In 1999, 24-year-old Patrick Grove started Catcha, an online portal which aimed to be the next Yahoo!-like corporation. Now, Catcha has a head office in Malaysia and has evolved into an investment company.
Grove first saw the magazine business take off after seven years, and started focusing on digitising other industries like real estate and automotive.
Three of its portfolio companies are listed on various stock exchanges, namely iProperty Group and iCarAsia on the Australian Securities Exchange, and Catcha Media on ACE Market of Bursa Malaysia.
“We are huge believers of the online (scene). If you study successful companies all over the world, and companies that can grow really fast, you keep reaching the same conclusion – whether it’s digital media, or digital advertising, or digital commerce, digital companies grow extremely fast,” he told Morning Bell, a programme on Capital TV in July.
A judge on the popular reality television series for startups, Angel’s Gate, Grove managed to survive the 2001 dot com bubble burst, and steer Catcha back to shore. Now, the Group is worth over US$150 million in total.
With the recent slew of investment and acquisition news in all of Southeast Asia, especially Singapore, e27 wanted to understand what Grove thought of the situation, as well as his criteria for startups.
1. Proven concepts only
Grove tells e27 that Catcha Group often looks out for entrepreneurs in Asia who are trying to replicate a proven business model.
“If someone says to me, ‘I’m going to invent some new technology that nobody in the world has ever seen before’, we’re not interested,” says Grove.
He adds, “If someone says, ‘I saw this in America. It’s very successful. I want to bring this concept into Southeast Asia’, we will take it up. We like to bet on ideas where the concept is already proven. Our only risk is execution risk, we don’t like to bet on idea risk.”
2. US$1 billion idea
Well, even if the business model works and has been proven in other parts of the world, it can’t just be a meagre US$10 million idea.
Grove says, “If you say ‘We’re going to copy this American website’ and the company is only worth US$10 million, you know what, it’s too small. It’s going to be even smaller in Southeast Asia.”
His idea of a big idea? One which is worth at least US$1 billion.
3. Young and hungry entrepreneurs
Building a business is hard work, says Grove. He adds that entrepreneurs who aren’t hungry will not be able to persevere through hardship, and ups and downs.
However, does that mean that entrepreneurs should never give up, no matter how dire the situation might look?
Grove nods profusely, and says, “Never. If you still believe in what you’re doing, never ever give up. For example, Catcha, we lost lots of money for seven years. From year one, people said, ‘Give up, you lost money.’ Year two, people said, ‘Give up.’ Year three, people said, ‘Seriously, you got to give up!’ It was seven years before we finally made money.”
“If you persevere, you’ll eventually figure out the formula of success.”
Investing in tech startups? Not for the faint-hearted
When it comes to traditional investors, tech startups aren’t exactly the most attractive bunch. What does this mean for Grove, who needs to persuade other investors to make a joint investment in these young, risky businesses, instead of land?
He explains, “You need to find people willing to (have) a decent level of risk appetite.” While technology companies are making a return, investors are still worried as not every single business will generate revenue. Investing in property, on the other hand, is comparatively less risky.
Grove also speaks to people who have already made money in these companies. He adds, “If you look at the shareholders in Viki, they’ll be the best people to talk to, because they’ve already made money, so the confidence is there to invest in other startups.”
Viki, a global subtitling and video streaming platform, recently made news with Rakuten’s upcoming acquisition at US$200 million.
He adds that he does understand the rationale behind many traditional investors refusing to put their money on tech startups. He says, “It’s very hard for them to invest when they don’t have successful case studies.”
The influx of acquisitions within the region encourages and attracts investors to see value in these tech businesses. Grove attributes it to a cycle. “People start businesses, people sell businesses. So you need this wheel to keep moving for this industry to grow. So, I’m happy with it. I think it’s great. I’m happy for all the investors who made money because that means that money will come back into other companies.”
Malaysia seems to be doing well as a startup and dot com hub as well. Out of the five largest internet companies in Southeast Asia that are publicly listed, four of them come from Malaysia.
Grove also expresses interest in marketplaces — hubs where buyers and sellers can come together, like eBay or iProperty. “We’re starting to look at things like home renovation, where you put all the people who want to renovate the house. I can find them in one site. … We love online malls.”
“We love mobile. We’re huge, huge fans of mobile. … We love a lot of things. As long as it’s online, Southeast Asia-focused, and has a mobile focus, it tends to be our sweet spot.”
“I think Southeast Asia is anywhere from two to six years behind, in terms of development time,” says Grove. However, he adds that the time gap is shortening. Three years back, he says, Southeast Asia was lagging behind the US by about five years. Now, the gap is around six to 12 months.