Billionaire entrepreneur believes in the law of averages; a guiding principle for him
Believes in second chances but would-be entrepreneurs must show their mettle by sacrificing and roughing it out to succeed
IT'S not every day that you get to meet a billionaire at an informal event, but that’s exactly what over 100 people got to do at the Oct 16 DNA-TeAM Disrupt event held at the Plug & Play Technology Garden in Kuala Lumpur, where Tan Sri Vincent Tan, one of the wealthiest men in the country, was on hand to field questions.
Themed “Are angels from Heaven?” the second installment of DNA-TeAM Disrupt saw Tan, founder of the Berjaya Corporation, in the house along with Johnathan Lee (pic, left), vice president of commercialization and ventures at Cradle Fund.
Tan (pic, center) was in his element, regaling the packed crowd with stories of how he views entrepreneurship, including how young people should be given the chance to be enterpreneurs, to how he felt about not trusting finance managers when making investment decisions based on gut instinct.
"If you have surplus money and are wealthy, you should invest and be an angel as this will help create employment and give our young people a chance. One day, we may create a Mark Zuckerberg (of Facebook fame) in Malaysia, or someone like the Google founders."
As for finance managers, Tan said, “One thing I’ve learned is to never listen to your finance manager!” he proclaimed to the laughter of the audience. “But not all the time…” he was quick to follow through.
The 60-year-old tycoon, who earlier in the year retired as chairman of Berjaya Corporation (BCorp), also told the crowd how he squarely believed in the law of averages, a principle that has guided him for much of his business and investment life.
“If you ask 10 girls to go out with you, no matter how ugly you are, I bet you that one will say yes to you,” he quipped.
The law applies even to the Welsh football club Cardiff City FC he recently bought.
“Recently, I was talking to my football coach and asked him to tell players to make more attempts at goal. I want them to shoot the ball into the net and not to pass the ball so much because I believe the increase in goal attempts was in line with the law of averages. So if we had 20 goal attempts, at least two will go in!”
Banter aside, Tan took time to field questions by Digital News Asia (DNA) founder and CEO Karamjit Singh (pic, right) on wide-ranging issues, including his experiences as an entrepreneur, his investment philosophy, and what motivates him.
Below are excerpts of the panel discussion.
DNA: When did you first get interested in investing in Internet-based businesses?
Tan: During the Internet boom, I did a very silly thing. In fact, that’s an understatement, more like stupid. I sold off my shares in DiGi.com when it was worth RM6 billion; today’s it’s worth RM45 billion! I had extra cash then and quite a few people approached me to invest, some of whom were friends, others were family. Berjaya is a very unfocused group as we invest in anything from A to Z.
My habit is to read as widely as possible, I guess it’s something that I do to make up for not being able to go to university and so I know what’s going on. I have diversified interests and I thought that Internet-based businesses would be a good area to invest in. Back then [during the dotcom boom], I read all the valuation of the tech companies, and wondered why we were not in it. I probably invested in over 20 ventures and injected over RM200 million into various companies.
[RM1 = US$0.33]
What were these companies?
Tan: I’ve been lucky on the law of averages. Of that, four or five made it. MOL Global is the most famous and there is also Kinetic that is a dotcom registrar, which is also doing well but keeps a low profile, and other software companies. I remember when I invested RM2 million in MOL and after I signed the check for Ganesh [Kumar Bangah, the CEO and founder], he went home to tell his mother he would quit university, and I told him that was the smartest thing he did!
To me, the word “angel” is a generous term for investors as not all investors are angels. They may start as angels, but they might turn out not be not so angelic later. But I guess Ganesh was lucky in the sense that I may have given him RM2 million but I’ve invested a total of between RM80 and RM90 million in MOL alone.
What is your advice for young entrepreneurs starting out?
Tan: When someone starts a business, he may want to pay himself a big salary because he may be used to a certain income level. I come from a poor family so when I started my business, I really had to rough it out. Entrepreneurs cannot expect high salaries because if you pay yourself such a high salary, your company will go bust very soon. Cost is very important, and even in Malaysia it is going up and entrepreneurs must learn to manage this.
What is it that you look for in an entrepreneur?
Tan: Like I said earlier, what I want to see is commitment. For example, we don’t want to see an entrepreneur collect too much salary because an investor would not want to see his money go to an entrepreneur’s high salary as it shows us that he’s not committed. I want to see the entrepreneur take a pay cut, rough it out to build his business as businesses are not built on luxury.
Having said all that, we have to bet on the law of averages. Some may show you impressive plans, as plans are always impressive. People tell us how impressive their plans are but at the end, I need to make a judgment call and decide if the business is viable.
When you invest in startups, do you always want a clear majority stake?
Tan: Not always. I have invested in a company in China and we started with 30% and we still only have slightly more than that. I don’t want a majority all the time, although a majority will be nice. I think I’m a good investor as I don’t only put in an initial sum but along the way, I might put in more. In the case of MOL, I started by putting in RM2 million but all told, I’ve put in RM90 million or so.
Sometimes, we take a majority so that the entrepreneur will listen to the angel. Sure, some of these startups think they are very smart and end up not listening to me as an investor as they claim that I’m not able to understand this space, but I actually do.
Are there enough angel investments in Malaysia?
Lee (Cradle): The investors are there. For example, the Virtuous Investment Circle (VIC) has invested about RM10 million into various startups in Malaysia since they’ve started. There are also other groups such as AIPO, Business Angel Club, and Pikom Angel Chapter.
There are angel investors around. It’s all about whether entrepreneurs can get to these people and can convince them whether they are worth investing in. Entrepreneurs can’t just wait for money to fall on their lap but instead go out and network and hunt for investors. Sometimes, this means seeing even over 20 investors before the right one comes along.
Tan: In Malaysia, there are a lot of investors, some of whom may be just low profile. For example, Datuk Vincent Lee, who invested in Soft Space International (pic) recently. There are plenty of people who want to invest, I believe.
But some investors get jittery over investing in companies and they would rather put it into high-end property for returns. Your thoughts?
Lee: Investment in property is like going after low-hanging fruit, and in a developing country like Malaysia, this is still prevalent. But what I tell high net worth people is that as a smart investor, they’ll need to diversify their portfolio and a good way is to be an angel.
What is your advice to those of your friends who are wealthy who may want to be angel investors?
Tan: If you have surplus money and are wealthy, you should invest and be an angel as this will help create employment and give our young people a chance. One day, we may create a Mark Zuckerberg (of Facebook) in Malaysia or someone like the Google founders. Those who are wealthy should give young people a chance.
When I started out, people helped me along the way and that’s why I made it. Although I’ve put it more than RM200 million in investment and lost most of it, the two or three investments that survived have more than paid for my losses.
Would you invest in a person who has failed before as an entrepreneur?
Tan: I would find out why he has failed in the past but I would look at his latest proposal and if it’s interesting, it doesn’t matter to me if he has failed. I think there is nothing wrong with failure. If you’re afraid to fail, you will not go out and try to be an entrepreneur. I’ve always remembered a quote President Theodore Roosevelt made that has stuck in my mind:
“Far better is it to dare mighty things, to win glorious triumphs, even though checkered by failure... than to rank with those poor spirits who neither enjoy nor suffer much, because they live in a gray twilight that knows not victory nor defeat.”
This quote is about going for it. At least if you go through failure, it will make you more resilient and a better person.
Questions from the floor
Have you ever invested in something even though you intuitively felt it wasn’t right?
Tan: One thing I’ve learned is to never listen to your finance manager! (crowd laughs). But, of course, not all the time. For example, in the year 2000, I was negotiating to buy the 7/11 chain convenience store. The deal was for RM80 million but the chain makes only RM300,000 profit. My finance guy asked, “How can they ask for RM80 million for that deal?” But I decided to invest anyway for long-term sake and to build the business. My plan was to increase the number of stores to over a thousand, it may be worth a couple of billion ringgit later. And I think it’s happening. If I had listened to the finance guy, I wouldn’t have bought it. So gut feel is important.
For every company that you’ve invested in, how many have you sidelined?
Tan: I would say between 20% and 30%. Also, you need to be lucky, as you have to find an investor that will hold your hand and take you all the way. In my investments, I’m always there to advice and make further investments if I feel they need to. I keep putting in money and I often put my credit on the line. If you have this kind of an investor, you have a better chance of building a bigger company.
What motivated you when you were young, what motivates you today?
When you're poor, it’s easy to be motivated. Nowadays, I’m retired from the public-listed company (BCorp), and I only act as an advisor. I’m also involved in charity and my aim is to help the community. I would like to give to deserving causes and individuals, as this is my motivation.
Watch the unedited video of the DNA-TeAM Disrupt session with Tan Sri Vincent Tan.
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