The mantra goes; ‘build what you love, fix a problem, create an awesome product and the money will come’.
In Southeast Asia, this means the typical strategy for an entrepreneur is to work towards raising the alphabet soup of funding rounds. And maybe after the revenue tops US$10 million, begin to think of an exit strategy.
The problem is, if startups don’t think of a potential exit from Day 1, they can make some early mistakes that could kill the exit years later.
Charles Rim — the former Head of M&A for Asian Markets at Google — is the Founding Partner of a new VC firm named Access Ventures, a company that wants to fix this problem.
“I think as startups have been growing, they have not focussed on an exit strategy. If you talk to a lot of startups, it is really about ‘[how can I] make the world better, I am going to create a product that everyone needs,”
“But, smart entrepreneurs — from the very beginning — are thinking about how to position [their] company for exit. And the only way to do that is to understand what an exit company is looking for. And that would be my role,” he told e27.
Access Ventures is targetting a fund of US$50 million and plans to make its first close in early November. A notable participant is the Head of Deal Leads at Google, whose name was requested to not be quoted.
First investments will range from between US$500,000 to US$1 million. The strategy is to take around a five per cent stake in the first investment and follow-up to build a 10 per cent stake.
Rim says his advantage as an investor comes from his time spent on the other side of the tech M&A world — having bought companies for Google, Yahoo and Tapjoy.
“When I lift the hood on a company, I know what would have stopped me,” he says.
For example, a company might check all the boxes: awesome founding team, great product, perfect timing. But, when Rim and his team would check out the tech stack, they would find an unscalable infrastructure.
Strapped for cash, startups often piecemeal the back-end, data systems and logs. The piecemealing itself is not the problem, but there is a method that allows the tech to be stacked upon itself — making it more scalable.
The reason this is important is because — let’s take Google for example — engineers at major tech companies think they can build anything. When it comes to an exit, the major advantage a startup has is the headstart from innovation.
Which means, if a company like Google is thinking of acquiring a company but realises they would have to rebuild the tech infrastructure for scalability, the speed advantage is gone. Then, what’s the point of acquiring? Google can just task a group of top-notch engineers to build something similar in the next six months.
This is an example of a mistake a young company can make.
Rim hopes his experience can help entrepreneurs avoid those early stages errors that impact acquisition. Which is why Access Ventures plans to be a hands-on VC focussed on mentoring entrepreneurs in corporate development and offering strategic guidance.
What kind of startups is Access Ventures looking for?
Rim says he wants to invest in about 20 companies with the fund and will focus on South Korea, Vietnam and Indonesia. Half of the investments will be made in South Korea — where Rim is based — and the other half will be split between Vietnam and Indonesia.
“My network is very strong in those countries, so in addition to the economics and the demographics being strong, I feel that access ventures has strong LPs and Advisors that can help us win in those markets,” said Rim.
Access Ventures has already made two deals. The first is a Vietnamese startup called Moca.
“A model has to work and be able to replicate across the region. So Moca, they are addressing a problem that is true across Southeast Asia; no POS terminals in all these countries, heavy cash economies. So they are figuring out a technological way without having to sell POS terminals,” he said.
The solution for the moment is QR-codes — but the reason why Rim chose to make an investment is because company is aware QR-codes have a shelf-life, and are positioning themselves to adapt to other technologies (Near Field Communication being an example).
“So they are building a deep tech stack to know how to scale. We are also doing a technology that is going to resolve the same sort of issue that is in Cambodia, the Philippines … these kinds of countries,” he added.
The other investment is in Reality Reflection, a Korean virtual reality (VR) company that is positioning itself to leverage user-generated VR content.
The idea is based on the evolution of online video. At the outset, major production houses moved their television programmes to the internet, but it was not until the users took control of the platform that the medium took off (YouTube celebrities, anyone?).
Reality Reflection is working on what they believe will be the biggest hurdle towards user generated VR: body movements. They are rendering human body data and, if/when the content takes off, are positioning themselves to be the company in charge of making the average person a viral VR star.
Moving forward, Rim is focussed towards B2B companies that show regional promise.
“Regional plays typically work with B2B, so I am very focussed on B2B regional tech investments. That does not mean I won’t do consumer, but B2B is something that is more predictable and they have a much better chance at a regional business model,” he said, alluding to the fractured nature of the Southeast Asian ecosystem as a whole.
Southeast Asia lacks an exit culture — but that may be just a matter of timing. In North Asia, it is the major first-generation startups such as Kakao Talk, LINE and Tencent that are the largest vehicles for exiting.
Access Ventures wants Southeast Asian startups to position themselves well as companies such as Tokopedia, Grab and Go-Jek move into the next stage in their evolution.