I am still trying to come to educated opinions on blockchain, bitcoin, ethereum, crypto currencies and ICO’S. This video was useful for me in that journey.
Category: Capital
World Domination
This past week was busy with switch, slush, venturecon, VC-PE summit and then walkabout. I hit or spoke or cheered them all on. I love 💕 being in Singapore and it was awesome to witness everyone from around the world coming out to support the city/state that continues to punch well above the weight class that everyone thinks it might be in.
I won’t lie – I am Singapore fanboy.
When I read stories like this about America, startup slump, I am thankful to be in Asia and specifically at the center of SEA. Pro startup with a government mindful of the challenges ahead but super supportive of tech and the role it will play in future societies.
I worry about America but remain hopeful.
Overall I continue to be concerned about the role of the huge tech companies in our lives and their impact on startups and capitalism.
I can’t wait to read The Four.
And on this subject his weekly newsletter is very timely :: https://www.l2inc.com/daily-insights/no-mercy-no-malice/the-worm-has-turned
The biggest opportunity for the Four
The Four could pull off one of the greatest moments in business, addressing a huge social issue while disrupting an enormous, wildly profitable sector that hasn’t innovated in decades. One or more of the Four should launch a tuition-free university that blends offline and online learning, and charges firms to recruit. Student debt and corporate profits are at an all-time high, meaning we need to flip the model — charge firms, not students, for education.
Apple is also well suited to do this as its brand has roots in education. I estimate the economic value of credentialing is, if taken as a market, likely the largest industry in business with 80%+ gross margins. There would be several ways to create $100B+ in shareholder value and catalyze desperately needed competition. We (universities) have stuck out our chins and deserve fists of stone. Feeding like insecure vampires on the scarcity of our product (dopamine surges through our brains at faculty meetings as we revel in how impossible it is for kids to get into our programs), and praying on the hopes and dreams of families. Education used to be the upward lubricant and a social good. It’s now just one of those things.
Other than each other, there is only one thing between the Four and $1T in market value: the perception of poor citizenship. The small-ball strategies of tax avoidance, obfuscation, and the idolatry of youth and the dollar, may turn big tech into smaller tech.
Thoughts to ponder for sure.
I hope one of the companies steps up and challenges the perception of the role they could play and make America proud.
Structured Financing
Over a quick bite today I continued to read the latest edition of Venture Deals, it has been enlightening to read it post working in VC for over a year now. I have been able to validate some of the principles first hand while gleaning a thing or two to help me in stuff I am currently dealing with.
I wrote, https://seedvc.blog/2017/09/07/take-a-discount/, the other day and was thinking more about the book in light of how some founders may not understand how various rounds of venture financing works.
A couple of things to note is that usually once you raise money – you will probably be raising until exit or profitability. So an angel round will turn into a seed round, which will lead to an A and most likely a B. Maybe somewhere in that mix you might exit or generate enough cash to no longer need to raise money. It could also be that venture financing makes way for debt financing instead.
The point being that as you look at your very first fundraise, one must have a view to how the follow on rounds will work and the milestones you will achieve during the rounds. Usually this will map to burn rates and the hopeful product or revenue targets that match rounds and the end of cash cycles.
Being careful about valuations during this process is important but also realizing that more than one round will happen helps to put it all in context.
Long story short if you are a founder or thinkjng abor becoming one? Read the book before you start your fundraising journey since it will probably help you more than my ramblings.
Enjoy the weekend!
Take a discount.
This is such a great read. I am tempted to take item 1-3 and send it to every startup prior to our first meet up.
https://www.linkedin.com/pulse/raising-venture-capital-take-discount-your-valuation-marc-lore
It is always hard to explain this stuff as a VC without a founder assuming that it is just our ploy to buy more of the company for less money but it is not – it is us doing the best we can to ensure that we are helping to build the foundations of a great company.
Best to read the whole article but let me drop the three main points here.This one is so true and I have seen it first hand. A top tier VC will do the math, model the stages and model the exits. They will use these numbers to create their valuation but also take into account the stage and any other important signals. A founder, most likely not using any models, will decide they think the company is worth more and then go find another VC to give them that valuation. Usually the other VC is not top tier and is using valuation as tool to win the deal. Founder will think they have won but honestly they didn’t.
If you still aren’t convinced, here are three more reasons to take a discount on your valuation:
First, you get better investors. I’ve seen too many cases where second-tier investors outbid the top-tier. But a lower valuation ensures the very best investors want in.
Which VC do you think will do the hard yards down the road? The one that does the hard yards going into a deal or the one that just throws out the number you want to hear?
Second, a lower valuation helps protect you from a down round. Even great businesses face unexpected challenges like market downturns; I raised money during the 2001 and 2008 market corrections, and it was rough. Valuations got slammed, and the end result for many was a down round that seriously hurt their companies’ stature and ability to raise more money.
If you raising to perfection on the high-side any sort of issue might cause your next round to be a down or flat round. Less revenue, miss some metrics, tight funding environment or politcal/environmental issues can all create an event that might cause a flat or down round. If you raise with the discount or some “wiggle room” you can weather the storm much easier.
The third and probably least understood reason is that a lower valuation allows you more headroom for an exit. I’ve seen many entrepreneurs raise money at valuations that are higher than any buyer would be willing to pay. The result is that they get themselves boxed in, and when they see an opportunity to exit they can’t get a deal investors will agree to because their last round was done at too high of a price.
This is the one that trips of founders the most, it is also the one that SEA founders should think on the hardest. Most exits in our region will be from acquisitions and if you are not exiting close to going public then most likely you exiting somewhere between your seed and B round – if so then price is going to be a huge factor. On top of these regions being more expensive to get a deal done in, the acquirers may not have funny money and will be somewhat price sensitive. You may get an offer only to find out that your valuation means the exit isn’t going to be very meaningful.
Best to make sure you really grok how to fundraise.
Reminder to read Venture Deals and then superset it all with these three nuggets of gold.
Thoughts about the so-called SEA e-commerce war
I have been an avid user of Redmart since they opened. Written about them a few times :: https://seedvc.blog/?s=redmart. I tend to walk to the market with my kids, visit the wet markets or visit the Thai market at Golden Mile but sometimes it is just easier to order some stuff online and have it show up. Magic.
I also use both Uber and Grab since depending on the time of the day and where I am going – sometimes one is cheaper then the other. I still say Uber has superior after sales support and so far that remains true. My biggest complaint was their stupid number masking system but they finally fixed that with the new in-app messaging. Now if they would support using taxi stand numbers I would say there is no difference between the two apart from the customer service. What I mean by that is when I have a problem with Uber they generally respond immediately and just fix the issue. Grab can take hours or days to respond and then it takes many, many emails to fix the issue. I have some issues that were simply never fixed, especially if resolving the issue requires giving me a refund.
Now let’s get to the bigger field of play. Alibaba via acquisitions is battling it out with Amazon in e-commerce. I love a good fight since consumers generally win anyway but one of the weapons the Alibaba team is weilding is the LiveUp loyalty program. As a redmart customer I signed up and honestly forgot to cancel the trial so I got stuck with their one year bill.
Realizing I didn’t want the service I started hunting around to cancel it:
From this: https://www.liveup.sg/faq
Q: Is membership renewal automatic?
A: Yes. However, you may choose to end your membership during the free trial if you do not wish to be subject to automatic renewal. Your payment will be processed by either Redmart.com or Lazada.sg depending on the pathway that you registered for LiveUp.
So basically only way to keep this from renewing is end your membership.
So then there is this:
Q: How can I cancel my subscription?
A: We are sorry to see you go, but if you insist, you may click on the following links to cancel membership your LiveUp membership. However, any and all unused LiveUp membership credits, Netflix and Uber benefits will be forfeited upon cancellation of LiveUp membership.
If you registered via Lazada: https://www.lazada.sg/customer/account/membership/
If you registered via RedMart: https://redmart.com/liveup/account
Just to be clear, this is not an error of my blog, those links are not clickable. You have to cut and paste them which to me is the first sign of a horrid user experience. Why make this hard to get to?
Anyway, I cut and paste to cancel since I figured I might forget to cancel.
However I forgot to grok this:
Q: If I cancel my LiveUp subscription, what happens to my rebates and partner benefits?
A: Your subscription will still be active for the full subscription period. Hence, you are still able to enjoy the all the benefits that LiveUp offers until the end of the current subscription period. Do note that unused rebates expire when your membership expires.
Honestly I don’t get what the purpose of a loyalty program is without the benefits but I digress. Once I knew I had to pay I figured I would look into availing of the benefits. The redmart one happens automatically and you get credits on orders so nothing to do there but won’t help me much if I don’t use redmart anymore.
The other benefit I wanted to use was Uber. I started to try and make that work. First I tried emailing LiveUp and nothing happened. Then I tried using Uber support and they kept telling me to login and activate it.
Told me to go here for the record: https://redmart.com/liveup/account.
I would go there and would find no link to Uber. Finally I called redmart cause after 2 days of sending an email they had yet to return my email. Let me just call out that basically LiveUp support is only by the kindness of the partners, no one seems to actually work at LiveUp from what I can tell.
On the phone, redmart was able to figure out that if you cancel, remember this is the only way to keep from getting billed, that the links to activate the other benefits are gone. Got that? As a user the only way to keep from getting rebilled is to cancel but when you cancel the links to benefit activations are gone.
How is that for loyalty program?
I re-apply to the program and the links show up. I activate Uber and it seems to finally work. A few days after that one of my Uber ride receipts says in yellow at the top to be sure to activate my LiveUp benefits. What? Thought I already did.
Now when I go back to the account page it shows me the activation link again – same as it did before I activated it. The link won’t work this time though. They suggest a workaround to use a special promo code in my Uber app but when I try it I get a promo full subscribed message.
Wow. Winning.
Emails to Uber confirm I am in the program, but have yet to see a ride counter for my 10th ride with 10$ off yet. If it comes cool but if it does not I think I have wasted too much time trying to fix it.
I have always said and will repeat it here, this battle will be won by superior customer service. If LiveUp is an example of this then we already have a leading indicator as to who is winning this battle.
Moglix
Apart from the catchy name – Rahul has been crushing it lately. All we can say at SeedPlus is, thanks bringing us along for the ride.
Updated :: Valuation
Updated the post with some new info.
His latest book :: Narrative and Numbers: The Value of Stories in Business (Columbia Business School Publishing)
Also this is his main web page with all the courses :: http://pages.stern.nyu.edu/~adamodar/
Private company valuation is a tough craft – part art, science, gut feel and negotiations.
Came across this the other day:
I love the Prof so figured this was going to be good. And it is.
That lead me to a few more docs.
http://pages.stern.nyu.edu/~adamodar/pdfiles/ovhds/inv2E/PvtFirm.pdf
http://people.stern.nyu.edu/adamodar/pdfiles/ovhds/dam2ed/ValIntro.pdf
But this one looks like a gold mine:
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcastvalonline.htm
ABL
Context
This was posted today :: https://www.dealstreetasia.com/stories/future-early-stage-funding-asean-exciting-seedplus-77307/
Which is great – I appreciate good press.
However I want to clarify the first paragraph:
Michael Smith of early-stage venture fund SeedPlus, an affiliate of Jungle Ventures, is uncertain about the trajectory of early-stage funding in Singapore and the wider region but believes that deep technology as a segment will emerge a winner in the long run.
This was the question that this answer was lifted from:
From your current perspective in the ecosystem, what’s the general trajectory for early-stage funding (i.e. pre-seed to Series A) and its evolution since 2015? What is the future?
My answer:
The future is something we can’t predict but we feel that deep tech will emerge as a winner in the Singapore ecosystem and that across the region there will be startups raising substantial money at the pre-A level for regional or APAC wide business ideas that need institutional money on their way to their Series A. The future looks pretty exciting in our opinion.
I don’t think what I said was I am uncertain. What I said is I can’t predict the future. I don’t have a crystal ball, startup opportunity, and I don’t think it ever makes sense to try and predict the future.
I am just honest in saying no one knows what will happen but I am confident the ecosystem has a very promising future.
Discovering the opportunity in a fragmented market
New deck from the Jungle Ventures crew about the state of things in Southeast Asia.
Check it…
Singapore as a hub
Interesting post from Matt W at EF :: https://medium.com/@mattwichrowski/field-notes-on-singapores-venture-scene-3dba1dd66798
Lots to parse in this but I generally agree in that the city is primed for potential and the big stuff is yet to come but we are on the cusp of it.
SeedPlus got a mention so I will just call that out but there is much more in the article than that. I personally like the section on Singapore as a hub:
3. There’s power in being a hub
I made the mistake of starting early conversations with: “What’s the Singapore venture scene like?” A simple question, but it immediately showed my ignorance. You can’t properly assess Singapore without taking all of Southeast Asia into account, because the two are cosmically intertwined. Investment strategy isn’t limited to the 277.6 mi² area of the island. It’s regional from day one. Singapore has achieved a remarkable amount in just 50 years, and it has done a lot of that by partnering with the rest of the world. International legal standards and advantageous tax treatment have made Singapore the de facto Southeast Asian hub for many businesses. So while there’s a lot of money in the small island nation, that cash is flowing to Vietnam, India, Malaysia and a host of fast-growing countries. The inverse is true for talent. Many of the region’s best minds flock to Singapore to build their startup HQ, and then attack their local market for dominance. This is, in no small part, one of the driving reasons EF set up shop there.
My relocation to Singapore after years of being around other parts of Asia was solely based on this premise – Singapore makes for a great hub and I think this is huge for startups and for VC’s. Of course no place is perfect and there are people that disagree but that doesn’t change the appeal of Singapore for me and most of the folks I work with.
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