Category: Tech

Take a discount.

~ michael_msft ~ 1 Comment

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

~ michael_msft ~ Leave a comment

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.

Blocking time for (planned) chance encounters

~ michael_msft ~ Leave a comment

I wrote this before about how I am trying to manage my time.

https://seedvc.blog/2017/07/19/time-management/

I always get asked as I have transitioned to VC from a product guy, how I feel about VC life. I think most folks are surprised when I tell them it is all good but managing my time is hard. Why? It is easy to get busy with all the stuff we do. Meeting companies, helping portfolio companies, fund management stuff, meeting LP’s and just spending enough time with your own team helping each other improve our craft.

I am not complaining but just highlighting that if I am not careful – I can easily fill up my day and then wonder where my time went.

Regardless, I still feel it is important to meet new people. Recently I was contacted to provide a referral for a former employee of mine. The person asking for the referral also requested a coffee to chat more. I have made time for these coffees and used my trusty admin Evie, Evie is well trained and knows that coffee meetings are 45 mins at a specific location I like, had it all set up in a few emails.

Yesterday I had that coffee. I am glad I did.

I actually got to meet the guy who helped lead the acquistion of Path and who ran the transitional Path engineering team. There were lots of interesting things I learned but not all I can share. Some small tidbits – the transition team was mostly all Koreans who moved to Jakarta, they all eventually moved back, there is one Indonesian engineer still working on Path, and Path is basically dying a slow death.

We enjoyed our chat given my Yahoo/Koprol experience and it reminded me that the “culture of busy” will keep these fun meetings from happening.

Have fun out there!

 

Hacking the Fish Tank

~ michael_msft ~ Leave a comment

DarkTrace never ceases to amaze.

Check this report :: https://www.darktrace.com/resources/wp-global-threat-report-2017.pdf

Read #6:

Technological innovations keep businesses dynamic and pro table, their employees productive and creative, and their premises exciting and modern. A North American casino recently installed a high-tech sh tank as a new attraction, with advanced sensors that automatically regulate temperature, salinity, and feeding schedules.

To ensure these communications remained separate from the commercial network, the casino con gured the tank to use an individual VPN to isolate the tank’s data. However, as soon as Darktrace was installed, it identi ed anomalous data transfers from the sh tank to a rare external destination.

Anomalous activity detected:

  • Transfer of 10GB outside the network
  • No other company device had communicated with this external location
  • No other company device was sending a comparable amount of outbound data
  • Communications took place on a protocol normally associated with audio and video

The tank’s communication patterns included sporadic communications with company devices, but that activity was in line with similarly con gured IoT devices. The external data transfers, however, were deemed highly unusual by Darktrace’s AI algorithms.

The data was being transferred to a device in Finland where an attacker had managed to gain control over the tank. This was a clear case of data ex ltration, but far more subtle than typical attempts at data theft.

By targeting an unconventional device that had recently been introduced into the network, the attack managed to evade the casino’s traditional security tools. Darktrace’s Enterprise Immune System detected the threat because the technology does not make assumptions about where threats will arise. It detected a subtle anomaly that indicated a much larger threat, and it aided the casino in remediating the vulnerability. The incident demonstrates the need to have complete visibility of every user and device – including internet-connected sh tanks.

Singapore the 🎯 

~ michael_msft ~ 1 Comment

Was quoted today in this article :: https://techcrunch.com/2017/07/22/alibaba-tencent-southeast-asia-game-of-thrones/

My general view is that although the Chinese VC and Chinese company activity in SEA region is probably the most as compared to any other region – my gut says that in general Singapore will continue grow to become a target of other regions like the USA and Europe as well.

Singapore has become the default SEA HQ and as the startups continue to mature – the attractiveness to Singapore acquisitions and investment will climb.

Productivity

~ michael_msft ~ 1 Comment

One of our views is that automation will eat the world – like it or not. For me personally, I try to figure out ways to get more productive and manage my own time better. As a VC, I take a lot of meetings. Which means being heavily into my calendar. I have pretty much always relied on Fantastical. They have a new update :: http://flexibits.com/blog/2017/07/fantastical-2-4-for-mac-midsummer-edition/.

Which is killer but I must say that I use it less and less. Why?

Cause my calendar is largely automated via email using Evie.ai.

They have just launched their new product and rebranding.

Full disclosure – SeedPlus is an investor but I was using it before that happened.

Anyways. Check it out. You will love it.

Context

~ michael_msft ~ Leave a comment

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.