Startup Portfolio Review for 2022 - The pain of costly capital

I just reread my 2021 report and unfortunately a lot of the points/predictions we made one year ago came true. The growth stock rerating lasted the entire year with no reprieve in sight as the Fed raised interest rates to 4+% in an effort to combat persistent inflation. SPACs and IPO attempts mostly all failed as the markets refused to tolerate expensive listed company valuations. Carousell, Kredivo, Carsome/Carro all have to say IPO or SPAC deferred for another 1-2 years as investor appetite dried up on loss making companies. And those few ASEAN startups that did manage to exit in 2020/21 like Goto, Grab, Buka, Prenetics, Propguru all crashed anything from 50-80%. Even the largest ASEAN tech company SEA crashed 76% from 220 to 52 per share.

In spite of the tough investing environment, Ning & I stuck to our investing philosophy and continued investing into 4 new startups and did 5 follow on rounds for existing portfolio. Amount invested 20% lower than 2021 which was a record year for us with 9 follow ons.  As shared in 2021, covid and Ukraine war has caused great pain to 3 of our startups and we have chosen to write them down to zero in 2022. On a positive note, 2022 saw a decent exit from our 2012 investment in an animation startup. Also, in spite of the bad market, we had 5 series A up rounds happening for our first Vietnamese and Thai startups and 3 SG startups. So in total,  for the 41 startups we invested since 2015, the IRR is now ~28% (down from 38% last year) with a TVPI of 2.66 (down from 2.98 last year).

On the VC front, our 8 funds are at 2.6 TVPI mirroring our angel side and actually up from 2021 2.47 TVPI. IRR should be low 20%s as they took capital much faster. 

Putting both angel and VC together, we actually still eked out a small gain of 2ish% year on year for 2022. Hard to believe but there is big caveat. See point 5 below.

Some comments and thoughts :

1) The drop in early stage valuations has happened. The valuations for follow on A rounds have been significantly worse than what founders thought. However, it is nowhere near the levels of how the growth stocks have fallen. ARKK fell almost 70% in 2022, it is only logical that series Seed, A, B, C, D, E valuations fall drastically too. Right now, startups are deferring fund raising if they have cash or raising from existing investors whose interest is to maintain last round valuations. Something has to give and i believe if interest rates stay above 4,5% this entire year, we will see some capitulation and failures from later stage startups which will cascade further to the earlier stages.

2) At Seed level, valuations have fallen 20-30% but its still expensive with no revenue startups valuing themselves at 4-6M SGD. If the later stage fallout happens as described in point 1, then maybe we will see valuations for seed back to the old S$2-3M range which would reflect the risk reward for angels and seed investors. 

3) One silver lining is many ASEAN VCs just raised capital for new fund and have cash to deploy. So it is entirely possible that they can maintain their winners valuations and ride out the storm until 2024/25 where they expect inflation rates to moderate back to the 2-3% range and hence interest rates to weaken and valuations to rebound somewhat. For these VCs with cash, they are in a relatively good place to slowly pick and choose  for new stories and only invest in valuations are good. For VCs who want to raise a new fund, i hear 2022 2H was very tough and i believe it will be very hard to close any meaningful sum for a few months more. Global investors need more clarity on inflation and IR and economy before deciding next steps. 

4) VCs (as of 3Q end) are still declaring good numbers. Two ways to see this. First explanation is the nice way.  Winners can still grow and command up-rounds in bad climate. Some of our VC funds invested in Ninjavan, Carsome, Grab, Buka, Kredivo etc. So its possible to swim against the tide for sure.  Second reason is that VCs have leeway in how they determine valuation. Usual rule of thumb is to keep at last round valuation. But they can also chose to up a valuation if company has no new round but business has a grown a lot. Also, they can continue to fund internal rounds at last round or even up from last round. All these moves allow them maintain valuation stickiness. The game is only up if the startup fails to perform, or lists and stock price drops or if climate stays permanently depressed and new round is down. Then write down becomes inevitable. 

While we can understand the logic of VC behavior, it does contrast with later PE funds. We also invest in some later stage PE funds and because they have many listed investments, they have had to write down 20+% mirroring at least a good chunk of tech stocks revaluation. So it’s important to take the VC numbers with a big grain of salt. 

5) On a personal front, while 30% IRR sounds good, it is mostly unrealized gains on unlisted companies.  The weakness in the ASEAN ecosystem is the lack of distributions. In current climate, I would much rather have a TVPI of 2 and 15% IRR but with 1x DPI already. 

6) This combination of high interest rate + high inflation + geopolitical issues = great uncertainty in global and ASEAN/SG economy. And when we add on our personal asset allocation shift into property, we feel a need to recalculate how much more to invest in startups. Bottom line, we want to see cash returns from earlier investments before committing much more capital into the space. So a lot depends on what happens next 2-3 years. Hitting 50 startups will probably happen but hitting 100 will require more exits. 

Bottom line, capital is now costly. Why would an investor take high risk to earn 15% returns if they can get 8% investing in a relatively safer bond portfolio? And why invest in a loss making unlisted startup if they can invest in google or baba at 12-18 PE ratio? Ning & I remember a time when startups were valued at 15 times profit and that was considered good valuation. And if you are not profitable, your business is not worth much until you show you can be soon!

7) We have actively communicated this investing climate change to many of our portfolio companies reminding them that profits matter a lot more now. I do believe many founders understand that turning profitable is the surest way to navigate 2023 successfully. Quite a few of our startups are either profitable in 2022 or have a clear path to become profitable in 2023. Those who can't are cost cutting to at least show narrowing losses and also making sure they line up equity funding to stay alive.  

It’s not a good time to run a startup now. Costs are rising due to inflation esp wages, but funding is hard to get. Debt is expensive and we expect startups that need lots of debt to suffer in the months ahead. See what's happening to Affirm and Klarna and Carvana. What will drag things down further is if USA economy goes into bad recession with its consequent impact on ASEAN. Then customers too will be hard to find as overall demand shrinks. 

8) Timelines to exit are now all extended at least 1-2 years as many startups will just stay alive and tread water in 2022 and 2023. So fellow investors, please do your own modeling and analysis and base it on a 10-15 year horizon for each startup and VC fund you invest in. With 10 years being a good scenario!  

9) One great thing that happened in 2022 is how the AngelCentral community has continued to grow. Our first investments into Vietnam and Thailand paid off well this year with significant uprounds happening as Series A rounds happened with good VCs. We also had earlier syndicated investments raising Series A in 2022 at improved valuations. So if you are keen to join us, do check out our services to help angels.

Moving forward this year, we intend to continue investing but with even more caution and discipline. This climate is not a bad thing as it removes all the crazy excesses of the 0 interest rate environment. It never did make sense that NFTs/alt coins were worth trillons or that startups are worth 10-30 times their sales even with lousy gross profits. Its a much needed reset for asset prices and forces everyone to get back to basics of profits and cash flow management. 

On a founder or investor individual level, we of course hope for the global economy to not tip into bad recession in this adjustment process and that inflation is curbed with minimal collateral pain. However, an old adage comes to mind - we can hope for the best but we should plan for the worst. Sounds like a good philosophy for 2023!

Footnote : This review focuses only on our startup and angel investments mostly in ASEAN space. if you want to know about overall philosophy in life, pls read annual review on life.

Back to the 2000s for startup valuations?

Have been watching and analyzing the public tech markets and broader markets for the year. Like everyone else, I have been taken by surprise by how rapidly valuations for loss making growth companies have fallen. Some examples ranging from those with really bad financials to those with slightly better ones:

1) Carvana has fallen 90+% in value. It’s now trading at just 1.65b usd or about 0.15 times of its revenue. So what does that say about what carsome or carro is worth and the IRR and TVPIs of their VCs?

2) SEA has fallen 88% from peak and is now worth just 20b or barely 1.5 times revenue. And they have a profitable gaming unit some more.

3) Grab, Goto, crowdstrike, twillo, teladoc all crashed 50-90+%. 

4) QQQ which is profitable big tech mainly has fallen 34%. But at least the valuations are supported by profit. That’s an important point- profits and not revenue now support valuations more.

5) And to add to all this pain even China tech and consumer companies- which frequently are profitable too have not been spared. They too are down >>50%. Their issue is a combination of worldwide revaluation + slowing economy + lack of trust in Chinese markets. 

For us in Asia, I am hearing most investors are hit bigger by the China & SE drop than by the DM fall in the form of QQQ or SPY as we started the year feeling that China stocks were cheap.

What does all this have to do with earlier stage startup founders in Asean? I hope I am wrong but current multiples remind me of post 2000s tech crash when it was normal for tech companies to be worth something serious only if profitable or approaching profits. A company with 10m revenue and 3m profit back in 2005/6 was worth more than a 100m revenue company with 10m losses because it is the PE ratio that matters more.

And the PE ratios for fast growing companies were usually ranging from 15 to 40. So the profitable tech company with 3m net profit off high gross margin of 70-80% was still just worth $45m give or take depending on growth rate. But the loss making one is probably worthless to public market investors or just worth its NAV esp if it cannot show path to profits and has widening losses.

So if I am a founder today running a loss making startup, I would plan for a “profit and cashflow hungry” capital market. Revenue growth matters much less than narrowing losses and profits. It’s also far more sustainable.

And if I were a fund, I would aim to make the current portfolio profitable and focus on getting distributions for LPs. Forget about raising a new fund for a while until the dust settles. Any LP will want to see this situation clear up and stabilize first. We also want to see distributions being done before just believing in current fund IRR and TVPI as it includes unrealized gains which have not reflected public market reality. Very soon LPs will see that 6x tvpi and 40% IRR means little if distribution is only 0.1x for a 6-7 year old fund. I would much rather have a 1x distribution and tvpi of 3x.

Unfortunately, there seems to be a state of tension going on between optimism/kicking the can down the road and being honest and realistic. Eg. bridge financing is needed but are still being done on last round valuation even though clearly the listed comparables have crashed to a 1/3. This deliberate mispricing by VC and PE funds is self serving behavior and will result in unhappy LPs if the write down ultimately happens 1-2 years later. 

Let’s see how this plays out. I would not be surprised if this downturn worsens on revenue front as businesses and consumers cut back.  if that happens,  there will be big loss making startup failures or down rounds in 2023 or 2024 as there is no way to justify 10x or more revenues when growth disappears and profit is absent.

As investors, we have been hiding out in profitable companies for listed market (only one nostalgic position in loss making SE) and some quality bonds since start of year. Even so, still down for the year but better than Acwi benchmark. For startups, we intend to continue investing but we will only do so at reasonable market valuations led by new lead investors to the round. No internal round at last round valuation for us if business has not improved dramatically.

As for our existing portfolio companies, we continue to ask them to prioritize ebitda and cashflow over revenue growth. Don’t count on always having investors to fund you and instead get customers to do it. Focus more time/energy on product, on customers and on employees. That always pays off.

Happy to see that many of our founders seem to get this and have moved to lower spend and drive revenue growth.  In the 2000s, it  was normal and desirable to turn a net profit if you have a few million gross profit. It was also normal to grow costs only if revenue grows in tandem or better still grows proportionately more. It’s time to bring that mindset back in vogue and stop being proud of losing money and using investor money to stay afloat! 

How COVID recession is affecting our startups.

I just wrote an article on what steps founders can take now to prepare for the downturn. As investors, it will be great if we can remind them on the various topics they need to think about. Beyond that, we can also give morale support by recognizing the stress they are under and also being patient as they come to terms with the new situation.

One interesting thing is that as Ning & I start surveying our startups to get a sense of the impact of the recession and their plans, we realize that our strategy of not having a fixed area or industry and our strategy to go for more conservative founders seems to be working well even with the COVID stresses. Of course, there is also an element of luck at play. Here's an interesting summary. Most of the VCs we know have also done this with their portfolio.

Out of 23 startups who replied.

New Revised Revenue for this year compared to original projection

same and up - 5
0% to -25% - 8
-25 to - 50% - 6
>-50% - 4

Cashflow runway with new scenario projections

> 20 mths - 14
12-20 mths - 4
<12 mths - 5

So while we can see that definitely the bulk of startups are affected by downturn in a big way on revenues, we are happy to note that most of them just raised their latest round last 6 months and so still have a lot of runway to tide through this tough period. We are focusing on the 9 which only have less than 20 mths to see if we can help extend their run way via loans if it makes sense.  Unfortunately, we do anticipate 1-2 failures next 6 months.

Hope this sharing is useful!

AngelCentral.co is up and running!

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

The AngelCentral Story

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

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

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

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

Launching AngelCentral.co

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

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

First Month of Operations

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

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

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

Moving Forward

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

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

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

Why we need more startups!

(This is an op ed piece i wrote on why we need more Startups)

We frequently hear about startups being sold for many millions and how these deals make instant millionaires of their founders and investors. While it is clear how successful startups can benefit their stakeholders, it is less obvious how these establishments can contribute to Singapore’s economy.
Using examples from my experience building and running a job portal service, I would argue that there is a need for more startups here in Singapore – and that building a larger and stronger startup ecosystem here will benefit Singapore’s economy.

STARTUPS DRIVE INNOVATION
In Singapore, over 20 job portals sprung up between 1999 and 2000. During those years, revenue from recruitment advertisements for incumbent print media players was estimated to be between S$120-150M. By 2015, the total estimated spending on recruitment advertising including print had decreased to S$70M, of which approximately 60% could be attributed to online platforms. This was in spite of Singapore’s GDP growing by more than 300% over the same period.

In this regard, job portals have helped to create massive savings in recruitment advertising for employers. On top of cost efficiencies, job portals have also generated substantial time savings for jobseekers in the application process, and for employers who now use software to screen and manage applicants.

Without job portal startups, the incumbent print media players would likely have taken a longer time to roll out digital platforms to avoid cannibalizing existing products. They would likely have also charged higher prices on their digital offerings to maintain their revenue.

The development of online recruitment portals is a good example of how startups can disrupt industries and change consumer behaviour through new technology. In the process, such efforts also result in great economic efficiencies for the industry.

STARTUPS TODAY, SMES TOMORROW
Many startups will fail. From the pool of more than 20 job portals established in 2000, only 3 to 4 still exist today.

These high failure numbers are a natural feature of a healthy startup ecosystem. The job portal companies which survived are no longer startups, having grown into mid-sized enterprises employing around 50 to 150 staff in Singapore alone, making tens of millions in revenues and paying taxes on their profits.

Hence, by encouraging startups, we are essentially securing a pipeline of potential SMEs to represent ‘Singapore Inc.’ in the future. Moreover, by raising the quality of our startups, we can expect to see larger and stronger SMEs.

Furthermore, some of these high growth startups in disruptive or blue ocean fields will grow past the SME stage very quickly to become smaller-scale multinational corporations (MNCs). Razer and Garena are good examples of such companies that have taken much lesser time to spread their wings overseas.

TESTBED FOR LARGER COMPANIES
Not all startups end up failing or growing into SMEs. A number are also acquired by MNCs or Large Local Enterprises (LLEs) which are interested in the startups’ technologies and know-how or are keen to access their geographical or niche markets.

Many larger organisations find in-house development and innovation challenging, and have turned to acquisition and venture investments as alternative y to create new products or expand their customer base. For example, SPH acquired real-estate listing portal Streetsine a few years ago, as part of their plan to grow their property advertising business. Another example is Zendesk’s acquisition of chat service provider Zopim to boost their chat product offering.. Recently, we also observed the National Research Foundation (NRF) supporting local corporates such as CapitaLand, Wilmar, YCH and DeClout to establish and scale up corporate venture funds to focus on engaging startups.

BUILDING A STRONG ENTREPRENEURIAL WORK ETHIC
The value of a strong entrepreneurial work ethic also cannot be overemphasised. At JobsCentral, we hired more than 300 people over the course of 14 years. I dare say many of our early stage employees learned a lot more with us and became more entrepreneurial than if they had joined a larger organisation. These experiences served many of them well when they went on to work with MNCs and LLEs.

Startups provide an experience for their staff that is more akin to going on an adventure filled with ambiguity. Founders and pioneer employees are required to take on multiple roles and be comfortable with regular change.  In general, employees who have been through the startup journey are trained to think on their feet, are comfortable with changes and making decisions, and constantly seek to innovate and improve on their products.

These traits are invaluable to any company. Hence, having a vibrant startup landscape in Singapore will contribute to the pipeline of entrepreneurial and innovative talent who can support the future needs of the economy.

Netting the greatest benefits from a strong startup ecosystem would require us to bear in mind two key considerations, ownership and the respective role of government and the private sector.

OWNERSHIP MATTERS
We want to encourage more local ownership of companies, because locally owned companies are more likely to continue to base high value functions here and returns on capital will be better captured here. This applies especially to startups and entrepreneurs supported by government incentives, which tap on public funds contributed by tax payers.

JobsCentral was 100% owned by Singaporeans, and although costs were higher compared to neighbouring countries, we located our IT and design team here to tap on local expertise. At that time, most of our competitors had only sales and marketing outfits here. Likewise, I have noticed that the majority of the Singaporean-owned enterprises do base strategic and higher-valued operations here. And if an exit happens or if dividends are paid, there is a higher chance of profits and capital gains being retained and spent here since the proceed are paid out to locals.

However, even as we continue to support locally owned companies, we must continue encouraging foreign entrepreneurs to set up base in Singapore. Currently, we simply do not have enough good entrepreneurs and startup employees to build a strong ecosystem on our own, and we have much to gain from remaining open to new entrants and ideas from abroad and we should remain open to new entrants of new ideas and businesses here.

ROLE OF GOVERNMENT AND PRIVATE SECTOR
Startups do not operate in a vacuum and will only thrive with the involvement and support of both the public and private sectors.

First, the Government can help to catalyse developments in sectors like Information and Communications Technology (ICT). This can be through the provision of funding tools, the facilitation of special manpower needs, and encouraging partnerships between startups and MNCs, Government-Linked Companies (GLCs), the Government, and overseas partners.

Second, the Ministry of Education can look into incorporating entrepreneurship as part of the education curriculum, and promote entrepreneurship as a career choice to be on equal footing with other prestigious careers like doctors

Third, government bodies can encourage collaborations with local SMEs by considering contracts with SMEs that provide competitive product and service offerings.

Fourth, the Government can consider taking a light touch on some regulations in specific areas, to allow more room for innovation. The idea of a regulatory sandbox for the Finance Technology (FinTech) sector mooted by Minister Vivian Balakrishnan in May this year is a good start.

Lastly, Government can also influence talent development and the channelling of talent. For instance, the recent move to adjust engineering and ICT payscales within government is a good signal that we value such skillsets.  The promotion of STEM careers is another such measure.

I also understand that the government is currently advocating more startups in high value-added and deep technology areas such as ICT and Medical Technology. There are also efforts to encourage more Singaporeans to pursue an entrepreneurial career. Such efforts should continue and be reviewed regularly for them to remain relevant even with economic changes into the future.

For the private sector, established corporations can consider setting up corporate venture funds for investments into startups, organising hackathons to foster ideas and support commercialisation efforts, creating specialised startup procurement models and engaging in partnerships with startups.

Collaboration between larger private-sector players and startups should also be encouraged. Experienced professionals and successful entrepreneurs may also consider providing angel investments and mentorship to startup founders.

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

It is my hope that in 10 years’ time, our startup ecosystem will be both robust and sustainable – a core engine of growth for the Singapore economy, with a deep pool of talented founders and employees. I believe our startups will play a critical role in advancing innovation and value–creation, not just in our country, but across the world.

Entreprenuers Need to Keep Learning too!

This is an article i wrote for the CFE which was published on Channelnewsasia. Below is the unedited version.

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A key thing that I discovered through my personal experiences and from my fellow entrepreneurs is that entrepreneurship is a learning journey, and many successful business owners embrace continuous learning as a way of life.

The founding team and I built JobsCentral, over 14 years from 2001 to 2014, into a leading regional job portal generating multi-million dollar profits and employing 150 full time staff. During this period, I had evolved from a hands-on, multi-tasking founder into a strategic and metric-focused CEO. I was also privileged to have made friends with many fellow entrepreneurs through organisations like Entrepreneurs Organization and ACE.

I strongly believe that having a positive attitude towards lifelong learning, coupled with a long-term, obsessive focus on business are attributes that separates successful entrepreneurs from the rest.

LEARNING BY DOING

The most apparent way to learn is to ‘learn by doing’. Many entrepreneurs picked up skills to build, to market and to sell a great product via on-the-job lessons every day. We all make mistakes. But we always try to iterate and improve for the next round. This can be applied beyond business to many areas such as people and self-management.

When we first started JobsCentral, staff were managed with an iron fist and the management team ended up micro managing. This resulted in our first sales team leaving the company en masse. From that painful experience, we learned to manage by focusing on clear objectives and balancing between micro-managing and giving autonomy to the staff.

This incident also gave us an opportunity to learn how to better manage ourselves. Some introspection is required to prevent us from repeating the same mistakes. However, many entrepreneurs with large egos find it hard to admit to their wrongdoings.

What we found important is for business owners not take criticism personally and to always refer to metrics to develop solutions.  For example, during the ‘group buying’ craze, we were sure that a ‘pay-per-course sign up model’ a.k.a. the ‘Groupon model’ would be very scalable. But after 6 months, indicators such as sales figures and usage metrics highlighted that traditional direct advertising models were more effective. In this situation, we admitted our mistake openly and switched our tack.

LEARNING FROM COMPETITORS, PEERS, EMPLOYEES

For entrepreneurs, on-the-job training and learning from mistakes will naturally be the longest and most painful way to learn. A faster and more effective way would be to learn from competitors, experienced hires and fellow entrepreneurs.

Many mistakes could have been avoided if there had been upfront consultation with or reference to books by people who have been there and done that.

The Information and Communications Technology (ICT) ecosystem is a great example  where knowledge gets spread rapidly via sharing sessions, media and online communication tools. I remember hosting visits for internet-based companies which wanted to understand how JobsCentral had built its strong consumer brand. Learning from our experiences helped these entrepreneurs build confidence and certainty in their marketing plans. Likewise, JobsCentral was able to negotiate a fair sale deal back in 2011, after seeking feedback from experienced entrepreneurs who had bought and sold businesses..

This sharing is not even across other sectors. Singaporean firms typically refrain from sharing information. While there is intense competition and secrecy among companies in the same sectors, there is nothing stopping entrepreneurs from sharing openly with non-competitive peers and helping each other grow.

I have personally found great satisfaction in playing a small role in helping fellow entrepreneurs build their businesses. Also, as Singaporean entrepreneurs, we must recognise that we need to operate on a regional and global stage to grow. So while we compete among ourselves domestically, we need to be mindful that we are also going up against overseas players.  It would be fantastic if we had open platforms for sharing and learning within our business community, to uplift the industries here – for instance, through our Trade Associations.

TRANSFORMATIONAL LEARNING

If we are able to learn from our mistakes, as well as the knowledge and experiences of fellow entrepreneurs, chances are that we will build a strong business.  However, to truly build a great business, more needs to be done.

For example, entrepreneurs need to understand and appreciate industry-specific processes and know-how, to be able to envision the future and achieve their goals. Our last 2 years in CareerBuilder was about transforming a global job portal into a HR Software-As-A-Service (SAAS) business.  Our management in the USA was able to observe next generation software companies like SalesForce and Zendesk and realised we would be better off in the long-term if we establish the direction to transform our company into a HR SAAS player. This insight was synthesized from studying SAAS trends and coupling that with in-house knowledge and current strengths in market positioning.

EVERYONE LEARNS DIFFERENTLY 

Each entrepreneur needs to find the most effective way to learn. I learn best by reading widely and talking to fellow entrepreneurs. The latter approach requires putting in effort to network and get to know people.  Organisations like Entrepreneurs’ Organization (EO), Young Presidents’ Organization (YPO), Business Leaders Alumni Club (BLAC), and Action Community for Entrepreneurship (ACE) are great platforms to support this. It does take some experience to figure out who and what to ask. 

Another effective way of learning for me is to read business/economy-centric newspapers, quality business cases and books written by successful entrepreneurs or functional experts. Besides acquiring information from these publications, entreprenuers need to also adopt a habit of self-reflection to apply our learning to ourselves and our businesses.

As entrepreneurs, we are always asking our employees to keep learning  and to improve themselves. Lets  also  walk the talk and take some time to reflect and embrace continuous entrepreneurial learning, too. This means reflecting on our mistakes, learning from peers, understanding our industry and having an curiosity about the world. There is always something new to learn!

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.

How much should startup founders be paid?

This is a very sensitive topic which many startup founders grapple with whether they raise capital or not. I am sharing based on personal experience both as a startup founder and also as an investor. I am not saying it works perfectly or is the best. In fact, I found that I had to bargain a lot over the years and the key is to be transparent and open. So will be happy to hear how other readers do it.

1) Bootstrap Stage (Usually first year, up to $150K expenses)

At this stage, I feel founders should be paid a roughly similar basic wage. Meaning plus minus $500 of each other. In Singapore, that can range from $1000 per month to $3000 per month.  This is enough for food and transport. Anyway, this money comes from the founders themselves. My cofounder and I were paid $500 a month and later $2000 a month back in early days.

The reason for similar pay is because the roles are all mixed up in the beginning and if everyone works equally hard and full time, each key role of sales, marketing, tech and leadership all make and break the company.

One point of view I sometimes hear from founders is that they used to earn $5K, or $10K outside. So that is their opportunity cost. That is fine to say but should not affect the actual pay. Once you decided to come out and do a startup, your last drawn pay matters little, though it would be good if your co-founders appreciate your sacrifice. Also shareholding should not affect pay. If I put in $80K and you put in $20K, we should still agree to a roughly similar pay at this stage. Though if shareholding is very different, the basic may be closer to $3K whereas if the shareholding is similar, then it can be $1K.

The only time where it makes sense to me when a bootstrapped stage founder is paid >$4/5K or more is when there is a passive investor who joins the bootstrap round. Even then, I feel the various founder pay should be roughly similar.


2) Seed Stage (Year 2-3+, S$500K expenses)

Seed stage founders should be paid about $3000 to $5000. During our seed stage equivalent, we drew about $4-5K salary all in each. The thinking is somewhat similar to bootstrap round in terms of how founder pay should be similar to each other. Again, my logic is that the outfit is still small. Everyone has multiple hats and roles. So paying a similar value reflects that all founders are contributing on multiple aspects.


3) Series A Stage (Year 3-5+, $>1-3M expenses)

At Series A, it becomes necessary to have different pay for founders as roles get more defined and some roles start to be outsized in impact. For me, 3 principles are followed.

a) Pay does not exceed  and is usually below market rate for same role in similar sized company esp of outside money came in.

b) Founders are ok with the differential among themselves. Usually vesting is used to make things fairer. Founders are usually ok with differential once they agree what is the market rate for each role. Then from each role, take a fixed discount off it and build it up through a combination of base, incentives and vesting options. The biggest shareholder founder may need to be behave more generously at this stage.

c) Clear KPIs are written up for each founder role with bonuses tied to those KPI and overall company KPI.


4) Beyond Series A (Year >6, revenue 3-10+M and usually profitable)

At this stage, it really depends if the company is profitable and whether it took VC money. If the company is profitable and has not taken VC money, founders usually pay themselves up to market rate. Once market rate is hit, dividends are paid to founders based on shareholding basis. The logic is that we can always hire a market level replacement for a founder so there is never a need to pay more than market.

If the company took VC money, then there  are some controls on management pay but it is reasonable for  founder management to negotiate KPI based incentives and advocate to move towards market pay as the business grows according to plan. A good mgmt. team will ensure they feel aligned and balanced by discussing mgmt. targets and pay annually with their board.

To my knowledge, a fair market rate for a single country MD of about 50-100 staff in a dot com should be paid $200-$350K all incentives including options factored in. Base would be about 60% thereabouts of total. The CTO pay would be lower  at about $150-250K but with much higher base component. 

 

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.

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!

Case Study on deal that did not work - SHOWNEARBY

For every success, there will be at least 10 failures alongside. I remember when we first started a job portal, there were easily 20 others in the market. Names like RecruitAsia, JobPilot, FutureStep, JobCulture, Jobhunter etc. All gone by 2004/05.

So i thought it will be fun to read about a company that was founded in 2007, got a lot of publicity and got a nice cash injection of S$3.5M from a listed company no less in 2010 but failed and was sold away by the same listco early 2013 for just $1. I say failed because site looks like no activity since 2011 and founder clearly moved on already.

So here is the story from outside. I like this type of forensic work and i hope that readers will do their own and learn from these numbers and experiences.

1) Founder - Shownearby founded by Douglas Gan whom i met once and only impression i have is that he is energetic and enjoys the whole entrepreneurship thing.  Don't know him well enough to comment more. Maybe readers can add comments. You can read what i excerpted from GYP 2011 annual report :

"Douglas is an entrepreneur with over 10 years of dot-com experience across South East Asia. He is currently Chief Executive Officer of ShowNearby, a location-based services company incorporated in November 2007. Douglas started his dot-com journey when he was 16, expanding his first web hosting business across South East Asia and Europe. Five years later, he sold the business to Skydio which was acquired by Webvisions Group. In 2002, Douglas started a popular online youth community, OhGenki.com, which spanned Singapore, Malaysia, Thailand, Indonesia, Philippines, China, Taiwan and Hong Kong. OhGenki.com was sold to StreetDirectory in 2007. Douglas was also a consultant for dot-com businesses such as GARENA, PropertyGuru, HungryGoWhere, Skydio and StreetDirectory. Douglas graduated from Ngee Ann Polytechnic with a Diploma in IT."

So if someone wants to work with him, should ask Steve, Forrest or Dennis from the various companies he mentioned what he actually did for them. All are good success stories.  I am not sure about skydio, they are a smallish acquisition for webvisions. I am also sure GYP will not have much to say too since shownearby failed for them.


2)  Business model - Location based directory. Wanted to cover everything. That is how i met Douglas, he wanted to have our jobs as part of his data pool. I guess idea is to monetize the resultant traffic from being a central point of discovery and search.

Can visit their web site and see the milestones as declared by them.

http://www.shownearby.com/press/milestones/

I have long learned to always read such milestones and what many entrepreneurs say with a lot of skepticism. There are entrepreneurs who believe in bullshitting their way to success (there is some article running around saying that now), i personally subscribe to the low key and let your profits and revenue do the talking model. Keeps me a lot more grounded especially when I realize just how big other businesses are in the non-internet space. There is a very thin line between required promotion and confidence and outright bullshit for the sake of personal ego and looking good. But that is another story which I will definitely write about.

Does model make sense? Location based obviously has some merit but I think trying to be the discovery starting point is a lot harder and the position is kind of dominated by streetdirectory and google maps. But even these two, I tend not to use them for discovery as opposed to directions and location search.

3) July 2010, managed to get  Global Yellow Pages to invest 3.5M for 53.15% stake valuing them at 6.6M or so. It was subscription for new shares and so Douglas did not actually exit in any meaningful way. But valuation was good for SNB. In 2011, SNB only contributed 204K in revenue for 9 months and contributed to a loss of 600K! Valuation easily 20+ times sales but of course it is an investment valuation and not an exit. I wonder what GYP was thinking when they invested.... granted they became controlling shareholder and maybe can make sure the money is spent properly. They must have really believed in the team and potential market.

Readers need to really understand the difference between new share subscription and vendor sale. The former is investment for company to grow, the latter is exit. Latter only happens when your company has realized value or your story really damn fantastic.

Investment in your company is just that, it is investing cash to help you realize the 3 or 5 year P&L plan that you projected to investors. It can be subscription of new shares, it can be convertible loan, all achieve the same effect. So see it as just start of your startup journey and not the end ! It is definitely not an exit and not time to any spend or take your eye off the ball.

Why did GYP do it? Obvious for them, they are a business under siege for years as their directory services dwindle to nothingness thanks to the internet. Amazingly it takes so long! So they have been wanting to enter online spaces to replace those revenues. But strangely almost none of their online products work.... that is another story by itself i am sure. But to their credit, they did buy eFusion solution which at least is profitable and now have gone into F&B and Tours...


4) Anyway back to main story. fast forward to 2012,  just a short 2 years later, SNB has flopped. Douglas is no longer listed in the annual reports as management. What happened? We can only guess or if we can grab Stanley who is a seasoned media magazine entrepreneur who now owns a large stake in GYP, he will tell us. My guess? Grossly mismatched expectations. To enter at valuation 6.6M, GYP expected a lot which clearly was not realized. 3.5M is a lot of money to manage and the vision and team must be strong to execute it well.

Douglas is now running a beautybox site i believe. Best of luck to him. At least he is truly quite a committed entrepreneur - never gives up!

Side note : GYP recently had a share placement to raise $7+M. So that 3.5M is really not small change to them. it mattered and perhaps was quite wasted. I would love to buy Stanley a lunch though and figure out what happened not just for SNB but their entire internet strategy. Maybe I can help... Who knows..

Contract Work for Key Clients & Partners

This is the age old issue of making "feed the company" money while trying to build up your core product. I think quite a fair bit has been said about this. I stand by what i wrote 7 years ago esp if your business is a pure bootstrapped type which has no Other Peoples Money. Sometimes, we just need to make ends meet and so taking on a few projects is nothing to be ashamed of.

Some good examples :

1) My own company. We used to do HR software for SMEs. Each year about $100-200K to help pay the bills while we focused on growing our own core job portal and media businesses. We got pretty good at it , so much so we ended up doing almost 0.5M of this many years ago. Then we made a decision to scale back as our core business was growing and such contracts became distracting.

2) More recently, i met with 2 other internet companies who are doing the same. One is at the 500-1M revenue stage of which about 200-300K are consultancy service which the founder is providing to MNCs. Nothing wrong so long as it is clear in future, this area will scale down as it is too unscalable and obviously tied to founder being the account manager.

The other example is a more famous one owned by Singtel in the mobile arena. Now they seem to be pureplay service provider when originally the idea is to build a product and scale up.

To be clear, those of us who take this route need to understand what we are doing. There is nothing wrong with becoming a software house or SI. In SG, SME software houses which do not productize can do up to 5-10M in revenue if done well and can make 20% margins. However, it is a different business for building a platform or product that scales. And usually the valuation afforded to pureplay software solution houses is weaker since recurring revenue is lower.


============================================================================ (Article first published on sgentrepreneur Jan 2007)

Thought I will share my experience about branding and the importance of building your own brand. In hindsight and for some of you, this may seem to be very obvious. However, I think for startups struggling to make ends meet, having revenue perhaps matters more than having your brand but low revenue. Let me elaborate.

I notice that quite a lot of service firms in Singapore leverage on their partner/client’s brands to deliver what is essentially their product. For example, magazine industry has lots of contract magazine publishers who will do the artwork, editorial, sales, printing etc for a big brand. They get paid a fixed fee and a variable depending on sales. They may even get to keep all sales and no fixed fee. However end of the day, the brand is not theirs. So all effort put into building it goes to naught. Krisflyer, AA magazine, AlumNUS etc, anyone knows who actually does all the work?

A similar situation can be found in dot commers. Many dot commers get distracted. They start with a great idea. Job Portal, Food Review, some Web2.0 stuff, but when they built their prototype, it takes a long time to grow it. Along comes an appreciative client who asks them to customize something and build and maintain it for them. Most startups will take it, cuz it generates some $$. But as time goes by, the client’s site and brand is the one who grows strong. And all efforts spent improving it goes to the client not yours. What I am driving at is that while it is important to do adhoc work and skills related work (design, editorial, IT contracting), never lose sight of your core business plan. Of course, unless your business is to be a contract service provider! At the first chance, use all revenue to grow your brand and strengthen your own position.

A good example is Shareinvestor.com. Their clients came to them to do online IR pages. They made it into a core service and integrated it with their forum and investor information offerings. Now they are pretty dominant in Singapore in their niche market worth easily 3-4M a year.

7 years on and still no YouTube in SG?

Looks like i was quite right back then to say that the environment conspires to ensure that our startups do not scale into the You Tubes of the world. Things are improving with recent exits and higher valuation rounds. But we are still stuck at the 10-100M valuation and exit area. The geographical constraint and market size is really a major determining factor. And with some many other startups operating in their home country in bigger markets, it is hard for SG based one to win in say China or USA or Europe.

 And i still stand by the good university statement. In fact the recent bunch of funded startups in Singapore are all from good schools and are founded by academically smart people. ======================================================================== (Article First posted on sgentrepreneurs Oct 2006)

I have been reading with interest about the recent debate in Singapore about whether we will ever produce our own YouTube type of company. Here is my take of the issue. I will confine my discussion to just dotcom type of companies since that is the area I believe I am qualified to comment on. To be brief, I believe it is difficult but not impossible for a local startup to duplicate what YouTube has done. That is to say, gather tremendous momentum over a relatively short few years and sell out to a larger firm for a world class payout. That means companies like my own – JobsFactory, Hardwarezone, Shareinvestor are all out of our league. 7.1M give or take 5M is not a world class, attention grabbing payout.

Here are some factors I believe are most important. Many have been debated before.

1) Size of market and relevance of local content.
Sad to say, this is a very real problem. Singapore market is way too small and SE Asia is too non-homogenous for effective economies of scale, even online. The way I see it, this is the major obstacle for any wannabe YouTube based in Singapore. Even the big names that succeed in USA find it tough to penetrate a non-english market easily even with cash and brand. Ebay failed in Japan, Google is losing to Baidu in China etc. Even between USA and Europe, there is difficulty. So I believe for a firm to succeed in Singapore, the concept has to be deceptively simple. Ala google style such that is does not require too much localization across the regions and more importantly, it has to be built for the big markets like USA or China. And you will probably need to start with one or the other since language and styles are so different. Chinese sites are messy with loads of flashing banners which US visitors hate.

A good local example is wholivesnearyou.com. I think it is a wonderful local site with great traffic. I estimate they are doing 5-10M page views per month which is very decent for a local site. They are very web 2.0 and very community led. However, it looks too local to me and obviously is focusing on local market.

2) Lack of vision or rather a different vision for local startups
Most entrepreneurs in Singapore do not have a vision to be a YouTube. I think our vision is to grow a good business, impact people in a good way and make good money. It is not to change the entire world. Again, I think most people in the world are like that. Americans, China PRCs are different, by default of their market size and population, doing well in their market, means conquering half the world already. Frankly, I feel there is nothing wrong with being happy and contented with what we have. One other observation I have is that many who do have world beating dreams are usually very very young startups who seriously have not done anything significant with their company. Once their company has some success, I think the environment conspires to reduce the scope of their dreams. We have exceptions of course, Ron Sim, Sim Wong Hoo, Wong Peng Kin are good cases to learn from.

 3) Lack of access to good quality funds.
Even if a firm overcomes the above two and has a great product or service which is global in outlook focusing on one of the major markets that has scale. And the firm has a strong founding team with brains, strategic prowess and management depth, they will still need money to make it all work. Now, frankly if a company has such traction in a major overseas market, then I believe they will get funding from valley investors rather than local ones.

The above 3 factors to me are the most pertinant in the discussion. There are of course others I am sure.

So does that mean we have no hope? On the contrary I believe we do have hope, it is just that we are against a gradient. So if any company does succeed, I truly applaud them. Some examples which I think can have hope? The characteristics I venture to guess will be as follows : Built with a larger market in mind. Either China or USA. But business can be based in Singapore for development, taxation, IP etc purposes. Web 2.0 community led concept. Spread like wildfire across the targeted market. May not even be known in Singapore. Probably focused on young. Esp since young are slightly more homogenous across the world thanks to cross cultural influences. Simple software and at least American standard designs and branding. Many local sites (mine included) are not up to standard still. We have basic grammatical errors, branding not looked into etc.

World class credentials from management team. Sorry guys, but I do not think a couple of fresh graduates will make it unless they are from Stanford, MIT or harvard, or maybe IIT, Bei Da, Oxbridge. Pedigree attracts pedigree. It’s a fact. There are exceptions of course, but I am taking an educated projection here. Funding from similarly well known firms. Perkin, Sequoia etc.

When to move office?

To carry on the story below. We grew from the 21 staff to current to close to 100. And we stayed at the science park place for 5 years before moving to the current IBP place that is about 4700 sqft. My thinking has not changed much on this. I feel rental in Singapore is so expensive. As startups we definitely want to watch our costs. So we have always only added office space when we are exploding from the current place. And we totally believe in just adding extra office units next door or next floor. That way we keep rental costs to under 2% of revenue at all times which makes sense for a company like mine.

I hate visiting firms that have huge office space. It just feels so wasteful to me. The current saga about Blk 71 really shows how startups in SG now have a much better deal. Even in golden mile i was paying about $2 psf. Now it is double that. I heard that in Blk 71, people are paying $1+!!! This is a fantastically good deal for startups who are occupying that space. It is a clear cut case of government money subsidizing the industry. No wonder MDA is considering to move tenants around. It cannot be subsidizing the same companies for such an extended period. Some food for thought for those of us who cannot understand why MDA wants to move long staying tenants out of Blk 71. In this context, i think it makes sense right?


=====================================================

(Article posted at sgentrepreneur Oct 2006)

Once you have stablized the first phase of your startup, you will need to look for a proper office. Our resident contributor, Der Shing draws his experience about moving the company office from place to place and shares his thoughts about the value of matching office environment to company growth. When I started out, two of us worked out of my room. I felt no compulsion to wake up on time and probably worked about 4 hours a day. Fortunately, this phase lasted only 6 months and I knew we had to go to a proper office. So home office is not something that works for me.

Next office was in Golden Mile Complex. For those in the know, this is one of the crappiest place with red light district downstairs and regular robberies and murders. We lasted 1 year there and increased from 2-man show to 6-man show. But secretly, we were amazed whenever a new person joined us as we cannot conceive why a young degree/dip grad would want to join us. Maybe we were very persuasive :) Anyway, during this phase of startup, we had DIY PCs and hand-me-down furnishing too. Personally, I was extremely motivated and the less-than-ideal surroundings made me feel even more determined to crawl out of it. However for staff, it was a tough place to be. No one likes to say they work in an old buiiding with prostitutes downstairs.

Next office was at phase z.ro tech park, a bright yellow colour container place. We thought it was heaven. We stayed 5 years and it saw us grow from 6-man team to 18-man team, taking more office space as we grew. Still a very scrappy environment. Miles ahead of golden mile but still not a proper office in most sense of the word. Clients and interviewees would joke that we work in containers, so we took to saying it first. My people were happier here though none were from the golden mile days. Personally, i still felt very “startup” and the lack of facilities and leaky roof and floor made us feel more determined to do well. Last month, we moved to Science park. We now have 21 staff and intend to grow past 40 staff here. Finally a normal office with recept area. And guess what, I noticed that my colleagues seem happier here and it is more professional feeling. So a nicer office does make a difference! But for me, I feel as though more things are expected of us now. The scrappy feeling is diminished and we now actually have our own meeting room and storage rooms. Feeling more corporate and more part of the scene.

 Next step? If we grow past our 40 staff and hence $5M mark, then I think a even larger office is in order. What next? A city office with a view? What will we be doing then? Probably more HR, Strategy, Finance stuff. No more feeling like an underdog. I wonder…

Changing Expectations - Update

Haha... this is something only a young idealistic person would need to grapple with. Currently, for self motivated people, we let them operate on KPIs and deliverables. For less self driven people, we hold them on a tight leash and micromanage more. Over longer term, i prefer to work only with self motivated ones at least as direct reportees. The key for any hire is to figure out quickly their level of self motivation.

Environment still the same . Very open concept and merit based. Workflows and processes are super important and quite a lot of my people's time is spent on streamlining and coming up with better processes as our functions are subdivided and our staff become more and more specialist. ============================================================================================== (Article first posted on sgentrepreneur - Jul 2006)

Reading some article lately in Harvard Business Review and it got me thinking that over the past 6 years of entreprenuerial journey I have changed my mindset and expectations quite dramatically. Here are some core changes I have observed. May be useful to compare notes.

1) Expectations of staff working hours.

I vacillated a lot on this one. At first, I felt that one should be objective oriented. As long as key objectives are achieved, it doesn’t matter how late you work or how late you come in. Then after 2 years, I switched over to the thinking that your working hours show how “on” and serious you are. Precipitated by a bunch of really quite not-too-engaged staff. So as management, we found overseas more squeezed towards watching hours and micro-managing. Fortunately, we had a major firing/exodus exercise and this allowed us to start afresh. Now, I am ina more moderate and enlightened mode.We have some rules and expectations of working hours but we are also objective and performance oriented. You may work late but if you do not work smart, I much rather prefer the guy who works smart. I have staff who leave at 5pm sharp each day and we do not judge them based on that. It sounds very simple, but it took us 4 years to figure it out and adopt it as a real mindset and culture of the company.

2)Dot com dream environment

Funny thing was that when I started the firm, I read a lot of management books and was very inspired by american dot coms. I believed in working smart, good collaboration, high motivation, fun atmostphere etc. So we worked 9 to 5, had an open office concept, minimal hierachy etc After 3-4 years, I looked and realized that we are just like any other SME. Only thing is that we work 9 to 5 :) Now after 6 years, I still do believe in all that brillant people with brillant people to make magic idea but it is very tempered with realism. And perhaps it is something for more boutique super high value consulting/IB firms and huge MNCs. For us, I am happy to have a fair working environment with good people who work well together.

3) Workflows and systems

When I started I used to laugh at systems and workflows. Being an almost fresh graduate, I thought it was very silly to have such things. It is so old economy. So you can imagine our company was pretty chaotic in our way things ran. Fast forward to now, I now still hate systems and workflows esp if I have to follow them but I now acknowledge the need for it. So as we grow we become more and more like the firms I laughed at…. Quite ironic. We just created a Human Resource (HR) handbook this year. Thats all I can think of for now. Will add in more items as I go along. Do feel free to add in your own changes

Those good old memories... read this if you want to understand the old 2000 dot com thinking.

This is cute. So i am looking back at an article i wrote. And in that article i was looking back another 5 years. The major difference between now and then is that today, the startups are having to make a lot more sense before we can raise money. In addition, the business models are a lot more developed and targeted and definitely there is a lot more talent available in the market compared to 2000. Interestingly, the idea of doing side software or service projects to make ends meet still applies esp for more bootstrapped outfits.

And even better, some names still exist! Catcha is now back in the game as the originator of iProperty, dealmates, icarasia... Kudos to Patrick and team from Malaysia. Job portals still strong as ever and i believe we are still the most profitable of internet plays. Hardwarezone and Shareinvestor both sold to SPH already. I will analyze those sales in another posting. ================================================================================================ (Article first published in sgentrepreneurs back in 2006)

Sharing my own experience on the topic written before as it got me thinking a fair bit more. JobsFactory was started as a job portal back in 1999. During that time, there were lots of start ups in Singapore which were in dot com. It was our own dot com boom. Companies like Interauct, Commontown, Wizoffice, eJazz, Nececity, Myscissors, asiastockwatch, catcha, zingasia, earth9, surfgold etc etc all raised lots of money and were advertising like crazy in mass media just to get “eyeballs”. The idea was that we got lots of traffic first and IPO. We can figure out the revenue side later. It was really a fun period as there was a strong buzz and young fellas under 30 were sitting in board rooms making contra deals that inflated each others revenues while adding no actual cash flow. Its damn funny now looking back.

We attended quite a few parties and opening ceremonies and they spent so much money on the marketing and image and yet spent so little resource thinking about sales and business model. A typical consequence of cheap money. My list above is for pure dot coms, i am not including players who closed like MPHonline, asiaone.com etc. These have parentage and roots in profitable businesses. Fast forward to 2001 in the aftermath of the dot com crash. Funding all dried up and very quickly those without a revenue stream crashed and closed down. The survivors tended to be those who :

1) Moved into corporate market by tweaking their C2C or B2C software into a purely software vendor for large firms in specialized fields. Example :

a) Surfgold – from online currency type consumer model to loyalty and CRM software vendor for large MNCs. Doing very well now if I may add.
b) Earth9 – from some community C2C site to a CRM software provider for Starhub and others. Doing quite okay too. This company cute, their CEO used to be called DNA.
c) Commontown – Still around. They were some C2C community too and now are software providers for web sites which revolve around community. But i think this one not doing that well.
 d) Of course, you got the suppliers of software like Adroit Innovations, managed to list but also died as nobody wanted to build expensive web sites after 2000. Can’t think of others. That is how few survivors there were.

The other category that survived and doing quite well are those that were in B2C or C2C and went deep into media area within their area of expertise. This group all making $2M – $10M range.
1) Hardwarezone – From just a site, to magazines and events and regional.

2) Catcha – From a yahoo wannabe, gave up online, moved to Malaysia too and now a decent sized publisher of magazines. Juice, Stuff, etc.
3) Shareinvestor – from community of investors to community + investor relations software provider + magazine publisher (new one).
 4) Jobsdb, Jobstreet, JobsFactory – Job portal is a proven business model. So still job portal but branched into running events, magazines etc. So if I do some projection.

Fast forward to 2008, I believe the 2 models will still be there. One as specialist software vendors, the other as media companies who are rooted in online mediums but who also cross synergize with events and print and maybe even TV production (I know catcha is doing this). In a sense group 2 are doing web 2.0, cuz they will be forced to be ever more interactive in their chosen channels.

For my side, job portals which increasing allow users to feedback and interact among themselves about companies and jobs? Or to allow them to search for referrals (ala social networking sites) ? These are all possibilities. One thing for sure, all the surviving companies listed above are profitable already. Sharing my experience. Make your own conclusions

Start Up Journey - First 6 years summary.

Reading what i wrote back then about 7 years ago. Agree with most of it. Except the bit about Mentors. What i learned from networking is that fellow entrepreneurs (whatever the industry) are the best people to learn from. They can give us benchmarks and they can share what they did before and how it worked for them. In terms of specific functional knowledge, the best way is to just hire the right talent who has done it before. You will learn a lot just watching them work. As for bootstrapping, i think still very relevant today even with a much easier funding environment. ===================================================================== (Article below first posted on www.sgentrepreneurs.sg back in June 2006!)

After reading the various experiences of so many others, I thought I would share my own journey and lessons learned as an entrepreneur. Before writing about what I have learned, a quick overview. I graduated from NYPS, CHS, HCJC, OCS and then got a scholarship with a GLC to study EEE in the USA. Graduated with equivalent of 1st class honours and returned to work in the GLC for all of 8 months. I am a typical product of our rather elitist system. Quit and started JobsFactory in 2000. Aim was to be a job portal. By 2001 we knew we were beat and switched plan and focused on our current mission of providing effective career channels for students and professionals.

Over the past 6 years, we have grown from a 2 man show to a 20 man show. From just $20K capital to over 2M turnover. Here are some key lessons I have learned. Some are observations, others are business experiences.

1. Bootstrapping a business is good for you My partners and I started with just $20K as a startup capital. We paid ourselves S$200 a month salary for 6 months and worked out from my room. It was a very painful time. Even when some revenue flowed, our first office was at Golden Mile Complex. Up to today, I am amazed and grateful that our first few employees were willing to work there. What this tough beginning means is that we are extremely cautious with spending and watched our finances like a hawk. We also do not believe in spending unless the product or service has revenues coming in. This idea of bootstrapping to launch new services has helped us conserve our limited resources and ensured that we could survive through the downturn and SARs in 2003.

2) People, People, People For a service firm like mine, our people matter the most. From our staff to my management partners, the most important thing is that they are fulfilled and aligned with company objectives. Ego has little role to play in a startup. This is a common mantra of all businesses but few people actually do something about it. We do. We work 9 to 6pm latest Mon to Fri and we have implemented quarterly company outings. We also created a performance development system with a fixed review and bonus process. In addition, we have just started to institute training budgets for staff. We want our staff to love working here. I am also lucky to have a good team of management partners.

3) Mentors & Benchmarking The first years until 2003, we were blind and could not see how we can grow. But fortunately we had an incident which allowed us to be guided through a proper strategic planning process. I learned to look beyond my company and see what others are doing. This spurred my team to be more strategic in approach. With a vision and mission and objectives, we knew where we wanted to go and nothing was going to stop us. Now, we spend a lot more time benchmarking our performance with industry peers and alot more time planning ahead with proper budgeting and controls. A good source of benchmarking data is to buy them from bizfile. Buy your competitors annual audited accounts and learn from them. Mentors are harder to find. But speak to more experienced people and see if you can listen well and learn a thing or two.

4) Scholars Make Bad Business People This is a generalization. But being a scholar myself, I realize we are too sure in our thinking and too clear headed. Being intellectually correct has little meaning if your market depends on emotional purchases or when there are emotional variables at play. Or on a smaller scale, winning an argument during a management meeting may feel good but offending your key partner in the process over a small matter perhaps is a dumb thing to do. Esp if you are a scholar who has worked to the end of your bond. In the government , you are probably Deputy Director level or perhaps even a member of the admin service. You are in charge of a department and everywhere you go, people pay attention to you. What’s more you deal with smart people and vendors send their best to present to you. Someone like that would have hard a time putting down his pride and starting from scratch. Can be done I guess but tough

Unedited Version - First published on Straits Times 1st Jan 2013

Reflections of a Singaporean Dot Com Entrepreneur

Mr Lim Der Shing, 37 is currently the CEO of JobsCentral Group. He co-founded the company in 2000 during the dot com crash and grew it into one of the largest online career media companies in Singapore. JobsCentral was acquired by CareerBuilder in 2011.   He is happily married with three very energetic boys. This article is written in his personal capacity. 

Background

My cofounder & I started work full time on JobsCentral Group during the dot com crash of 2000. It was a tough time as nobody wanted to fund us and so we had to bootstrap our business. I can still recall our first sale which was for $9 and we actually cashed the cheque when we received it.  We paid ourselves a monthly salary of S$500 for the first 9 months. Fortunately for us in 2001, we pivoted our job portal business and found a good niche in campus recruitment. We executed on that plan and managed to bootstrap our business to cross S$1M in sales by 2004.  We also got other co-founders with complementary skill sets to join us in those very early years. 

In 2005, we made a major decision to expand our business back into the job portal business. Leveraging on our 5 years of campus recruitment experience, we expanded quickly and by end 2010, we were one of the largest locally owned dot com with over 1M jobseekers and 10,000 employers using our services. In 2011, we were acquired by the #1 job portal in the USA – CareerBuilder for the price of a small listed company.

Currently, my team and I still run the regional business as professional management. We all give back to the startup community as angel investors and by sharing our experiences as mentors. I have gathered some key learning experiences in my twelve year journey and I would like to share them below.

Attitude & Mindset

I have lost count of how many times I have obsessed over some minor detail throughout the day.  Whether it is a watching out for competitor advertisements, or vexing over a small feature bug or even just checking the site every 30 minutes to ensure applications are working fine. I have found that being obsessive ensures success. I also found that when I am obsessive over my business, the various short and long term problems and issues are percolating in my mind all day long. Then sometimes, as if by magic, a solution or path will present itself that frequently works well for the business. And this usually happens when I am doing something totally unrelated like jogging or even sleeping.

Besides being obsessive, most successful entrepreneurs I know are street smart, curious, very competitive and take failure in their stride. Of course, being well educated helps too. This is especially important when scaling beyond 100 staff as many business school type principles and work process issues start to become increasingly relevant.  

We frequently read about successful entrepreneurs whose core motivation is to solve a problem or scratch an itch. Most I have met are driven to build an empire and many simply like to win. I once had a dinner with a very wealthy entrepreneur and he let slip that there are about fifty families ahead of him in terms of net worth in Singapore. I laughed at that time, but upon reflection, I realized that he is dead serious. Net worth is how many entrepreneurs keep score even if they will not admit it.

Are there many potential entrepreneurs in Singapore with such traits? I believe so. We are a highly competitive, well educated society and are famous for being willing to work hard. We just need more success stories where entrepreneurs of varying educational and economic backgrounds succeed spectacularly. With these role models in place, a safe and well paid job with a MNC will seem less and less attractive.

Team Selection and Management

My team works well together. We have clearly defined roles and the team is willing to report to one person. Each member of the team is better than me in what they do and frequently, all that is needed from me is to get out of the way. What works is to be totally transparent in terms of how each person is paid and also to be transparent when it comes to the accounts of the company. Every year, we collectively review and agree on our own pay and bonuses. Once the trust is built, then we can all focus on improving the business.

I have found that managing a team of talented owner managers requires me to manage my emotions very well. There have been many incidents where I have to swallow my pride or put aside anger or disappointment in order to make sure that the best decision is made for the business. It gets easier with time but it is still very much a challenge. I believe that is why some entrepreneurs chose to do it alone and just pay professionals to do the key functional jobs. You can always remove a professional manager but it is much harder if that person is also a significant shareholder.

Most startups I see today are a team. I think a team makes the most sense still especially if you intend to raise funds. Investors like to know that there is a team that complements each other and that their money is in the hands of not just one person. New startup teams need to have a clear idea of roles. They should decide who is the leader, how will pay be decided and sign a joint legal agreement called a shareholder’s agreement to spell out these details and contingencies.

Fund Raising

Back in 2000, nobody wanted to fund us. We were a bunch of fresh graduates with no money or experience.  As such, we were forced to grow organically with just $100K funding from savings, family and friends.  We built a habit to always be cash flow positive in all we do and to grow at our own pace. We kept focusing on clients and what they needed. Fortunately for us, it worked out well.

The usual silicon valley model is to raise funds via angel investors. Once the product has traction, the company will raise further funds via Venture Capital firms (VCs).  This model works well if the business is very scalable and can grow revenues rapidly. However, after observing and speaking with many local and regional startups, I feel there are not many that can meet the rapid growth and large market criteria for raising VC funds.  Generally speaking, the final exit has to be at least worth S$25M to justify a Series A round at S$5M valuation. The only exception is unless the exit happens in 1-2 years like the Tencube or Hungrygowhere case.

In terms of raising capital up to S$600K, there are many options nowadays thanks to the plethora of co-funding schemes from MDA, SPRING, ACE and NRF. A good skilled team with a viable business model should be able to find funding up to this level. What is missing is the Series A round from S$1M to S$5M.  However, I feel this is a consequence of our market rather than something that the government should step in to help on. Entrepreneurs should use their angel round and grow to justify their next round. Very often, it will mean they have expanded into an overseas market and/or are breakeven or profitable in Singapore already. In both cases, they will need to show a clear path and vision to grow to an eight digit valuation to justify a VC round.  We do not want to waste taxpayers money and end up funding many S$1M to S$5M rounds which cannot scale to the required exit size.

Overseas Expansion

We are a conservative bunch of entrepreneurs. We take only calculated risks.  So we did not expand overseas until 2009 when we were clearly profitable in Singapore with sufficient management resources. We have since expanded into Indonesia this year and will enter more ASEAN markets. Many entrepreneurs expand far more quickly and it depends on many factors like whether they are first movers, expected capital investment, market readiness, management team depth etc.

The current situation is that many startups feel a need to go global from day one. They believe that having a regional story is of utmost importance. To some extent this is true especially if the startup is trying to raise money. However, it would be best to have at least firmed up their home market processes and basic business model first.  This ensures that the business does not end up failing on both home and foreign markets.

Mergers & Acquisitions

We had a grand total of 4 possible buyers during the five year period from 2003 to 2008. What I found out is that the valuations offered by Asian firms are really quite poor compared to western suitors. We were offered valuations that ranged from 5 to 10 times PE even though we were growing at 40% per year. The attitude I found that works best is to not plan for an acquisition. Before we were cold called by our current shareholder, we already decided to just hunker down and build the best possible business. Since we were already profitable, there was little pressure to sell or raise more capital.  This also helped us much when negotiating since we staying happily private was always an option for us.

Today, while there is definitely more activity in terms of M&A in the region, entrepreneurs should always remember to look for clients first before looking for buyers. We need more highly profitable local outfits and/or highly scalable regional/global outfits. Both will then be sought after by different type of global buyers. The exits will be eight, nine or even ten digits. And the founders who exit can then become role models and investors for other startups. 

Contribution to Singapore

I feel strongly that entrepreneurship needs to be nurtured and considered as a career path for all Singaporeans. We want both top students and school dropouts to start up.  By deciding to start a business, my team has generated a hundred new good paying, high productivity jobs for Singapore. We help thousands of employers cut costs by improving their recruitment process and we are now helping spur the digital startup community via our angel investments and mentoring.  Imagine if there are thousands more such stories in all industries doing the same!

The various schemes by ACE, SPRING, MDA and NRF are all on the right track. We need to help locally owned SMEs as much as possible. While most of us may never make the same revenue numbers like an MNC can, some of us will do well and the long term rewards will be substantial. I strongly believe that a Singaporean owned company will stay in Singapore through thick and thin in a way that a MNC will never do. SMEs may expand overseas and sell overseas but the profits will be repatriated and spent via their Singaporean shareholders.  

Mentors & Government Help

I have been fortunate to have met and interacted with many entrepreneurs through the course of the past 12 years. It really is true that not only do we need to meet the right person, ask the right questions but also we must be at the right stage of development and frame of mind to benefit. I have learned the most when speaking to fellow entrepreneurs who run similar sized or larger companies. Talking to professional managers helps when I have a specific functional problem. For instance, during our acquisition process, I consulted accountants and lawyers. They were useful in so far when I was discussing specific points of law or financial terminology. But the best learning points I got were with fellow businessmen who have bought and sold companies and who were able to share from personal experience. 

With respect to the many government grants and funding which are offered to digital startups. I would advice new entrepreneurs to go for them but go with the mindset that even if you fail to obtain a grant, you still have a good plan to succeed. In fact, if we look at recent eight and nine digit exits/investments like PropertyGuru, Reebonz, Beeconomic, JobsCentral, and Hungrygowhere, none of us have taken any form of government funding.  Entrepreneurs should always start with ourselves and blame ourselves if anything goes wrong. I cannot stress this enough. Only when we see ourselves as the root of all our business problems, then can we act to overcome them.