Year end update : So how is semi retirement after 2.5 years?

This is a slightly indulgent article. Not much to do with entrepreneurship or startups, so bear with me or just skip this entry! It will be relevant if you are thinking of purpose in life or if you have recently retired. I am writing because I do get a lot of curious comments from all walks of life when they hear that i sort of retired at 38+.

Its been slightly more than 2.5 years since I stopped full time work. Last update was done 1 year into retirement. Many people assume retirement when young is all fun and games but actually having no structure in life and no over riding purpose can be difficult. I can be both busy and restless, bored at same time.

Quick summary of what happened since official no work status to give context since June 2014 :

1) Mum passed away in oct 2014 after a brief but painful 4 mth battle with lung cancer.

2) Baby #4 came along in June 2014 and he is so precious and cute.

3) 2 older kids entered teenagehood and secondary school. 3rd one entered primary.

4) Started a business Doctor Wealth using chairman model which failed due to mgmt issues and had to be given a new lease of life via some corporate development work.

5) Between Ning and me, we invested in 8 more private startups (iMoney, metro residences, Worq, aldoktor are public knowledge) and 5 VC in the region.

6) Volunteered for the Committee of the Future Economy, ACE and 2 other govt boards. Started ACE peer sharing groups for startup founders which has helped over 35 startups.

7) Launched a crowdfunding platform for Swcdc. Mixed success in terms of scaling up but still running. So far projects have raised some 40-50k in total.

8) Got healthy. 6 day a week Yoga, weights and jogging routine. Traveled a fair bit but no where near what I would like to or to the places I want to. About 60-70days a year.

9) Built an entire balanced type portfolio over the years and implemented decision making, tracking and benchmarking processes. Met target of beating private bank discretionary portfolios and index benchmark.

10) Created and trained singapores first angel Investing workshop in 2016. So far only 25 pax trained but will do more next year.

I lead what I call a balanced portfolio life nowadays. The logic behind it is that while obsessive and crazy focus is needed to achieve first success in business, it is not exactly great for ones spiritual, mental or physical health. It also frequently leaves family members and loved ones shortchanged of attention and love.

So nowadays I spend around 20% of time on exercise and leisure stuff (reading, tv, gaming etc), 20% on volunteer work, 30% on family activities, 20% on portfolio and finances and last 10% on angel investing related. Each of these activities have specific goals linked to a purpose or reason for why I do them.

Eg. Portfolio is to return min 5% annualized with fund mgmt standard vol and sharpe ratios. Angel and volunteer is to impact fellow entrepreneurs and build a culture of entrepreneurship in sg in my own small way.

Some key observations:

Personal related

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1) Losing a parent is very painful. I think of my mum every few days and it truly is a permanent gap in my heart. So if you are lucky enough to have both parents around still. The best sharing I can give is to spend as much time doing stuff with them as possible. 

2) Kids grow up real fast and are loads of fun. Have more of them if you can afford it in terms of time, attention and resources. We have 4 children and without a full time work focus, children, wife and rest of family are the main purpose that drives me.

3) Being present and aware of life as it happens is very fulfilling. In business, we are always projecting into the future. Now I try to focus on the present. Really listen and look at what is before me. A side effect is that I notice more about people and I hope in time to be the sort of person people like having around. Not to get their approval but because life is more fun when others are comfortable around you and share their stories! Being aware also means we become more understanding of others and that most people are just trying. So patience gets developed a bit more.

4) Learning still matters perhaps more so than ever. Since learning new stuff is the reward once payment is taken out of the equation. The other driver is being useful which I cover below. Big stuff I learned about include portfolio thinking, board roles, angel investing and about myself and people in general.

5) Undergone some major personality and health change. Both are connected. I am far less competitive though I can still be triggered to the old mode if I suddenly meet a whole bunch of alpha super successful males. How I overcome this is to remind myself that in the end it's all the same. See learning (1). So if I am lucky enough to get out of the competition while relatively young, why continue? For recognition? For the net worth scoreline? To buy more stuff? This diminished desire to win others coupled with a lot of exercise and nutritious food has resulted in a  healthier me. Sleep much better and smile more and feel more at peace.

Work & Portfolio  related

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1) Being useful works. This is my criteria for doing the volunteer and angel work. I try to do stuff that plays to my strengths. But I must admit it is hard to be satisfyingly  useful when one is only occupying an investor or board member role since they are not operational.. My philosophy is that  I say exactly what I think that could be constructive to listener . And those who want to hear more, I am always happy to help further. In terms of being paid, it is strange to suddenly not get paid for all the work I do. But I try to see it as giving back. 

2) Being open is something new I am trying. . Last year I was laser focused on angel and startup work. This year I tried being open to anything. It's a work in progress as all the knowledge and skills I have are tech and startup related. So people tend to pigeonhole me there. But joining some government boards and committees has been intellectually interesting and makes me feel I am doing something useful. Though I must say I am not used to the much more slower pace compared to startups due to the size of the issues and organizations we deal with. I am also hoping to go beyond all this corporate and business type areas. 

3) Portfolio mgmt.   It is a full time thing to do it well. Need to research a lot which fits me since I like to read and pay attention to numbers.. Attitude and psychology matters a lot. Attitude meaning we need to admit we are rookies and so have to learn almost everything from scratch. So far so good and I like the stretch and challenge as the thinking is almost opposite from what an "all-in" first time  entrepreneur needs to do. There is also a lot of tracking involved to know how I am doing.  Honestly, I think few entrepreneurs should do this activity diy  as the traits needed are quite at odds with what make them succeed.

4) Startup investing via angel and Vc investing is quite fun. I learned a lot in terms of how to assess, how to handle post investment and am now waiting to see if all the effort will pay off. Unlike stocks and bonds, this activity is more long term. But I am optimistic it will do the best. This activity is most fun as I also contribute a little in helping the startup in terms of mentality and strategy. The best sort of work is one where you put in time and money and it all works out! I think this is a must do for most entrepreners who have made enough money.

Next year, my goal is to continue what I now do and be open to what life will bring. It may mean full time work in the form of starting a new business, it may not. But I want to make sure I continue adding value to people and organizations around me and also be present for all my loved ones!

Thoughts on Paktor fund raising

This one pipped my curiosity as its the 3rd >30M dollar deal for a Sporean company that I am aware of this year alone! Ninja Van, then Caurosell and now Paktor. You can read more about what I think about caurosell here. I never reviewed Paktor space before though I did meet and are friends with Violet & Jamie who run Lunch Actually which is a more traditional offline dating company which now has also ventured into the online space. No vested interest in both parties.


Company story & financing so far
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Paktor is founded by Joseph Phua, Charlene Koh & Ng Jing Shen. They run a combination of various dating apps and offline dating services in 4 countries. They started in 2013 and grew the company via VC money.

Paktor did revenues of 21.5K SGD In 2014 and 1.05M SGD in 2015. This rapid growth is impressive and does perhaps show that there is demand on consumers part to pay for dating and social dating related services. However, this growth came with spending 9.1M SGD in 2015. So I think any reasonable person would say the jury is definitely still out on whether their current business model makes sense. The strength is that they claim to have 22M users. So that is a cheap $0.5 per user acquired if I just use their last 2 years costs. Not bad and if these users are engaged, then that is a reason for optimism.

Joseph further claims in his msg to me to be profitable 3Q16. If he is referring to GAAP accounting profitable as a consolidated entity, I am extremely impressed as it means top line must have grown 10X with costs constant. Perhaps this explains the investment. However, I would wait for ACRA report next year to verify this fact. They had deferred revenue of 261k sgd for 2015, assuming that is 1 month sales, their run rate in Jan 2016 is still just 1/4 of what they need per month.  I have yet to see any ASEAN startup grow revenue so fast AND be profitable. Its usually one or the other. Happy to be wrong though. Actually, if Paktor grows revenue 10 fold for 2016 to 10M SGD without increasing costs, nevermind profit, I think they would have justified the round already simply because the speed of revenue growth is screaming at demand.


Company Founders
===============
Joseph is the main owner with about 31-32% before most recent round. The other 2 founders own  2-3% each. Of course, may be there is private agreement to split more shares. On salary front, they don't overpay themselves and it is a fair sum for the 2 directors of a well funded startup.

I have never met any of them but Joseph immediately contacted me after I posted a comment on FB and I must say I like his style and what he says. Considering he is from a very privileged background, he does genuinely come across deeply engaged with his business and clearly cares. He also talks about profits which resonates very well with me. Of course to have some many VC (esp Vertex who has had some nice wins this year) support them it should be that way. Anyway feedback is also good about how the company culture is run.


Financing Details
=============
Since  2013, Paktor has raised Seed, Series A, B of about 18M USD from Vertex, Majuven, Yahoo Japan etc and now apparently $32.5M USD Series C from MNC group and K2 global vc with follow on from existing investors. I say apparently because the newest round have not been lodged as far as I can see.

The most recent rounds valued Paktor at about 33.6M USD. So this latest run in Nov is really a large and quick round considering they raised and settled last round only in Jul 2016. Valuation (if indeed it is a full cash Series C round) should be anything from 60-100M USD premoney.

This is a pretty large investment for MNC and K2 Global.  The latter is a newish fund that came out last 2 years saying they aim to raise 100M to invest in pan Asian plays. So even if K2 took 10M of the 32M, it is a bold first investment. For MNC group, they are large media player in Indonesia with holding company having a market cap of around 660M USD. However, they have large bond/debt obligations which need to be refinanced which caused their Ottawa USD to be marked down a fair bit. I can't imagine MNC taking all the rest, so their existing investors must have ponied up more money. We will know when the filing is made.


Deal Rational/Market Sizing
======================
In the USA, Match.com group does around 900M USD and has profits in excess of 300+M. So the potential is huge if they are able to make it work the same way  in Asia.  Match was valuing themselves at around 4-6 times revenues. Closer to home, Jiayuan which was china's listed dating online/offline play, was taken private in 2015 at 233M USD market cap which was just 2+ times revenues of 110M USD.

So if we account for per capita differences and of course higher mobile adoption, it looks like there is an opportunity here on paper. However, experience tells me things always take longer. China and USA are ahead of us in this area and I suspect total dating revenues in ASEAN will be lucky to approach 50M USD next 5 years. But of course, readers know I am conservative. The VCs obviously think Paktor will be closer to Match rather than Jiayuan. I don't know why though.

BTW, closer to home Lunch Actually has much larger revenues at least back in 2015 but has taken many years just to get here. This is another reason why I think the market will take time.

How about this whole social entertainment thing? Its rather vague so I am not sure that it means. I guess we will know as they execute. But there is a company called Migme which I analysed before which tries to monetize social networks differently. Still very much a work in progress and is facing a big cash crunch next few months.

In a nutshell, Paktor will need to find some scalable new  product within this dating and social space that is radically different from jiayuan or lunch actually in order to grow well to justify this kind of round and deliver for their investors.

Summary
========
Overll, my assessment is that this round is very much a selling the future type of story similar to Caurosell. It is is a lot of funding  for a proven S$1M revenue. They need not just superb business execution as they expand regionally and improve/create products, they also need market wind behind them for adoption via subscriptions or advertisements to grow fast enough to justify their spend and valuations. It will be interesting to see what happens next. My gut is market wind is not that strong next 5 years but this is a viable good market but it may be a long haul game. Good luck to Joseph and team!

One a final note, if more such deals happen and set the benchmark, we are going to see larger deals with even less fundamentals moving forward! Is this good or bad? Well, I see it as part and parcel of the ecosystem evolution. Some founders/investors who get the timing off will lose big and those who read it right will gain big as the markets run up and down, but so long as usage grows, revenues grow, the overall ecosystem will continue to do well. Just be clear what is niche and what is broad market and make sure you have enough cash in the bank to do the battle!

Analysis on Carousell (Updated Oct 2018)

Quick update on Caurosell numbers

1) FY2017 revenue is 1.727M USD on costs of 31.5M USD or so! Super huge expansion in costs! TIA has a good analysis on numbers at :

https://www.techinasia.com/carousell-173m-lost-us298m-2017-monetization-efforts

2) June 2018, raised a further Series C 85M USD from rakuten and a bunch of investors. Price per share is 14.925 USD.  DBS also participated. Market cap post money is about 27,031M shares x 14.925= US$403M USD. Founders ordinary shares of 2.6728M are worth on paper about US$40M before all the coupons and liquidity preferences. Each about 9.9% each before options. 

3) With the dramatically increased cost and revenues not really growing, we are looking at 3 year runway if no more rounds. It is extremely critical to see how revenues grow this year. I would argue 2018 (or if kind investors, 2019) is a crunch year for management to prove they can monetize and grow into the 400M valuation. At 400M valuation it means their revenues should be at least 30-40M USD annually and growing rapidly. 


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Edit: James has reached out to say Quest came in pre-seed. Very likely since it is ordinary shares. It also means their multiple on paper is higher than 47 times!

Mobile marketplace carousell just announced a 35.8m usd round valuing themselves at about 236m usd or about 320m sgd. this is probably the largest pre revenue valuation i have ever seen in this region and is testimony to their rapid growth and probably cheap money driving valuations.

No one has exited so far so it's all paper gains and all in the game. Biggest winner I can see is NUS who incubated them and so own a small stake worth on paper over 5m sgd. Each of 3 founder owns same stake at about 12.5% of company in ordinary shares now. That's about 40m on paper if I assume no funny liquidity preference or coupon terms. Wonder if private banks will give some liquidity based on such stakes. Maybe cut by 50-75% to offer loans? 

Seed round vc/angel like 500 durian, quest and Darius make about 47 fold on paper. Sigh.. Pity I passed on it last time. Can't even remember why. Would have made about 1m paper profit. Only consolation is that invested in 500. But much smaller order of paper gain :(

The other thing that is interesting is that Rakuten is the lead investor for seed, then sequoia did the vc series a round at 20.4m valuation and now Rakuten is back valuing them 11-12 times more after 2 years. Why skip the series A when it was so much cheaper? And in a sense it is also a form of averaging up for Rakuten. They are now biggest shareholder with about 33% stake. I don't pretend to know how huge corporates work so perhaps someone can share.

I met siu rui recently at a panel where minister Chan Chun sing was presiding. He hustled and tried to get minister to use carousell and struck me as very driven in his goal to make everyone use it. When questioned about revenue model, he spoke about classifieds margins and how freemium and other measures can be great monetization. He then refocused on usage regionally and stated that as his goal.

I also tried carousell once to see what it was all about and it is truly very easy to use and I managed to sell a few items but only the well discounted ones. It has a strong appeal for bargain hunters and perhaps to just get rid of stuff.

The beauty of raising without revenue based on usage is that no one really knows the ultimate potential. The true test will be when revenue tap is switched on. What will be the gmv sold? How many will pay for whatever premium service created?  How will epayment fees, delivery, escrow fees eat into the model. Will it be a lucrative business generating >10m profit annually to justify this valuation? My gut is this situation is not like Facebook or google. If fees are across the board or just certain categories but everyone pays, cheaper competitors will enter and users may move. If fees are only charged on freemium model, then will it be large enough to justify these numbers? Left to me, I would pick the latter first. Entrench more and evolve more sticky features and then do the former. Perhaps that's why so much money was raised. To have a war chest to slowly experiment. Carousell spent lost only 1m in 2014. Even if losses are at 3m this year, they have a 10 year runway!

Good news is all the shareholders seem to think numbers can grow even more. No one is exiting at all at least based on filings so far. Perhaps revenues and profits are the wrong target, perhaps with huge traffic across the region, a buy out by Rakuten or another corporate giant is also possible. We shall see. But in mean time, things are really heating up in our startup space!

Listing as a form of Series A or B - Migme

21aug 2016 Edit : Steven reached out and corrected me on some items. Here are amendments. First mgmt owns a fair bit more due to 53m restricted shares and about 20m option pool. About 73m shares in total which majority will be mgmt. so about 25-30% owned by mgmt. Second, migme has announced they will be raising 6.5m to 10m more very soon. At current burn, it will last 6 month to 9 months more. Their game strategy must really take off and reduce cash burn from current 5m per quarter. It looks like a key period coming up for the team!

Migme has resumed trading after a 1+month trading suspension. It is not normal for a listed company to stop trading for long because the basic idea of a listed firm is be liquid and tradable all the time for it's shareholders.  Migme has announced raising $8m more various investors of which Mnc group is one. Mnc is a large conglomerate in indo with a lot of broadcasting interests. A good strategic investor. However market is punishing it today with a 23% drop in stock price to 0.36 below the subscription price of 0.4. What I wrote earlier still stands. The key period is upon migme now. It has to use this 10m over next 9mths to prove it can improve financials and maybe even be cash flow breakeven. To me, this whole suspension episode is a good reason against raising via public markets instead of usual Vc. Mgmt has so much more public stress than needed. Readers can read Steven fb post to feel his pain.

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I am writing this because someone asked me what I thought of migme.

Have commented about this before. Essentially, migme was a 7m series A "ish" round raised via an ipo route. Then over the last 2 years raised another 15m or so ala a series B. So while there is added complexity clearly there is some advantage to be listed. However end of the day cash flow and subsequently profit is king.

So in migme case they are still like most series A and some series B type company, deeply unprofitable and need cashflow aka more funding. One thing good as a listed entity is that has a bit more options to raise via more non vc routes like rights issue, corporate investors etc. they proved this by further raising the 15m.

An interesting downside for listco style raising is that a listed entity structure may deter traditional vc firm from investing. Too many moving parts, less control, public disclosure and also have to spend more to maintain listing status.

So if we treat migme like a usual money losing  series b firm, then there is nothing surprising it needs to keep raising. The only issue is that it has to be all public due to listed status!

The question then turns to whether non vc investors will have the patience to fund migme moving forward. Financials are not pretty. The 22m or so raised all spent. But business still losing 10m per half. In 2015 negative cash flow of -17m!

1H2016 Cash receipts growing only 7% QonQ so not massive growth. The good part is cash receipts was 12m in 2015 and looking like 20-30m this year. But again it is not revenue and we don't know how much is high margin stuff or how much is just low margin ecommerce. How much is recognisable revenue, how much is future revenue. Too many questions.

Final point is that Mgmt has too small (about just 20m shares or < 10% of company) a stake now and it is a concern. Granted the company is extremely generous with options. For the financials of company, CEO was paid 1.35m of which 933k is in options which are in the money still as issued very early so low strike price. In contrast, Patrick grove of iprop paid himself $1 for first few years and had a much more sizable stake.

It will be interesting to see how this story turns out. There is a limit to investor patience and when it is all public, it can all go downhill very fast esp if key business metrics don't perform. Ibuy/ensogo is a good example. From 100+m company to just 20+m market cap, CEO resigned and shares
suspended.

Building a strong startup culture in SG

I have been thinking about the role of startups and the role they play in the SG economy. Part of this is interest, part is because I am a volunteer on a economic planning committee. Here are the key thoughts I have on this topic. Please do feel free to comment.

WHY DO WE WANT STARTUPS?
Startups matter because they are the future MNC and SMEs of our country. They also matter because they add vibrancy and innovate quicker than established companies. Personally, I also advocate entrepreneurship for those with the right temperament because it is a way of life that is immensely empowering.

WHAT KIND OF STARTUPS DO WE WANT?
I don't believe only certain sectors will produce all the high value add companies. We should encourage all types of startups and focus more funding, grant money, govt help on the low lying fruit like ICT, certain services (eg. fund mgmt. startups), Medtech etc. But if a startup in F&B starts growing like bazookas and builds a strong regional brand, we should embrace the company. It is actually the way the entrepreneur innovates, dreams and executes that counts most at the end.

We also want startups that succeed with or without govt help. Government schemes that end up creating a crutch mentality are a major no no. All government level help given to the startup ecosystem needs to viewed through this lens.

OWNERSHIP MATTERS
Local ownership of startups matter because citizen ownership implies knowledge and profits stay in SG. However, we have a shortage of founder and cofounder talent, so we need to open our doors to outside talent to come here and start companies at least in the short to medium term.

HOW TO ENCOURAGE MORE STARTUPS?
We need to dispel the idea that failure in work life is bad. We need society to view enterprise as something very positive and as a worthy career path if one is so suited. We need an active funding landscape at Seed, Series A, all the way to IPO level. One that not just funds SG startups, but also regional startups that take SG money.

ENTREPRENURIAL LEARNING IS KEY
We need to raise the quality of our startup entrepreneurs. The best entrepreneurs are always comparing, benchmarking, improving their knowledge. To this end, we must provide both formal and informal learning channels for startups to learn from each other, from mentors and from universities.

THE ROLE OF GOVERNMENT
One important role of government is to catalyse specific startup segments like what was done with ICT. This can be via funding, grants, special manpower quotas, partnerships with MNC/GLC/Govt/Overseas etc. Another key role is to get MOE to start including entrepreneurship as a career choice at school level. Government can also take the lead in awarding more contracts to SMEs esp majority locally owned ones.

Finally, government can also influence talent development and where it goes. Recognition of stock options as compensation, raising ICT salaries and training more ICT graduates are all good measures.

HOW DO WE KNOW THIS IS THE RIGHT PATH?
As with anything worth doing, we must define and measure our startup ecosystem. Its not just about funding rounds and exits though those are important metrics. It is also about the broadness and quality of our investor base, quality of employees who choose to work in startups and of course, the number of startups that graduate to become the next SIAs of Singapore creating many jobs and wealth for our country.

It is my hope that in 10 years time, startups become a core strength of our economy with a constant, deep pool of talented founders and employees creating vibrant, innovative new products and services demanded by sg, regional and global consumers and businesses.