Image credit: Michael de Waal-Montgomery / e27

Bill Tai addressing the audience during his recent visit to Hong Kong

This concludes the two-part e27 exclusive with venture capitalist Bill Tai. Read Part 1 here

How’s Hong Kong as a startup location?
Hong Kong and other geographies around the world are becoming more and more viable as places to start companies. When technology implied starting a company whose job was to commercialise technology like chips or routers, it was impossible to compete with the human talent that existed in Silicon Valley because it was so concentrated and you needed very large teams to execute products. You needed hundreds of people per company and a lot of capital to just get something out the door. You might have needed US$50 million in five years to launch a company, so you could really only do that in one place.

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As we move more and more to a world of user interface, designers and people who understand human behaviour have become of paramount importance. Those are everywhere and local to their culture. When I started in the venture business in the early 90s, rule of thumb was you never invest in anything more than an hour away from your office. I didn’t really think that someday I’d be funding a lot of companies overseas.

In the past three years, I’ve funded two startups out of London, three out of Japan, six out of Australia, and one out of Brazil. At more of a seed-level scale, which would appear to be more labour intensive at the early stage, a lot of companies are able to get going without a lot of help and hit it. Like in London, TweetDeck came out of nowhere. I seeded that one and they got acquired by Twitter without raising much money.

So we’re in a world where it can happen anywhere, including Hong Kong.

What do think of Southeast Asia at large for startups?
It’s a very, very large population base with very unique cultural behaviour per economy, and as a result, there are opportunities to create companies that American startups wouldn’t understand. Since the population bases are big here, there’s definitely an opportunity to have local startups get to some semblance of scale depending on the country.

What are the trends in this region? Obviously e-commerce is big right now.
I can’t say I’m an expert at the local level. Anything that you describe as sort of web-based, mobile-based, hyper-local businesses, the local people are going to have an advantage.

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If two companies have products of equal quality, but one company’s manager is able to scale and the other is not, what’s the reason?
The manager that was able to scale is probably a more charismatic leader that was able to build a team. In the world we’re in today, it’s really about talent, it’s about human resources more than technology resources because this is not a world where a better transistor [read product] from a startup wins. This is a world where a team that is more effective at executing to the needs of its customer base rapidly, iterating fast, and failing and recovering wins in the long run.

Build a good product and funding will come. Is that true?
That’s probably more about liquidity in the market. We’ve been in a very liquid market for financing the last couple years, so I think it’s definitely been the case that if you build a good product and show great user growth, funding will come.

To turn a product or product cycle that will be of value in an acquisition… [into a company] that is building on its own and then acquiring other companies, that’s a different story. So, can you attract capital? Yes. Can you build it into a company? That’s really a function of team.

What is the difference between startups with the primary desire to make money and startups that aim to make a positive social impact?
I do see examples of both. But I think, founders that are not necessarily in for the money are the ones that build bigger and more sustainable enterprises.

If you think about Mark Zuckerberg or the team at Twitter, they didn’t start those companies because they thought they’d make money. They started because they wanted to make something more efficient to communicate. They saw a way of doing something and they believed in it. Over time, monetisation happened, but they didn’t build those just to make money.

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I think we’re in a world also where passion matters a lot because any time there’s a wave that enables a company to form, there’s a lot of people trying to ride that wave. It’s so competitive out there, and if you’re not in it for the right reasons or not in it for the long term, then there’s somebody else that is. If you are just in it for the money and you make a little misstep, hit a little bump, the teams that are just in it for the money probably step aside.

And do such teams exist?
Oh, absolutely. I see those people, but it’s not a high percentage now. Could I put a percentage on it? That’s not really easy to do.

In the late 90s, when the so-called internet bubble was happening, there was definitely a period where a lot of mid-level corporate executives from big companies were quitting their jobs to go into the internet because they thought they would make money. That’s when it sort of lost its authenticity and kind of got hollow, and the thing got set up for a crash.

Today, I don’t see that same thing happening. I see more of a structural change in the market where young people, when faced with a career decision coming out of school or several years out of school, realise that they have to take advantage of the opportunity in front of them. There is no such thing as job security or lifetime employment by any big companies, we’ve all seen that with this generation.

Whether pensions promised weren’t properly funded or don’t really exist, or companies end up downsizing because they are older dinosaurs that aren’t really built for today’s economy, career stability in the big companies isn’t what it used to be. And so, there isn’t as much of a draw any more. People would rather try to take control of their own destiny and have fun while doing it.