From entrepreneur to angel: Douglas Khoo’s journey
By Benjamin Cher June 17, 2016
- ‘Giving back’ is important, and that giving is not just about money
- Landscape more competitive now, anyone with an idea can be an entrepreneur
THE entrepreneur playbook, as dictated by Silicon Valley, is for entrepreneurs who successfully exit to become angel investors and/ or philanthropists.
Malaysian angel investor Douglas Khoo (pic above), also a principal at The Coding Shophouse, faced a similar turning point after exiting Qunar.com.
Qunar was only among the few startups he had cofounded, but the travel website was his most famous after it was acquired by Chinese search giant Baidu in 2011 for a whopping US$306 million.
“After I exited the company, besides playing golf every day, I decided to invest some of my money in startups,” Khoo said at Echelon Asia Summit 2016, the startup and investor gathering organised by Singapore-based tech blog e27.
READ ALSO: Echelon: How telcos can forge a path through today’s OTT world
“It was not so much about the need to generate more money, but to have access to startups and provide mentorship to them,” he added.
The problem is, after you have one successful travel startup, you tend to attract more of the same. In the startup world, like attracts like.
“Once you do travel, every other travel startup wants to have you as an advisor or on its board,” said Khoo.
“When I started investing in companies, the tendency was that because I knew the category well, I would try to help them along,” he told Digital News Asia (DNA) on the sidelines of the conference.
“But I felt that travel was pretty much done to death – it was just variations of the same theme and there was not much innovation,” he added.
So Khoo decided to diversify. He has got four travel startups under his belt, but the other four are in different fields, including a drone startup and Vibease – yeah, a remote-controlled vibrator company!
“I wanted to start diversifying and see if there was an opportunity to learn about different industries,” he added, declining to disclose details about his other investments.
Then and now
The startup landscape today is different from when Khoo embarked on his entrepreneurial journey.
“It is a lot more competitive these days because anyone who has an idea can be an entrepreneur – whether they become successful or not is a separate question,” he said.
“Would I do another startup in China? The answer is categorically, ‘No.’
“When I started out, we didn’t have that many real Chinese competitors, but today you have a lot of returning Chinese who have studied in Ivy League schools, who speak good English, have a network, and understand what’s happening in Silicon Valley.
“They are far better equipped to execute better.
“To compete with them now, even though I have the wealth of experience, would be 10 times harder compared with when I started out,” he added.
The Internet landscape has changed too, and some of the different things Khoo tried out when he started have become an essential nature of today’s Internet.
“When I did my first startup, it was all about providing really easy stuff like news coverage and comparisons, but now that is mostly done to death and it’s fundamental on the Internet,” he said.
“The Internet is moving into VR (virtual reality), social sharing and a bunch of other things. You look at these and ask, ‘How does anyone make money out of that?’
“Yet you still have companies like LinkedIn being sold for US$26 billion – the landscape has changed tremendously,” he added, referring to Microsoft Corp’s proposed acquisition of the professional services networking company.
READ ALSO: Is LinkedIn doomed to be a Microsoft turkey?
Khoo has previously advised Malaysian entrepreneurs that Kuala Lumpur is not the centre of everything, and he is now warning Singaporean entrepreneurs about the dangers of getting too comfortable.
“It’s great to be in Singapore where you have a lot of access to government funding and infrastructure, but I tell a lot of startups here, develop your alpha or beta product, but very quickly after that, expand into other markets,” he said.
“Singapore can become very comfortable and if you are going to be an entrepreneur, you cannot be comfortable. You are there to disrupt a process or industry, you cannot get too comfortable, and I think Singapore provides that.
“What you’ll also need is to expand your markets as well, and your market is not just Singapore but the whole region,” he added.
Next Page: Bringing the ‘pay it forward’ culture to the fore
Mentoring and building talent
Having been an entrepreneur for some time, the transition to becoming a mentor as well as an angel investor has been a fun, and in its own way, fulfilling journey for Khoo.
“Having gone through the tough journey of being an entrepreneur in China, there’s so much I’ve learnt along the way, and it’s great to be able to give back to startups,” he said.
He said he works with two groups of startups, with the first obviously being his own investee companies.
The second group he works with are through entities like the Founder Institute, which has chapters in Malaysia and Singapore where he serves as mentor.
“I am also taking on startups or teams that I think are interesting or may need mentoring help – I don’t take equity in them, I just spend time having coffee with them when I’m back in Malaysia or Singapore, just to give back to the industry,” he said.
It was also with this intention of giving back to the community that Khoo started The Coding Shophouse, which teaches young people to code, in the northern Malaysian state of Penang.
“I felt a need to pay it forward given that I had been so fortunate, and because I came from a poor family and didn’t have an education, I thought if someone had given gave me an opportunity early on, why can’t I give opportunities to other people?” he said in his Echelon talk.
“The joy that I get seeing the students in the three intakes that we have had so far – about 40 odd students have graduated – it’s a nice feeling to see them coming out and either getting jobs or launching their own startups,” he said.
This desire to give back to the less fortunate is also one of the reasons why the long-term objective is to have The Coding Shophouse in smaller cities.
The other reason? “What we see is a brain-drain – if you really want to work as a developer, more often than not, you might actually have to migrate to big cities, which is taking away a lot of resources from the smaller cities.
“Why can’t Penang be the tech development office for the whole of Asia, where Indonesian companies can outsource their work to Penang or Kuantan or Ipoh?” he added.
While The Coding Shophouse might not have produced any notable alumni at this early stage, Khoo hopes that in the next 10 years, “all of them will be a force to be reckoned with.”
Growing a talent pool of developers takes time and Khoo sees Malaysia moving in the right direction.
“I think we are starting to gather momentum, not just with The Coding Shophouse but with all the other initiatives that are being carried out in Malaysia, whether by MaGIC, Cradle, MDeC or Khazanah,” he said, referring to a bevy of government-linked companies or GLCs.
“We’ll probably see tangible results in the next four to five years … when hopefully Malaysia will be on the map, whether as a development powerhouse or a place to do a startup because the ecosystem is vast and conducive,” he added.
Startups and opportunities
As for the kinds of startups Khoo might be interested in investing in, it boils down to him being able to understand what that company is doing.
“For me, I see startups in two categories – the first category is trying to provide a solution to a problem, making the process much more efficient,” he said.
“The second is on trends, things I can’t put a finger on or see why anyone would want to develop an app like that for the market, except for the youth who are able to capitalise on that market.
“For the first one, I can calculate the business potential of making a process efficient. But if someone came up to me and said they have a new app that takes a photograph and pulls 14 characters and disappears in 10 seconds, I don’t know how they are going to make money, so I don’t invest in those companies,” he added.
Khoo said his reluctance to invest in such startups stems from his lack of understanding of the markets these companies can tap into, which means he would not be able to contribute much.
“I don’t know anything about that market and I may not be able to be effective as a mentor in that kind of thing – I may be able to tell them how run the company in terms of HR (human resources) and fundraising, but in terms of product development I cannot give any input.
“Whereas If I see a company making a process efficient, I can see the value that’s being created, and that’s where I look at it, focus, and invest on,” he added.
While South-East Asia is awash in business-to-consumer (B2C) or consumer-to-consumer (C2C) startups, Khoo believes there is huge opportunity in the business-to-business (B2B) space, which the region has largely ignored.
“I think B2B is definitely a huge market opportunity. In B2C, one of the things I look at when startups show me their business plans or financials, I see 50% or more than 50% of what they raised is going into marketing, and I think it’s such a big waste,” he said.
“Who are you making rich? You are making people like Google and Facebook rich, because that’s where the money is going to.
“The reason why they’re doing it is because on the B2C side it’s so competitive, you have to be able to shout louder and longer to be heard, and everyone is going for the same consumer,” he added.
But B2B provides stability once a startup gets it right, Khoo argued.
“While it is not sexy or does not grab the headlines, and takes a long process, once you get it right, it is going to be recurring revenue that you’ll get back, and it is huge.
“Perhaps it’s not sexy, so young entrepreneurs don’t want to get into it, and it might not attract the same type of fantastic valuations the B2C companies get.
“And also, I think with B2B you need to have some category experience as well, and as a young entrepreneur you may not have the working experience, you might not be able to see where the opportunities are.
Which is why in B2B, “you tend to see more entrepreneurs with more working experience, who see a huge deficit in the way things are being done,” he added.
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