- VC and startups need to complement each other
- Just a matter of time before more unicorns emerge in SEA
THE connection between startups and their investors goes beyond just the money – the investor also has to play a supportive role.
In fact, it is not just a business agreement, but a relationship where both complement each other – much like a marriage, according to Ku Kay-Mok, partner at China-based venture capital firm Gobi Partners.
“As a former entrepreneur, I know that entrepreneurship is very tough. It is very lonely and many entrepreneurs have nowhere to go when a problem arises and they have no shoulder to cry on.
“So VCs have to play a supportive role at times like these – a VC (venture capitalist) is like a wife with many husbands,” he said during a panel discussion at the What’s Next 2016 conference organised by Digital News Asia (DNA) in Kuala Lumpur on July 28.
The panel discussion, titled Combustible Combination: Meet the VCs Fuelling the Startups After Your Markets, was moderated by Bloomberg TV Malaysia anchor Sophie Kamaruddin, and included Malaysia Venture Capital Management Bhd (Mavcap) chief executive officer (CEO) Jamaludin Bujang and Xeraya Capital Sdn Bhd CEO Fares Zahir.
Entrepreneurs tend to focus a lot on execution, among many other things, so they may have tunnel vision in certain things as compared to a VC, according to Ku.
“In such a case, the VC has a critical role to play because the VC provides ‘a mile wide, an inch deep’ knowledge to the entrepreneur,” he said.
“This doesn’t mean that a VC is a know-it-all because a VC may have a wide-ranging network but he or she may not have the depth of an entrepreneur, so it’s a good counterbalance,” he added.
Mavcap’s Jamaludin concurred, saying that VCs have to establish a personal relationship with startups if they want to make sure the relationship thrives.
“[VCs] should be able to communicate on a daily basis and listen to them (startups) as well,” he said.
“And for startups, you must have someone who’s open to suggestions and ideas. You need to choose someone whom you can work with from the start,” he added.
On the issue of unicorns – startups with valuations of over USS$1 billion – the panellists agreed that it was just a matter of time before South-East Asia sees the emergence of more unicorns.
Xeraya Capital’s Fares said that the existence of unicorns in South-East Asia has given hope to VCs that they may have their own unicorn in their portfolios.
Meanwhile Jamaludin said that the ecosystem in the South-East Asian region has improved significantly over the past few years.
“Startups are now much better in managing expectations of investors,” he said.
Ku said that the young population in South-East Asia will help contribute to the emergence of big exits and unicorns within the region.
For example, the high smartphone penetration rate in a market like Indonesia will drive the growth of financial technology (fintech) as many young people do not have enough of a credit history to get loans from banks.
“It will happen, thanks to the young demographic of the region. It’s just a matter of time,” he declared.
When questioned about the lack of investment in startups from non-sexy fields such as agriculture and farming, Jamaludin (pic above) said one reason was the lack of expertise in those fields.
“For example, a plantation startup wants to raise funds – is there a VC who’s an expert in that field? The same goes for areas like mining. Not many VCs have deep knowledge in those fields,” he said.
“I believe there is a skill gap in that. Maybe you need to get corporates to participate in those areas,” he added.
Ku said that VCs are also looking into investing in brick-and-mortar companies that are seeking to transform into ‘click-and-mortar’ companies – often called bricks-and-clicks – but he noted that there may be regulatory challenges that VCs have to face.
“In Malaysia I believe it’s easier as many companies are privatised, but in Singapore it might be the other way round as companies there are highly regulated,” he said.
Other What’s Next 2016 stories:
Tycoon Vincent Tan on his costly failures
A digital strategy? You’re behind the times
If it ain’t broke … well, fix it anyway
How to make corporate-startup collaboration work
Focus on SEA’s basic needs, forget Silicon Valley
The generational clash, and sharing vs privacy
Digital disruption not a key concern for Valiram Group
The third digital disruption wave is here
Data, models and asking the right questions
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