Saturday, June 15, 2019

AngelCentral/Angel Portfolio Report Card

ANGELCENTRAL
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AC goal is to build effective angels by offering quality deal flow, investor education and syndication services. Our community manager zijie has written a wonderful summary of what AngelCentral has done in 2018. You can read it here. Some highlights:
  • Hit our goal of doubling investment commitments. From 3m in 2017 to 6m. Of that about 3.7m actually funded.
  • Signed up over 100 paying members from 0 in 2017. Lovely mix of entrepreneurs, corporate types and family/corporate funds. Best part? Almost 40% of them actually cut a cheque.
  • Trained more than 200 angels.
  • Successfully ran 3 syndicates. 
For 2019, Ning set more ambitious targets to grow everything and we are off to a good start already. Of note, we just launched our 2 sided online platform to facilitate discovery and dealflow.

PERSONAL ANGEL PORTFOLIO
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As for own angel portfolio, we now have 24 investments as of 31st May 2019. Using the 24, it’s a TVPI of 2.6 since 2011. If it is over the 19 investments made since Jan 2015, we are at 3.3 TVPI.

In terms of IRR, it has been 23% since 2011 which includes all our early mistakes and 68% since 2015. Hopefully the numbers show we are getting good at our game and that all our fellow AngelCentral investors are working with a good formula. Hard to say because the high IRR also coincides with increasing liquidity in funding ecosystem. But I do feel we are picking better since retiring and focusing on angel investing.

A few observations
  • mostly paper gains based mark to market so really need to wait for exits to realize those gains
  • 80/20 rule definitely applies. The top 5 startups account for almost all the paper gains.  
  • Angel/vc/pe part of portfolio can act as a barbell to overall portfolio. It helps add 2-3% to overall returns which is very significant. 
  • Early exits are no good. We need 30x returns not 2-3x.
  • It’s really all about founders and depth and scope of their hunger.
PERSONAL THOUGHTS
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Personally, I want to share that helping to run AC has given more purpose to my life. So it really validates the point about having a meaty identity to sink my teeth into that takes up time, is intellectually challenging and also hopefully pays back.

Now Ning and I call ourselves full time angel investors who not only invest 4-5 startups a year but help hundreds more find angels via AC. We are now useful again in a concrete economic way. It’s also a lot more fun to co-invest with other likeminded investors. 

The tricky thing is how to balance it all so that I don’t end up getting obsessed.
It’s quite easy to get back to old mould. I got disproportionately frustrated over a failed syndicate and I had to remind myself that it’s just part and parcel of running an angel grouping.

Hopefully things will continue to balance well and our angel activities continue to grow and add value to the ecosystem. Key thing in my mind is monetization for existing startups and real exits that generate founders who can invest back to spur our ecosystem even higher! 

Tuesday, June 4, 2019

Thoughts on Strategic Direction for Carousell

(Wrote an entry on Carousell before.)

Friend sent me an article on BT about Carousell. It resonates with how I have been feeling but I have been refraining from commenting partly because I want to see how they executed last 2-3 years and partly because we do have a small indirect stake via a VC that’s now actually significant. 

Note : Latest OLX deal is 22.12m cash, the rest by injecting OLX Philippines outfit at a 30+m valuation if I recall right. So they bought another 8-9mth burn time. And OLX is of course potential buyer. 

Can Carousell become mobile Craigslist of ASEAN? 

Not many people are aware that Craigslist is very profitable on close to 1B of revenue annually. Thats what Carousell is selling to investors. That it can dominate ASEAN as a classifieds player which is a very large 0.5-1B (my estimate) revenue market. However, the dynamics that allowed Craigslist to charge for jobs, property, cars and personals back in early days no longer apply in ASEAN.

It will be tough for caurosell to become a profitable mobile classifieds following the trajectory of Craigslist. Reason is it is not a true first mover in the various classified verticals and each vertical is crowded. The property, jobs, cars, dating classifieds space all have very deep custom built web/mobile platforms and strong brands with significant resources that already are taking up the available online advertising revenue. 

So it would be a hard slog to win against the likes of propertyguru, jobstreet or even sgcarmart. Can slowly make headway like in cars (weakest group) but quickly will be very tough.  Ask yourself where you go to look for jobs, cars, dates or property? 

Can Carousell become a MarketPlace?

Back in 2015, I thought the logical strategy would be to be a mobile marketplace ala Lazada on web and that the whole classifieds was a deliberate strategy to get started with some mindshare and users. Unfortunately, they did not try to primarily earn off GMV and transactional revenues and build out a comprehensive marketplace platform. Now I would argue they have missed the boat and Lazada and shoppee are the regional leaders. There could be a niche as a c2c marketplace but that’s probably much smaller.

Growing into 500m valuation?

Based on 2017 1.7m usd in revenue (Expenses are an estimated 30m in 2017), my guess is if via ASEAN mobile classifieds as a business, they will be lucky to be doing 10m ish usd advertising/fee type revenues (not some funky gmv type topline) this year.

That’s not enough to justify the  500m valuation now. 500m requires to hit at least 50m revenues. And those revenues better be high gross margin type (>75%) type and growing rapidly year on year. Product wise, they need to have users preferring to use them to search and get property or jobs or cars across asean. I don’t think they are anywhere near that now. 

The other possibility is to that it’s not too late to switch into marketplace. I don’t know enough on the competitive dynamics of this space. But a good mark of success here will be an improved platform that somehow offers sufficient value for carousell to earn a cut off the transaction value and which a significant percentage of users are willing to pay for. 

So what’s next? 

Even if Carousell fails to deliver on revenues, it is still valuable to a buyer. Great brand and traffic means it can end up being like Redmart. Founders get decent package but early investors will probably lose most money with latest investors losing less. Redmart gets to continue and consumers and staff benefit. 

Ecosystem wise, that may not be a bad thing. Poster boy does not and cannot mean sure win for everyone. Anyway, we have other poster boys like Garena/Shopee, Patsnap, Ninjavan, Razer, Justco etc and I would argue they have much firmer revenue positions.

Of course, am happy to be wrong and if Carousell manages to crack how to beat the various classifieds players and/or become a dominant marketplace, then it will become a sizable, sustainable unicorn for sure and our small indirect stake will be worth many times more!