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2022 Key insights from Singapore Tech EcoSystem

Saemin Ahn – Venture Capital blockchain investment

VC challenges in cryptocurrency investing

A problem faced by traditional VCs looking to invest in cryptocurrency projects

  • VCs will experience problem exiting their coins when they need to pay their LPs
  • Developers of cryptocurrency projects might stake the liquidity provided by VCs on other currencies get the interest and then abandon their own project. EOS is a prime example
  • VCs are concerned about continued health of crypto project when early developers leave with out sized voting rights and tokens leaving not much motivation for newer developers

Proposed solution

  • A SAAS model that charges subscription fees to cryptocurrency projects that pretty much function like Monday.com. Developers are awarded tokens only upon job completion.
  • SAAS model will end up with a basket of cryptocurrency tokens. This can then function as a clearing house, exchange or a fund.
Additional Insights
  • Blockchain audits gain access to audit the protocol of blockchain projects prior to their listings. Utilizing this unfair advantage, they purchase stakes in stronger projects with their investment arm
  • Most cryptocurrencies have a offramp problem back to fiat. CHAI, LUNA and TERRA are good examples of how the offramp is managed.

On China

  • China CCP has utilized a very blunt tool to deal with the consumer software sector
  • Exceptions are Hardware and Electric Vehicles industry

Teck Chong Lim – Market Research

  • Never perform research and sales lead generation at the same. It corrupts the research data and discourages the research participant from future engagement
  • US seeking to expand into new Asia Pacific region will need to utilize research services
  • Research companies maintain a database of research participants. They keep their research database fresh by periodically giving out freebies in exchange for answering questions.
  • COVID has reduced the use of focus groups (one off) and brought most of the research activities online. Online research panels (ongoing) is now the prevalent form
  • Business developers function like lone wolf hunters. Conversion rates are low usually around 1%. Their job is to find new opportunities to extend their top line. They also work on bringing back customers that have lapsed.
  • Account managers function like farmers. They basically retain customers and grow their customer’s business.
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Peter Thiel Lecture on Startup Strategy


Key take aways

  • Create X dollar of value for the world and capture Y% dollar of value for yourself
    • X and Y are independent variables
    • Google – relatively smaller market but profit margins are great. Accumulates so much cash year or year
    • Airlines – large market but profit margin are shit. Companies go bankrupt often in that market
  • Companies are either operating in perfect competition or in monopolies. Nowhere in between. Avoid markets where you have a lot of competition
  • The last mover advantage:
    • Proprietary technology needs to be 10X of the closest substitute
    • Gain monopoly and maintain monopoly in that market segment as it grows in size
    • ability to have durability in a sector is more important than growth rate since the bulk of the revenue is really really far in the future
  • As a startup it is important
    • you want to start in markets that are so small it has almost no value and people don’t notice.
    • It becomes really easy to saturate the market to establish a brand
    • You want to be a one of a kind company in that small market versus a company in a very large market with lots of competitors it is hard to differentiate
  • You want to figure out how to expand that market after you have saturated it
  • Monopoly characteristics
    • Software – Google, Facebook, Amazon
      • Economics of scale
      • Network effects
    • Vertically integrated complex monopolies – Tesla, SpaceX, Standard Oil
      • Very capital intensive to build
      • Very complex coordination
      • Not easy to convince investors to fund to build
  • Avoid the psychological blindspot where you think competition is a form of validation
    • While competition gets you better at doing something
    • Too much competition is not profitable
  • Other thoughts
    • Skeptical about lean startup methodology
    • By the time you figure everything out the competition has came. There is always a risk element to going into unknown terrain
    • Asperger syndrome
      • people who have high conviction and uneasily swayed very introverted
      • versus Harvard people who are super-extroverted and low level conviction
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Insight on discussion with Tiffine

  • Deploying USD40 million per year
  • Deploying USD1-2 million per company
  • Estimated number of companies deployed is 20
  • Looking for companies that can return 10X of investments
  • Looking for companies that has potential to be big versus companies that are sold off as features
    • Companies sold off as a feature will fetch a maximum of USD30 million
    • Companies with successful exists should fetch more than USD50 million
  • Expectations
    • Seed stage to pull in USD 1 million dollar revenue a year
    • Series A to pull in USD 10 million dollar revenue a year
  • Company that has been around for 7 years without remarkable growth is not exciting for VCs trying to hit their own target
  • VC take the pitch deck provided by Founders and translate these pitch deck into a investment memo which gets forwarded to all her partners
  • At the early stage, VC fund not just the idea but their assessment of founder’s ability to pivot fast to another idea that could return 10x if current idea does not work
  • At latter stage, VC ok funding for 3X returns but deploying larger amount of capital

Key takeaways

To make the job of a VC easier do the following:

  • Make it obvious how this company is going to return at least 10X the capital deployed
  • Paint how big the company could potentially grow by describing the size of the market it is going after
  • Structure the pitch deck in such a way that it could almost be just copied and paste into an investment memo

Resources

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Single man flying suites: The future is here

We are now a few stages before single man flying suites become commercially available for the masses. In this stage of the technology life cycle, it is common to see multiple companies coming up with their own working prototype.

In the next stage, some number of companies will figure out the business model and marketing channels while a lot more will fail. Many of the viable ideas and employees from these failed companies will get absorbed into the surviving companies.

The final stage would be when the manufacturing gets outsourced to China. During this stage, cost of production will drop by 10X. That is when adoption gains traction amongst the early majority .

The stage after would be when government steps in to define regulations for proper use in public.

https://www.facebook.com/100056716005101/videos/236171661616699/

#business #manufacturing #innovation #supplychain

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Founder University day 2021 May 4th

Precursor Ventures – Charles
Acceleprise VC – on sales process

  • Whitney Sales
  • whitney@acceleprise.vc
  • Enterprise sales early stage investor B2B space
  • @thesalesmethod

Whitney Graw

  • Becki Degraw
  • Wilson Sonsini, Partner
  • rdegraw@wsgr.com

Acrew Capital

  • Lauren Kolodny
  • Twitter @LaurenKolodny

Do fewer things in terms of revenue stream. Do them better and faster.

Give a great example of the solution to the problem that a user is experiencing

Don’t care about recognition on the Forbes list. Just focus on product, customer, revenue and team member

Show how business model and product strategy are closely linked are fit together.
Show how business model will scale to a 100 million dollars revenue in a year

How to get laggard industry to adopt the technology

De-emphasize do-gooder (save the world) stuff in the content. It does not seem profitable

Show traction earlier in the deck

  • brain treats companies with product and actual usage builds way more credibility earlier in the presentation
  • if don’t have customer but have demo, show how it works
  • if product is strong start with product, if performance is strong start with performance
  • show bottoms up business model
    • this is how we work
    • this is how we charge
    • profit margin??
  • Looking for net negative churn
  • Like easier bets and very focused
  • elegant and simple means scale
  • complex means founder might need to spend a few million dollars to figure out their business model
  • Sales process
  • problem solving
  • project management
  • the larger organization being sold, the more they want to be told what to do.
  • record your calls so that you can reference it later on for product development and education
  • work your network in the early days
  • use twitter direct messaging
  • for engaging engineers, you won’t be able to engage them directly.
    • use community development and content and APIS
  • handling price rejections
    • in early days not optimized for price
    • but to learn for use case
    • see early users for partners
    • use what you learn in the qualification and use that as reference for the price point
    • anchor to how much the problem is costing your company right now
  • let your early customers be your guide
  • Negotiating term sheets
  • Becki Degraw
  • Wilson Sonsini, Partner
  • rdegraw@wsgr.com
  • Types
    • preferred stocks
    • convertible notes
    • safes
  • components
    • Valuation
    • pre/post money valuation
    • option pool – dilutive to founders
    • liquidition preferences
    • board composition
    • stocket holder vetos/controls
    • investor rights
  • focus on how much you need till 12 to 18 months
    • the hiring plans
    • 90% shares
    • 10% option pool
    • help with negotiating the options pools
  • talk about how outstanding convertible and SAFEs are accounted for – pre-money valuation
  • Get legal council to prepare the cap table to see the dilution
  • preferred stock used to keep common stock cheap for employees
    • participating or non-participating preferred shares
    • participating gets to double dip after the preferred payout
    • usually only happens during down round or PE is involved
    • should not see it during initial round
  • Board
    • make sure to have odd number to avoid deadlock
    • smaller boards are good – keep it to as small as possible
    • hires or fires the CEO
    • financing transactions – new pool
    • M&A transactions
    • Series A – common should control board
    • Series B – more balanced board common and preferred
    • Seed round – 3 directors
    • Series
    • 2 common directors – 1.5X voting rights
    • 1 seed director
    • 1 preferred director
  • Preferred investors will usually ask for board seat
    • negotiate down to observer
  • Prorate or information rights are reserved to major investors – cross a certain threshold
  • Founder re-vesting
    • usually during Seed stage and Series A
  • If founder puts in money
    • treat that as convertible note and convert at the next round
    • demand note – to get paid back during the next round
    • totally ok if it is a small amount in there
    • 200K easy versus 2 million
    • If raising less than 2 millino USD just use convertible or safe notes for seed stage
  • Put founders on a vesting schedule for optics purposes
  • US investors only what to invest in Delaware LLC Corps
  • Vesting is important for protecting company against vagrant founders and employees
  • We are in a company/founder friendly market right now
    • investors are doing things we haven’t seem the doing in many years
    • putting down term sheets 2 months ago with nothing
    • need to get in earlier and earlier to beat the valuation from investors
    • create hype and interest
  • For small financing round – seed round
    • small amount of money
    • Use YC safe note
  • Million dollar Marketing campaign
  • Unit Economics
  • creative testing
  • Landing pages
  • media buying
  • metric
    • Cold traffic needs to convert at 2%
    • CPM needs to be lower than 20
    • Ads click through rate > 3%
    • CPA 1.8
    • gross margin needs to be 70%
    • COGS less than 30%
    • 4000K impression
    • 5% add to cart
  • If has no prior competition – make really good videos
  • GrowthUniversity.IO
  • Looking for
    • 100 million revenue in 10 years with 50% margin
  • Avoid the Total addressable market (TAM) trap
    • We have 15 people paying us
    • we acquired them for CAC XXX
    • we know their LTV right now to be X
    • we are going to spend X on Facebook, Google and LinkedIn for CAC XXX
  • Structure to use to follow based on lead investor
    • SAFE notes is cheaper and less expensive to issue and no maturity dates
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Advice from Johnson on fund raising

Entrepreneurship is much like playing competitive basketball where it is becomes more mental competition and less physical competition as the game wears on. There will be phases during the fund raising process when you get so much external rejections and internal failed experiments that you starting thinking “am I just being a con-artist” when entering into the next fund raising session.

The real work of the entrepreneur is the mental exercise. Do not let external rejections and internal failed experiments cause your conviction to waver. Let the investor deal with their job (where to park their cash) and the management deal with theirs (how to use the cash). Your job one and only job is to convince the investor to part with his cash so that you can pass it to the manager to use the cash.

Do not confuse the roles of Entrepreneur, Management and Shareholders

  • Entrepreneur: role is to acquire external resources required to grow the company
  • Shareholder: role is to keep watch over security of the capital invested and have it grow
  • Management: role is to ensure the externally acquired resources get put to proper use with minimal wastage

When in fund raising mode, do not emotionally entangle yourself with “being accountable/responsible” for the funds that will be acquired externally to be put to good use internally. Just dealing with all the multitudes of external rejections during the fund raising exercise is in itself already a Herculean chore. There is no reason to self-sabotage by causing yourself to waver from your conviction by further introduction of self doubt during this critical process.

There is a difference between marketing the product and marketing the company. Products are marketed to customers while the company is marketed to the investors. The three classes of investors:

  • Angel investors – buy the story
  • Venture Capitalist – structured as a fund to ensure compliance with governance
  • Private Equity – late stage fund to get the company ready for IPO
  • Public offering – the general public as well as trust funds

The important thing during fund raising is to rapidly filter out the naysayers and frame a story that will excite the remaining investors to want to part with their cash. Do not waste time with the naysayers.

It is unlikely that you will be able to haul in all the capital you need in one shot. Just figure what story you need to tell to the next person to pull in the resources necessary to snowball the idea bigger and repeat that process until the entire idea gets fully realized.

Ideas/ brain child a fragile creatures that need to be protected and nurtured by the founder.

People who started companies but only have experience working in technical functions will under appreciate the importance of story telling. These companies will ultimately fail. They do not see all the marketing the partners in the company did to get it off the ground initially. People who started companies but do not attempt to build up the company in fear of failing are people simply just trying to find a job for themselves. They are not entrepreneurs but self employed.

The reason why entrepreneurs like to hang out with other entrepreneurs is that they feed off each others energy. And that is crucial for the mental game that they have to deal will on a daily basis. The most classic example is Steve Job’s reality distortion field.

There is one fundamental difference between Jeff Bezos and Elon Musk. Jeff Bezos is from the investment banking background, since series A he constantly tweaks his story to the tune of the market to get the resources the company he require. Whereas, Elon Musk was so strong in his belief and charisma that right out the gates he was able to create a cult following around his company while polarizing all the naysayers. These two approaches are reflected in their companies share prices with Tesla being really really turbulent.

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An evening of insights with the Hutters

The optimized route for a startup is to first deploy a small skeleton crew to focus on mining for the insights on human behavior with cheap experiments that will support a viable business model before raising money and scaling up the operations.

Big organizations tend to forget the insights that lead to the founding of the company. That is how large companies get disrupted by new entrants who “rediscover” them.

If there is a company out there that is solving a problem you are trying to find a solution for but you cannot think of it off the top of your head, they might as well have been dead.

What you think might work will usually not. It is only when you land up in a promising domain and start mining for insights in that domain do you start finding ones that are useful for building a company with.

Screenwriting is probably the only occupation where you can envision how all the moving pieces fits together while you are lying in bed. Writing a business plan is a very useless undertaking because unless you have tested your business model to get actual market response, you will not know if it would work or not work. This is much of other inductive processes where much of the building blocks required to work are out there in the environment yet know and to be discovered.

Do not be fixated on what should but be instead embrace on what is and work for there when it comes to human nature.

Humans are motivated beyond pain and pleasure.

No one has considered hyperlinks themselves as important data elements.

It is usually the simplest actions backed by the most fundamental insights that drives the largest consumer adoption.

People feel that sense of accomplishment when they gather stuff thanks to our hunter gathering roots. They might not even need it at the end of the day.

Social book marking just died when most of their operators pivoted away from the central idea in 2005

  • Stumble upon
  • Digg
  • Reddit
  • Pintrest
  • Trello

The mass adoption of Slack and Quip might be a great channel for growing such an idea again but for the enterprise space.

The success of YouTube can be speculated to be due to:

  • In baked flash media code into browsers
  • Increase in bandwidth
  • Delaying the payment of royalty fees and taking down of copyrighted contents
  • They got sold for 1.2billion but paid of 750million in terms of royalties

Mark Cuban is a fake billionaire for selling Real networks to AOL which eventually got shut down after six months. Reason for Real Network being empty is because while it looking really impressive on the outside, it did not capture any of the user behaviors.

People only build shared reality with others they consider part of their own tribe. They might interact with others who are not considered part of their own tribe but will not go about building a shared reality with them. This is how echo chambers happen.

Related readings

  • Tory Higgins, “Beyond Pleasure and Pain: How Motivation Works”
  • Tory Higgins, “Shared Reality”
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Paid acquisition strategy review

The way MasterClass, Apple and SquareSpace execute their paid acquisition strategy is just a cut above the rest. The advertisement are inherent viral.

SquareSpace – John Malkovich Super Bowl 2016
https://youtu.be/LgQB9cIa0DE
SquareSpace – Jeff Bridges super bowl 2015

Apple: Think different 2013
https://youtu.be/5sMBhDv4sik

Apple: 1984 big brother
https://youtu.be/VtvjbmoDx-I

MasterClass – Hans Zimmer
https://youtu.be/yCX1Ze3OcKo