PLANTING THE SEED

Investing in start-ups can reap fantastic rewards, and who better to give tips to those thinking of getting involved than those who have been there and done that 

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SIMON SQUIBB  

CEO at NEST Investments 

“I came to Hong Kong back in 1997 and one of the first companies I set up was a branding agency called Fluid. When I look back now and think of all the contacts and relationships I’ve built up since, I realise that if I started it now, I could have done in three years what ended up taking me ten. I now want the companies I invest in to take advantage of that built-up experience. I think as a start-up investor you really have to be willing to help, otherwise you might as well invest in the stock market. At NEST we try to give entrepreneurs the tools they need to build scalable businesses. We give them support with capital as well as hands-on insights, knowledge, contacts and infrastructure. I would always advise on investing in concepts that excite you, and in industries that you understand. One of the interesting things about start–ups is that because you are so involved, you have a certain element of control in its success, which is unusual in other types of investment. Look at the property or stock market; you often don’t have any kind of influence and in some cases you’re at the liberty of government regulation or management decisions. With a start-up I can look at it, see it, touch it, help it – nothing is more transparent. I find it satisfying to invest in an entrepreneur and watch them flourish. We’ve just invested in a company which is looking to solve the problem of attention deficit disorder (ADD) in kids. Obviously there is a financial return which is important but success can also come from making a difference in the world  something I find very rewarding.”

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JOSHUA STEIMLE 

Entrepreneur and start-up columnist

“I wouldn’t invest in a company whose product or service I wouldn’t use myself, and which I’m not at least something of an expert on. My background is in web technologies, and more specifically online marketing. I might invest in start-ups that are involved in social media, apps or online services but I wouldn’t invest in other areas. It would take too much work for me to vet the opportunities and I wouldn’t be able to provide much, if any, support to the entrepreneurs other than financially. Market size is also important. I was recently a judge for a university business plan competition. One of the plans I read was for a business whose market size couldn’t be larger than US$500,000. I’ve seen Hong Kong start-ups that are focused exclusively on Hong Kong and have no plan to expand to larger markets. There’s nothing wrong with entrepreneurs creating businesses that produce nice livings for the owners, but those aren’t businesses I would recommend to investors. No matter how good the team is, no matter how good the concept is, and no matter how good the execution, if the market size isn’t large, the return is going to be small even under a best-case scenario. Finally, you need the ideal team. Perhaps one that has worked together successfully before to launch one or more businesses, and is now launching a business that is related to their previous one, meaning they already have domain experience. That may not guarantee success, but it sure improves the odds.”

 

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KEVIN YEUNG

 Co-founder of Feeding Hong Kong

“It is easy to be enamoured by the explosive returns that successful start-ups deliver. The press love the fact that Tencent is worth US$150bn and Pony Ma is the richest man in China. Investors need to understand that internet start-ups represent the highest risk investments out there. With a staggering failure rate of over 90%, they should never be your primary investments.  I’ve never chosen to invest in tech by itself, instead I always choose teams of smart, ambitious and tenacious people who work well together. I like to invest in people who possess strong problem-solving skills. In start-ups, the only constant is uncertainty. Teams need to grow fast, iterate ideas and solve problems constantly. My latest start-up is Archangels Access. My friend and partner Gabriel Fong wanted to join forces to use our wealth of experience and networks to help selected Asian start-ups succeed. It’s our view that start-ups will forever remain risky investments but we believe that we can help avoid pitfalls and help them become significantly more efficient as we fast-track their growth.”

 

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DOUGLAS JAFFE

CEO at Solution Access 

“When assessing a start-up, I look at its product and immediately think to myself, ‘could I personally sell that to someone?’ This is more than theoretical in our case, as we have brought portfolio companies to Asia and acted as their distributor. Getting your hands dirty by actually going on sales calls, closing deals and managing customers gives you real insight into the viability of a product or service. Even if the start-up’s product is still in the development phase, having this idea in the back of your head is important. It’s a lot easier to be passionate and excited about your start-up if you can see yourself selling it. I think many start-up investors tend to think their investment is a one-way ticket. They are the investor and think this entitles them to something. Good early-stage investors have committed to a journey with their company and leave egos and neuroses at the door when interacting with their company’s founder and team. A good investor goes above and beyond to help and this can include introductions, advice and referrals. A useful start-up investor gets on a call and asks how she can help. Start-ups are born with one foot in the grave and nudging them into viability takes patience, encouragement and genuine support.”

SIX SUCCESFUL ASIAN START-UPS

Rakuten

Established: 1997
Founder: Hiroshi Mikitani
Listing date: 2000
Current market cap: US$13bn

Sina Corp  

Established: 1998
Founder: Charles Chao
Listing date: 2000
Current market cap: US$3.5bn

Tencent

Established: 1998
Founders: Ma Huateng, Xu Chenye, Zhang Zhidong
Listing date: 2004
Current market cap: US$125bn

Alibaba

Established: 1999
Founder: Jack Ma
Listing date: N/A (private)
Valuation: US$150bn (Source: Bloomberg)

Baidu

Established: 2000
Founders: Robin Li, Eric Xu
Listing date: 2005
Current market cap: US$53bn

Youku Toudou

Established: 2003
Founders: Gary Wang, Marc Van der Chijs, Victor Koo
Listing date: 2010
Current market cap: US$4.5bn

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