake. At 55% left for founders and average sale value of lets say 20M, that is 11M only for say 3 founders. Or about 3.66M each. Now imagine if this company raised a initial bootstrap round that took out 15%, they are left with 2.7M each for about 6 years work if divided evenly.

2) The 2nd observation i have is a lot more contentious. I have seen many teams where the 2-3 founders share the stake equally. While this feels right at the startup phase, it actually does not make sense. A company will require a CEO and driver. That person performs a role that is more stressful and more impactful than other founder roles. And in startup, pay cannot be used to compensate. So i would argue and indeed prefer configurations where the key leader has a much higher stake and plays a stronger role. So in the case of the 3 founders, maybe 50%, 30%, 20% or even 60/20/20. Of course, the founders should put in capital commensurate to their shareholding and i am all for equal or near equal pay among the 3 to show the solidarity.

On the flip side, i would not advocate any key founder having less than 10% equity from the start. Too little to feel any pain and to be aligned well. And after all the dilution, the person will be left with 5%. Too little for talent for our region. They will end up looking around and asking for near market rate salaries to compensate.

As an investor, one thing good about CEO owning the bulk is that we know even if the shit hits the fan, there is one clear person with the most to lose. And that is good alignment.

iBuy and DealGuru

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!

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.

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.

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.

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.

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.