Wavemaker revealed it has 35 portfolio companies in Asia, of which 10 have already raised follow-on financing of US$1 million or more


Paul Santos is a Managing Partner at Singapore and Los Angeles-based venture capital firm Wavemaker, but until today he has stayed largely out of the media limelight, preferring instead to focus on doing what he does best: Investing in startups and working closely with the entrepreneurs behind them.

Change is in the air, however and Santos recently began writing as a columnist for Forbes (Philippines) on the topic of entrepreneurship, signalling the start of a more active approach to and with the mass media for both himself personally and the firm at large.

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The dual-headquartered VC has two partners in each location. Eric Manlunas and David Siemer are based out of L.A., while Santos and Dennis Goh (who Co-founded HungryGoWhere and grew it into Singapore’s top F&B digital company before selling it to SingTel in 2012) are based in Singapore.

Living in the “hopefully-get-rich-slow scheme”

Paul Santos, Managing Partner at Wavemaker

Paul Santos, Managing Partner at Wavemaker

Like the other partners at the firm, Santos was an entrepreneur prior to joining the venture capital world, having started and sold companies ranging from call centres to marketing communications and high-end pest control. “We make fun of ourselves because we think we’re in the hopefully-get-rich-slow scheme,” Santos told me, when we met over coffee at the Mandarin Orchard in Singapore last week.

Wavemaker sees itself as more of a seed-stage investor than growth stage investor, though it has the muscle to follow into later rounds for the right deals. Santos believes investing at the early stage is more about the people, the opportunity they’re pursuing, and the vision they’re trying to realise. “At the later stages it’s really more about metrics,” he said.

Less talk, more action: Understanding the pain of the entrepreneur journey

“I understand that sometimes the media need to play up the extremes to make [the startup journey] more interesting. [Startups] are hard. Maybe that’s why I don’t like to talk so much,” Santos said of his lack of media engagement over the years.

“Because I know how hard it is for entrepreneurs. How hard it is to think of a business, to raise money, to eventually exit, to negotiate with people, to fight with partners or fire employees, to appease disappointed clients,” he said.

In 2006, Santos was invited to join the Entrepreneurs’ Organisation, a global network of entrepreneurs who have founded, co-founded or are controlling shareholders of business that have more than US$1 million in revenue. In the words of Forbes magazine, “EO is basically the Justice League of the entrepreneurial world.” 

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Involvement in the group exposed him to different kinds of entrepreneurs from a whole variety of backgrounds, but what he really liked was its ethos and culture. “They have this way of talking to each other. When you’re talking to your peers, you don’t give each other advice — you share your experiences,” he said.

Over the years, he has come to embrace a philosophy in which gaining the trust and respect of the entrepreneurs he works with is “more important than a board seat.” Without this intimate relationship, it’s much harder for a founder to value the feedback of their investor.

“Being an entrepreneur sometimes is a very stressful, lonely journey. I think, sometimes, some of the benefit is just a chat to decompress. It might not even just be about the work, but how they’re feeling. A lot of our experiences in life are really just by ourselves, and if you’re in a company and your employees are looking at you, your customers are looking at you, your investors are looking at you — you can’t help but feel alone. You’re balancing it all.  You learn to cope. You learn about what’s important,” he said.

Spilling the beans on Wavemaker’s never-released record to date

Wavemaker’s first fund (US$8 million; with a spend of 95 per cent US, 5 per cent Asia) was started in 2003 by Manlunas. Siemer then joined much later in 2011, followed by Santos in the same year — just as the firm was raising its second fund (US$20 million; with a spend of 85 per cent US, 15 per cent Asia).

In 2012, the Singapore side created Wavemaker Labs (US$20 million; with a spend of 100 per cent Singapore) in conjunction with the National Research Foundation (NRF). Fund three (US$45 million; with a spend of 70 per cent US, 30 per cent Asia) was launched in 2014 and is currently still in the midst of being raised, now almost two-thirds complete.

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To go on, we have to define two ways that VCs measure the performance of funds.

The first being TVPI:

“Total value to paid-in (TVPI) is the ratio of the current value of remaining investments within a fund, plus the total value of all distributions to date, relative to the total amount of capital paid into the fund to date. As defined in the current GIPS Standards, any recallable distributions should be included in the numerator of this ratio. Any reinvested capital (resulting from recallable distributions) should be included in the denominator. Perhaps the best available measure of performance before the end of a fund’s life.” (Source: ILPA)

The second common way to measure a fund’s performance is realised IRR:

“Internal rate of return (IRR) is the interest rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equal zero. Internal rate of return is used to evaluate the attractiveness of a project or investment.” (Source: InvestingAnswers)

Fund 1 (vintage 2003): 42 startups, TVPI of more than 4x and a realised IRR of more than 40 per cent, potentially three unicorns. NYSE-listed Digital Globe provides high resolution satellite images, aerial photos and geospatial content and has a market cap of more than US$2 billion.  Mindbody has grown to become the industry leader in business automation for the wellness space and is set to IPO on NASDAQ in a few weeks.  The third one is still privately held but is already valued at more than US$1 billion.    

Fund 2 (vintage 2011): 91 startups, TVPI of about 2x and a realised IRR of more than 40 per cent.

Labs (vintage 2012): 15 startups (by Q3 this year), TVPI of about 2x and an IRR of more than  200 per cent.

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Santos led the 2013 seed round into TradeGecko at a time when “nobody was looking at B2B SaaS” in the region. The startup went on to raise a US$6.5 million Series A round at the end of April 2015 and also secured a bridge round prior to that, at the end of last year.

“We now have 35 portfolio companies in Asia. Not many people know that. Of those 35, 21 have been with us for more than a year. And of those 21, 10 have already raised follow-on financing of US$1 million or more.  We have a couple that postponed Series A funding because they’re growing profitably. We can’t beat our chest too much, but what I’m saying is we’ve been doing this a while in the US, we have numbers to show returns, we’ve found exits, and we’re replicating it here in Southeast Asia,” Santos said.

Wavemaker also invested in Luxola, a Singapore-based e-commerce play for beauty products that has gone on to raise over US$15 million. And the VC made a full exit on Gushcloud recently, a Singapore-based social media marketing firm that was acquired by Yello Mobile for an undisclosed amount at the end of April 2015.

What others have to say

Here are some quotes from successful entrepreneurs in Asia who have worked closely with Santos and Wavemaker over the years.

First up is Alexis Horowitz-Burdick, CEO, Luxola:

“I think the general partnership I feel with Paul has been of great value to me. As a sole founder, I have certainly gone through some hard times and I have a relationship with Paul that allows me to discuss those issues without feeling as if it will come back to bite me, its been hugely valuable. Trust and advice has really been the backbone of what Wavemaker has offered.”

Cameron Priest, Founder, TradeGecko:

“Paul has been my closest advisor and mentor in helping me grow TradeGecko.”

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Thijs Jacobs, Founder, Pie:

“One of the reasons we chose Wavemaker was because we liked their portfolio and the down-to-earth ‘Is this a good business?’ and ‘let’s make stuff happen’ approach – no wild ‘Silicon Valley wannabe’ fluff.”

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Vincent Ha, Founder, Gushcloud:

“Since we got to know the Wavemaker team, they have been connecting us to all the right people in Singapore and the US, allowing us to gain new strategic advantages. They also care deeply for the entrepreneurs and that shows.”

Image credit: Matthew Cole / Shutterstock