Jumpstart Issue 25: Investment by Jumpstart Magazine: The Entrepreneur's Magazine

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The Entrepreneur’s Magazine

Issue 25

April 2019

The Investment Issue Southeast Asia’s Overvaluation Epidemic

How Fashiontech is Addressing Fast Fashion’s Sustainability Problem

10 Minutes with Jason Calacanis

What’s to Come for E-cigarettes

Asia’s Family Offices

The Tokenization of Everything

Now I Know My A, B, Seeds

What You Need to Know About Generation Z

Transforming Microfinance Through Technology The Evolution of Crowdfunding

A c onv er sation with 500 S ta rtu p s Fou n de r

EDITOR’S NOTE

ethod Man once proclaimed: cash rules everything around me. While he may have been describing urban life in 90s America, this phrase is certainly appropriate within the context of the Investment Issue. In the startup world, conversations begin and end with valuation and fundraising, where numbers and mythical creatures act as parameters for success. Cash may rule this ecosystem, but the way it’s used is changing. One trend readers will observe in this issue is the flow of venture capital into emerging economies. Investors and entrepreneurs are taking note of the immense potential of such markets as Latin America, Southeast Asia (SEA), and the Middle East and North Africa (MENA) region. This new developmental path, characterized by creative tech solutions to address underdeveloped infrastructure within these states, is indicative of the power of the private sector in improving lives. Just as startups are becoming more diverse, minority representation in the investment space is rising, too. Leading the charge is 500 Startups–the most active early-stage accelerator and venture fund in the world. In our cover story, we speak to 500’s founder Christine Tsai to understand why she pursued a diversity-driven mission before it became a visible topic in the industry, and how this decision played into the firm’s ability to become as international as it is today.

This issue will also examine other ways startup investment has matured over the past couple of years, including the surge of thematic funds, diversification of funding sources, and growing awareness around measuring social and environmental impact. Whether it’s microfinancing a Kenyan teacher’s general store or providing billion-dollar investments to bring about an artificial intelligence-enabled future, forward-thinking investors are acknowledging that capital return is only one element of what they can achieve through the work they do. The Silicon Valley startup model works, but as global ecosystems evolve, innovation will be dependant upon localization rather than emulation on the part of investors, founders, and startup communities. Entrepreneurialism was never confined to Mountain View or limited to one sector, gender, or racial profile; it just took a bit of time for cash to reflect how diverse it is. We wish everyone a lovely Spring and happy reading.

Min Chen Editor in Chief Have thoughts about this issue? We’ d love to hear from you. Email us at [editors@jumpstartmag.com] and include your full name and address. Please note that letters to the editor may be edited for length and clarity.

WWW.JUMPSTARTMAG.COM Unique content, press releases, directories, videos, and more.

MANAGING DIRECTOR EDITOR IN CHIEF

James Kwan

Min Chen

EDITORIAL ASSOCIATE

Nayantara Bhat

DIRECTOR OF OPERATIONS

Anita Chan

DIRECTOR OF MARKETING

Reggie Addae

DIRECTOR OF PRODUCT DEVELOPMENT

Maggie Lau

COMMUNITY EVANGELIST (SILICON VALLEY) FOUNDER / ADVISOR ADVISORS

Li Xing Chang

Yana Robbins

Joseph Chow, Carman Chan, Shitiz Jain, Leo Ku,

Derek Kwik, Jeanne Lim, Prem Samtani EDITORIAL ASSISTANTS

Khadija Azhar, Kelly Cho

COVER PHOTOGRAPHY

500 Startups

SPECIAL THANKS Peyton Ong, Sabrina Wang

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Copyright © 2019 Jumpstart Media Ltd. The contents of the magazine are fully protected by copyright and nothing may be reprinted without permission. The publisher and editors accept no responsibility in respect to any products, goods or services that may be advertised or referred to in this issue or for any errors, omissions, or mistakes in any such advertisements or references. The mention of any specific companies or products in articles or advertisements does not imply that they are endorsed or recommended by this magazine or its publisher in preference to others of a similar nature which are not mentioned or advertised. Published articles do not necessarily represent the views or opinions of Jumpstart Magazine. Printed by Print & Print Pte Ltd. Blk 3011 Bedok Industrial Park E #03-2000, Singapore 489977. MCI (P) 110/03/2019. April 2019

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Tsai speaking at Batch 24’s Demo Day. Photo courtesy of 500 Startups.

Cover Story

500 Reasons to Lead Inclusion and people power with 500 Startups Founder Christine Tsai

Now I Know My A, B, Seeds

Three founders share their fundraising experiences

More Miniskirts, More Problems How fashiontech is cleaning up fast fashion’s dirty big secret

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SEA’s Overvaluation Epidemic Remedies for encouraging a healthier startup ecosystem JUMPSTART MAGAZINE

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FEATURES

A Tale of Two Cigarettes An industry leader shares what’s to come for vaping

Family Offices: Asia’s Biggest Open Secret Why Asia’s under-the-radar investors are putting money into tech startups

10 Minutes with Jason Calacanis What the world’s most famous angel investor thinks about the market, politics, and being a Silicon Valley insider

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GUEST COLUMNS

It Was Never About Having It All By ALISON CHAN

Advice from a fellow working mom 12

You Don’t Need Venture Capital By FURUZONFAR ZEHNI

As told by a venture capitalist 16

Latin America’s Era of Innovation By PEDRO VIEIRA

A brief overview of the continent’s startup ecosystems CONVERSATION STARTERS

Our World in 2019 Autonomous vehicles, the trade war, gender dynamics, and more LIFESTYLE

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Book Review

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How to Bullet Journal: Design your life with a simple analog method Angel: How to Invest in Technology Startups ORII by Origami Labs ET CETERA

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One Last Question

StartmeupHK Festival 2019 What Happened at Your Most Memorable Pitch Meeting?

Lori Granito speaking at the 2019 StartmeupHK Festival. Photo courtesy of InvestHK. April 2019

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CONTRIBUTORS

RUSS MAL ANGEN

THÉO MÜNCH

L ARRY KIM

A N G E L A T OY

Russ is the Global Accelerator Exchange Program Manager at Launchgarage Innovation Hub, the Philippines’s premiere incubator and accelerator for startups. He founded LX in 2015, which led him to be named Connected World Magazine’s Top 10 IoT Pioneers Under 40 in 2018. launchgarage.com Read his feature on page 62.

Théo specializes in bringing creative projects to life. As Senior Project Manager at Daly, he’s executed crowdfunding campaigns with Hong Kong watchmaker Anicorn and design documentary legend Gary Hustwit. His first book of original poems, corporal, was published in January 2019. daly.nyc Read his feature on page 64.

Larry is the CEO of Mobile Monkey, a platform that allows marketers to build chatbots to enable mobile communication between businesses and customers through Facebook Messenger. He also founded WordStream, a world leading pay-per-click marketing software company. mobilemonkey.com Read his feature on page 70.

Angela leads Portfolio Strategy and Operations at Golden Gate Ventures, a venture capital firm investing in early-stage startups. She previously worked in audit assurance, regulatory compliance, consumer sales, and foreign exchange before starting her own ecommerce venture. goldengate.vc Read her feature on page 68.

DOUGL AS

ABRAMS

Douglas is the Founder of Expara, Southeast Asia’s leading early-stage venture capital firm. Founded in 2003, Expara has offices in Singapore, Bangkok, Ho Chi Minh City and Kuala Lumpur. He managed information technology at JP Morgan for 14 years and received his MBA from The Wharton School. expara.com Read his feature on page 58.

STEPHANIE

Stephanie is Managing Director of Rookie Fund, Asia’s first student-run venture capital firm funding student startups out of Taiwan, Xiamen, and Hong Kong. She is a Forbes 30 Under 30 honoree, and previously managed HTC Vive’s Virtual Reality Venture Capital Alliance. rookie.fund Read her feature on page 78.

L AU R A G AY L E

S H A N N A H K E N N E DY

DREY NG

Laura is a full-time blogger who’s passionate about ecommerce and the ways tech is rejuvenating the American dream. She’s ghostwritten over 350 articles for top software companies, tech startups, and online retailers on topics ranging from inventory management to cybersecurity trends. businesswomanguide.org Read her feature on page 30.

Shannah is an Australian life coach and the bestselling author of Simplify Structure Succeed, The Life Plan, Chaos to Calm, and Shine Restore. An Advanced Certified Coach and NLP practitioner, Shannah works with a diverse range of executives, entrepreneurs, and professional athletes. shannahkennedy.com Read her feature on page 73.

Drey is the Chief Product Officer of Liquefy, an end-toend digital securities platform. He is also the Partner and Head of Research of BlackHorse Ventures, an investment arm focusing on digital security infrastructure. He is certified by China’s Ministry of Human Resources and Social Security. liquefy.com Read his feature on page 76.

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April 2019

TA N G

Get in touch with us at [editors@jumpstartmag.com] to learn more about how you can become a contributor. Please provide at least one writing sample. We look forward to hearing from you.

April 2019

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GUEST COLUMNS

It Was Never About Having It All Advice from a fellow working mom By ALISON CHAN

ll moms are multitasking masters, especially working moms. The word ‘efficiency’ gains a new definition after one experiences the difficulties of juggling between taking care of a family and developing, or just maintaining, a career. So, it is possible to have it all? As a working mom of two girls, my answer–honestly–is no. It’s nearly impossible to be as dedicated as a full-time mom while accelerating full-speed in the workplace. But there’s no need to be discouraged. My view is that working moms should walk into their role with realistic expectations, so we don’t feel inadequate at work or feel guilty for not spending enough time at home. At different phases of being a working mom, one will experience different levels of satisfaction and stress. The journey always has its ups and downs, but it’s a rewarding one.

For example, a female executive may shift her focus on cultivating close relationships with stakeholders, which allows her to add value with more flexibility. Pinpointing other ways you can consistently deliver results will allow you to continue to contribute equally to the team’s overall success. The same rule applies at home. A team approach means sharing the work, so you don’t drown yourself with chores and burn out. It’s also about finding and spending quality time with the family, which is the highest priority for working moms, and the most difficult part of maintaning a work-life balance. I wake up early to send my children to school before going to work, and I try my best to give them undivided attention when we are together. Also, I find it vital to to attend events that are particularly significant for them, such as their school performances, so we can make meaningful memories together. Sharing special experiences daily and reading books before bedtime also help us stay close. From time to time, I will initiate projects, such as organizing celebrations or fundraising events together, so I can teach them life lessons in a fun way. There are many benefits to be a working mom. Active participation in the workplace enhances my professional and personal growth, which allows me to develop a better version of myself every day–a more fulfilled professional, mom, wife, and friend.

So, it is possible to have it all? As a working mom of two girls, my answer–honestly–is no.

How do we balance work and home life? Well, prioritization becomes key. There are only so many hours in the day, after all. The opportunity cost of unproductive meetings, tasks, and networking events is significant, thus, making careful choices and cutting down unnecessary activities are musts. Delegation is also essential. Understanding one’s capacity and working closely with the team to divide and conquer will provide you a robust support system, and make your life that much easier. In the workplace, starting a family should not limit your ability to add value as you did previously, even though it may manifest in other ways.

ABOUT THE AUTHOR

Alison is the Managing Director of New Frontier, an investment group specializing in health, innovation, and education. She has over 15 years of experience in consulting, corporate finance, and startups. Alison obtained her MBA from Harvard Business School (HBS), and is President of the HBS Association of Hong Kong and Chairman of the Board for Bring Me A Book, a non-profit organization serving children who do not have access to quality books. She is the proud mom of Alexis and Amelia. new-frontier.com

April 2019

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GUEST COLUMNS

Trading Places Venture capital and Japan’s path toward a new economy By JOSEPH HUANG

he China-United States trade war, which began in July of last year, has led to many foreseen and unforeseen consequences for the global economy. One example of the former is how the 10% U.S. tariff on all imported Chinese goods is creating opportunities for neighboring Asian countries. According to the World Bank’s 2018 ‘Doing Business Report,’ Japan currently ranks 34th out of 190 nations when it comes to chasing power, make Japan more appealing than ever for foreign “ease of doing business.” Alongside Prime Minister Shinzo Abe’s investment. growth strategy, the Japanese government has been lowering the Technological innovation has always stood front and center effective corporate tax rate, and establishing research centers and for the country’s steadily developing economy, as Japan boasts special financial zones in an effort to become the world’s most the largest number of patents in the world. In 2018, the Japanese business-friendly country. startup ecosystem raised a total of US$982 Organizations have long been drawn to million in venture funding. The country’s Technological innovation has this large and unique economy. Japan offers leading tech companies LINE and GREE always stood front and center appealing opportunities for investors: cost raised over $1 billion on their own. for Japan’s steadily developing competitiveness, trend-setting innovation, a In a world dominated by WhatsApp economy, as the country stable political framework, an exceptionally and Facebook Messenger in the West and boasts the largest number gifted and committed workforce, and easy WeChat in the East, LINE’s user penetraof patents in the world. access to the Asia-Pacific region. tion in Taiwan and Thailand–where the The country’s aging population also platform is most popular outside Japan–is creates opportunities for products and serthriving. Japan’s close relationship with the vices geared toward the elderly demographic, such as healthtech, two countries is becoming more apparent with the China-U.S. pharmaceuticals, and entertainment. Such characteristics, com- trade war, as historical trade relations are further strengthened. bined with a sophisticated consumer base with substantive pur- Thailand and Taiwan remain priority destinations for Japanese manufacturing and tourism. This trend has also become reciprocal, as approximately one million Thai and four million Taiwanese tourists visited Japan in 2018 (Japan Tourism Statistics). Whether it’s from the public or private sector, Japan is gradually opening up to more foreign business activity and capital. The market still presents some barriers to entry, but investors are becoming less reliant on domestic advice and expertise. Considering the country’s population of 126 million and openness to ecommerce and new technologies, I was surprised to find investments with such low multiples compared to its Asian peers, especially those found in China. While most investors look to China, it would be wise for them to diversify their alternative investment portfolios with a Japan component.

ABOUT THE AUTHOR

Joseph is a Partner at Infinity Ventures (IVP), where he focuses on Series A and venture-building investments in ecommerce, fintech, logistics, artificial intelligence, digital content, and media. Prior to IVP, he was an Investment Partner at Abico VC and co-founded Gamesamba, an anime game publisher. infinityventures.com

April 2019

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You Don’t Need Venture Capital As told by a venture capitalist By FURUZONFAR ZEHNI

ntrepreneurship comes in all colors and flavors. Not every business has to raise US$20 billion dollars from visionary funds. There are plenty of impactful, sustainable, and large companies that are changing people’s lives without venture funding. Before listing a few of these businesses, let me explain my thought process. Disclaimer: I work at an early stage venture fund, Fresco Capital. We meet with about 1,500 companies annually. Now that’s out of the way: in this column, we will go over what kind of companies should raise from venture capitalists (VCs), from a nerdy VC’s point of view. We will then touch on companies that never raised from VCs, but are incredibly successful.

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First, we have to understand a notable key performance indicator (KPI) for venture funds: multiples. It’s the number of times the initial injection of capital multiplies over the investment’s lifetime, and on a more macro level — the multiple of the total portfolio. VCs look at multiples because startups are risky investments. The second definition we have to understand is the impairment ratio, or the total amount of capital in investments valued below their initial investment value. In a typical venture portfolio, one-third will generate zero return, one-third will generate one time the return, and the remaining one-third will–by necessity– generate most of the return, making your impairment ratio around 50%. Having identified two notable components that make up the venture frame-

work, we can now create a hypothetical scenario: Your fund, Future Fund II, has $100 million to invest. Your limited partners (LPs), or investors that give investors money, expect you to generate three times the return on their commitment ($300 million) by year ten. As a fund manager, you decide to make ten investments. A third of those investments generate no return, so that’s $33 million gone. A third return their initial investment —you have $33 million in the bank, great. Now, you have to generate $267 million with the remaining $33 million, which is more than eight times your initial investment. Let’s take a closer look at those remaining three companies. With a $10 million investment, you might get about 20% of the company–that is if all goes well. Considering this 20% ownership, you would need the combined valuation of the companies to be $1.3 billion to return enough capital to your fund, so you hit that target for your LPs. If one of those companies is valued above $1 billion–that’s unicorn status. There are about 300 million companies out there. Only 325 are unicorns. Building one is super difficult, and getting to invest in one is almost as difficult. Thus,

were boring, so she began recording short videos to help teach her students. She meticulously built out her content platform and was rewarded with a $1.5 billion acquisition by LinkedIn. PluralSight: CEO Aaron Skonnard bootstrapped and steadily built out a content platform that covered everything a software developer would need, from C++ to Javascript to Ruby-on-Rails. The company went public for $2 billion last year after almost nine years of operation. Unity: David Helgason wanted to democratize game development and allow game developers to reach the biggest audience possible. He achieved this by focusing on cross-platform compatibility and ease-ofuse. Founded in 2004, Unity only raised a round five years later, and is now valued at over $1.5 billion and loved by game developers everywhere.

VCs have to find companies and founders that fit a profile. Not every business will or needs to grow as explosively as the startups VCs are looking for. Every founder must ask themselves whether they want to go through this journey–although it is fulfilling, too.

Now you may be thinking: companies that don’t fundraise are non-tech, non-scalable, or small. However, this idea couldn’t be further from the truth.

Now you may be thinking: companies that don’t fundraise are non-tech, non-scalable, or small. However, this idea couldn’t be further from the truth, as you’ll see with the following examples. Shutterstock: Jon Oringer was a profes-

sional software developer and amateur photographer. His skill set and the company’s capital efficiency meant he didn’t need to add as much outside talent or raise funds early on. It helped that he had a head start with 30,000 images when he launched the stock photo service, which is currently worth $2 billion. Ikea: Ingvar Kamprad founded the company as a mail-order home furnishings business, and he became an expert in flat furniture. This competency became Ikea’s core selling point. The first store opened in Almhult, Sweden, and the company– due to its operating revenue–has never raised external equity funding to this day (and it’s not even listed). MailChimp: Co-founder and CEO Ben Chestnut was running a design consultancy and had a number of clients who were looking for email newsletters, but few designers provided this service. He and his friends started MailChimp as a side business, which became a $400 million company 18 years later. Lynda: Lynda Weinman was teaching web design in the 1990s, before it was cool, and saw a gap in the market. Textbooks April 2019

There are many more examples of successful businesses that required little to no venture capital to get to where they are. The profile of a company looking to fundraise is clear, whether one needs it or not is usually the bigger question. Startup culture has ingrained this notion that fundraising is the be-all and end-all of building a company. However, founders should not allow the dollar to distort why entrepreneurialism exists, and realize the ability to scale always goes back to the product and the value it provides.

ABOUT THE AUTHOR

Furuzonfar is an entrepreneur and investor working to connect local and global ecosystems, where the influx of diversity, new knowledge, and value can be magnified. He is involved in all aspects of investment and operations at Fresco Capital, a firm with 60 portfolio companies transforming edtech, healthtech, and the future of work. Furuzonfar has built and scaled businesses in data analytics, wealth management, and investment advisory. He is a TEDx speaker, Laudato Si’ Challenge and Founder Institute mentor, and Shahidi Foundation fellow. fresco.vc

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April 2019

GUEST COLUMNS

The Talented Mr. Da Nang Why Vietnam is Asia’s startup ecosystem to watch By KEVIN TUNG NGUYEN

startup ecosystem through their experience and expertise. But let’s not forget about local entrepreneurs or those who were educated abroad and returned to contribute to the economy. Two examples of the latter are Duc Pham and Diep Nguyen, who were both were born and raised in Vietnam. They co-founded MoMo (M-Services), a home-grown tech company that’s become the country’s number one e-wallet and fintech platform, boasting nearly 10 million users and funding from the world’s most prestigious venture firms. The company recently raised a $100 million Series C, which was one of the largest single rounds ever raised by a Vietnamese startup. Another example is Tuan Pham, who is the founder and CEO of Topica Edtech Group, a leading online education provider in SEA with over $50 million in funding and 1,500 employees throughout the region. Vietnam’s Generation Z is keen to enter the fast-growing tech sector. Empowered by the recent influx of smart capital, and prominent entrepreneurs and investors coming to the country, fresh graduates are more open to taking the riskier path of joining startups led by young founders over choosing corporate roles. Government support he government is aggressively promoting entrepreneurship and innovation, backing many accelerators and incubation programs offering mentorship and seed funding to local startups, such as the Vietnam Silicon Valley Project and Saigon Hi-Tech Park Incubation Center. It has also implemented tax cuts and more transparent legal frameworks targeting startups. The Ministry of Science and Technology’s (MST) National Technology Innovation Fund provides equity-free loans and grants for tech companies to invest in research and development. Vietnam has also hosted a number of large-scale startup events in recent years. One prominent example is TechFest, an annual showcase of over 200 startups organized by MST. Prime Minister Nguyen Xuan Phuc attended the event in 2018, and it was broadcast live across the country. TechFest raised a total of $7.86 million for 160 startup projects in just three days.

ietnam’s startup ecosystem is still relatively new compared to other markets, yet its growth potential is second to none. The country’s rapid economic expansion, coupled with its tech-savvy and increasingly educated population, provides startups with strong market demand and a highly qualified, yet affordable workforce. Home to more than 3,000 startups, compared to 1,800 in 2015 and 400 in 2012, Vietnam is now Asia’s third largest startup ecosystem (National Agency for Technology Entrepreneurship and Commercialization Department). The country’s startup investment reached a record US$889 million in 2018, up threefold from $291 million in 2017 (Topica Founder Institute). Demographic shifts oday’s Vietnam, with a population of over 97 million people and an average 6% GDP growth rate, is defined by a growing middle class of young people who are destined to become the next consumer generation (General Statistics of Vietnam). This generation can now afford to buy a home, which reflects the tremendous change the country has undergone in the last few years. Although Vietnam remains a cash-dominant economy where only 31% of people have a bank account (World Bank), the country’s mobile penetration is rising rapidly and is currently at 73% (We Are Social). Mobile phone use is driving digitization and changing consumer habits, as most people’s first Internet experience is on these devices. Internet use is now at 67% with 64 million users (We Are Social)–a significant increase from 50 million users in 2017 (Ministry of Information and Communications).

The right talent

iet Kieu, or Vietnamese people who were born and raised overseas, are leaving a mark on the country’s burgeoning

hile there is still progress to be made, Vietnam is well poised to become a key destination on the Asia startup map. Looking forward, fintech–especially on the consumer side– will still dominate the startup ecosystem in 2019. Aside from edtech startups, which have also seen large funding rounds, other frontier technologies–such as robotics, blockchain, and agritech– are expected to gain more traction in the coming years.

ABOUT THE AUTHOR

Kevin is the Founder and CEO of JobHop, a software-as-aservice startup that leverages artificial intelligence and machine learning technology to help companies in SEA recruit faster, easier, and cheaper. The company raised a $710,000 Seed round in July 2017. Before JobHop, he co-founded a San Francisco-based software outsourcing firm and a social enterprise benefiting orphans and disadvantaged artisans in Vietnam. jobhop.vn

April 2019

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GUEST COLUMNS

Latin America’s Era of Innovation A brief overview of the continent’s startup ecosystems By PEDRO VIEIRA

atin America has a population of over 650 million people, where the median age is 29.5 years old (Worldometers). This vast, young continent is made up of avid tech users, representing the fastest-growing market globally for Airbnb, top three cities by ride volume on Uber, and Brazil and Mexico being among the top four audiences globally for YouTube and Facebook (LAVCA). What’s more, around half the population has yet to digitize. These facts, especially the expectation of new users, demonstrate the region’s incredible potential. The making of rgentina, Brazil, Chile, Colombia, and Mexico are leading the region’s startup growth. With strong governmental support, Chile created Startups Chile, a program where accepted startups earn equity-free funding, and international startups receive a one-year working visa. Mexico has benefited from private initiatives such as 500 Startups and Techstars, which have a large presence in the ecosystem. Colombia similarly enjoys public and private support, as seen with INNPulsa, which provides business development programs for startups, and notable Latin American accelerator Wayra Colombia. Argentina has had a prominent presence in Latin America’s startup ecosystem for decades. In addition to the success stories of the early 2000s with MercadoLibre (online marketplace), Despegar (online travel agency) and Globant (software development), the country passed the Entrepreneurship Law in 2017 to encourage startup activity. The law facilitates business setup and development, creates new financing channels, and provides attractive tax breaks for people investing in local startups and venture funds. Brazil remains the region’s dominant player and has raised US$4.2 billion in

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April 2019

deals from 2012 to 2018, which is nearly seven times that of Argentina with $600 million and Mexico with $570 million (LAVCA). The country fosters its ecosystem through several innovation clusters in San Pedro Valley in Belo Horizonte, Porto Digital in Recife, Florianópolis in the South, and São Paulo in the Southeast. An increasing presence of accelerators, angel investors, and programs connecting innovation with corporates are also contributing to startup success. The fruition ast year saw exceptional growth for Latin America’s startup ecosystem: Colombia introduced its first unicorn with Rappi, Brazil saw a record number of unicorns and tech IPOs, and global investors such as SoftBank and Andreessen Horowitz participated in deals throughout the region. According to the Association for Private Capital Investment in Latin America (LAVCA), Brazil leads in venture financing, raising more money in the first half of 2018 ($546 million) than all Latin American startups in 2016. LAVCA also found that seven Latin American companies became unicorns last year. The first was Brazilian rideshare app 99, which was acquired by Didi Chuxing for $600 million. Other unicorns that took international headlines were Brazilian fintech startup Nubank, which raised $400 million to reach a $4 billion valuation; Stone Pagamentos, the NASDAQ-listed Brazilian payments company with an initial market cap of $6.6 billion; and last-mile delivery service Rappi, which raised over $385 million from the likes of Sequoia Capital and Andreessen Horowitz. In 2018, the largest amount of venture capital was deployed into fintech, with over $337 million raised throughout Latin America (LAVCA). Fintech is under-

standably the fast-growing industry, considering the region’s immature financial landscape, where many still lack access to financial services. This demographic condition provides fintech startups with the opportunity to innovate and provide solutions to real problems. The future nstitutional support, liquidity events, and growing numbers of early-stage investors are expected to continue increasing in the coming years. In 2018, there were 8,000 angel investors in Brazil alone, marking an 18% increase from 2017 (LAVCA). The arrival of late-stage, international funds and the growth of local investors will also offer more capital and likely inflate startup valuations.

tartups are bringing significant developmental changes in Latin America; traditional companies need to adapt quickly should they want to stay competitive in the face of what’s to come.

ABOUT THE AUTHOR

Pedro is an Investment Associate at Babel Ventures, a leading consumer biotech venture capital firm based in Silicon Valley. Prior to joining Babel Ventures, he worked at Kyvo Design-Driven Innovation–the Brazilian-based representative of GSVlabs–where he was part of the corporate venture team managing the Visa Acceleration Program, one of the largest fintech acceleration programs in Brazil. babel.ventures

GUEST COLUMNS

Deconstructing Stablecoins What does a dollar on the blockchain actually mean? By SARAH OLSEN

he concept of money is as old as history itself. Although the evolution of money has encompassed the barter system, commodities, representative money, and fiat, the concept of exchanging value remains unchanged. At the end of the day, money is simply a system of debits and credits between those participating in a given economy. In today’s world, the vast majority of money is digital, where value is recorded on hard drives controlled by banking institutions and credit card companies–compared to when the majority

of consumers carried cash in their pockets. While we’ve made progress in how we digitally maintain money, we haven’t made as much in how we transact or send it. Sending a wire to someone abroad is costly and slow, even though it’s merely a transfer of information. So, why isn’t sending money like sending an email? Cryptocurrency is the next step in the evolution of money to make exchanging value easier and more efficient. Although ‘the blockchain’ has become a somewhat intimidating term, it can be understood as a ledger of debits and credits recording value between its users. What makes this transfer method both novel and profound is the decentralized manner in which it maintains information. Protocols like Bitcoin act as a network of replicated databases, where each database contains the same list of debits and credits, and no central database acts as the sole source of truth. Anyone in the world with an Internet connection can transfer value and serve as a recordkeeper to secure the Bitcoin network. Value is transferred almost immediately, recorded publicly, and open to anyone who wants to participate in this financial network. However, cryptocurrency is still a new method for transacting value and digital assets, such as Bitcoin; with a fixed supply, it often experiences significant price volatility. This instability makes it challenging to pay for a cup of coffee with Bitcoin, as you may be overpaying or underpaying by a lot. A new cryptocurrency, the stable value coin (stablecoin), solves this problem. The Gemini dollar is built on the Ethereum network and strictly pegged 1:1 to the U.S. dollar, making it the world’s first regulated stablecoin. Every Gemini dollar in circulation corresponds to a U.S. dollar held at a bank, enabling parties to transact without the price volatility of traditional cryptocurrency. Gemini dollars are issued by Gemini Trust–a New York trust company. In essence, it has the ease and efficiency of cryptocurrency without price fluctuations. Having the U.S. dollar on the blockchain means the dollar value of any amount can be sent to anyone in the world with an Internet connection almost instantaneously, with little to no cost and zero chargeback risk. Stablecoins can be used for remittance, ecommerce, interbank settlement, trading, online gaming, native Internet applications, and pretty much any case where one party needs to transact with another. Stablecoins have not reinvented the concept of money, but they have significantly improved how global transactions can occur in the digital age. Sending money can finally be as easy as sending an email.

ABOUT THE AUTHOR

Sarah is a Managing Director at Gemini Trust Company and leads corporate development. Prior to Gemini, she worked at Apollo Global Management, focusing on capital raising for commingled funds, and separately managed accounts investing in structured and performing credit. Sarah also worked at Brightwood Capital, where she focused on capital raising for commingled funds investing in the equity and debt of U.S. middle-market businesses. Sarah graduated from Georgetown University with a B.A. in Philosophy. gemini.com

April 2019

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April 2019

GUEST COLUMNS

Launching Human-Centered Ventures Insights from a design-led venture firm By VINCENT TAN

rom ventures like Airbnb and Square to enterprises like Virgin Atlantic and General Electric, design-led businesses have been making headlines for their ability to enable growth and change within their organizations. With more and more startups using design to articulate their value proposition and connect with users, it’s only natural for VC firms to do the same as a way to distinguish themselves and help their portfolio companies in the process. These firms apply design methodologies and principles to their daily operations and use them to encourage a culture of creativity, curiosity, and empathy. As a VC working at Design for Ventures (D4V), a Japanese venture firm in partnership with global design and innovation firm IDEO, I have seen how effective design can be in helping startups problem-solve, tell stories, and refine their product or service. Here are some of the key things we look for in a design-led startup:

eventually won the customer over through his genuine desire to improve and provide a safe and fresh product, concluding the pitch with a heartwarming photo of them in one of his stores. These stories act as currency to connect the startup to all stakeholders, not just investors. They also help us understand what drives the startup, where it wants to go, and how we can better work together. A creative and collaborative culture

tartups that embrace ambiguity when ideating are set up for greater success than those that don’t. We often conduct sprints with our startups, using a human-centered approach to find inspiration and create new solutions together. By facilitating a collaborative environment where dynamic teams of designers work seamlessly alongside other functions, such as engineering and finance, the sprints can spark the conditions necessary for creativity.

A mission grounded in a fundamental need

hen channeled properly, design-thinking conOne of D4V’s internal inspiration workshops: ‘Lunch and Play.’ Photo ccasionally, we hear entrecepts and methodologies can courtesy of D4V. preneurs extol the technobe a powerful resource. Former logical aspects of their product, Kleiner Perkins Design Partner while seemingly forgetting to address the more vital question: John Maeda captures this notion nicely: “The value of design does your solution bring together what is technologically feasi- only exists when it’s in relation to the other parts of a company’s ble and financially viable with what is desirable from a human operations. Alone, design is a microworld of aesthetic high-fives. point-of-view? Integrated, design is a catalyst for interdisciplinary teaming, To effectively leverage design, we need to understand the learning, and winning.” wants and needs of customers on a deep level, and bridge it with a novel and innovative solution. Technology can help get us there, but without identifying the problem we’re solving for, how would we know we have the right technology?

A human-centered and numbers-driven story s a design-led firm, we believe the pursuit of financial returns does not compromise our mission to positively impact individuals, ventures, and society, so we look for companies that can balance a great numbers story with a great human story. It does not always have to be a grand origin or mission story; simple and personal learning moments can be just as impactful. I remember a pitch where the founder of a food startup recounted a confrontation with a very unhappy customer. He

ABOUT THE AUTHOR

Vincent is a Portfolio Director at D4V. Based out of Tokyo, D4V enables early-stage ventures to create impact in the world through design, insights, capital, mentorship, and networks. He is a former Project Leader at Boston Consulting Group and holds a J.D. from Columbia Law School. d4v.com

April 2019

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GUEST COLUMNS

Achieve the Best Return on Investment for Your Personal Brand (Part 1 of 2)

How to win respect and influence people By TRACY HO

e often see people wear designer outfits or makeup in an attempt to look more professional, put together, and successful. They are essentially leveraging brands to increase their self-worth, but fail to realize that these are cosmetic changes with short-term impact. Investing in your personal brand is another matter. As mentioned in my previous column, personal branding is a strategic concept. It is about creating a desirable perception of yourself, and communicating it to your target audience in a clear, concise, and consistent way. Defining our personal brand starts with asking ourselves who we are, what we stand for, what we value, and how we want to be perceived. In the words of Tom Peters, a well-known American writer on business and management: “In an increasingly crowded marketplace, fools will compete on price. Winners will find a way to create lasting value in the customer’s mind.” Effective branding enhances a company’s credibility with consumers. The same goes for people. A strong personal brand builds trust and nurtures a following. It helps us generate rapport, win clients, and drive revenue growth. To build an impactful personal brand, we need to first invest in ourselves. Personal brand equity is defined as the value that derives from others’ perception of you rather than your actual performance. Therefore, your relationships with others matter and is the foundation of your brand equity. Building your brand equity is about increasing the reliability of your leadership. It can be enhanced by elevating yourself as having superior qualities compared to your peers, such as your management skills, integrity, and service quality. Here is a case study of an executive I coached recently: X was a manager at a Fortune 500 company heading a regional team of 40. He had always been a hardworking, committed employee, but remained low profile and was reluctant to speak up during meetings. X did whatever his supervisors told him to do and accepted whatever salary increment he was given. After seven years, he began to feel he was not being given the credit he deserved. Soon after X departed the firm, he realized that he had been earning 40% less than his counterpart who was far less experienced, handled fewer projects, and managed a smaller team. This realization caused him to reflect upon what went wrong with his personal brand. X never built a strong executive presence within the organization. He wasn’t heard or recognized for his achievements. X never spoke up for himself, so naturally, his team didn’t speak up for him either. His supervisors and coworkers mostly remembered him as a nice and responsible person. X did not have sufficient brand equity. He missed an opportunity to earn respect and the income he should have had. Whether it’s products or people, every brand goes through 20

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April 2019

highs and lows. It’s essential to develop sustainable brand equity, which can help us fight against personal attacks, mitigate reputational risks, and make us less vulnerable to competition and career setbacks–even in times of recession. In other words, investing in our personal brand equity can help reduce the chance of business failure, and lead to long-term professional success. If you want to get a higher return on investment (ROI) on your brand, invest your time, energy, and resources sooner rather than later. In our next column, we will share with you how to measure your ROI from investing in your brand. Stay tuned.

ABOUT THE AUTHOR

Tracy is a leading personal branding strategist based in Asia. She is the Founder and Managing Director of Frame and Fame, an award-winning personal branding boutique. Tracy is also a personal branding coach for various MBA programs, startup accelerators, co-working spaces, and universities in Hong Kong. frameandfame.com

GUEST COLUMNS

The Pounding Heart of Tech A look into Egypt’s flourishing startup ecosystem By KARIM HUSSEIN

gypt is the fastest growing tech ecosystem in MENA, making up 22% of investments made in the region in 2018 (MAGNiTT). For those of us working here, it’s no surprise the country has been buzzing with startup activity in recent years. With a population of almost 100 million people, half of whom are under the age of 25, Egypt stands out among its regional peers for the quality and quantity of its technical talent and its rapidly expanding digital economy (World Bank). The Egyptian tech space is thriving, and a new wave of experienced and hungry entrepreneurs are taking on this diversified and fragmented market with billions of dollars in uncapitalized opportunities. Smart investors are already chasing these opportunities, and high-potential tech startups are benefiting from a rich support system of incubators, angel investors, venture funds, and corporate venture arms. I’ve invested in exceptional entrepreneurs through my firm Algebra Ventures, and I am seeing regional and global capital follow suit. A few years back, an Egyptian tech startup would typically raise US$1 to 2 million at Series A. Today, we’re seeing

rounds that range from $5 to 20 million from global investors. Since the 1980s, international tech companies–such as Mentor Graphics, IBM, Intel, Trend Micro, and Valeo–have been establishing research and development centers in the country, having recognized the strength of its talent pool. Egypt now enjoys expertise in several core technologies, including nanotechnology, microelectromechanical systems (MEMS), integrated circuit design (both analog and digital), security and encryption, wireless technologies, natural language processing, and artificial intelligence (AI). With this foundation, Egyptian entrepreneurs are now using disruptive technologies to address the abundance of challenges that emerging markets face. The country has become a test-bed for scaling products that are relevant to similar markets, such as Africa, Latin America, and SEA. Fintech, cleantech, and mobility solutions stand out as exciting industries to watch. An underdeveloped retail banking sector and largely unbanked population makes Egypt an ideal location for fintech innovation. Fawry, the country’s leading

payments provider, is now more active than the entire formal banking sector with 2.1 million daily transactions (Fawry). Egypt has a highly-strained transportation infrastructure, providing a clear opportunity for entrepreneurs like Halan Founder Mounir Nakhla. Halan is a ride-hailing app for motorcycles and three-wheelers, and facilitates millions of rides every month in underserved communities all over Egypt and Sudan. Several local and global mass transit solutions including Buseet, Uber Bus, and Careem Bus have also been introduced, enabling more efficient and higher quality alternatives to public transportation. Tech entrepreneurs are also disrupting fragmented industries like shipping and logistics, as seen with trucking marketplace Trella, which raised $600,000 in pre-Seed funding. Egypt enjoys abundant sunshine yearround and has large and consistent coastal wind corridors that supply a rich basis for cleantech solutions. We are experiencing a solar boom as a result of the government’s removal of energy subsidies, which has allowed the private sector to get more involved. Startups like KarmSolar and Solarize Egypt are providing clean energy solutions and building public and private sector facilities; technological advancements have already reduced costs for renewable energy generation. Egypt’s pool of entrepreneurs and tech talent is growing by the day. This trend, coupled with its geographical location, gives Egypt the potential to be the launchpad for digital transformation in MENA and beyond.

ABOUT THE AUTHOR

Karim is Managing Partner of Algebra Ventures, Egypt’s leading venture fund. He is a tech industry veteran and has been an active investor and startup mentor. Karim was Senior Vice President of Products and Engineering at WebMD. He received his PhD in Information Systems from the Massachusetts Institute of Technology. Karim has published over 40 articles and received a patent for his work on distributed computing. algebraventures.com

April 2019

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CONVERSATION STARTERS

VENTURE CAPITALISM

Recent Market Findings to Tickle Your Interest

19 percent of the reported capital raised by

private tech companies in 2018 was closed in supergiant venture funding rounds, which are rounds of US$100 million or more (Crunchbase)

US$207 billion

was invested across 14,247 deals in 2018. Total annual global VC funding increased by nearly 19% (PwC)

9 out of 10 of the largest deals announced in 2018

year were Asia-based companies, seven of which were from China (Preqin)

Our World in

88 PERCENT

of surveyed CEOs are ‘extremely concerned’ about trade conflicts. 98% from the U.S. and 90% from China have voiced these concerns (PwC)

HK$470 billion

Autonomous vehicles, the trade war, gender dynamics, and more

is saved by Netflix each year due to the effect of their machine learning algorithms (in personalizing recommendations) on churn rates (McKinsey)

US$1 billion

30 PERCENt

of new cars in 2020 will have a self-driving mode. The most recent unicorn in this space is Nuro, currently valued at US$2.7 billion (Crunchbase)

250 million hours

of consumers’ commuting time will be freed per year by pilotless vehicles in the world’s most congested cities (Intel & Strategy Analytics)

62 PERCENT of China’s CEOs are adjusting their

A‘passenger US$7economy’ trillion will be

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April 2019

800 MILLION

2019

of total retail sales are forecasted for Hong Kong in 2019 as a result of trade tensions, marking a 3% drop from 2018 (PwC)

supply chain and sourcing strategy. 58% are adjusting their growth strategy in different countries (PwC)

62 PERCENT

of all AI patents are related to computer vision, and this number is growing by 24% year-on-year (MIT)

workers could have their jobs displaced by 2030 due to automation, comparable to the effect of the Industrial Revolution on agriculture (McKinsey)

AUTONOMOUS VEHICLES

THE TRADE WAR

ARTIFICIAL INTELLIGENCE

enabled by the growth of autonomous driving technology by 2050 (Intel & Strategy Analytics)

GENDER DYNAMICS

40 PERCENT

of women believe that companies do not spend enough time addressing diversity, while 82% of men think that organizations spend too much time on it (Forbes)

83 PERCENT

of the venture funding raised globally last year went to male-led companies (Crunchbase)

19 PERCENT

of tech-related jobs at the top ten global tech companies are held by women. About 28% of leadership positions at these tech giants belong to women (PwC)

5 percent

of tech startups are owned by women (Statista)

Since 2000, The number of active AI Startups has increased BY (STANFORD)

35%

The size of the global autonomous driving market in 2025 is projected to be

US$24BILLION (Statista)

APPROXIMATELY

20,250

angel and Seed-stage transactions took place in 2018 (CrunchBase)

14X

OF CHINESE CEOS ARE CONFIDENT ABOUT REVENUE GROWTH IN THE NEW YEAR, COMPARED TO 40% IN 2018, DUE TO TRADE TENSIONS, U.S. TARIFFS, AND WEAKENED INDUSTRIAL PRODUCTION (PWC)

85PERCENT By 2020,

9% 900,000 By 2025, of accidents and

deaths will be prevented due to autonomous driving (WeForum)

of customer interactions will be handled without a human (Stanford)

US$9.33 billion of VC funding was raised by AI startups in 2018 (PwC)

56 percent

39%

OF U.S. CEOS ARE CONFIDENT ABOUT REVENUE GROWTH IN THE NEW YEAR, COMPARED TO 52% IN 2018, DUE TO TRADE TENSIONS AND SLOWING ECONOMY (PWC)

April 2019

of women leave the tech industry in the middle of their careers (Capital One)

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“The largest tech conference in Asia.” Hong Kong July 8-12, 2019 24

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www.riseconf.com

FEATURES

Now I Know My A, B, Seeds As the global startup ecosystem brings in more capital, navigating the market is becoming increasingly challenging for new founders. To help demystify the fundraising process for aspiring entrepreneurs, three founders share valuable insights drawn from their own experiences of raising Seed, Series A, and Series B funding. By KHADIJA AZHAR

SEED Band P r otoc ol

“If you are a firsttime founder without much experience, then build a prototype to show how you are solving a real problem, with numbers to prove traction and application.”

ith product blueprints finalized and potential market fit researched, startups that intend to move beyond ideation raise a Seed round of funding. Mainly led by angel investors, these rounds pave the way for future revenue growth. In February 2019, Band Protocol, a Singapore and Thailand-based startup that focuses on decentralizing data curation, raised US$3 million in Seed funding led by Sequoia India. The company’s CEO and Co-founder Soravis Srinawakoonis delineates how founders should approach Seed rounds based on his recent involvement in fundraising circles. What did you look for in potential investors for your Seed round? We looked for strategic partners who can contribute beyond just funding, so we opted for traditional venture funds over cryptocurrency funds. Traditional venture funds, such as Sequoia India, tend to be more hands-on and can help us with marketing, finances, legal, etc. Since our product is B2B-driven, having investors with that experience and the right connections to potential partners is extremely helpful, especially for a young startup. Did you consider raising a pre-Seed or taking part in an acceleration program? We wanted to be laser-focused on product development. It was a conscious choice to bootstrap the startup, which ensured full commitment from all co-founders. It allowed us to be lean without having to worry about pre-Seed or an acceleration April 2019

program, which would have taken away our time and resources. In your experience, what do investors value the most for Seed funding? If you are in an early, pre-product stage like us, the team is what investors value the most. As a young startup, we will have to inevitably pivot, and it will take a few iterations to get to the right product-market fit. What remains is the team. If you can execute and work well together, the original ideas or early revenue figures don’t matter as much. What was the biggest challenge you faced during the fundraising process? We raised funding in what was probably the worst bear market in the history of the blockchain. The global cryptocurrency market has been slow to recover ever since its dramatic fall last year. We overcame this with tenacity and perseverance, pitching to over 50 investors–giving them detailed valuations and projections on potential market sizes–to convince them that this is the right sector and right time for them to invest. What advice would you give startups looking to raise a Seed round? Have a clear vision of the problem you are solving and make sure you assemble a team that can execute. If you are a firsttime founder without much experience, then build a prototype to show how you are solving a real problem, with numbers to prove traction and application. JUMPSTART MAGAZINE

About the Founder Motivated by the world-changing potential of blockchain technology, Soravis Srinawakoon founded Band Protocol in 2017. He possesses a strong technical and business background, having earned his M.Sc. in Management Science and Engineering from Stanford University. Prior to founding the company, Soravis worked for two years as a Management Consultant with Boston Consulting Group. His management consultancy experience allowed him unique insights into entrepreneurialism, which have been pivotal in establishing his company. bandprotocol.com

SERIES A Mydoc

â&#x20AC;&#x153;Focus on the core items investors want to see: product-market fit and a go-to-market strategy. Spend time ensuring you have credible traction to prove those metrics.â&#x20AC;?

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April 2019

fter the Seed round, the next step in the fundraising process is to obtain Series A investment from VCs. At this point, startups aim to begin generating revenue by introducing their product to the market through a defined marketing strategy. MyDoc, a Singapore-based digital healthcare platform, intends to streamline outpatient care facilities. The company raised $5.2 million in Series A funding, and is currently working toward a Series B round. MyDoc CEO and Co-founder Dr. Snehal Patel draws upon his experience as a VC to describe what founders can expect from the Series A fundraising process. What are the important things a startup should consider before they begin fundraising Series A? Series A is that point when a startup should offer ownership to investors. On the economic side, it is key to have done your homework to know the capital required and how you intend to use it to grow the business. A precise estimate of what the operating cash flow will look like is mandatory, as is a contingency plan. Founding teams typically underestimate cash flow issues and overestimate revenue forecasts. Another critical consideration is whether the new investor gets your mission and has what it takes to support accelerated growth for your startup. Founders, in turn, should be asking which sales channels funders can help open up, or what kind of mentorship they can provide.

What did you look for in potential investors? Healthcare is a long-term play. We intentionally sought out strategic investors who understood this, could help with the growth, and also provide longer-term capital. What do investors value the most in a Series A pitch? A simple articulation of the unique opportunity youâ&#x20AC;&#x2122;ve proven in the market. The right investors are not looking for incremental ideas, but high impact opportunities that can create new markets or change traditional industries in significant ways. Capture their imagination and demonstrate you have the chops and the team to seize the opportunity. How did your Series A experience contrast to raising your Seed round? The challenge increases as the startup progresses from Seed to A, B, and onwards. Seed and A rounds in SEA are relatively easier, as there are more investors focused on these early stages than B and later. What was the biggest challenge you faced in the fundraising process and how did you overcome it? MyDoc launched in 2012, and we were early to market in a specialized, professional industry with a complicated ecosystem. Educating investors on the healthcare and healthtech landscape, and why our approach works, has been the

SERIES B u rg e n t. ly

biggest challenge. We were lucky to find our lead investor, who built a successful business at the intersection of insurtech and healthtech in the U.S., and deeply understood our value proposition. That sort of understanding is still scarce in SEA, but is changing as more successful business models continue to launch. Having an unwavering belief in the future you are building is vital.

“As you approach your Series B, don’t become so bogged down by the numbers that you lose sight of the company you are trying to be.”

nce a startup has raised Seed and Series A funding, the product should be generating revenue. At this stage, scaling the business becomes a priority. With the help of Series B funding, startups can work to increase market share, stave off competition, and diversify revenue streams. In January 2019, Urgent.ly–a U.S.based digital roadside assistance platform– raised $20 million in Series B funding from four investors. Urgent.ly CEO and serial entrepreneur Chris Spanos clarifies how founders should prepare for Series B rounds. What do you think are the most important things a startup should consider before fundraising Series B? Relationships are critical in all fundraising rounds. When preparing for a Series B, it’s important to nurture relationships with current investors, while establishing relationships with new investors who can help move your startup forward. Your early investors may not be those who invest in your Series B round, but they can contribute to the success of your fundraising by talking positively about your company with other investors. Another essential part of your Series B is to identify and meet with potential investors early. Hopefully, you’ve established a degree of rapport and trust by the time you are ready to begin pitching. Almost all investors in our Series B round were partners we had been speaking to and working with for quite some time.

What advice would you give to startups preparing to raise Series A? Focus on the core items investors want to see: product-market fit and a go-to-market strategy. Spend time ensuring you have credible traction to prove those metrics. Layer that on the available market of your approach, and you are likely to have fruitful conversations. Most of all, spend some time figuring out the investor profile that is right for your startup. The right one can be a tremendous asset to your growth, and the wrong one can be detrimental to your plan.

About the Founder Dr. Snehal Patel moved to Singapore from the U.S. in 2008 to found and lead the healthcare team at the Chandler Corporation, a multi-billion dollar investment fund. Prior to practicing law at Cravath, Swaine & Moore LLP in New York, Dr. Patel was offered a Fulbright scholarship to study the differences between health economics in the U.S. and Singapore. He received an M.D. and a J.D. from Columbia University. A VC and entrepreneur with investment and operational experience in multiple markets, Dr. Patel has a unique combination of medical, legal and business experience and qualifications. my-doc.com April 2019

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About the Founder Chris Spanos is CEO and Co-founder of Urgent.ly, a leading global mobility and roadside assistance platform. A lifelong entrepreneur, Chris has been a co-founder or principal in multiple successful startups and projects across a wide range of vertical industries. Prior to Urgent.ly, he launched several startups (Animators at Law, SeniorChecked), managed multiple successful ventures (AOL Local, Going.com, Repair. com), and was an award-winning film producer. Chris has proven a proven track record leveraging innovations to compete with market leading incumbents and creating new growth opportunities. urgent.ly

What did you look for in potential investors? Generally, you start with a broad group of potential investors. After a few meetings, you narrow down the list to people who best understand where you want to take the business and how that aligns with investor expectations. We sought out investors with ties to the automotive and mobility sector who could understand and embrace our vision for creating a new approach to roadside assistance. For our Series B, we met with BMW’s i Ventures team. They were rigorous in their analysis and came back with good questions about the business and our performance. To us, this showed a level of commitment and eagerness for understanding the long-term potential. It was clear our goals aligned well and one of those circumstances where everything just came together perfectly. From here, we expanded our circle of potential investors to include other original equipment manufacturers (OEMs) and strategic partners like Porsche, Jaguar, Land Rover, and few others. We feel very fortunate because Urgent.ly’s recent financing is one of the rare times in which global OEMs have come together. What aspects of a pitch do investors value the most for Series B? At this stage, investors are most interested in the things you would expect: revenue growth, margin improvement, the leadership team, and the vision. In our case, 28

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April 2019

prospective investors were looking for evidence that Urgent.ly had gained traction with service providers who are the backbone of our roadside and mobility assistance network, as well as with the OEMs and insurance companies that are essential to the mobility ecosystem. We also had to demonstrate that our leadership team was comprised of talented individuals, with a track record of success and a passion for turning Urgent.ly’s vision into a leading market solution. How did this experience contrast to raising your Seed or A round? Seed and Series A are early, so you raise money based on a future vision of the company. We started Urgent.ly as more of a B2C business and were approached by a global automotive OEM to run a pilot. We performed well, which opened up new opportunities with even more B2B partners, and ultimately convinced us to refocus our strategy. As a team, you have to execute your vision while watching for unexpected opportunities that can drive meaningful returns. By your Series B, you have figured out what is working, so it’s more about scaling. You also have a track record with investors because you’ve already successfully raised funds in prior rounds, which is where relationships come into play and can propel you even further. What was the biggest challenge you faced in the fundraising process and how did you overcome it?

One of the most critical and most challenging aspects of the fundraising process is telling the right story with the right set of metrics about the business. When you have been operating a company for some time, it often helps to get people you trust around the table and ask for their thoughts. I don’t know if this is a challenge per se, but it’s something I have learned over the years: soliciting feedback drives new ways of looking at the business and often leads to better outcomes. This exercise certainly helped us in fine-tuning the Urgent.ly story. What advice would you give to startups that are looking to raise Series B? As you approach your Series B, don’t become so bogged down by the numbers that you lose sight of the company you are trying to be. Also think about the kinds of partners you want to have by your side for the long-term, and find ways to involve those who share your vision and your passion as you enter this vital phase of your company’s growth. Khadija is Jumpstart’s Editorial Assistant.

April 2019

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FEATURES

THE

Mysteries of

Gen Z How this generation will change the workplace By LAURA GAYLE

illennials currently make up 30% of the workforce (New York Times). As baby boomers retire by the thousands, millennials are becoming leaders in every industry. However, just when many employers have figured out how to woo and keep millennials in the workplace, a whole new generation is graduating from high school and college: Generation Z. Members of this

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April 2019

generation are very different from their predecessors, and in some surprising ways. Gen Z vs Millennials: What’s the difference?

illennials were born between the 1980s and 2000s, and there are important differences between them and members of Gen Z, who were born in a time range loosely defined between 1996 and 2010 (New York Times). The ranges overlap a bit depending on who’s defining them, but it’s clear the first Gen Z arrivals are now finishing college and looking for jobs, potentially at the companies where millennials are now hiring managers. One of the main differentiators between millennials and Gen Z is the latter’s lack of confidence in formal education and its immense costs (Capture Higher Ed). They would rather consume information via an online class or YouTube video than a college seminar, so fewer of them are heading off to the ivy tower. This generation is still a mystery to most organizations, so hiring a few of them might be the best way to strengthen your company’s diversity and prepare it for the future. A great cup of coffee is one of the essential things in life to baby boomers and Gen X, but it matters less to millennials. Despite their propensity for spending thousands of dollars a year on fancy lattes, millennials would rather give up coffee before saying goodbye to social media. The same is likely to be even more true for Gen Z. Gen Z and Millennials in the workplace

illennials are increasingly shown to value job security, no longer craving constant change as seen in the past. This change may be due to the economic uncertainty their families experienced during the recession in their formative years—one of the things they have in common with Gen Z. Gen Z is beginning to assert their values in the workplace and seek out their ideal employers: •

Job security and a consistent work environment attract these young workers (Quartz).

•

Gen Zers are very competitive, and they might thrive in companies where healthy competition is encouraged (Forbes).

This generation is still a mystery to most organizations, so hiring a few of them might be the best way to strengthen your company’s diversity and prepare it for the future.

•

This new generation is entrepreneurial and more likely to start a business than its predecessors. Millennials, on the other hand, cherish their downtime and are willing to leave a steady job for one with a better work-life balance, even with a little less pay (Inc).

•

Millennials would rather email than go to meetings, but Gen Z likes faceto-face communication (Rise). Digital pioneers vs. digital natives

lthough both generations are tech-savvy, Gen Z workers are true digital natives born into a connected world. Millennials were digital pioneers who experienced game-changing technological advances as they happened, but some grew up with landlines, dial-up Internet, and film cameras. The difference is that while millennials suspect there are technological solutions to most problems, Gen Z is certain of it. From doing their taxes on their smartphones to feeding their pets from miles away using an app, they have few reservations about automation and are always looking for faster, easier, and more efficient ways to get things done. Gen Z exhibits a different value system April 2019

en Z workers are consummate multitaskers who might keep open an average of five screens at a time, compared to the two preferred by productive millennials (Huffington Post). This practice could lead to difficulties concentrating on occasions they’re required to unplug. The hyper-aware Gen Z have ‘beautiful minds’ that can bounce between topics with ease; it’s not unusual to see them scanning the room and checking their phones during a conversation with colleagues. Multitasking may require additional policies and procedures to keep them in check at the office, but it could also be a positive trait if they are equally detail-oriented when facing work tasks. Gen Zers are technology-dependent and spend a lot of time on social media, which could be a boon if they work in marketing or communications. They also highly value their privacy, and employers will have to work harder to win their trust (Growing Leaders). Connecting to Millennial business owners

en Zers could be the key to connecting your company with the massive millennial market, both as clients and business contacts. They grew up under the legacy of millennials, so they understand the kind of interactive, personalized customer experience their ‘older siblings’ want. This familiarity can present an advantage for companies seeking to get into the heads of millennials both as workers and clients. At any given company today, the hiring manager is probably a millennial, who likely also makes up a large percentage of clients–particularly in tech industries. Millennial business owners are more likely to partner with companies that understand technology, where Gen Z excels. Gen Z workers can help employers understand millennial clients’ and workers’ attachment to technology better than older employees who are less tech-oriented. Modern businesses need an active presence on social media channels, presenting tasks suited for Gen Z workers who grew up using Facebook, Instagram, and other platforms.

hile it may seem early to begin accommodating the values and preferences of Gen Z, especially since you just started to understand millennials, it’s never too early to position your workforce and workplace for success in the future. JUMPSTART MAGAZINE

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A Tale of Two Cigarettes An industry leader shares what’s to come for vaping By KHADIJA AZHAR

wo years after the Oxford English Dictionary inducted ‘vaping’ into the English lexicon, photos of Leonardo DiCaprio puffing on an electronic cigarette began circulating the Internet and triggered an intense debate about whether the non-combustible devices should be accepted. Detractors argued the media was peddling manufactured narratives about their benefits and glossing over potential harm, while supporters touted their alleged success in helping nicotine addicts overcome dependence. Despite this divisive public sentiment, it would be unfair to dismiss the innovation behind the e-cigarette, especially when the product pioneers intended it to aid smoking cessation. Growing literature, such as a January 2019 study in the New England Journal of Medicine, corroborates this claim, showing that e-cigarette users are twice as likely to give up smoking compared to those who use nicotine patches and gums. Cue the backstory

ue Vapor Systems CEO Alexander Basile began researching the prospects of breaking into the non-combustible cigarette market after personally using them to quit smoking. Through testing various devices, he found that although traditional e-cigarettes (which look like regular cigarettes) were easy to use, they lacked power. Modified vaping devices were more effective, but required cumbersome assembly. He felt the need for a device that could bridge the two and provide a simple yet satisfying experience for smokers. Motivated by this idea, Basile turned to his long-time adventure racing partner, Ruben Perez, for help. Perez, who is now Cue’s President, remembers how Basile strode into his office armed with nothing but a “box of junk” and the vision to turn those disparate pieces of hardware into a product with lasting global impact. After years of development, self-funding, and help from local design companies, they were able to produce their first prototype–the Digirette–in 2013. Cue has come a long way since then. Not only does the company boast an unprecedented range of thirteen flavors with three possible nicotine strengths (including a zero-nicotine option), it also provides technologically superior devices while maintaining ease-of-use. Cue’s E-Vapor Kits are equipped with sub-ohm tanks, which are as straightforward to use as traditional e-cigarettes, but with more powerful and consistent vapor. Most devices on the market use complex open-tank systems, which comprise numerous, and

“Vaping devices aren’t inherently tobacco products; the sizeable market for e-cigarettes is what drives manufacturers to focus primarily on nicotine delivery.” 32

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Below: Examples of combustible cigarettes, traditional e-cigarettes, and open-tank vapes, which require the user to refill the device with liquid. Right: A selection of Cue’s cartridges, which are replacable, and offer a variety of flavors and nicotine levels. Bottom: Cue’s E-Vapor Kits, which are equipped with sub-ohm tanks. Photos courtesy of Cue.

often costly, components that need to be replaced regularly. “You can’t give this thing to grandma and say, ‘Hey, quit smoking,’ because she can only use it for three days before she has to start changing stuff,” says Basile. Cue allows consumers to sidestep the hassle of replacing coils by introducing devices that use closed-tank systems with cartridges that do not require assembly. Moreover, by removing the ability to tinker with individual components, the company can maintain a high standard for customer experience. Although the prototype was designed and developed in California, the company has since outsourced manufacturing to factories in China, which incidentally happens to be the birthplace of the e-cigarette. Discussing plans for potential expansion to China, Basile and Perez agree that penetrating the market could be lucrative, but their strategy focuses on establishing and maintaining a firm footing in the U.S. first. “China has always lurked in our background, but our strategy moving forward is that if you want a successful brand in China, you need to have a successful brand in the U.S.,” Basile explains.

Misconceptions and other applications

he e-cigarette industry is mainly criticized for capitalizing on and marketing its products to the youth demographic. The best example is the backlash faced by Juul, currently the industry’s biggest player. Whether or not this criticism is warranted, it’s easy to see why the device is so popular among underage consumers; its sleek, USB-like appearance facilitates easy concealment for use in schools, prompting concern from parents who fear that it may steer their children toward early nicotine addiction. Even if marketing messaging is regulated, many still argue that the tantalizing flavors and efficacy of nicotine delivery are making addiction more common among young people. Basile contests this claim, emphasizing that teenagers have historically used and abused combustible cigarettes, and now have an alternative that has less impact on their health. At the same time, he explains that the onus of prevention should lie on retailers who don’t follow regulations.

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For example, the U.S. Food and Drug Administration introduced the Premarket Tobacco Application in 2008 to vet tobacco manufacturers before they can market their product. The application’s additional processing time became a bureaucratic barrier to entry for prospective brands, while Cue enjoys more protection as an established company.

“Once you separate the contents from the delivery mechanism, it all becomes crystal clear.”

Above: Perez posing with Cue’s E-Vapor kits at a convenience store in the U.S. Bottom: Cue’s three partners at their factory in Shenzhen. From left to right: Ruben Perez, Alexander Basile, and Derek Kwik. Photos courtesy of Cue.

“It is an adult product. It already is illegal for kids to vape, so it’s really an enforcement issue. It’s the store that needs to regulate it,” he adds. Detractors also fail to acknowledge the technological innovation behind the e-cigarette and how its applications could extend beyond the tobacco industry. Vaping devices aren’t inherently tobacco products; the sizeable market for e-cigarettes is what drives manufacturers to focus primarily on nicotine delivery. Derek Kwik, the third partner in Cue, has held a long-standing belief that the device could disrupt the health and pharmaceutical industry. In fact, its delivery mechanism could administer virtually anything, provided the chemistry allows for it. “Once you separate the contents from the delivery mechanism, it all becomes crystal clear,” adds Kwik. While nebulizers are a more traditional example of pharmaceutical aids that allow patients to inhale medication, there exist commercial cases of using vaping to administer vitamins, caffeine, and even a variant of Viagra. Though these applications are yet to be refined, it is quite possible that we could be inhaling aspirin to quell a headache in the near future. What’s on the horizon

espite the ubiquity of non-combustible cigarettes, most countries impose either no regulation or a complete ban. One would assume that regulations would be a bane to manufacturers, but surprisingly, the founders thinks otherwise. “Regulation is the most exciting thing for us,” says Perez. Dubbed a proverbial ‘Wild West’ by Basile, unregulated markets allow e-cigarette companies to make and follow their own rules. while regulated ones provide a robust framework for them to enter. It is a favorable scenario either way. 34

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However, trends have shown that most countries are converging to a middle ground when it comes to their opinions about vaping. Laws are becoming laxer in some places, stronger in others. Undeterred by regulatory uncertainty, e-cigarette companies have gained considerable traction within the startup scene in the past few years. Juul recently sold a 35% stake to tobacco giant Altria to reach a hefty US$38 billion valuation, making it one of the biggest success stories to come out of Silicon Valley in 2018. Discussing their goals for the coming years, Basile and Perez agree that Cue’s vision is to expand the industry as a lead innovator. They also look at their business as a catalyst for social impact, which was a founding mission. Basile reminisces about the first time he showed the prototype to his dad, who has lost four brothers to smoking. Having him acknowledge that the device could have potentially saved their lives remains one of Basile’s most treasured milestones throughout his Cue journey. E-cigarettes may not be as trendy as blockchain or AI in the startup circuit, but it’s not an industry to be overlooked. With vaping becoming more mainstream by the day, the decline of combustible cigarettes is no longer a question of if, but when. Khadija is Jumpstart’s Editorial Assistant.

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hose who haven’t heard the term ‘family office’ (FO) before may think it’s referring to some sort of service-oriented business run by a friendly mom-and-pop duo. Far from the quaint image this impression suggests, FOs control vast amounts of money on behalf of the world’s wealthiest. Ultra high net worth individuals (UNHIs) are people who have accumulated vast fortunes, usually through one or more business empires, and are looking to grow that wealth through investments and other endeavors. Private wealth managers are often deputed to handle investments and portfolios, but many UNHIs choose to set up FOs instead. Looking at the numbers, it’s clear that UNHIs aren’t as rare a breed as one would imagine. Estimates vary, but the 2016 EY Family Office Guide approximates the number of single-FOs to be ‘at least 10,000’ globally, and others peg the number at 5,000 to 6,000. Defined as having at least US$200 million worth of assets under management, FOs have largely been concentrated in the United States and Europe. However, Asia-Pacific UHNIs are not to be ignored: the UBS 2018 Global Family Office Report found that 17% of the offices surveyed are based in this region. The essential difference between an 36

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Family Offices Asia’s Biggest Open Secret

Why Asia’s under-the-radar investors are putting money into tech startups

By NAYANTARA BHAT

FO and a wealth manager as told by Eva Law, Chairman and Founder of the Association of Family Offices in Asia (AFO), is that an FO manages much more than just money. Preventing future conflicts, managing family disputes, and preparing for family and enterprise succession are a few of the tasks handled by FOs. Since the goal of FOs is to grow the family fortune, their investing strategy is generally risk-averse, relying on investments that will guarantee returns. But according to Law, the past few years have marked an interesting and out-of-character trend: investing in startups. Investing across generations

aw notes that the historically high price of real estate globally in 2018 caused FOs to start “selling their portfolios and reducing their exposure in real estate.” FOs needed a new investment allocation for the money that was freed up by real estate divestment, and where better to put that money than into tech? At the forefront of pushing tech investments is the ‘next gen,’ or the children of tycoons and billionaires who already hold executive positions in their families’ enterprises. They often act as financial investors, putting money into a number of different projects, but some have other motivations–demonstrating

investing knowledge to their parents, or investing in their own passions. “The increase in direct investments comes from families who want to be more hands-on and involved in the areas they invest,” says Francois Botha, founder of international family office strategy consultancy, Simple. In many cases, the next gen don’t have the full financial power of the family enterprise on their side, and circumvent this by finding other like-minded heirs to co-invest with them. These ‘club deals’ result in several next gen investors owning minority stakes in startups, and in some cases, outright ownership and management of new ventures. For a startup, family office investment can be a refreshing change of pace when there is an alignment of values and less pressure on earnings figures. “Family offices offer ‘patient capital,’ where they don’t necessarily look for huge returns right away, as they have the ability to plan in generations, and not quarters,” says Botha. The sectors they invest in paint an intriguing picture. At AFO, Law and her team are responsible for bringing FOs together to co-invest in club deals, allowing them an eagle-eye view of where money is flowing. “Last year, 40% of our club deals were into blockchain companies,” Law says. The next generation may be advocating for more tech investing, but when patriarchs throw their hats in the ring, the dollar volumes are backed by the substantially deeper pockets of the family enterprise. Unlike the next gen, patriarchs invest purposefully rather than passionately, and are constantly seeking technologies that could offer their enterprise a competitive edge. “People acknowledge innovation is very important, and they also see the Internet making a lot of changes,” says Law. “That’s why they are interested in making changes to the business while investing into new companies–it’s an opportunity to fuel the future growth of their business.” Given the size of the companies involved, there’s a board of directors and squad of key executives who need to sign off on any investments, but Law believes where Asian companies are concerned, one person usually has the final say. Venture investing has not been a popular choice among FOs in the past, perceived as an untenably risky vehicle for the family fortune. Instead, FOs enthusiastically put money into private equity

funds, banking on the fact that their beneficiaries would be close to either an IPO or acquisition. “That means they can still capture the growth momentum, while avoiding the risk-taking period in the early years,” Law says. “I would say about 80% of investments are into companies in this kind of development stage.” UBS found that private equity now makes up 22% of the average portfolio globally. Exceptions to this rule are gradually

Above: Association of Family Offices in Asia Chairman and Founder Eva Law. Photo courtesy of AFO. Below: Simple Founder Francois Botha. Photo courtesy of Simple.

growing in number. Law cites one of AFO’s members as an example: a property developer who now has a string of investments into proptech startups. Investing in tech to augment their existing business is becoming a strategy for FOs, particularly with fast and lean early-stage ventures entering the playing field. Tech is also making its presence known within the space of customer relationship management. FOs are paying more attention to AI and big data tools to help them manage customer databases, which have allowed them a deeper understanding of their clients. April 2019

“Effective digitization has been a focus area for many family offices lately,” says Botha. “The main tools we’ve seen relate to business management, consolidated reporting, and tools to help manage deal flow.” These tools allow families and family offices to become more agile, engaged, and purpose-driven organizations. A lasting legacy

aw forecasts impact investing to be the next trend for FOs. The Global Family Office Report notes it as a hot area, with one-third of the surveyed FOs engaged in impact investing via private equity. Law and her team have been advocating for more impact investing among AFO’s members. “We want to make it mainstream. It’s okay for them to pursue investment, but at the same time, do something good for the community,” she says. It’s still an area of investing that hasn’t picked up traction from Asian FOs, largely due to traditional ideas around charity and giving back. Patriarchs, who have firm ideas about what charity should be, struggle to separate impact investing from conventional philanthropic activities like building schools and hospitals. “We’re actively having these discussions and dialogues with the next gen, not with the patriarchs,” says Law. She predicts that the tech investment trend will continue at least for the next few years. Botha also believes families are transitioning away from purely financial priorities–which can be handled by wealth managers and brokers–and putting more emphasis on ‘soft’ or intangible assets such as agility, culture, and goodwill. Simultaneously, the next generation is preparing to take over their families’ legacies. “It is estimated that currently, over 80% of the world’s wealth is sitting with people over the age of 60,” he says. “That means that over the next 20 years, we will see an enormous transfer of wealth from the Baby Boomers to the purpose-driven Millennials.” FOs provide unique opportunities for startups looking for funding, but due to their private nature, it’s difficult to say what kind of long-term impact they will have. The growing number of UHNIs suggests that private wealth will have a growing influence in the Asian investment landscape. Meanwhile, as long as there are startups in need of funding, the next generation of billionaires will be on the hunt for prospects. Nayantara is Jumpstart’s Editorial Associate. JUMPSTART MAGAZINE

April 5th, 2019 Swiss Tech Convention Center Lausanne, Switzerland

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How fashiontech is cleaning up fast fashionâ&#x20AC;&#x2122;s dirty big secret

More Miniskirts, More Problems By MIN CHEN

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A nna Wintour is widely credited for turning fashion into a necessary topic in our cultural dialogue, ushering in an age where dreams are made of Chanel Jumbos and 4.5-inch Hangisi pumps. Whether or not one subscribes to this lifestyle, there’s no escaping the reality that we’re often judged by the way we dress, which endows the fashion industry with considerable power in shaping our identities and, by extension, our consumption habits. But headlines about fashion week are now frequently overshadowed by the industry’s underbelly, which is made up of two words leaders like Wintour do their best to distance themselves from: fast fashion. According to Alternet, the garment industry is the second dirtiest in the world behind oil, and much of its pollution problem stems from consumers’ insatiable demand for fast fashion. Over 100 billion

Above: Fashion Tech Consortium Founder Michael B. Reidbord. Photo courtesy of FTC. 40

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garments are produced each year (Fashion Revolution), 73% of which will end up in a landfill and around half of all fast fashion items will meet that fate in less than a year (Ellen MacArthur Foundation). With influencer culture continuing to escalate the pace of changing trends, the number of times a garment is worn before it’s disposed of will only decrease yearon-year, already down 36% from 2000 (Drapers). The fashion industry’s sustainability problem is complex because wastage plagues every stage of a garment’s lifecycle. According to the Smithsonian, a t-shirt uses 120 liters of water and generates 0.01 kilograms of carbon dioxide per wear from dyeing alone, without accounting for supply chain emissions. Rapid turnarounds for new collections often mean the t-shirt won’t stay on the rack for long, whether it’s discarded as unsold inventory or destroyed to protect the brand’s exclusivity–further generating carbon emissions from incineration.

“The days of producing products brands think their customers want are over. Predicting in advance what will sell by style, color, fabric, and quantity will greatly assist the industry.”

An ever-growing body of research about the scale of environmental destruction has instigated action from a bottom-up and top-down level. Greenpeace International launched an early grassroots effort with their ‘Detox My Fashion’ campaign in 2011, which pushed brands including Adidas, Puma, and Nike to eliminate hazardous chemicals from their product lifecycle by 2020. In the United Kingdom, the Parliament’s Environmental Audit Committee invited Amazon, ASOS, Boohoo, PrettyLittleThing, and Missguided to provide evidence on their practices regarding garment lifecycle, recycling, and unsold inventory last year. However, market solutions have proven to be the most holistic, where fashiontech is working to address concerns all along the value chain, from manufacturing to supply chain to retail.

Current fashiontech innovations anufacturing is rapidly changing on the textile and garment production side. Bacteria-produced dyes, lab-grown leathers, and alternative silks are gaining popularity among designers. Silicon Valley-based Bolt Threads raised $123 million last year following the success of its spider silk, and recently introduced a leather made from mushrooms called Mylo, which is being used by Stella McCartney. In terms of garment production, supply chain solutions are cutting down on manufacturing inefficiencies by overhauling how the system fundamentally operates. New York City-based retail intelligence firm Fashion Tech Consortium (FTC) bridges manufacturers, retailers, and legacy brands with the innovation economy, through their portfolio of more than 80 enterprise-ready startups. “The days of producing products brands think their customers want are over. Predicting in advance what will sell by style, color, fabric, and quantity will greatly assist the industry,” says FTC’s President Michael B. Reidbord. According to Reidbord, it currently takes companies 40 weeks to design, merchandise, produce, and distribute apparel. This lead time often means the final product won’t meet fast-changing con-

The way forward hile fashiontech has alleviated the industry’s environmental burden, environmental activists and other stakeholders have voiced concerns that the root of the issue, or the general overconsumption of fast fashion, remains ignored. Education, for both brands and consumers, is the favored approach among industry players as the way forward. A recurring educational theme for fashion’s sustainability problem is circularity, a term first popularized in the industry by Dr. Anna Brismar. She describes circular fashion as keeping a garment “in society for as long as possible in their most valuable form, and hereafter return safely to the biosphere when no longer of human use”–a concept that’s now widely echoed by consumers and brands alike. Global Fashion Agenda launched the 2020 Commitment in 2017, which asks brands to commit to their own cyclability targets. The Commitment has 94 signatories including fast fashion giants like ASOS, H&M, and Target, as of March 2019. While circularity has the potential to disrupt the linear system that’s currently in place, this concept isn’t without its faults. According to the Center for Clean Air Policy, source reduction is the most preferred method for sustainable development in the waste sector, followed by reuse, recycling, resource recovery, incineration, and landfilling. Additionally, such efforts are inevitably countered by the world’s growing population and rising middle class. The circularity movement will be fighting an uphill battle as the $1.3 trillion fashion industry is set to

sumer tastes, generating unnecessary carbon emissions from the supply chain and incineration process. He considers ‘Supply Chain 4.5’ as the way forward, which is a “hyper-lean manufacturing and distribution process encompassing the newest technologies for design, merchandising, manufacturing, and logistics.” Some examples of this process include 3D visualization tools to replace physical samples, blockchain technology to increase supply chain traceability, computer vision to reduce wastage in textile mills and manufacturing facilities, AI algorithms to predict defects, and data to bring about inventory accuracy. Retail experiences are also transforming, where the focus is shifting toward more targeted engagement strategies and on-demand production, providing consumers with personalized apparel at an affordable cost. Hong Kong-based The Mills, an experiential retail and heritage space with a ‘techstyle’ incubator and investment platform called the Mills Fabrica, emphasizes the importance of co-creation between consumers and brands. Its retail store, Techstyle X, is dedicated to products and technologies in the fashiontech space. For example, the Mills Fabrica’s incubatee unspun (more on page 43) held a pop-up shop that allowed customers to create denim jeans, based on 3D body scans, to fit their body perfectly.

The Mills Founder and Managing Director Vanessa Cheung believes supporting startups and fashiontech entrepreneurs are the most direct ways to disrupt the current retail model, which is why Fabrica Fund’s portfolio companies must “have a strong focus to create meaningful impact for the industry or community, such as sustainability.” “Eventually, the best way to drive adoption is for these innovations to achieve cost equilibrium, which we believe will come once the scale of these innovations increase,” adds Cheung.

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increase by 63% by 2030 (Global Fashion Agenda). Industry leaders like Cheung and Reidbord agree that actions speak louder than words in terms of educating consumers and brands. Last year, The Mills supported the Hong Kong Research Institute of Textiles and Apparel, H&M Foundation, and Novotex in launching a store where customers could bring their old garments to be recycled.

“Eventually, the best way to drive adoption is for these innovations to achieve cost equilibrium, which we believe will come once the scale of these innovations increase.”

“The best kind of education is through experience. It’s one thing to hear about something, but when consumers are actively participating in the process itself, they are more likely to believe in the idea,” says Cheung. Similar to this sentiment, Reidbord believes that showing manufacturers how sustainability solutions are also beneficial to their business is the best way to get buy-in from them. “If I were a company who faced fierce competition on several fronts, I would be looking for ways to save money, go to market faster and eliminate waste and

inefficiency,” he adds. The industry’s outlook for sustainability is positive, considering the attitude displayed by contemporary brands and future generations. Cheung has sensed a growing awareness among consumers, who now feel empowered to boycott brands that don’t align with their values, as seen with the backlash Burberry faced after it reported destroying $36.8 million worth of merchandise in 2017 to preserve its exclusivity and reputation. In contrast, Reidbord applauds brands like Patagonia for encouraging customers to bring in their damaged items to be fixed for free, so the items don’t end up in landfills. Top: Entrance to the Mills Fabrica. Left: The Mills Founder and Nan Fung Development Managing Director Vanessa Cheung. Photos courtesy of The Mills.

“The thought process here is changing. Young people today are not necessarily looking for throw-away clothing that they buy the day of the party and then discard,” he adds. he fashion industry is at a crossroads, where brands that are embracing the sustainability movement are rewarded, but little can be done to those who do not. But just as the industry’s problems are multifaceted, its solutions from within are, too. Fashiontech companies and consumers are slowing down fast fashion and eliminating waste at the source. Such efforts, coupled with education about making smarter wardrobe choices and prioritizing environmental sustainability, will pave the way for a cleaner industry and more mindful consumer behavior. Min is Jumpstart’s Editor in Chief.

MINI COLUMN

Making Fashion and the Planet Cool Again How one startup is addressing fashion’s sustainability problem through customization By WALDEN LAM

rom 2000 to 2015, apparel production doubled from 50 billion units to over 100 billion units, and the average life of a garment shortened to under a year, according to Euromonitor and the World Bank, respectively. The current clothing supply chain is surprisingly efficient at turning natural resources into waste, and at scale. According to Circular Fibers Initiative, the fashion industry is poised to account for about a quarter of our carbon budget in 2050. Hope is not a strategy, and only change can guard humanity against runaway environmental destruction. Against this backdrop, my co-founders Beth, Kevin, and I founded unspun to create a supply chain that responds to what customers want. In our zero-inventory stores in Hong Kong and San Francisco, customers can personalize fit, styles, fabrics, trims, waist heights, and hem lengths. With our fit algorithms, we can now turnaround custom denim jeans within two to three weeks. We are also building a 3D weaving machine that will ultimately create custom garments within two to three hours, all inside our shops in a truly zero-waste fashion. We have chosen to start with denim jeans because finding that perfect pair is no easy task, as we’ve heard from customers. The current practice of dyeing and chemical processing simply has to change as well. Our thesis is that if a small ten-person startup team can eliminate excess inventory, reduce waste, and shorten lead time and carbon footprint, then surely bigger and more sophisticated players will be inspired to do more.

We will be the first to admit that we have made mistakes, such as shipping laughable products that go against the grain, to say the least. Our pilot customers have allowed us to continually improve our product through their feedback. Compared to a year ago, we have made quantum leaps in our fit, sourcing, and retail experience. For example, we have started wear-logs to document how washes and wear affect fit over time. We also now have a selection of fabrics that are extremely comfortable and more sustainable, such as denim fiber that is made from recycled coffee grounds. Lastly, we are working with other forward-thinking tech companies and brands to make scanning more accessible and visualization more accurate, bringing everything together in a wholly new retail experience. Through prototyping and partnerships, we will make our offering mainstream. My wife gave birth to our baby girl last year. She is now a screaming reminder that the work we do directly affects generations beyond our own lifespans. unspun’s mission is to combine technology, design, and business innovation to address this challenge, one pair of jeans at a time. ABOUT THE AUTHOR Walden is unspun’s co-founder and the Chief Hustler. He previously consulted with and invested in consumer companies at IDEO, GGV Capital, and OC&C Strategy Consultants, and most recently held a management role at lululemon. unspuntech.com

Walden Lam (left), Beth Esponnette (right), and Kevin Martin (not pictured) co-founded unspun in 2016. They plan to expand their no-inventory model to include other types of apparel. Photo courtesy of unspun.

With our fit algorithms, we can now turnaround custom denim jeans within two to three weeks.

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Spread Your Propellers The future of air-mobility with Drone Fund Founder Kotaro Chiba By KELLY CHO

rone Fund is the first fund in Japan focusing on investing in drone technology and air-mobility startups. Founded by Japanese angel investor Kotaro Chiba, its vision is to support the preparation, creation, and advancement of drone-based societies across the globe, which was a passion of Chiba’s from an early age. “Since childhood, I have imagined the future with scores of

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drones in the sky and robots in our daily lives, like in the movies. Now, it’s our mission to turn this dream into reality,” he says. Japan’s low birth rate and aging population also play into Chiba’s belief that air mobility will help to alleviate critical labor shortage issues–something he is confident about, considering that the country is at the forefront of hardware development and manufacturing. Drone Fund raised ¥1.6 billion for its first fund and aims to more than triple that number to reach ¥5 billion for its second fund. At the time of writing, Drone Fund II has ¥3.7 billion of committed capital from notable investors including Mizuho Bank, footballer Keisuke Honda, Canal Ventures, and FFG Venture Business Partners. The firm has invested in a total of 26 startups since its founding. When evaluating a possible portfolio company from a tech perspective, Drone Fund looks at its technical superiority, intellectual property potential, and management ability. It has a dedicated Drone IP Lab to help portfolio companies obtain patents both regionally and on an international level. The fund’s portfolio companies range in specialization and product offering, and one that stands out to Chiba as especially innovative is Aeronext’s 4D Gravity Control. This technology comprises an inserted gimbal structure that connects the mounting and flight sections, meaning the drone’s center of gravity allows for more advanced altitude control. Aeronext is anticipated to broaden industrial applications and

Far-off as it might sound, the depicted drones are not concocted by science fiction writers, but based on real innovations by Drone Fund’s portfolio companies.

facilitate growth in new markets by improving drone reliability and safety. Their goal is in line with Drone Fund’s idea that manufacturers need to develop robust mobility technologies in order to expand the industry internationally. Apart from working on drone technology, Chiba understands that he and his team need to increase public awareness about the benefits of air mobility. “We hope to take an omnidirectional approach to innovation, not just in terms of developing the technologies needed to lead innovation in sky infrastructures, but with a service-based strategy as well.” Drone Fund has made efforts to reach and connect with the public. The fund has an official character, Misora Kanata, who is a high school girl living in Tokyo’s Sumida Ward in 2022. She is featured in a series of illustrations that explores how drone technology can interact with people, from picking up packages to delivering supplies following a natural disaster. Far-off as it might sound, the depicted drones are not concocted by science fiction writers, but based on real innovations by Drone Fund’s portfolio companies. It’s an exciting demonstration of how their products can be applied to many areas of our lives and help streamline everyday tasks. Japan was among the first countries to regulate the flying of hobby drones, banning them from densely populated areas, and only allowing the operation of drone taxis in remote islands and mountainous regions. The government is encouraging the development of drone technology with the implementation of deregulated zones for testing, open bandwidth for drone communications, and facilitation of commercial applications. That being said, the safety of integrating drones into society is still a major concern, and one deadly accident could set the industry back by years. Additionally, military applications and increasingly stringent regulations have encouraged the percep-

tion that drone technology is somewhat dangerous. Chiba, however, doesn’t see such perceptions as obstacles for a drone-based society, but a process all new technologies must go through. “Could you have imagined a world without iPhones, Instagram or Twitter in 2000? It’s the same with drones. We cannot imagine the future yet.” Kelly is Jumpstart’s Editorial Assistant.

Above: Drone Fund Founder Kotaro Chiba at their office in Tokyo. Top: Drone Fund’s vision for the use of drone taxis by 2025, as a part of their outreach campaign. Left: The campaign’s depiction of how drone technology can be used in disaster relief. Photos courtesy of Drone Fund. April 2019

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FEATURES

10 Minutes with

Jason Calacanis What the world’s most famous angel investor thinks about the market, politics, and being a Silicon Valley insider By MIN CHEN

ou don’t have to rub shoulders with the leading tech entrepreneurs of our time to have Instagram and Twitter handles as snappy as @jason, but it likely wouldn’t hurt the cause. The man behind the tweets is Jason Calacanis, a serial entrepreneur and angel investor who made a name for himself when he struck Silicon Valley gold–or unicorn glitter, rather–for being one of the first people to invest in Uber. He’s invested in over 150 companies throughout his angel investment career, of which Thumbtack, Desktop Metal, and Robinhood also went on to claim unicorn fame–and that’s excluding the many that are on the cusp of billion-dollar valuations. Calacanis has had a few successful exits himself, notably with tech magazine Silicon Alley Reporter and Weblogs, Inc., which was bought by America Online, Inc. for US$25 million in 2005. While most people in his position would be slowing down, Calacanis seems to have opted instead to do it all, recently authoring the bestseller Angel: How to Invest in Technology Startups and launching his own syndicate. What unites his many projects is his intent to bring more talent and capital into tech as a way to encourage innovation. Being the straight-talker he is, Calacanis was as vocal about his love for Peking duck as he was about his investment thesis. Jumpstart had the opportunity to speak to him before his fireside chat at the WHub Startup Impact Summit, which took place in Hong Kong on the last day of the 2019 StartupmeupHK Festival on January 25. 46

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You’ve talked about how beginning your career as a journalist helped you to succeed as an angel investor. Can you tell us more? When you’re a journalist, you ask a lot of questions and try to figure out what the truth is. When you’re an investor, you also ask a lot of questions to try to figure out the truth. It’s the same job; one, you get the glory of being on the masthead, and the other, you get the glory of having a large bank balance. One of your objectives for Founder University [founder.university]is moving racial minorities, women, and other under-represented groups upstream. Are you sensing a shift in tech when it comes to embracing these groups? Diversity in tech was anemic ten years ago. When I started angel investing, we would obviously see a lot of white guys. Then we started to see an overrepresentation of East Asians and Indians in terms of the percentage relative to the population. Still, Latin Americans, African Americans, women, and other groups were underrepresented. What’s interesting is that in the last four or five years, we’ve seen a massive change in the number of women founders, but a modest change in the number of Latin and African American founders. In the venture capital world, it’s still changing very slowly, but it’s changing. I like to focus on solving problems rather than placing blame. Arguing with people rarely results in change. If these founders are underrepresented or under-appreciated or undervalued, we should just create opportunities for them, which is why we started Founder University. It’s a free course. We do two a year for female founders and two for underrepresented founders. Do you think you have to compromise certain things about yourself to make it in Silicon Valley, or is it more about changing the game? One of the things about Silicon Valley is if you have high performance, you will rise. But it will be harder for certain people. I didn’t go to MIT. I didn’t go to Stanford. I had a knowledge of technology, but I wasn’t a developer, so it was a little harder for me. Then there’s a whole group of people who it’s even harder for. Everybody has some degree of difficulty becoming successful in life, but I

don’t think you have to check your morals at the door. In fact, I’ve become more outspoken. I’m known for being outspoken. I’ve criticized Facebook for a decade, and it hasn’t affected my business. I like a good fight. Sometimes that wins me a lot of fans, and sometimes I lose fans, but I’m always candid and honest. I try to be helpful to the founders I invest in and the ones I don’t invest in. That’s why we do all these free conferences, free education, the podcast, the books–all that’s designed to help people rise up. I want to see people go from being poor to middle class, middle class to being upper middle class, upper middle class to being rich, rich to being ultra wealthy. I like to see that change. I like capitalism. We’re seeing more firms raise megafunds to face off with the Vision Fund. Do you think growth-stage funds will change things for investors like yourself? What these growth stage funds do is they’ve kind of inserted themselves where initial public offerings (IPO) used to happen. Companies used to IPO when they were a five, ten billion dollar company. Now, these funds come in and give the company a billion or ten billion dollars like Masayoshi Son. It keeps the company private a bit longer, so they can quietly grow their market share and expand around the globe. If anybody loses out, it’s the public markets. Investors don’t get the appreciation they used to–that’s why we’re seeing more people trying to dip down and invest in these private companies. But more capital is a good thing. Once in a while, you’ll see somebody do something stupid with the capital or lose money on every transaction, which they try to make up with volume. That’s never a good idea. What do you make of the brewing competition between Silicon Valley and China? What will determine the winner? I don’t think there’s much of a competition. American companies have taken the globe, and Chinese companies haven’t left China. Until a Chinese company is used by 100 million Americans every day, you lost. Sorry, China. I think American companies have more ambition and have better founders. China is a much bigger market, so those companies are naturally going to be bigger. In terms of AI, it’s going to be a race, but I think capitalism still wins. Until April 2019

China has a more capitalistic society that has more democracy, it’s going to be very hard. We’ve made a mistake in America by not letting more people into the country with this Donald Trump experiment we’re currently doing. But that’s going to end very soon, and we’ll go back to some level of normalcy. Are you bracing for what’s to come with regards to the uncertain global economic and political climate? You know, I’ve been through three major crashes in my life: the stock market crash in the 80s, the dot-com bust, and the financial crisis. When the market goes down, it’s a great time to invest in companies. You just need to understand what market you’re in. We’re in a hot market right now; it’s a bit frothy. It’s not a bubble exactly, so you should be selling shares right now. You should be investing in companies, but doing it wisely. I invested in Uber in a down market, and people invested in Google, YouTube, and Facebook in a down market. I always say: fortunes are built in a down market and collected in an upmarket. What has been an especially memorable experience touring your book and what other projects are you working on? Japan was amazing. I love the people of Japan and Tokyo as a city. I am over the moon and pinching myself that the book’s been translated into Japanese and Chinese, and maybe another six languages. I’m trying to inspire 10,000 rich people to invest in startups, maybe $500,000 each. These are people who can afford to lose it. If I do that, we could be talking about billions of dollars being invested. That’s my goal. I want to see rich people take this money that’s just in bonds and treasuries, and putting it in innovation. We have a website called [jasonssyndicate.com] that we’re about to launch. You can sign up now. We have 2,900 members; we had 1,200 members in our AngelList syndicate before we left to start our own. We’re already the largest syndicate in the world, but we’re hoping to go from 2,900 to 10,000. Min is Jumpstart’s Editor in Chief.

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COVER STORY

500 REASONS LEAD to

Inclusion and people power with 500 Startups Founder Christine Tsai

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April 2019

By MIN CHEN & NAYANTARA BHAT

April 2019

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ith startup fervor at an all-time high, it takes more than a winning idea and a passionate team to stand out in today’s venture landscape. For many, the only hope of getting their product to market is being accepted into an acceleration program, where access to capital, mentors, and a network of fellow entrepreneurs will often prove to be the formula for success. If an Ivy League for accelerators existed, then 500 Startups’s Seed Program would unquestionably be part of the club, and one of the most exclusive, no less. Appropriately, the firm’s website reads much like a university’s landing page, filled with statistics about its global representation and photos of people smiling proudly for getting to where they are.

But 500 is far from a stuffy, centuries-old institution. The young, San Francisco-based accelerator is also the most active and international early-stage venture firm in the world, with a portfolio of 2,210 companies from 74 countries–a feat they achieved in under nine years. What’s more, ten of those companies are unicorns, and an additional 66 have reached a more than US$100 million valuation. 500 ended 2018 with $454 million of committed capital from 19 funds. While such numbers are noteworthy, 500 makes it a point to highlight the fact that 26% of their investments are led by at least one female founder and just under half of their portfolio companies are based outside the United States. These statistics are not only what differentiates 500 from other venture funds, but determinants of the firm’s ability to scale at such an unprecedented pace. Deviating from the traditional venture model, 500’s strength of identity-–notably its focus of placing diversity front and center-–has redefined startup success as going beyond Silicon Valley to reach every corner of the globe.

The CONTRARIAN

ust as 500 has come to represent the future of venture capital, so has its CEO and Founding Partner Christine Tsai. Jumpstart had the pleasure of speaking to her in January and, consistent with the persona she emanates in past interviews, Tsai is patient, open, and thoughtful about her leadership role in the industry and the responsibility that comes with it. On the surface, Tsai would appear to be an insider, having grown up in and around Silicon Valley, where her mom was a software engineer at Intel. She went on to attend the University of California, Berkeley and was a Product Marketing Manager at YouTube and Google. Only when she began seeking opportunities in venture capital did she sense that she might be an outsider, due to both her professional and personal background. “I didn’t see a lot of people like me, let alone in these types of roles,” says Tsai, who felt like “a lost cause” after being rejected from a number of firms in the beginning. “It can be intimidating as a woman 50

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and an underrepresented minority coming into an industry where you’re one of the few. That’s hard for sure,” she adds. However, Tsai worked to expand her network and play to her strengths in strategy, execution, and user understanding, rather than taking venture’s predominantly numbers-driven approach. “I was much more interested in the chance to work with founders who were taking these big risks and their products, not so much of ‘how much return is this going to get,’” says Tsai. She further deviated from the status quo when she co-founded 500 in 2010 with Dave McClure on the belief that entrepreneurship was not limited to the U.S., and that there were opportunities internationally. “There’s no logical reason that anyone can’t be a successful entrepreneur, an angel investor, or the general partner of a fund,” says Tsai. While such a statement may be taken for granted today, she notes that “in hindsight, [she] forgets how contrarian it was at the time”–to the extent that it led to a

negative impression of the firm in its early days. “I just remember hearing things here and there, where it was clear that there might’ve been a market sentiment, maybe just in Silicon Valley, that 500’s companies were not as good because we had a lot of international companies. We were known for international very early on, but that wasn’t a good thing,” says Tsai. Acknowledging that the venture world has transformed over the past few years, Tsai is glad the firm had the foresight to invest outside the U.S., as there’s no question how global venture capital and entrepreneurship have become. In 2018, startups outside of the U.S. surpassed U.S.-based startups by $27 billion in terms of dollars raised (CB Insights). “It was, of course, risky and hard being the contrarian investor when everyone else thinks you’re silly for doing that. Now we’re seeing the fruits of our labor, and I feel like we’re just getting started,” adds Tsai. Right: The firm’s LatAm Accelerator headquartered in Mexico City. Photo courtesy of 500 Startups.

“It can be intimidating as a woman and an underrepresented minority coming into an industry where you’re one of the few. That’s hard for sure.”

Left: 500’s Batch 24 on their Demo Day, after completing the fourmonth acceleration program, which took place in San Francisco on February 28, 2019. Photo courtesy of 500 Startups.

500’s EXPANSION & INVESTMENT STRATEGIES

hile other VCs in Silicon Valley may have overlooked or underestimated the thriving startup ecosystems that exist outside of the U.S., 500 leaned into its new role as the contrarian. Tsai believes 500’s success abroad

has made venture capital more inclusive for startups in need of funding, and for women or other minority groups who want to enter the industry. “We planned it to be inclusive in terms of investing in the founders and bringing others into the network, but also expand-

April 2019

ing beyond that,” she says. “Everyone has their own different needs, or they’re all at different stages, and we’re much more willing to partner and work with people, whereas I think VC in general [...] they’re more exclusive.” With more firms going international, more money is circulating in the startup ecosystem. The number of early-stage deals globally went from 2,091 (amounting to $18.1 billion) in Q2 2017 to 2,701 (amounting to $25.7 billion) in Q2 2018 (Crunchbase). The proliferation of entrepreneurship and incubation programs has risen in tandem, providing more opportunities and resources for early-stage startups. While more people are pursuing entrepreneurship, companies with a solid business model are few and far between. As the ecosystem matures, venture capitalists are reminded of the investment philosophy that has served them so well: evaluating a startup based on its business fundamentals above all else. Business fundamentals can mean slightly different things to different peoJUMPSTART MAGAZINE

ple, but at the core, it comes down to one simple thing: the bottom line. Activist investor and Live Ventures CEO Jon Isaac wrote in a 2017 Entrepreneur column: “I believe in the old-fashioned virtues of understandable businesses that simply turn a solid profit.” To Tsai, customer validation, retention, and a business that relies on solving a problem are fundamentals because “if you do raise funding, then funding runs out at some point.” Although some of today’s tech giants started without a clear business model–Tsai lists Instagram, Facebook, and Google as examples–they are truly one in a million, which means startups need to consider fundraising as a means rather than an end. Another misstep founders need to avoid is incomplete or inaccurate knowledge of their customers, as it becomes difficult for them to roll out the right solution. “As an example, a lot of companies are trying to build a business for moms, but they are not moms themselves, they’re not even parents, they have no moms on their team,” says Tsai. Details like this come out in interviews, she says, and a lack of empathy

for the customer is one of the biggest red flags–second only to meeting founders who haven’t quit their day jobs to work on their startup. On the flip side, venture firms have their own pitfalls to watch for. It’s easy to be swayed by tech trends, particularly given how explosive they become within the startup community. With terms like AI, blockchain, augmented reality and the like becoming synonymous with ‘investor bait,’ firms have become more cautious about what and who they invest in. “We still invest in sectors that proba-

bly a lot of Silicon Valley VCs think are boring, or they stay away from because they’re not trendy anymore, like ecommerce and brands,” says Tsai. The key, she believes, is again going back to how the product solves a problem for people, independent of tech trends. “Things like education, access to education, those are probably universal challenges in every market. If you implement AI later on, how will AI help?” she says. “What are the really deep tech advancements that will hopefully improve life, and not make it worse?”

“I think that’s one of the special things when the companies come in, and 500 appears several times on their cap table.”

Another issue with following trends is that investors are limited in their ability to conduct due diligence if the industry in question is outside their area of expertise. This gap is an especially glaring problem for early-stage investments, as they are considered riskier bets, which is where 500’s strength in ecosystem building comes into play. Each of their dedicated funds has a local team that identifies strongly with 500’s mission, and a community of people who have benefited from the firm’s initiatives and are eager to pay it forward. Top: Microsoft Startup Evangelist Jordan Svancara speaking at the 500 Startups Unity + Inclusion Summit, which took place in New York City on May 19, 2018. Left: 500 Startups Founder Christine Tsai. Photos courtesy of 500 Startups. 52

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With several thriving regional funds, Tsai returns to the importance of localization. Market expertise, she says, is the first thing they look for when establishing a local team, which they value even more than previous venture experience. 500 TukTuks and 500 Durians are two regional thematic funds that invest comparatively smaller amounts–as is appropriate for funds operating in emerging markets–than their companion global flagship funds. Even so, TukTuks counts Thailand’s first co-working space HUBBA in its portfolio, and Durians has invested in ride-hailing titan Grab and online marketplace unicorn Bukalapak. Along with Latin America’s 500 Luchadores, the regional funds are tailored to the markets where they operate. However, they are far from tied to their territory. Tsai says that some startups have received investment through participating in 500’s acceleration program, which is funded by their Flagship Fund, in addition to investment from one or more regional funds. “I think that’s one of the special things when the companies come in, and 500 appears several times on their cap table,” she says.

“If you know that your network is not diverse, then I think the first step is then at least trying to increase the diversity of your network proactively.”

DIVERSITY & THE VENTURE INDUSTRY

Below: The second batch of 500’s annual MENA Dojo Series A Program. Photo courtesy of 500 Startups.

April 2019

he bottom line is often the topmost concern for investors, and even more so for their limited partners. An unwritten tactic for many firms is counting on one or two of their portfolio companies exiting to compensate for losses across the rest of the portfolio. While returns are essential considerations for any firm, Tsai’s interest lies on a parallel track: the founders and the risks that they took to get their startups off the ground. She attributes this approach to her time at Google, where she was tasked with diving into the ‘nitty-gritty’ of a company–the product, the customers, and what the brand represents. Her interest in founders and the rapid changes in how tech is applied offer a constant challenge, and are what keep Tsai drawn to the industry. One of the significant changes in the investing landscape over the past decade can be seen in the profile of an average entrepreneur. Ten years ago, a startup founder was seen as “a young guy in a hoodie who dropped out of Stanford.” While this impression has faded, there’s still progress to be made when it comes to tangible change.

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The topic of diversity and the benefits of a diverse team are frequently discussed in the venture space, but the numbers tell a different story. Plenty of firms support the push for greater diversity, but few are successful. To Tsai, having a diverse network to source underrepresented founders or investors is an essential kickoff point that many firms lack. “If you know that your network is not diverse, then I think the first step is then at least trying to increase the diversity of your network proactively,” she says, adding that seemingly insignificant things like the language or models used in marketing images could be turning off founders from underrepresented groups. “In our imagery, our websites, our emails, our newsletters–we usually pretty intentionally try to feature women and founders of color, and even the language makes a difference. Those types of visuals are very powerful,” she says. Actively

creating opportunities, or even blatantly putting out a call for female founders, is all it takes to get the necessary deal flow. Tsai is also sharply focused on people when it comes to assessing the broader trajectory of the venture industry, believing that investors should be keenly aware of demographic considerations should they want to succeed in developed and emerging markets. “Globally, women are increasingly becoming breadwinners, or delaying or not having kids, so that presents an opportunity […] that’s where things are changing, completely independent of what’s cool in tech,” she says. Another example, she notes, is the growing population under 30, particularly in SEA. This people-focused investment thesis permeates throughout the firm’s seed programs and thematic funds, and remains an unchanging prerogative as 500 looks to the future.

“My leadership philosophy is definitely being authentic to yourself and being a strong example of your company’s values and mission.”

FROM 500 STARTUPS TO 3,000 STARTUPS

ith the firm growing at the rate it has, Tsai and her team haven’t had much time to reflect on it all and to share 500’s story, which is something she would like to do more of going into 2019. “We’ve planted all these seeds, and it’s clear we have a strong network internationally. Now, I think it’s about flying our flag and looking at how strong our portfolio is. We have ten billion-dollar companies, and half of them are outside of the U.S.–very few VCs can say that,” she says. In 2019, Tsai’s priority is to continue to do what they do best, which is investing in great companies and supporting entrepreneurialism. Last year, 500 worked with the Stanford Center for Professional Development and UC Berkeley School of Law to educate 350 investors from 60 countries, “all in the spirit of building ecosystems and increasing access to entrepreneurship and capital.” On a higher level, it’s about walking 54

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the talk and inspiring other firms to adopt and stick to a values system they genuinely care for–a belief that was put to the test in 2017 when McClure resigned as a result of sexual misconduct. “It doesn’t necessarily mean that you have to be superhuman and perfect, but at least my leadership philosophy is definitely being authentic to yourself and being a strong example of your company’s values and mission,” says Tsai. Her outlook on the future of venture capital is positive, especially as “it’s become more accessible outside of Silicon Valley. Gender, race, pedigree–hopefully, that doesn’t matter.” For those hoping to follow the same path as a woman or racial minority, Tsai’s advice is to be persistent, understand your skills, and forge your own path. Min is Jumpstart’s Editor in Chief and Nayantara is Jumpstart’s Editorial Associate. Right: Christine attending the 2017 500 Kobe Accelerator Demo Day. Photo courtesy of 500 Startups.

April 2019

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April 2019

FEATURES

Southeast Asia’s Overvaluation Epidemic Bringing about a healthier startup ecosystem through the Venture Capital Method By DOUGLAS ABRAMS

here’s an epidemic of overvaluation raging in Southeast Asia’s entrepreneurial community. It appears to be highly contagious, as most entrepreneurs I meet seem to be infected. Overvaluation is dangerous for startups and can even be fatal in extreme cases. Most SEA startups that pitch to my investment firm Expara Ventures do well until they get to the valuation slide, at which point their presentations quickly go off the rails. One of my favorite exam-

It’s not just founders who struggle; I also see investors valuing startups at levels that virtually guarantee they will not be profitable, even if the investment ‘succeeds.’

April 2019

ples is a Thai fintech startup that seemed to have it all: an innovative product, a strong team, and good initial market traction. They were raising US$3 million, which I felt was exceedingly high for a Seed-stage company, but this number was nothing compared to their valuation. In fact, I wasn’t sure I had heard the founder correctly. “Did you say $16 million?” I asked. “No, $60 million,” he replied. Game over. The product helps investors value publicly traded companies, and when I asked the founder if he saw the JUMPSTART MAGAZINE

irony in this, he replied: “Everyone has their view on valuation.” Indeed they do. This example is extreme, but most startups we meet are improperly and significantly overvalued. Investors will naturally lean toward lower valuations than founders, but the discrepancy I am seeing goes well beyond polarization. It’s not just founders who struggle; I also see investors valuing startups at levels that virtually guarantee they will not be profitable, even if the investment ‘succeeds.’ Let’s take a look at traditional valuation methods that may be causing these inaccuracies, and compare them to a startup-focused method that actually makes sense. There are three commonly used methods: •

Price to earnings (P/E): The company is valued as a multiple of its earnings, with the multiple reflecting the company’s expected growth rate. Higher-growth companies are valued at higher multiples, and lower-growth companies at lower multiples.

•

Comparables: The company is valued by comparing it to companies with known valuations, adjusting for differences between the two.

•

Discounted Cash Flow (DCF): The company is valued based on the discounted net present value (NPV) of its projected cash flows. These methods are popular and

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April 2019

well-understood, so why do they all fail when applied to startups? Traditional methods are primarily used to value publicly traded companies, which create value for shareholders through capital appreciation and dividends. But startups create value through trade sales or IPOs, so they focus on growing revenue rather than earnings.

It’s unlikely for a startup to be overvalued until exit because the market is good at correcting itself in the long run.

For a high-growth startup, earnings represent capital that was not invested into growing revenue, which is why even successful startups can still be posting losses every quarter. Since startups will usually have low or no earnings by design, they cannot be fairly valued by P/E. The Comparables Method can theoretically be applied to startups, as it does not rely on cash flow or profits. However, its problem lies in the application, as it assumes valid comparisons can be made from a large group of similar companies, which does not hold for the startup world. Startup valuations are typically private,

unknown transactions. Additionally, known valuations tend to be the outliers, as they are usually the ones that attract attention. I often hear this from overvalued startups: X was recently valued at $40 million in its Seed round; we are just like X, so our Seed round should also be at $40 million. Nevermind that X’s valuation made it into the news because it’s a freakish outlier or the fact that it’s based in Silicon Valley (where the valuation is still an exception) when you’re based in Bangkok (where this valuation is ridiculous). This example highlights another problem with the Comparables Method: what constitutes a comparable company? Should a Thai fintech startup be placed in the universe of U.S. fintech startups (which will have lot of data), or Thai fintech startups (which will have sparse data), or Thai startups overall (which will have a reasonable amount of data)? There is no easy answer, but generally, geographical comparables are more meaningful than sectoral ones. The DCF Method values companies based on future cash flows, so it’s possible to value startups using this method if they are projected to become profitable during the forecast period. The method uses a pro-forma model to forecast the company’s cash flows, which are then discounted back to their NPV. It must make assumptions about revenue growth rates and the discount rate used for the present value calculation. In a DCF valuation, the discount rate should be the company’s weighted average cost of capital (WACC). We give more credit to founders who use the DCF method, but almost all DCF valuations still use the wrong discount rate. Since venture-invested companies are usually 100% equity-financed, the company’s WACC should be its equity cost of capital, which is equivalent to the investor’s ROI or annual internal rate of return (IRR). A venture investor’s cost of capital is around 100% per annum, but most DCF valuations we see have a discount rate between 10 to 15% because it’s the WACC for many publicly traded companies. But those who use the DCF method should understand that the discount rate needs to reflect the company’s actual cost of capital. Since discount rate and valuation in a DCF model will be inversely correlated, this much-too-low discount rate results in a much-too-high valuation. The last problem with using valuation methods designed for publicly traded

companies is that they are relevant for liquid shares markets, so the same valuation should apply for buyers and sellers. But for venture investors, the valuation today is only the valuation they will buy because the investment is typically highly illiquid and cannot be sold for years. Startup valuations need a method that captures a meaningful value for investors. Enter the Venture Capital (VC) Method, which encompasses the following: •

A venture firm’s return is equal to the exit valuation, divided by the investment valuation and adjusted for dilution. Setting aside dilution for a minute, if the exit valuation is $100 million and the investment valuation is $5 million, then the VC’s return will be 20 times (X).

•

For early-stage investments, the firm’s required return is 30X (so this example is already a failed investment).

•

We assume the investor will be diluted by 50% in between their early-stage investment and their exit.

•

The investment valuation is then equal to the exit valuation divided by 60.

•

If we assume an exit valuation of $100 million, then the fair investment valuation is $1.67 million. The first question most entrepreneurs

will ask about the VC Method is: why is there a 30X return requirement as seen in the second point? 30X comes from (a) the firm’s cost of capital, which is equal to the return required by the fund’s investors, and (b) the failure rate of portfolios. Venture fund investors, especially for early-stage funds, expect a return of at least 20% a year (accounting for net of fees, expenses, and carried interest) over ten years (the average life of a fund). This annual return translates into a 6X overall return after ten years. The required return is 30X instead of 6X because only 20% or less of the average portfolio will deliver a meaningful return. Each early-stage investment that returns less than 30X is, therefore, returning less than the firm’s cost of capital. Now we can see where the 100% per annum discount rate we posited for a DCF valuation comes from; assuming an average five-year holding period for each investment in a ten-year fund, 100% return per year will yield an approximate 30X return after five years. The most likely exit for venture-funded startups is a trade sale, which makes up 90% of all exits in the U.S. Given the average exit valuation of startups in a trade sale is around $100 million, we should expect to see average early-stage valuations between $1 to 2 million. The vast majority of early-stage startups we meet in SEA are valuing their companies at $5 to 10 million, suggesting they are overvalued by 5 to 10 times. April 2019

You might wonder: so what? If investors are okay with overpaying, then why can’t startups accept the investment and run? Well, overvaluation is okay until it isn’t. It’s unlikely for a startup to be overvalued until exit because the market is good at correcting itself in the long run. Typically, they will face one of several unpleasant situations: •

The additional dilution will be shifted to the founders in a down-round, especially if the investors who overpaid are not entirely clueless and included an anti-dilution clause in the agreement.

•

Their next round will be blocked by investors who don’t want to do a down-round at all.

•

A reasonable exit for founders will be blocked by investors who will not receive their required return at a reasonable exit valuation.

•

Founders may receive little or nothing in an exit if investors have liquidation preferences, which is likely, given the overvalued investment.

Overvaluation is not in the interest of investors or founders, but the good news is that it can be rectified if and when the correct method is applied. Let’s try to stop this epidemic before it spreads any further, and help to create a healthy ecosystem for all. JUMPSTART MAGAZINE

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The Dropbox Story, Retold It’s time we take back growth hacking By LI-XING CHANG

despise the words ‘growth hacking.’ What started as a useful term for teaching startups how to scale quickly has turned into one that means running marketing campaigns on a minuscule budget. It’s been tossed around the startup water cooler so often that it’s brought a toxic group of marketers into the industry. Just scroll through your LinkedIn feed, and you’ll know what I’m talking about. These marketers are the self-proclaimed industry influencers who spend more time writing articles or selling themselves as public speakers than executing campaigns. Currently valued at US$12 billion, Dropbox is one of Silicon Valley’s most popular startup tales, and it’s frequently misinterpreted as the ultimate growth hacking success story by those marketers. This article will show how it’s, in fact, a case of applying deep industry knowledge and unit economics to build a scalable user acquisition strategy. 60

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Before they made marketing history

hen Dropbox CEO Drew Houston founded the company in 2007, he utilized two different strategies to acquire customers before settling on the now popularized referral marketing campaign. Dropbox first acquired customers through content marketing by leveraging the community on Digg [digg.com], a website that showcases trending topics on the Internet. The team used a private launch video they created specifically for the outreach campaign, filling it with jokes and references only Digg readers would understand. By customizing their content to attract Digg users, Dropbox was able to grow their customer base by 1,400% in one day–from 5,000 to 75,000 users, according to Houston. These numbers are astonishing even by today’s standards, but content marketing proved to be an unsustainable scaling strategy for small

The Dropbox story has always been chalked up as a ragtag team of misfits who did the impossible at almost zero cost to them, which simply isn’t true.

Gigabytes A brief history Dropbox’s core business is data storage, which is one of the tech world’s oldest bastions. Tech would not have reached today’s heights had it not been innovations in this industry. In 1981, the cost of one gigabyte (GB) was roughly US$300,000. Now imagine modern-day computers that contain one terabyte of storage. By 1981 standards, a modern computer would cost at least $300 million, which would have made computing virtually impossible. Fortunately, data storage also follows Moore’s Law, meaning the amount of data we can store on hard drives doubles every two years as price decreases at the same rate–a trend we’ve seen play out since the 1980s. Nowadays, one GB costs about $0.05 at most.

startup teams due to its resource demands. After carrying out a successful beta launch on Digg, Houston and his team moved on to Google AdWords in 2008. At first glance, this strategy seemed workable. They acquired four users at a $291 cost-per-conversion and maintained a 0.11% clickthrough rate at an average cost-per-click of $1.65, according to Houston. However, for a product that generates $99 in revenue per sale, Dropbox would have lost $192 for every converted customer should they have continued down this road. With these metrics, they would have spent $1.455 million to acquire 5,000 customers, ending with a $960,000 loss. Clearly, not a scalable strategy.

If I were an Apple user in 2008, the opportunity to increase my storage by 20% just by sending an email to my friends would have been a pretty sweet deal. Other computers were also stuffed to the brim with unnecessary software and a bulky operating system, eliminating a good portion of what’s available to the user. To this day, manufacturers still quote hard drive sizes, and not the actual amount of storage the customer will have on their device. Now, it’s easy to understand why Dropbox utilized their most valuable asset (data storage) to create a referral marketing strategy. With each GB of storage costing only $0.11, the company was able to scale on the premise that for every friend a customer refers, the existing user would get 500MB of storage. For example, if a user refers one friend, Dropbox would only have to spend about $0.05 to acquire the new user. To acquire 5,000 new users through this strategy instead of AdWords, Dropbox would have only paid $250 instead of $1.455 million. It’s through this program that Dropbox found the most success, leading them to eventually dominate the cloud storage industry.

he Dropbox story has always been chalked up as a ragtag team of misfits who did the impossible at almost zero cost to them, which simply isn’t true. So why do we keep telling the growth hack story? In the beginning, marketers applauded Dropbox for finding a referral strategy that worked after AdWords failed them. Then came Internet marketing personalities like Neil Patel, who used their social clout to forcefully define growth hacking as a methodology where “the cost of acquiring each additional customer is much closer to $0” (neilpatel.com). These marketers kept selling this idea, and so it persisted. The real lesson to be learned is that building a scalable user acquisition strategy requires a deep understanding of the end user, industry conditions, and business economics. Together with a sound product, Dropbox breathed new life into the world of computing, and they didn’t need to hack their way there. Li-Xing is Jumpstart’s Silicon Valley Evangelist.

Using the GB to their advantage

he remainder of Dropbox’s tale is one for the history books. At this juncture in the story, many entrepreneurs and startup geeks would say that they growth hacked their user base by 3,900% through a two-sided referral marketing campaign. However, if we look at the cost of a GB and other industry conditions at the time, it becomes evident that Dropbox was implementing a mathematically sound strategy. Even though the cost of a GB was at an all-time low in 2008 at $0.11, the first MacBook Air, which launched that year, only had an 80GB hard drive–significantly less compared to the average 160GB hard drive of other computers. With 2008’s Mac OS Snow Leopard requiring 5GB of storage, the customer was paying $1799 and only getting 75GB of storage. In comes Dropbox with a fantastic offer: earn up to 16GB by referring friends to create a Dropbox account. April 2019

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Opposite page: Students from La Salle Green Hills learning about the startup ecosystem at Launchgarage. Photo courtesy of Launchgarage.

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THE

Pearl of the

Orient Is the Philippines Asiaâ&#x20AC;&#x2122;s next technology tiger? By RUSS MALANGEN

he Philippines has been a popular destination for foreign entities looking to enter emerging markets for the better part of the last two decades. Today, investors are increasingly inclined to allocate their resources to the countryâ&#x20AC;&#x2122;s tech and innovation sector, and for a good reason. In a state riddled with problems the moment you step out the door, opportunities to provide solutions are always present and plentiful. 62

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Filipinos have long adhered to a narrow concept of success commonly seen in third world countries: obtain a good education (on paper), secure a stable occupation, work hard, and rise through the ranks. In a fast-paced world where technology is evolving at an exponential rate, such cases of tunnel vision simply cannot remain the paradigm. Witnessing every foible and triumph of globally renowned entrepreneurs has certainly left its mark on the Filipino people in recent years. The abundance

of Internet resources and communities formed through social media, forums, and streaming platforms have diversified career aspirations among locals, overshadowing the old world concept of hustling and grinding with diminishing returns. New perspectives are also challenging traditional industry practices, forcing even the largest conglomerates to work alongside startups to remain competitive in their respective fields. Touted as one of the most vibrant startup communities in SEA, the Philip-

pines is currently undergoing a massive shift from being a service-oriented industry that addresses the needs of other markets to individuals creating startups to cater to their own demographic. The country averaged an annual 1.24% GDP growth rate from 1998 to 2018, but analysts see it increasing to anywhere between 5.5% to 6.5% in 2019, effectively making the country one of the fastest-growing economies in the world (Trading Economics). A rising generation of entrepreneurial-minded youth and saturation of foreign investment in neighboring countries like Singapore and Indonesia have also convinced investors to deploy capital into the country. Local startups have proven their ability in applying the latest innovations. Fintech, in particular, has the highest rate of adoption because it solves one of the population’s most pressing needs: access to fast and hassle-free financing. Acudeen Technologies, a marketplace for movable assets, secured over US$11.2 million worth of invoice purchases–an impressive feat for three years of operation. Cashalo, a mobile app that provides on-demand access to loans, received a $190 million investment in 2018 from JG Summit Holdings Inc. and Hong Kongbased Oriente in a joint venture. Indonesian superapp GOJEK got their slice of the pie by acquiring a majority stake in Coins.ph, one of the most prominent local fintech startups, for $72 million in 2019. Local tech talent is another factor that makes the country so attractive to investors and established startups looking to expand regionally. Angelo Valdez, CEO of Singapore-based human resource (HR)

startup Diplomazee, echoes this sentiment. He expanded his company into the Philippines after seeing a massive gap between fresh college graduates and companies looking for new talent. “Due to its massive business process outsourcing industry, the Philippines has developed an incredibly strong tech servicing industry,” says Valdez. He also saw the country as an ideal market for testing new products due to a number of socioeconomic factors.

Witnessing every foible and triumph of globally renowned entrepreneurs has certainly left its mark on the Filipino people in recent years.

“With a fast-growing middle class that can afford technology, a largely fluent English-speaking population, a society that is addicted to social media, and low labor and operating costs, the Philippines apparently has all the ingredients of an emerging tech tiger,” says Valdez. The government also introduced advantages for startups over their competitors who have yet to enter the market. Among these are tax cuts and other finan-

April 2019

cial incentives for overseas and offshore businesses. Companies that qualify can enjoy income tax holidays, or even a 5% tax rate if they are located in a special economic zone. That being said, entrepreneurs like Valdez recognize that it’s “a give-and-take process” between allowing startups to benefit from local talent and resources, and encouraging them to set the foundation for “a stable economy and sustainable growth and development” in the country. Accelerators are in no short supply, boosting governmental efforts and acting as a pillar for both aspiring and experienced entrepreneurs. Notable among these is Launchgarage, which was co-founded by serial entrepreneurs Jay Fajardo and Jojo Flores. QBO Innovation Hub is another example; it’s a partnership between the Department of Trade and Industry and JP Morgan catering to early-stage startups. StartUp Village, in the same vein, aims to assist entrepreneurs in turning their ideas into reality through their incubation program. The Department of Science and Technology also introduced a Tech-Business Incubator Initiative to provide capital and the necessary resources to cultivate entrepreneurialism within select universities across the country. There’s no denying that winds of change are sweeping the Philippines, as the older generation’s service-oriented industries are slowly making way for a leading ecosystem for technology. Without a shadow of a doubt, with the ecosystem being as vibrant as it is today, the Pearl of the Orient is poised to be the country to watch in the coming years.

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Evolution of

Crowdfunding Where the only constant is change By THÉO MÜNCH

he crowdfunding landscape is incredibly dynamic. It’s an industry unlike any other, born out of need and built up by creativity. During my time working as a crowdfunding consultant, I’ve seen campaigns for everything from a potato salad to an Emmy-nominated documentary. While the space can be diverse and quirky, it is an extremely effective tool when used correctly. Crowdfunding 101

oday, rewards-based crowdfunding (obtaining funds for a project in exchange for a product, service, or experience) has grown to be a massive industry, with an estimated US$17.2 billion raised in 2017 (Statista). That’s quite the leap since its mainstream debut in 2003, and we’re still seeing significant shifts each year. The emergence of crowdfunding can be traced back to the early 2000s with the founding of ArtistShare, the first crowd-

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April 2019

Below: The Fidget Cube raised $6.4 million from 154,926 backers on Kickstarter in 2016. It is the 12th highest-funded project on the platform.

funding website on record, which allowed fans to make contributions to support an artist’s musical endeavors. ArtistShare gave the public unprecedented access to creators and allowed independent musicians to finance their work without a record label. It opened up the music industry to more people than ever before. Gradually, others began to catch on. If it worked for the music industry, where else could this model be used? Thanks in large part to the Internet and social media, it was possible to harness the power of an audience to create something, often with little to no money upfront. For many creatives, crowdfunding was a beacon of hope to make their dream projects come to life. The crowdfunding model continued to expand and the later 2000s gave birth to two of its most popular platforms: Indiegogo and Kickstarter. These rewards-based sites became synonymous with crowdfunding, and creators of all backgrounds and disciplines began putting their ideas online to secure the capital

needed to make them a reality. Ideas spread like wildfire. To date, Indiegogo and Kickstarter combined have brought to life almost one million campaigns that have reached their funding goals. Despite the platforms’ widespread adoption, less than 40% of campaigns actually hit their funding goal (Kickstarter). In turn, creators have had to become, well, creative and use beautiful branding and smart marketing to share their projects. To stand out, creators have to tell a compelling story. Crowdfunding today

t’s true that crowdfunding has been an extremely useful tool for creators working in the arts, giving them access to funds in an industry that is often underfunded. On the other end of the spectrum, the tech community realized that they, too, could use the popularized practice for their projects. Log onto Kickstarter or Indiegogo right now and you’ll find hundreds, if not thousands, of tech product campaigns live on the platform. Traditionally a tedious process requiring a team, investors, developers, and market tests, launching a product through crowdfunding is simpler and poses relatively lower risk.

Crowdfunding has come to epitomize just how connectivity is transforming the way we do business.

Today, Kickstarter’s top crowdfunding categories are games, design, and tech, in that order. On Indiegogo, tech and innovation has the widest variety of project categories. The prevalence of tech-related campaigns is due to the unique benefits such platforms present. Not only can you fund your project, you can also gauge demand, acquire preorders, and make improvements all before beginning a production run. It’s a smart, time-saving, and inexpensive way to launch. Plus, it works, as seen from brands like Brooklinen, Pebble smartwatch, Fidget Cube, and more. Once you’ve successfully launched, manufactured, and shipped a product, you’ll likely want to expand. The next logical step is to get funding to further scale your company, which is where equity crowdfunding comes in. Equity crowdfunding and beyond

quity crowdfunding is on the rise thanks to platforms like AngelList, StartEngine, and SeedInvest. These platforms are, for the first time, giving startups opportunities beyond taking part in traditional investment rounds to reach their large funding goals. They’re also making headlines in the process, as seen with Revolut, a fintech company that recently closed a $250 million Series C at a $1.7 billion valuation, giving its initial crowdfunding investors a 1,900% return. Equity crowdfunding is adapted from a rewards-based model, where contributors essentially invest money in exchange for partial ownership of a company rather than a product or service. Simply put, it’s the sale of securities in a private company. The model further solidified its place in the investment world after the Jumpstart Our Business Startups Act was passed in 2011, which “created an exemption under the federal securities

laws so that crowdfunding can be used to offer and sell securities to the general public” (U.S. Securities and Exchange Commission). The act not only legitimized equity crowdfunding in a major way, it also sped up the pace of innovation.

rowdfunding has always been less about instant gratification, and more about the long haul, which is perhaps why it deviates from the norm in American culture. In both rewards and equity campaigns, backers have to wait to see their return on investment, and companies have to continually refine their product. It’s given us time to think, reflect, and pivot toward opportunities that help us create new things most effectively. In a way, crowdfunding has come to epitomize just how connectivity is transforming the way we do business. It’s difficult to predict the future of crowdfunding, especially since the practice and tools available have evolved year-to-year since its inception. What we do know for sure is that it’s going to keep changing and offering new ways to make the world a better place—or at the very least, give us more potato salad. April 2019

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Tech to the Rescue

“Our old assumption of what developing countries and what people are like is very outdated. The world is becoming much smaller, and even these places which are hardest to reach are becoming more integrated.”

How technology is creating entrepreneurial opportunities in the developing world By NAYANTARA BHAT Zidisha Founder Julia Kurnia

overty is a challenge world leaders have been working to alleviate for decades. Microfinance and microcredit have made great strides, and startups are now taking up the challenge to improve rural credit systems as well. When microfinance was pioneered by Muhammad Yunus at Grameen Bank in Bangladesh, it was heralded as a sustainable solution for poverty. Yunus was awarded the Nobel Peace Prize in 2006 for his work, and his model was exported to emerging economies around the globe. Microfinance has become a key ingredient for rural development, particularly in India, Vietnam, and Indonesia. It’s become a necessity in some countries’ banking systems. Bank Rakyat Indonesia (BRI), one of Asia’s leading microfinance providers, saw defaults in all categories except micro-loans during the late-90s Asian Financial Crisis. Recognizing the value of lending to the economically disadvantaged, BRI now offers ‘mobile banking,’ which involves dispatching a loan officer, bank teller, and security guard to disburse loans in remote locations. However, the system is not without its flaws. The cost of hiring, training, and paying loan officers to collect debts is substantial–so much so that interest rates must reach 30% or 40% for the bank to recoup expenses. These numbers have been the standard for years, leading to the world’s poorest paying the highest interest rates. But new possibilities opened up with the arrival of the Internet. Case Study: Zidisha

ne startup that has made waves in Kenya, Senegal, and Ghana, amongst other countries, is Zidisha. The platform connects microfinance 66

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lenders directly with borrowers, allowing them to interact and transfer money. The company’s founder Julia Kurnia has long been committed to creating social impact in developing countries, as she considers poverty to be “the defining challenge of [her] generation.” Her journey began in graduate school when she worked with a field partner of popular microfinance platform, Kiva. After observing inefficiencies in the microfinance space first-hand, through Kiva and a government role managing grants in West Africa, she began to think about how to improve the system. “Even in really destitute locations, young adults were all going online,” says Kurnia. “There were cybercafes appearing everywhere [...] I saw how [people] could use a decentralized online marketplace

and participate in loan auctions, and I wanted to give them that chance.” That was the moment Zidisha was conceived, but it took a few more years before Kurnia discovered a suitable money transfer tool, which came in the form of Kenyan mobile money exchange platform, M-Pesa. “Our first loans were to Maasai nomads in southern Kenya. They lived in settlements that didn’t have paved roads or electricity, or connection to the electric grid, or any bank branches,” she says. Sitting in her apartment in Washington D.C. in 2009, Kurnia sent US$500 raised from family and friends to a nomad in Kenya via M-Pesa. Eventually, he paid it back the same way. Today, Zidisha has disbursed over $15 million worth of loans to over 200,000 people.

What sets Zidisha apart from predecessors like Kiva is that it enables direct communication between lenders and borrowers, encouraging transparency in a space that usually involves middlemen and opaque transactions. At first glance, the platform feels like a sleek ecommerce website, and the recently-launched Android app is gaining traction and generating more demand for loans. Initially, Kurnia wanted the platform to work like eBay, where borrowers bid on loans with their preferred interest rates. She soon realized it wasn’t going to work. “It turned out lenders didn’t want interest, they just wanted to help people,” she says. Zidisha then became purely philanthropic. Strikingly, Zidisha doesn’t have a ground team of loan officers and evangelists, which means they don’t need to hike up interest rates like traditional microfinance institutions (MFIs). In fact, they don’t charge interest at all, but only a small risk fee, which goes into a fund to reimburse lenders in the case of default. Without a physical presence in their countries of operation, Kurnia’s team needed an alternative way to determine whether a borrower would pay back a loan. One major component of their risk mitigation system is based on a surprisingly simple notion: scammers don’t have the patience to work their way up through Zidisha’s system. An initial loan on the platform starts at an average of $1.50. Borrowers can access greater amounts by meeting repayment schedules, eventually working their way up to a few thousand dollars. By setting a small amount for the initial loan, Zidisha can cut defaults down to a minimum. Those who fail to repay the starting loan, which makes up 50 to 60% of borrowers, aren’t eligible to take out larger loans. Conversely, those who pay can generally be counted on to repay larger loans. Another tech integration that’s essential to Zidisha’s risk mitigation is a predictive credit risk algorithm created using DataRobot. “We have about 150 different data points, everything from data on the person’s smartphone, if they use our app, to how many friends they have on Facebook,” says Kurnia. Using these data points in conjunction with patterns found in older users’ data, the algorithm is able to predict the riskiness of new borrowers. Zidisha also integrated with Kenya’s credit bureau, and is now able to use the bureau’s application programming interface to access a borrower’s credit history.

Left: Esther Wanjiru is a school teacher from Mombasa, Kenya who also owns a small general store that receives micro-loans from Zidisha. Top: Microfinance is also increasing marginalized communities’ access to education. Photos courtesy of Zidisha.

“This is very basic in a developed market but it hadn’t existed in Kenya before,” says Kurnia. Moving beyond traditional microfinance institutions

icrofinance is enabling great strides in once-destitute communities. About 90% of Zidisha’s loans are for small businesses, and the majority of the remaining 10% is used to pay tuitions. Young people are accessing education, while older generations are pursuing entrepreneurship with gusto. “We often see people who start one business with their first loan, the second loan they’ll start something completely different, and they’ll be running two or three things simultaneously,” says Kurnia. Other startups are also introducing solutions for improving microfinance, and impact investors, in turn, are taking notice. According to 2017 Global Impact Investing Network, microfinance and other financial services received about 60% of impact funding in 2016. Meanwhile, traditional MFIs are maturing, but they remain hesitant to replace legacy systems that have taken decades to set up. This opportunity gives startups the space to innovate. “I think there’s room for both. In the markets we target, most people still don’t have access to the Internet, so they need to talk to someone in person,” says Kurnia. Kurnia hopes that as microfinance startups continue to sprout, more inforApril 2019

mation will be shared among stakeholders, enabling greater efficiency and less risk for everyone. That being said, rural entrepreneurs who need larger loans are still often unable to secure them. Those who borrow from traditional MFIs are considered risky and face unreasonably high interest rates. The current practice for those in need of larger loans is to borrow from a number of different vendors. Kurnia believes this problem has yet to be solved, and isn’t something that lies within the capability of Zidisha’s model, since it would rely upon having on-theground expertise. “You would need to be able to engage legal action if needed, and you would probably need some security at that point,” she says. “We’re not set up to do that–we’re more of a lightweight, Internet remote platform, so it would probably have to be a local entity.” Her hope is that people see Zidisha and are inspired to build similar products, utilizing decentralized services to solve key problems in developing countries. “Our old assumption of what developing countries and what people are like is very outdated,” she says. “The world is becoming much smaller, and even these places which are hardest to reach are becoming more integrated.”

t goes without saying that technology is accelerating development in emerging economies, but this doesn’t mean existing systems should be replaced. To take on an issue as multifaceted and immense as poverty eradication, collaborative efforts are needed from the public sector, non-profit organizations, traditional MFIs, and startups working to bring about inclusive innovation. Nayantara is Jumpstart’s Editorial Associate. JUMPSTART MAGAZINE

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The Three Cs

By ANGELA TOY

Portfolio management for venture capital success

uccess for an early-stage VC firm is defined by the ing capital, having a supportive portfolio management strategy to number of unicorns and exits in its portfolio, which is providing ‘connections’ and ‘counsel’ is imperative to the success guided by choosing the right management team, and of the startup and subsequently, the investor. ability to evaluate market potential and the timing of The earlier an investor hears of an issue, the faster it can be an opportunity. However, VCs can’t merely rely on solved, and the consequences of not actively managing the portfomaking the right pre-investment decisions lio are evident. The Ewing Marion Kauffand let the startup run by itself post-inman Foundation found that the average vestment. Upon investment, most firms exit multiple from active contact (one to When there are cracks in will put portfolio management processes two times a month) is 3.7X, compared to the portfolio management in place, working to gather and analyze the average exit multiple of 1.3X from pasprocess, the investor data to improve the portfolio’s value over sive contact (one to two times a year). time. Having spent the past five years in the is unable to generate When there are cracks in the portindustry, I’ve seen the SEA startup ecomore value and, in the folio management process, the investor system grow from nascency to one of the worst case, cause the is unable to generate more value and, in most attractive startup ecosystems globvalue to decline due to the worst case, cause the value to decline ally. However, SEA founders still face the due to the lack of timely help. Around same challenges around hiring and retainthe lack of timely help. 29% of startups fail due to insufficient ing talent. funds, often as a result of poor finance and An early-stage startup usually has an resource management (CB Insights). This pitfall, among others, average three-person founding team with less than 50 employees. could easily be averted if the investor has a proper understanding Once the startup receives investment, growth becomes critical of the startup’s operations. and hiring becomes the focus, but building a great team is never Founders choose to partner with venture firms because of the easy. The startup is competing with tech titans for engineering three Cs: capital, connections, and counsel. Apart from inject- talent and global brands for sales talent. VCs with their in-house 68

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CMY

recruitment specialists can, therefore, be extremely valuable in creating a pipeline of candidates interested in joining the startup, and help shortlist candidates faster and at a lower cost. Another HR-related challenge is establishing a company culture that engages and motivates employees. VCs can advise on best practices, knowing how other portfolio companies have successfully implemented policies in the past, such as drawing up an appropriate Employee Stock Option Plan to keep employees motivated. VCs have the privilege of meeting people from different backgrounds, and these connections and networks are valuable to startups for business development and fundraising efforts. At Golden Gate Ventures, we are in close contact with a network of multinational corporations, late-stage investors, co-investors, and global and regional tech companies to keep abreast of the demands of these stakeholders and market trends. Thus, we can plug portfolio companies into this ecosystem and help make meaningful connections on a global level. We commit more than half of our resources to support our portfolio companies, where an experienced team assists with HR, CFO support (e.g., strategic level capital structuring, fundraising, price setting, etc.), and digital growth. We also have a dedicated Slack team with all the portfolio companies, which allows us to be available at all times. The portfolio companies can also use this channel to exchange ideas with each other. The fruit of our portfolio management success has come in many forms. For example, weâ&#x20AC;&#x2122;ve helped increase the efficacy of digital marketing for a leading property portal by almost 70%. Also, more than half of our portfolio companies have raised follow-on financing from introductions weâ&#x20AC;&#x2122;ve made. These wins

have translated to success for us when raising capital from LPs as well. VCs that stay up to date with the performance of their portfolio companies are more aware of the obstacles they face, and are capable of helping them navigate through troubled waters. Portfolio management is an integral part of the venture industry, as collaboration is the formula for long-term success for both investors and startups.

April 2019

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QUICK TAKES

of your tricks, tactics, hacks, and crazy ideas will lead to donkey results, but 3% of those will be successful. You’ll notice them instantly because they should be performing two to five times better than your average campaign. To find your future unicorn, you need to look to the past. What blog content drove the most organic traffic? Which social media post created the most engagement? Which email subject line elicited the highest open rates? Try, test, rinse, repeat. The goal is to find one or two unicorn marketing techniques. Every business has one. My startup, Wordstream, had been limping along for a couple of years with ho-hum growth. I’m not a ho-hum growth guy, so we obliterated our original product, made something entirely new, and basically gave it away for free. This momentum was what we needed to slash our cost-per-acquisition and blow up our growth.

A Different Type of Unicorn Three principles to overhaul your marketing strategy By LARRY KIM

’m obsessed with unicorns. That might sound a bit weird for a middle-aged guy, but hear me out. For over ten years, I’ve been on a mission to discover the most successful marketing tactics available. I call these tactics unicorns. In this article, I’ll share with you my three principles for creating unicorns. Be somewhat delusional elusional thinking is about coming up with plans that are so aspirational they sound ridiculous, while believing they are achievable. At one time, it was delusional to think it was possible for automobiles to replace horses, thousands of songs to fit into your pocket, and a quarter of the Earth’s human population to be on a single social network. When you come up with a crazy plan, most of the general population will either laugh at you or mock you. You’ll have a hard time finding employees and investors who believe in it. That’s okay. You’re looking for the tiny minority of people who will buy into your delusion and turn your wild dream into a reality. Delusional thinking attracts high-caliber people who create growth by virtue of their dreams, passion, and addiction to success. Delusional thinking also forces epic change. There is no way to carry out a delusional plan with timid donkey steps or anemic tweaks. Instead, you have to invent new ways of doing things.

Take risks elusional thinking leads you to try out marketing practices that are whacked out, off-the-wall, and possibly dangerous. Much of what you try will fail. 97%

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Make unicorn babies aking unicorn babies requires taking those marketing methods that worked well and doing them again. Yep, it’s that boring. Find what’s working, and make it work again–only better. I’ve discovered that 95% of marketers prefer new and unproven marketing tactics over old, proven ones. That’s donkey thinking, not unicorn marketer thinking. Once you find the unicorn, you start making unicorn babies. The mistake people make is not understanding that a crappy idea is crap no matter what. Cut your losses and move on. Of course, marketers should always be trying new and unproven tactics, but they shouldn’t neglect what’s working. Rather, they should improve upon it again and again until it stops working altogether. At Wordstream, we tried a bunch of marketing tactics, from PR stunts to free tools. We took this pile of experiments and selected the top 3% for repurposing, which we kept optimizing, testing, and pushing.

nicorn land is a remarkable place. To get there, you’ll catch the attention of naysayers, but you’ll also attract believers who will join you. If you’re tired of the marketing strategies you’ve been executing, I understand. Making little conservative moves and getting mediocre success is a complete waste of time. It’s time to be a unicorn in a sea of donkeys.

7-10 MAY 2019 Hall 5BCD | HKCEC

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visit@retailasiaexpo.com April 2019

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QUICK TAKES

Investing In Yourself Elevating your life through soft skills By SHANNAH KENNEDY

very successful person I work with wants to make more money, feel more energetic, find inner happiness, be healthier, and continually elevate their life. Thanks to technology, we now have the tools to juggle multiple projects and access the knowledge to become better versions of our professional selves. However, many work tirelessly toward their goals without realizing that life mastery extends beyond hard skills. The fundamentals humans need to grow, flourish, and evolve are also the soft skills that are often dismissed as a waste of time. But only when we slow down are we able to nurture our most valuable asset–ourselves.

Identify your values alues are the gateway to your authentic self, as they form the basis of your thoughts, words, and actions. Identifying your values can reduce anxiety and stress because they act as a framework when you’re feeling stuck about how to move forward. Some values are family, happiness, health, financial security, creativity, freedom, inner harmony, affection, self-respect, adventure, achievement, power, wealth, and honesty. Choose three that define your character, then live them visibly at work and at home. Living by your values is also one of the most powerful ways to lead and influence others, as it forms the basis of your emotional intelligence, thus bettering your ability to interact and forge connections with them. Successful people live by their values because they serve as a navigator in all situations, giving them the confidence to make decisions. Most of my clients identify health as a value, so they say the gracious ‘no’ to extra work functions, and even promotions, if the timing is not right or if it will compromise their physical or mental wellbeing. This structure allows them to live by design and not by default.

Create a life plan life plan provides you with clarity and direc-

tion on where you want to go and how you want to get there. It’s not just a picture of what you could be, but an appeal to become something more. A life plan should permit you to dream big and refuel you as you reach each new chapter, and it can only be a motivating force if it’s based on your values and resonates purpose. My clients start by drawing up a simple table, where each column makes up a decade with ten rows for each year. They then plot their age, and the ages of their partner and children, if they have a family. This exercise alone gives them an overview of what each stage of their life will look like and what their priorities should be for each decade. For example, they’ll be able to see which is the right year to take a six-month sabbatical to study, or a long holiday to spend time with the kids. The cost of not having a plan is feeling that you’re not moving, not growing, and on the treadmill doing the same things while others are running ahead.

Commit to self-care elf-care is a movement against mediocrity by honoring the life you’re given. It’s a concept that sounds easy in theory, but difficult in practice because it requires mindful actions that need to be taken every single day. Here are a few ways you can start:

♥ Stop comparing: Judging both yourself and others neutralizes self-love and depletes your energy. ♥ Address your basic needs: People with self-love nourish themselves with healthy activities, clean nutrition, exercise, sleep rhythms, meaningful connections, and respectful boundaries. ♥ Be grateful: Take a few minutes every day to write down all your reasons to be happy. ♥ Keep compliments on file: Our brains are not programmed to remember the good, which is why we often fixate on the negative comments that are said about us. Start a compliments file in the notes section of your phone, and look at this every Monday morning as a new self-care ritual. ♥ Forgive yourself: We are often too hard on ourselves, so remind yourself that mistakes are opportunities to learn and grow. High achievers, elite athletes, and world leaders can unleash their full potential because they’re able to balance between perfecting their soft and hard skills. Acknowledging your individuality, planning ahead, and investing in self-care are the most rewarding ventures you can embark on as you journey through life.

April 2019

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FEATURES

Investing Inmusik Getting a fair return as a musician and a fan By KELLY CHO

t is notoriously difficult for aspiring artists to break into the music industry. Even if they do manage to sign a record deal, they are often the last to see profits–after advertisers, publishers, licensees, talent agencies, and many others have taken their cut. However, just as it has enabled greater transparency for so many other industries, blockchain technology is making its mark on the entertainment world. It has allowed musicians to more easily obtain royalties from their work by providing an open record of when their songs are played. Inmusik is one of the world’s first blockchain platforms providing fans the means to invest in their favorite artists. Artists can create investment campaigns to fund their future projects and, in exchange for the capital, provide returns to their fans through future revenues. By putting fans in a role previously occupied by record companies, Inmusik aims to change the game for the music industry, where more control is given

Above: Inmusik Founder and CEO Stephen Brett. Photo courtesy of Inmusik. 74

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April 2019

to listeners and artists, rather than the middlemen. To explore the tech-empowered evolution of the music industry, Jumpstart speaks to the company’s CEO Stephen Brett, who has over 18 years of industry experience as a musician, producer, sound engineer, recording studio owner, and now the founder of a platform for fan investment.

“Anyone who creates a platform where it’s a win-win for artists and their fans will dominate the music space.”

How did you come to found Inmusik? Back in Ireland, where I am from, I owned and ran a recording studio. The idea came late one night while working with a band. I wanted to create a way for independent artists to make a good living from their art, keep creating great new music, and at the same time reward fans for their involvement. Anyone who creates a platform where it’s a win-win for artists and their fans will dominate the music space. This idea of ‘shared success’ is why we created a platform where fans can invest in an artist and earn a monthly payout based on the success of the artist. The music industry is criticized for being controlled by major record labels. What factors have led the industry to this situation?

The fault was that the industry didn’t move fast enough to keep up with what was happening in streaming–a common result of disruption. Fans love streaming, as we get whatever music we want when we want it. It’s a far better place compared to the piracy years. A few players are dominating the industry right now; the bigger ones are still investing the most into artists, taking the biggest risks, and as a result, getting the biggest returns. Right or wrong? That is a tough call. But I do think this is going to change gradually over the coming years. What measures are needed to shift the paradigm away from their dominance and towards community platforms like Inmusik? I think it’s important to have all pillars of the industry–fans, content creators or artists, and business people–work together to come up with a solution to grow the music economy. There is a sweet spot where these players intersect, and blockchain is the perfect technology that can account for the contributions of all of these parties. It provides a way for a fair measurement of value and the resulting reward. While the token votes are organic, introducing mainstream artists and songs onto the platform might make it more difficult for emerging artists to be heard. What are your thoughts about this? Every single platform has to deal with

to seven songs in a row. We are doing our best to allow great content to surface organically and give all new content a chance to be heard. The rest is up to the community. With the introduction of new business models, do you think artists will actively write songs that cater to mainstream demands (similar to what the major labels encourage), to attract investments?

popular content versus new content. It’s incredibly challenging for new content to stand out from the crowd, as seen with YouTube or Spotify. While bringing in token votes solves this issue to some degree by introducing transparency, it still doesn’t solve the whole thing. We have created a feature called Quick Play, where you can stream the best seven seconds of all new songs and listen

Yes, I think that may happen. Most artists, and I’m speaking as a musician myself, will do their best to stay true to themselves and not ‘sell out.’ Art is an expression of the creator, after all. But it’s also smart to create a product that appeals to a large market. If the artist aims to express themselves, then they will create for the love of it. If the artist wants to find a market of fans and create music that speaks to them, the approach changes. I think there is room for it all, and as new technologies and new business models emerge, it will be very interesting to see how the community content will adapt to take advantage of it. What challenges do you foresee as you grow Inmusik? The biggest challenge is to find qual-

April 2019

ity partners, and figure out how we can curate them to make sure the system remains trusted, honest, and transparent. Is it necessary for entrepreneurs to have a deep and diverse understanding of the industry they’re trying to disrupt? While it’s not necessary, being in the music industry for 18 years has helped me to think from multiple perspectives based on my experiences. It’s important to have a deep and diverse understanding of something to prepare yourself for any challenges that come your way and to keep moving at a fast pace. Can you share one piece of advice for an aspiring entrepreneur who wants to pursue the same path as you? One thing that I always strive to do is to say yes to opportunities. When an opportunity comes along to do something different or is outside your comfort zone, say yes—the more uncomfortable, the better, as you only get new results when you do new things. Doing the same thing over and over will get you more of the same. If your goal is to be massively successful, you are going to have to get used to, and even enjoy, being uncomfortable. Kelly is Jumpstart’s Editorial Assistant.

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FEATURES

THE

Tokenization of

Everything What the rise of Securities Token Offerings mean for everyday investors By DREY NG

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April 2019

ecurity transactions traditionally operated on a T+5 cycle via brokerage firms, meaning the purchase and sales of securities requires ‘trade date plus five days’ to settle. Unfortunately, it still takes T+2 to settle security transactions today, even following the reduction of settlement periods almost a decade ago. Despite the explosive growth of new technologies, the stock settlement process has barely evolved until recently. Stock exchanges, such as the Australian Stock Exchange and the Hong Kong Stock Exchange, are now working to rectify transaction inefficiencies by testing blockchain-based settlement systems. Blockchain technology made its debut in 2008 and has certainly come into its own, reshaping industries from finance to supply chain to manufacturing. The technology is a game-changing innovation within the context of decentralized value exchange and distribution, where potential applications are virtually limitless, leading to a frenzy of Initial Coin Offerings (ICOs) last year. ICOs have been in decline since the second half of 2018, as savvy investors realized that ICO tokens generally lack real backing or are not needed in most use cases, making it an opportune time for Securities Token Offerings (STOs) to step into the spotlight. This new financial instrument is combining ICOs’ one-of-a-kind and highly efficient trading and settlement process with asset-backed tokens.

To get a clear picture of STOs, it’s necessary first to under- checks can be incorporated into security token contracts. While stand the tokenization of assets and how it’s realized through many countries are slow to acknowledge the indisputable rise of blockchain technology. Asset tokenization is the process of con- STOs, the regulatory frameworks that are currently in place will verting asset rights into a digital token on a blockchain. The gradually shed light on the benefits of embracing this system. token represents a portion of the underlying asset’s value and can Malta has always been ahead of the curve regarding token be traded freely on Over-the-Counter or exchange markets. regulations, and the recently ratified Virtual Financial Asset Act Blockchain ensures the ownership information of your token is a case in point. The Act is a preliminary regulatory framework is immutable, so no other person or authority can modify its for blockchain, cryptocurrency, and distributed ledger technolrecords once it has been docuogy, and serves to prepare for mented in the system. Tokenized the rising prevalence of digital assets are shaping the future of securities. finance, as they bring a horde of The Singaporean govbenefits to the current business ernment has also displayed a landscape, including enabling friendly attitude toward STOs, flexibility and liquidity for preas stated by the Monetary viously illiquid assets, automatAuthority of Singapore (MAS). ing the execution process, and However, under the Securities lowering transaction costs. and Futures Act and the FinanAs appealing as STOs seem, cial Advisors Act, the issuance there are still some roadblocks of digital tokens deemed to be that must be addressed. There’s capital market products must a need for regulatory clarity still be regulated, depending on whether token holders have on the tokens’ structure and legal ownership of the assets attributes. and whether the law protects It is worth noting that diginvestors. To transform real and ital securities are referred to physical assets into digitized as “shares” in MAS’s ‘A Guide assets, centralization–to a certo Digital Token Offerings’ tain extent–will be required. because the organization is Considering the state of the essentially giving the green light capital market and the regulato attract international asset tory measures that are in place, owners to conduct STOs in the STOs are the most promising country. Singapore is setting financial instruments to disrupt the bar for regulatory openness, current securities transactions, and it’s likely that regional and with the potential to construct a global governing bodies will folbrand new asset class. Not only From purchasing artwork low suit in the coming years. can they streamline the way In the U.S., the Securities to properties, STOs offer assets are bought and sold, they and Exchange Commission a defined structure for can also democratize the process similarly allows companies to by removing the intermediary. fractional ownership and give conduct STOs by applying for From purchasing artwork to an exemption through Regindividuals the opportunity properties, STOs offer a defined ulation D 506(c), Regulation to access markets with high structure for fractional ownerCrowdfunding (Reg CF), or ship and give individuals the barriers to entry. Regulation A+. opportunity to access markets China’s stance towards with high barriers to entry. UltiSTOs is in stark contrast to the mately, the meaning of ownercountries mentioned above. The ship will be completely redefined. Central Bank Deputy Governor has explicitly stated that STOs Non-fungible and unique assets, like the Mona Lisa, can be are considered illegal financial activities due to their adverse tokenized and distributed in fractions. The tokens are one-of-a- impact on the country’s economic and social stability. kind to retain authenticity, and each ‘share’ of the artwork can be The future of STOs in Hong Kong remains uncertain. Howbought and sold freely by accredited investors or even the general ever, it is likely that Hong Kong will apply its existing ordinance public. For a novice who wants to invest in the art world, STOs of traditional securities to digital securities. After all, digital make it possible to do so with a modest amount of capital. securities are essentially private assets, only with the Registry of Likewise, real estate is another opportunity for new inves- Members stored on the blockchain. tors. Tokenized assets enable properties around the world to be In the face of regulatory awareness around STOs, it’s easy to securitized and financed globally. Imagine the ability to purchase envisage normalization akin to the how the Jumpstart Our Busimultiple properties in different parts of the world to rent out with ness Startup Act liberalized crowdfunding activities in the U.S. greater liquidity, and doing so without any intermediaries. Along these lines, businesses can raise capital quickly without the STOs are more practical for regulators to approach, as Know need to go through a time-consuming and complex fundraising Your Customer (KYC) and anti-money-laundering (AML) process, accelerating the rate of innovation in all industries. April 2019

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FEATURES

Supporting Youth Innovators Five challenges student entrepreneurs face By STEPHANIE TANG

hy would you choose to give up a stable income by jumping into the risky waters of entrepreneurship, constrained to a diet of instant noodles? I meet many students from top universities across Asia, and questions like the one above are common. While entrepreneurship appears to be covered daily by news outlets, the truth is those who pursue the startup life are still few and far between, much less those who stay in it. Student entrepreneurs represent an even smaller percentage. Over the past couple of years, governments throughout Asia have started allocating resources to youth entrepreneurship, from setting up on-campus incubation centers to hosting hackathons and issuing grants to student-run startups. Universities have embedded entrepreneurship courses into their academic offerings, and there is an increase in innovation-related classes that can be taken by non-business majors. Hong Kong University of Science and Technology’s Entrepreneurship Center and Hong Kong Polytechnic University’s Institute of Entrepreneurship provide courses, co-working spaces, and even opportunities for funding. More than eight entrepreneurship programs in Hong Kong now target the youth, including startup support schemes from the University of Hong Kong, Hong Kong Baptist University, and Hang Seng Bank. 78

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April 2019

However, student entrepreneurs face a myriad of obstacles when it comes to running a startup, despite the apparent successes of student-founded startups like Facebook and Snapchat. Based on our encounters from an investor’s perspective, below are five observations as to why.

Lack of experience is a doubleedged sword; having learned less also means one has been influenced less, which might make room for creativity and mustering innovative solutions with no precedent.

1. Studying in and of itself is a job Running a startup is a full-time job. Yes, some entrepreneurs can juggle multiple roles at once, but in most cases, a successful entrepreneur is one who is focused solely on their business. Compared to adults who have left school and have control over their timetables, students have rigorous academic schedules to navigate. Hence, famous entrepreneurs are college dropouts–a situation they took on to accommodate the hours needed to invest in their venture.

Rookie Fund is Asia’s first student-run VC fund. The fund’s student VCs deal source and deploy two tickets a year funding student startups. Photo courtesy of Rookie Fund.

2. Imminent opportunity costs We’ve all heard career centers reiterating the importance of a padded resume, and how designing a career trajectory is vital to landing an ideal title five or ten years down the road. Hiring managers weed out resumes without the necessary buzz words, and those without relevant internships fall short. In this competitive landscape, diving into entrepreneurialism has high stakes; rolling the dice on whether your startup will succeed presents the risk of spending a few years on the project and having nothing to show for it on your resume. For academically outstanding students, taking on a prestigious entry-level job with alluring compensation would be a tough alternative to give up. 3. Entrepreneurship has become institutionalized Many students we’ve met came up with their startup idea from a homework assignment or a funded hackathon, where the motivation behind it was purely to win some prize money. While it isn’t fair to dismiss this reason for starting a company, it is apparent that founders who are passionate about their startups from the

onset are more committed. Student founders who are not as committed will likely drop their projects once the funds from their government or campus grants burn out. There is no survival instinct and financial statements frequently allude to overspending on human capital with no plans for future fundraising. With so many campus incubators receiving government funding, their KPIs encourage instigating as many student projects as possible, with no punishment for lack of follow-through. The result is students taking advantage of such opportunities, viewing entrepreneurship as a ‘vacation from school’ of sorts, and quitting when it stops being fun. 4. Lack of experience Asian cultures dictate that young people are taken less seriously. VCs are also less inclined to support a first-time founder, much less one who is straight out of or in school. While it’s true that experience comes with age and going through a few jobs brings about more maturity, it doesn’t necessarily mean student founders have less potential just because of their age. Supporting a student founder means

the investor is taking on more risk, which is an issue in Asia’s relatively risk-averse investment landscape. Young people have difficulty booking facetime with VCs, and their lack of credit and job history creates challenges in taking out loans. Student startups are often unable to raise more funding once they run out. 5. Students often lack confidence When the general public underestimates your abilities, you need to work twice as hard to convince them otherwise. Founders must be skilled salesmen, which is a skill most students lack. With Asian education generally discouraging proactiveness in elementary and middle school, speaking on stage or selling an idea or product don’t come naturally. Students tend to be less confident; be it from shyness or the acknowledgment that they are inexperienced, it’s common for them to be nervous when pitching or undersell during the question and answer segment. That kind of presentation isn’t going to land funding.

espite having to swim against the current, the proliferation of young entrepreneurs in the next decade

is inevitable. With the prevalence of startup exits promising potential financial upsides, an increase of coding courses in schools, and more options for self-learning online, students are more aware that pursuing entrepreneurship is not only an option, but a rational path to consider. Venture funds are also sighting profitable opportunities in this space, with the appearance of student-run firms focused on funding niche student startups. First Round Capital’s Dorm Room Fund and General Catalyst’s Rough Draft Ventures have been running for more than six years with strong investment track records. Rookie Fund, which spun out of 500 Startups, has been expanding its footprint since 2015, with five investments to date. Lack of experience is a double-edged sword; having learned less also means one has been influenced less, which might make room for creativity and mustering innovative solutions with no precedent. As entrepreneurship becomes a recognized skill set, students are rewarded with the freedom to get their foot in the door without as much tradeoff as they traditionally would have had to pay. The wave of next-generation breakthroughs can spring from our youth, so let’s believe in them.

Curated experiences with experts and trade masters for your team or clients

Make Hong Kong-style milk tea with an award-winning milk tea master

Learn about traditional Chinese medicine from a seasoned practitioner

Visit inaccessible areas of a village with its Deputy Director of Welfare

To book or for more information, email explore@samtheexpert.com or visit www.SamtheExpert.com April 2019

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LIFESTYLE: DIY

HOW TO

Design your life with a simple analog method By Kim Alvarez WHAT YOU WILL NEED:

KEY

â&#x20AC;˘ A notebook you love â&#x20AC;˘ Your favorite pen

Task Task Completed Task Migrated (Forward) Task Scheduled (To Future Log) Event Note

Kim shares insights about Bullet Journalling, productivity, and organization. Having bullet journalled for over 4 years, she is a regular contributor to BulletJournal.com. She was featured in The Bullet Journal Method, and sells journal supplies and stationery at tinyrayofsunshine.com

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Learn how to transform your favorite empty notebook into a bullet journal that can help you track your past, order the present, and design your future. Whether you use it as a planner, a calendar, a sketchbook or a diary, it will make your life a lot more organized.

April 2019

The Bullet Journal was created by Ryder Carrol, a Brooklyn-based designer. He wrote The Bullet Journal Method, where he dives into why and how the Bullet Journal works. Go to BulletJournal.com to learn more.

STEP ONE: CREATE INDEX

FUTURE LOG

• Title the first 4 pages INDEX

INDEX

Future Log: 4-6 April: 9-10

FUTURE LOG

May

Aug

June

Sep

July

Oct

STEP TWO: CREATE FUTURE LOG • Title the first 4 pages “Future Log“ • Divide into even sections

STEP THREE: CREATE MONTHLY LOG • Write down dates on left-hand page (Calendar) • Write tasks for the month on the right-hand page (Tasks) APRIL

TASKS

1M 2T 3W 4 Th 5F 6S

APRIL 12th 2019

4pm - Movies Grocery Shop Write for 20 mins * Work on Project X

STEP FOUR: CREATE DAILY LOG 10

• Date and rapid-log tasks, events and notes

OTHER PARTS OF A BULLET JOURNAL

TIPS

COLLECTIONS • Turn to a new page, title it, and add related information (e.g. books to read, etc.)

• •

MIGRATION • Migrate undone tasks to a fresh monthly log or schedule to future log • Migrate daily and weekly tasks as needed

•

April 2019

Keep it simple Follow the original method for a couple of months to understand how it works Write neater by slowing down & try writing in all caps

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LIFESTYLE: ENTERTAINMENT REVIEWS

Film Review

Generation Startup

eneration Startup is a documentary film that follows a diverse group of college graduates and budding entrepreneurs launching startups in Detroit. The feature employs an intimate style of storytelling that’s meant to inspire. It opens with the message that economic innovation is at an all-time low in America for people aged 18 to 30, and closes with a concise call to action for the audience to “help bring back the spirit of entrepreneurship and risk-taking.” The film spans 17 months and follows six young people who are living together while building their startups. Each frame is lovingly rendered to be warm and glowing, even against the backdrop of Winter and while the once-abandoned house they are sharing is still being patched up. Generation Startup captures many different narratives, including creating the first-ever chickpea pasta, setting up a peer and mentor matching program for women, building specialized smart devices for corporate use, and transforming an urban revitalization project into a pitch for a high-tech reinvention of property management. Beyond the hustle of startup life, the film details the trials and tribulations one faces with growing up and striking out on one’s own. The cast’s struggles are relatable, though at times overdramatized. All in all, there is dignity to be found in their earnest pursuit of success. Directed by Academy Award winner Cynthia Wade and filmmaker Cheryl Miller Houser, Generation Startup was conceived of and produced by Creative Breed and funded by PwC Charitable Foundation and UBS. It is available on Netflix, Google Play, Amazon, iTunes, YouTube, and VUDU. generationstartupthefilm.com

Bertha Chiu is a freelance designer and writer.

Dextina rides her bike through Detroit (top) and Castle CEO Max working at Rebirth House (below). Photos courtesy of Creative Breed.

Podcast Review

Getting Curious with Jonathan Van Ness

ven though I was a fan of ‘Queer Eye for the Straight Guy’ back in the noughties, I wasn’t particularly excited for its Netflix reboot after hearing about the epic failure of shows like ‘Fuller House’ or ‘Heroes Reborn.’ But ‘Queer Eye’ turned out to be one of the most heartfelt shows to come out of 2018. What drew viewers in was the undeniable chemistry among the new ‘Fab Five,’ who–like the original cast–are relatable and lovable, which is unheard of for reality television. A fan-favorite from the first episode is the show’s resident grooming expert Jonathan Van Ness, who’s known for his lush mane and effusive demeanor. While he could have started a line of swanky hair care products following the show’s success, Van Ness instead doubled down on the podcast he started in 2015 by bringing in high-profile guests like novelist Jodi Picoult, comedian Michelle Wolf, and U.S. House Speaker Nancy Pelosi. The format of the weekly podcast is simple: an expert is brought in to explore topics, ranging from Brexit to dating and AI. Like on ‘Queer Eye,’ Van Ness’s remarkable ability to mix light-hearted banter with real talk keeps listeners engaged, even if the conversation veers–often dramatically–off topic. Van Ness excels the most when he delves into personal conversations with his guests instead of discussing specific topics, as seen in episodes like “What’s it Like Being a Woman in NASCAR? With Julia Landauer.” These conversations work better with his off-the-cuff interview style and ability to put people at ease. His approach to discussing heavy issues such as suicide rates among LGBTQ youth or parental alienation is to ask the expert to offer solutions, ending these episodes on an optimistic note. Van Ness said in one episode that he wants to be the Annie Leibovitz of podcasters because she always makes sure that nothing about her process is forced, so everything she shoots feels natural. By that standard, the podcast is a success; he is always unabashedly himself and inspires listeners to be the same. –MC earwolf.com

Cover art courtesy of Earwolf. 82

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April 2019

Most folks think I’m lucky, some say I’m a complete fraud, and a handful think I’m a brilliant hype man, and I don’t agree with any of them–I agree with all of them.

Book Review

Angel: How to Invest in Technology Startups by Jason Calacanis

Book Review

The Crowdsourceress by Alex Daly

ritten by one of the most prominent Silicon Valley angel investors, Angel is a comprehensive overview and how-to guide for anyone who wants to dip their toes into the investment world. As the title suggests, Jason Calacanis boasts a 9-digit net worth after a string of early bets on startups that went on to become unicorns, most notably with Uber. At 288 pages separated into 32 chapters, the book is broken down into one to five-page sub-sections, where readers can efficiently identify topics that interest them. While Calacanis touches on his personal experiences from time to time, the majority of the book is a straightforward explanation of what the angel investment profession encompasses, from big picture concepts like evaluating a deal to more nuanced subjects like bringing a paper and pen to your pitch meeting instead of being “that guy” writing on a tablet. Industry insiders can probably do without reading the first few introductory chapters–such as ‘What’s Special About Silicon Valley’ or ‘Startup Funding Rounds Explained’–although they do lay the groundwork for understanding Calacanis’s approach and the environment he’s investing in. Chapters like ‘The Perfect Way to Decline a Deal’ and ‘The Disastrous Second Year as an Angel Investor’ really play to the depth of his 25 years of experience in the industry, and are sure to even be insightful to seasoned investors. The later chapters are generally more

technical–covering topics like minimal viable product or valuation–and jampacked with advice newbie investors may not even know they needed, such as writing the perfect deal memo and managing their relationship with other angels. Investors can use sections like ‘Question Zero’ as a play-by-play for what they should ask at a founder meeting. Calacanis explains that he wrote the book for anyone interested in angel investing, from “the mom in the bookstore with screaming kids” to “the kid graduating from college,” so he also includes sections about investing with little or no money. Like his podcast ‘This Week in Startups,’ Calacanis has an effortless way of drawing listeners and readers in with his genuine demeanor and take-it-or-leave-it attitude. In one memorable section titled ‘Jason Calacanis does not eat shit,’ he details an incident where he tells another investor: “If you try and trample my rights on this deal, I will simply not pass the ball to you in the future–but I will pass the ball to your competitors, and not only that, I will take this current deal and walk it into Alpha, Beta, and Delta ventures personally.” While this anecdote is amusing, it also relays the more important message of protecting oneself and encouraging collaboration rather than infighting within the startup community–a middle ground that exemplifies why the book is an enjoyable read throughout. –MC

seasoned campaigner who’s responsible for raising over US$20 million would know. Each chapter is divided into digestible sub-sections that define and breakdown major topics, interspersed with case studies from real campaigns Daly worked on with her team. Perhaps the most valuable part of the book is the ‘Resources’ section at the end, where all the significant takeaways are condensed and summarized into bullet points. Readers who only want to use this book as a checklist for structuring their campaign should skip to this section. Crowdfunding is an ever-changing space, and The Crowdsourceress is a useful snapshot of the best practices today, making it a must-read for anyone who wants to launch their product with the confidence of knowing they’ve covered all the ground they need. Those with a crowdfunding background also have things to gain from Daly’s wealth of knowledge. –RA

hen I was handed The Crowdsourceress, I couldn’t help but smirk. As a digital marketing professional with five crowdfunding campaigns under my belt, I was skeptical. I put off reading it for as long as I could and even misplaced the book (don’t tell my editor). But when I did pick it up, I was pleasantly surprised. In a space sometimes plagued by con artists and so-called experts, Alex Daly has managed to create something magical: a beacon of hope. Taking readers through her experiences as an industry leader, Daly provides a step-by-step guide on how to create an effective campaign, from six months before launch to after it wraps– sometimes down to the hour. Her detailed tips and tricks are extremely helpful compared to the generic crowdfunding advice that can be found online. The book also explores various campaign types, breaks down differences in approach, and provides insights only a April 2019

angelthebook.com

thecrowdsourceress.com

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LIFESTYLE: PRODUCT REVIEWS

Product Review

Orii by Origami Labs

RII is a smart ring that allows you to quickly send and receive audio messages or calls. What’s exciting about the device is that you’re able to hear the audio by gently pressing on your tragus–situated in front of the opening the ear canal–with the finger that’s wearing the ring. The device first launched on crowdfunding platforms Indiegogo and Kickstarter, and raised US$333,617 on the latter with over 2,000 backers. I’ve been curious about ORII since first coming across it more than a year ago, attracted to the idea of being able to use my phone without always fumbling to pull it out of my pocket when it’s ringing. ORII is best suited for those who often get voice messages or quick calls

on-the-go. I can see it being especially useful for someone who needs to be available at all times, but doesn’t want to constantly be wearing headphones or bulkier hands-free devices. It can be used for voice assistants as well. Before turning on the device, you have to determine the appropriate ring attachment for the size of your finger; a snug fit ensures there’s no sound leakage. A small screwdriver is included, so everything can be easily assembled on the spot. The device vibrates when you receive an incoming call, so you won’t miss it even if your phone is tucked inside a bag or set on silent mode. You can also customize notification colors using the app. The ring is best suited for a brief voice message or a snappy “yes” or “no” conversation because, while you can hear the other party during a call, I found the sound to be a bit muffled, as if the person is speaking from a distance. At times, it was also difficult for the other party to hear me. It takes some trial and error. I think these issues go back to the device’s intent, which is to give speedy access to your phone’s audio and voice functions, rather than to have long conversations. The audio quality doesn’t take away from the fact ORII is an interesting technology and has great potential in the world of wearables. ORII retails for US$199 and can be purchased on ORII’s website. –AC orii.io

Photos courtesy of ORII. Product Review

3DNA: The world’s first user-designed eyewear

he eyewear industry is not as it would appear. Nine out of ten frames you reach for will be from the same manufacturer: Luxottica Group. Their near-monopoly on the designer eyewear space means those Ray Bans or Dior sunnies you saved up to purchase cost almost nothing to produce. On the other end of the spectrum, you have poorly made eyewear that breaks even before you carelessly toss it in your bag, although going through a pair every few months is doing no favors for the environment anyway. 3DNA, a graduate of Betatron’s acceleration program, is here to do things differently by introducing a co-creation process for eyewear, where customers can design a pair of fully bespoke frames in ten minutes. Not only do they offer a vast array of customization options, but 3DNA’s face scanning technology also ensures the frames will fit perfectly. Their no-inventory model reflects an industry-wide shift towards 84

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April 2019

customization, where the emphasis is on individuality, empowerment through design, and the elimination of wasteful consumption habits. The process is simple: make an appointment at one of 3DNA’s locations across North America, Europe, and the Asia-Pacific region, have your face scanned (or take a 3D selfie using an iPhone X or iPad Pro), design your frames, and wait for them to arrive in about ten days. You can customize frame shape, material, accessories (nose pads and hinges), and lens on the platform in the form of a 3D rendering, so you can see how each element suits your face. The selection is more than sufficient for bringing any style you see on the market to life, with room to get as creative as your heart desires. There’s also an option to personalize the frames with a name or message. We were especially impressed by the unique materials on offer– such as mother of pearl, horn, stone, and wood–and the platform itself, which allows every minute detail to be adjusted. Aside from being able to alter rim size or the position of the bridge, what makes the process special is the user’s ability to change elements like the frame’s proportions or the alignment of bifocals–something that isn’t achievable through traditional eyewear retail. 3DNA also offers B2B services for eyecare professionals, where they can create custom frames for patients or design their own eyewear collection. The company is passionate about transforming the opticianry profession by giving opticians more agency to be inventive and hands-on when serving their customers. The quality of 3DNA frames are on par with high-end eyewear, and while the cost is steep, with a pair retailing anywhere between US$600 to $1,200, the company is working to bring it down as it continues to expand its reach. –MC 3dna-eyewear.org

Photos courtesy of 3DNA.

April 2019

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EVENTS

StartmeupHK Festival 2019

rganized annually by the Hong Kong government’s innovation arm InvestHK, the StartmeupHK Festival brought together over 8,000 participants and 200 speakers to showcase the latest innovations coming out of the city. The week-long festival was packed with an impressive lineup of industry leaders and government representatives, deep diving into topics around fintech, healthtech, IoT, edtech, retail, logistics, and more. The Hong Kong government’s Under Secretary for Food and Health Dr. Chui Tak-Yi kicked off the week with an opening keynote at the Healthtech O2O Summit, which was hosted by NexChange Group. He used the opportunity to announce the launch of the Hong Kong Genomic Institute, an organization to spearhead a large-scale genome sequencing project to advance healthcare development in the city through big data. Policy and public healthcare was a theme for day one, as attendees also heard from the Hospital Authority’s Chief Medical Informatics Officer Dr. Ngai-Tseung Cheung. He spoke about the organization’s efforts to digitize patient records and deliver next-generation clinical management to address the city’s aging population problem. “We have massive healthcare needs and fewer 86

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April 2019

January 21 - 25, 2019 Hong Kong Convention Center

young people to provide it. Business as usual isn’t going to cut it,” said Cheung. Other notable speakers included Bayer Greater China President Celina Chew, who discussed the company’s digital therapeutics app Power Plus, and Novoheart CEO Ronald Li, who closed with a final keynote about the company’s version of a biological pacemaker. The Tech[Life]Style Conference, co-hosted by Startup Launchpad and The Mills Fabrica, took place on the second day of the festival. With its theme of ‘living smarter, living better,’ the conference brought together over 100 startups that are changing the way we live, work, and play. Exhibiting startups set up booths in the Innovation, Sustainability, and Lifestyle rooms, where attendees could test out the services and products on show. One highlight was TG3D Studio’s Scanatic™ 360 Body Scanner, which instantly renders a 3D scan of the user’s body for the purpose of producing made-to-measure apparel. The conference also brought in high-profile speakers who represent the world’s leading tech companies, including SenseTime, Ant Financial, Uber Eats, and Huawei, to speak about how they’re working to pave the way for a smarter world. Inside Retail Hong Kong hosted Retail’s Cutting Edge for the third year running on day three. InvestHK Associate Director-General Jimmy

The city is now home to 2,625 startups, marking a 146% growth over the past five years and employing more than 9,500 people.

Top: Alibaba CTO Wang Jian speaking at Jumpstarter on day three. Photo courtesy of StartmeupHK.

Chiang welcomed attendees by sharing statistics about Hong Kong’s growing retail landscape, which he attributed to improved Greater Bay Area access resulting from the high-speed rail and the Hong Kong-Zhuhai-Macao Bridge. He also reiterated the government’s commitment to preserving a low-tax business environment and discussed areas of growth in the coming years. “The current Muslim market population is 1.6 billion, nearly a quarter of the world’s total population, of which 60% live in Asia. That number will reach 2.2 billion by 2030,” said Chiang. Other notable speakers included Fung Retailing Group Managing Director Dustin Jones, OC&C Strategy Consultants Partner Pascal Martin, and Idea Farm Ventures President David Bell, who shared critical lessons for retailers, upcoming trends, and relevant case studies with the audience. Hosted by the Alibaba Entrepreneurs Fund, Jumpstarter took place on days three and four to give voice to some of the most inspirational entrepreneurs in the region. They included Emma Yang, who founded her company Timeless at age 11, and Wantedly Founder Akiko Nata, who is the youngest CEO ever to have their company listed on the Tokyo Stock Exchange. Alibaba Entrepreneurs Fund Executive Director Cindy Chow

Left: The ‘New Tech in Hospitals & Clinics’ panel, which took place at the Healthtech O2O Summit on day one.

and Alibaba Group Vice Chairman Joe Tsai also shared their vision for the Jumpstarter platform, which is to help entrepreneurs realize their startup dreams and encourage founders to have a vision for their company. “Mission, vision, values–these are the three most important things to think about as you start your business,” said Tsai. The Connected Cities Conference, hosted by KPMG, took place on day four, where the focus was on building smart cities through people-centered collaboration. Associate Director-General of Investment Promotion at InvestHK Charles Ng’s opening speech touched on the city’s role in the future development of the Greater Bay Area, which is propelled by its more than 149,000 high net-worth individuals and growing startup ecosystem. Other speakers, who represented their respective cities, echoed the need to build smart solutions to elevate the quality of life for its residents. The audience heard from Smart Sustainable Cities Organization (Seoul) Secretary-General Lee Kyong-Yul, Centre for Liveable Cities (Singapore) Director Limin Hee, Innovation and Technology (HK) Under Secretary David Chung, and the Asia Pacific Model e-Port Director-General Simon Huang.

Business leaders also took the stage to share how their companies are using technology to address specific issues in the world’s most cosmopolitan cities. Signify’s General Manager Timothy Mak spoke about the company’s collaboration with Alibaba and the Chinese government to tackle the issue of air pollution. They installed sensors in lamp posts, which will send data to the governing bodies when pollution levels reach a certain point. The Startup Impact Summit, hosted by WHub, took place on the last day to explore successful cases of co-innovation between startups and corporates, bringing together over 30 speakers. Over 100 startups had the opportunity to exhibit their products in the Startup Village as a way to connect with attendees and global ecosystem builders. Hong Kong-based legaltech firm Zegal led a number of interdisciplinary workshops to help startups hone their fundraising, marketing, and accounting skills. Angel investor Jason Calacanis also hosted a six-hour course for aspiring investors through his organization Angel University. The last event of the week was Calacanis’s fireside chat on the Main Stage, where he spoke openly about his investment strategy and the need for the younger generation to adopt a strong work ethic. Head of StartmeupHK Jayne Chan and WHub Co-Found-

Right: InvestHK Associate Director-General Jimmy Chiang speaking at Inside Retail Hong Kong, which took place on day three. Photos courtesy of StartmeupHK.

ers Karena Belin and Karen Contet Farzam ended the day with closing remarks, toasting to the end of a fruitful week. “With market-driven developments, supported by the government’s innovation and technology priorities, we expect the growth trend to continue in the years ahead,” said Chan. StartmeupHK has become a much-anticipated event for the regional startup community, and the 2019 festival was no exception. With the intent of being a knowledge-exchange platform for all stakeholders in the startup ecosystem, the festival also shared some impressive statistics about its growth. The city is now home to 2,625 startups, marking a 146% growth over the past five years and employing more than 9,500 people. Fintech, ecommerce, supply chain management, logistics, and professional or consultancy service startups have the highest representation. Founders in the city are also becoming more diverse, with 35% reporting to be non-locals (InvestHK). Based on this trend, it’s expected that the 2020 StartmeupHK Festival will welcome an even bigger pool of innovators and leaders to address the world’s most pressing problems. –MC startmeup.hk

April 2019

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EVENTS

We must enrich our students’ education journey with humanities. We need to understand people and machines, not make people into machines.

EmTech Asia 2019 January 22 - 23, 2019 Marina Bay Sands Expo and Convention Centre, Singapore

o-organized by MIT Technology Review and Koelnmesse, the world’s most influential leaders and innovators came together for the sixth edition of EmTech Asia, bringing together over 700 industry professionals from 30 countries over two days. Over 50 speakers discussed how emerging technologies would influence industries related to artificial intelligence, robotics, sustainability, blockchain, bioengineering, social media, education, virtual reality, and 3D printing. Ten of the youngest and brightest innovators under 35 from the region also presented their work to an audience of accomplished scientists, entrepreneurs, and investors. Hong Kong Baptist University President and Vice-Chancellor Roland Chin presented a different perspective in the pursuit of tech and STEM-driven education at the conference, asserting that a liberal arts education in the age of AI is imperative. “The world is becoming more competitive and uncertain as we enter into an era of technological disruption. We must enrich our students’ education journey with humanities. We need to understand people and machines, not make people

into machines,” said Chin. In line with the event’s tagline, ‘Discover the emerging technologies that will change the world,’ EmTech Asia 2019 attendees heard from companies that are driving the next generation of technological breakthroughs, including Dolby Laboratories, NVIDIA, Desktop Metal, Rolls Royce, SENS Foundation, The Rockefeller Foundation, and Pinscreen. One of the key topics this year was ‘Tech for humanity: Energy, food, and water for all.’ John McGeehan, who is

Director of the Institute of Biological and Biomedical Sciences at the University of Portsmouth, spoke about the plausibility of using a plastic-eating enzyme to address the global plastic pollution crisis. Other sessions included ‘Transforming the Way the World is Energized with Fusion,’ ‘Infrastructure-free Distributed Water,’ and ‘Electricity-generating Windows for Future Cities.’ “EmTech Asia gives attendees a unique opportunity to be surrounded by impressive speakers from many branches of technology and the chance to cross-pollinate ideas across different sectors, and these collisions often create inspiration. It also allows us to network and make connections, especially in the Asia region, so that we can collaborate in the future,” said Siemens Head of Advanced Manufacturing Automation Juan L. Aparicio Ojea. There were also various sessions on blockchain and the impact this technology will have on industries beyond finance. These sessions included presentations from SGInnovate Founder and CEO Steve Leonard and Harvard University Berkman Center for Internet and Society Fellow Patrick Murck. emtechasia.com

Sabrina Wang is Jumpstart’s Journalist in Residence in Singapore.

Top: Discovery Channel host Mike North. Right: NVIDIA Vice President Kimberly Powell. Photos courtesy of EmTech Asia. April 2019

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NETWORK WITH 12,000+ TECH & BUSINESS LEADERS IN NORTH ASIA | 22-23 May 2019 | Hall 1 , HKCEC , Hong Kong | ● Source from 280+ solutions providers on cloud computing, edge data centre, DX, DevOps & agile, Kubernetes, Blockchains, infra tech, modern data centre, microservices and many more. ● Learn from 250+ industry experts from different regions like mainland China, Singapore, Korea, Japan, India – covering a wide range of topics such as enterprise intelligence, cybersecurity, FinTech, AIOT, BizTech, etc. ● Access to multiple show features like DevOps workshops, Unified Communications Zone, Live Data Centre, etc.

Vidal Fernández Director Big Data – Innovation China Light & Power - CLP Holdings

Redouane Boumghar Applied Machine Learning and Trainings, Former data scientist for ESA and NASA FDL ; current affiliates of the Libre Space Foundation

Shirabe Ogino Board Member, Fintech Association of Japan; Founder & CEO, ZAISAN Net/Phantom AI, Inc.

Eric Thain Co-chair & President, Artificial Intelligence Society of Hong Kong ; General Manager, HK Express

Christopher Chan General Manager, Research & Technology The Hongkong & Shanghai Hotels

Richard Leung Deputy Group Chief Information Officer, Chief Technology Officer Hong Kong Exchanges and Clearing Limited (HKEX)

Edward Chow CTO & Founder PressLogic

Natalie Rubnan Que Supply Chain Strategy, Manufacturing, Research & Development, Quality, & Innovation Global IT Director Mondelēz International

Jabez Tan Head of Research, Data Centers Structure Research

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April 2019

EVENTS

EO GSEA Awards: Hong Kong Chapter

Top left: So receiving his cash prize at the awards ceremony, which was presented by Entrepreneurs’ Organization Hong Kong Chairman Yvonne Kam and UBS Wealth Management Managing Director Philip Mak, who was the event sponsor.

ounded in 1998 by Saint Louis University, the Global Student Entrepreneur Awards (GSEA) is a competition celebrating university students who have built valuable businesses. Through mentorship and other empowerment initiatives, the program emphasizes the importance of community in paving the way for the next generation. The awards are organized in collaboration with Entrepreneurs’ Organization (EO), a network connecting founders with peers, experts, and other resources to grow their startup. With 185 chapters in 58 countries, EO is the world’s largest

organization of its kind. The Hong Kong chapter event was sponsored by UBS. Winners are selected based on how well they epitomize EO’s five core values, namely their ability to take smart risks, proactively seek knowledge, plan for the future, build trust and respect, and showcase their unique identity. The 2018 Hong Kong Regional Finals winner is Aaron So Chak Hei, who founded Marketemy–a company that develops digital marketing learning tools for higher education institutions on a subscription basis. When tested, students using Marketemy’s course materials displayed higher retention rates. The company also provides training services for digital marketing roles, software development, and general marketing consultancy. So’s objective is to transform marketing education into a more interactive

First Runner Up: PlaySmart

Second Runner Up: Reubird

Third Runner Up: 80/20 Media

It’s key for us to draw on market data and make it into something useful from the service provider’s perspective.

In the long term, we aspire to make all entertainment experiences available online, where users can browse and book on-the-go.

Offline advertising will never die because advertisers need both offline and online media to achieve the best marketing performance.

Founder Hilda Tsang Kit Ying

Founder Brian Chui Wai Ho

Founder Leo Ho Tsz Ho

PlaySmart is a one-stop shop for techsavvy Hong Kongers to search, book, and, pay for entertainment venues. Its key differentiator is giving small-to-medium-sized service providers access to big-data solutions. Vendors are able to make better operational, financial, and marketing decisions from the data, and track transactions, revenue, and profit– all on the platform.

With the goal of becoming the marketplace for party venues and catering, Reubird offers a curated selection of entertainment activities from vendors throughout Hong Kong, which are easily bookable through the platform. Activities range from virtual reality experiences to escape rooms and yoga, and the platform boasts more than 170 party rooms available for booking.

80/20 Media is an online-to-offline advertising platform connecting marketers to shops and restaurants in Hong Kong. The startup allows customers to reach a broader demographic through offline marketing by cultivating a local perspective and leveraging the exposure and higher precision offline advertising offers. 80/20 also provides advertising advisory and PR services.

November 19, 2018 – April 12, 2019 UBS Office, Hong Kong

April 2019

Top right: A group photo of the winners. Photo courtesy of GSEA.

experience through gamification. “These types of practical skills are so hard to manipulate without real-world interactions. That’s why we provide students with hands-on learning that’s fun at the same time,” says So. Marketemy is currently used by Hong Kong Polytechnic University, and the team hopes to expand to more institutions throughout Hong Kong and Taiwan. So will go on to compete in the GSEA Global Finals, which will take place in Macau from April 10 to 12, 2019. gsea.org

MC and freelance writer Ema Farjana.

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April 2019

EVENTS

Let’s Talk About Gender Equality January 23, 2019 WeWork Causeway Bay, Hong Kong

collaboration between Encompass HK, Women Chief Executives, and Turnkey Group, Let’s Talk About Gender Equality brought together 30 academics and experts in the financial services and human resources industries. The intent of the workshop was not only to discuss sustainable development goals from the perspective of gender equality and workplace inclusion, but to highlight the value of environmental, social, and corporate governance reporting for firms. Notable speakers included Ali Tse from PwC, Krisztina Anspach from Admired Leadership Asia, and Ruby Lam from the Hong Kong University of Science and Technology. In one segment, Tse presented a report based on the Gender Diversity in the Hong Kong Financial Services Sector Survey, which provides insights and solutions for areas of inequality in the sector. In another, University of Hong Kong lecturer Dr. Aditi Jhaveri showcased the newly developed Prevention of Sexual Harassment Course and an app to raise awareness about sexual harassment on university campuses. “We are not short of ambitious and qualified women in the talent pipeline, but they drop out along the way. I think industries might want to think about how to create an environment and culture that is more friendly and attractive to female candidates to join, and stay,” said Ruby Lam. encompasshk.com

Ema Farjana is a freelance writer. Left: Representatives from Encompass HK, Women Chief Executives, and Turnkey Group welcoming attendees. Photo courtesy of Encompass HK.

LawTechMY Launch

January 25, 2019 Co-labs Starling Mall, Malaysia

awTechMY’s (LTM) launch brought together leaders from Malaysia’s legal and tech industries, government officials, and academics to celebrate a significant milestone for the future of legaltech in the country. The four partners, including KDJ Law, Crowe, Chung Chambers, and Halim Hong & Quek, began the event by signing a Memorandum of Understanding. During the sharing session, Malaysia Digital Economy Corporation COO Dato Ng Wan Peng shared her outlook for legaltech in 2019. A panel discussion among Chung Chambers Managing Partner Patricia Chung, NetSynergy Solutions Founder and Director Gwendeline Liew, Fusionex International Head of Legal Sharing Kaur Veriah, and KDJ Law Partner Jonathan Lim shed light on navigating deep tech applications in legal contexts. The panelists touched on other pressing issues in the legaltech space, such as data security and venturing beyond the pervasive B2B products

Left: LTM’s partners: Adeline Chin, Daniel Liu, Melissa Lim, and Jenna Beh. Top: The crowd on LTM’s launch day. Photos courtesy of LTM.

on offer to provide B2C solutions. “Similar to fintech’s growth around the region, legaltech is poised to grow as steadily and provide new jobs in the market. I believe the impending digital transformation will push the legal industry to increase its ability for access to justice and better lives for legal professionals,” said LTM Co-founder Daniel Liu. LTM was established after the four founders organized a hackathon in August 2018, which culminated in the creation of 21 minimum viable products. It was an eye-opening experience as they saw the possibilities of what technology could do for the legal industry. The founders wanted to further educate the market and bring together the legal, technology, finance, regulatory, and business verticals, which is LTM’s mission going forward. LTM will be leading another LawTech Hackathon Summit on October 19 - 22, 2019. lawtechmalaysia.com

Peyton is Jumpstart’s Journalist in Residence in Malaysia. April 2019

JUMPSTART MAGAZINE

April 2019

EVENTS

Entrepreneur First Investor Day February 19, 2019 Garage Society Wan Chai, Hong Kong

lobally-renowned talent investor and venture firm Entrepreneur First (EF) showcased a total of 13 startups from Hong Kong and Singapore. The founders entered the EF program at a pre-company stage and spent six months building their products from the ground up. EF Asia Managing Director Alex Crompton welcomed guests and shared the news that the firm recently closed a US$115 million funding round before handing the microphone to the EF Hong Kong General Manager Lavina Tien. Tien spoke about the firm’s reasoning behind setting up the program in Hong Kong, explaining that the quality of education and capital available in the city makes it ripe for startup disruption. She then introduced the companies, which span the biotech, big data, healthtech, robotics, and edtech industries. “EF is a game-changer for Hong Kong. There is so much untapped talent–technical, domain and otherwise– tucked away in academia and large corporations, that the idea of coming out to build a globally important company is not always front of mind,” says Tien. The cohort includes a number of frontier technologies, notably seen with new-generation nano-filters for chemical separation (SEPPURE) and a data converter with the potential to alter the growth trajectory of 5G and IoT (Caelus Technologies). Another theme is products that appeal to corporates, such as intelligent compliance assistant MICA by Radicali, and AI-driven due diligence solution, NOTARUM. Hardware products were among the most memorable; Volt14’s lithium-ion batteries are challenging the industry standard by increasing the stored power of its cells by up to 70% compared to what’s currently on the market. Neptune Robotics pitched their underwater drone, which cleans biomass from ships to reduce lag and unnecessary fuel consumption. Although an early-stage investment firm, EF positions themselves as ‘talent investors,’ preferring to reach out to individuals rather than startups. This differentiator is evident in the founders they attract, as they all boast exceedingly impressive backgrounds, where PhDs and industry awards are in no short supply. EF has backed over 1,200 founders since 2011, building companies worth a total of $1.5 billion. –MC joinef.com

Zeroth’s 4th Demo Day March 5, 2019 Hong Kong Convention Center

sia-based accelerator Zeroth.ai celebrated its fourth cohort (#Z04) with a jam-packed Demo Day of 15 startups who pitched to investors and the media. The AI-focused program opened its doors in Hong Kong in 2017, and has grown every year with Founding Partner Tak Lo and an experienced team. #Z04 was the first cohort since Zeroth expanded the program to India and Japan; five startups from the new locations were flown in to pitch out of the total 30. With so many teams presenting, the tightly-packed schedule left no room for delays. Lo took the stage after a brief introduction from Partner Raymond Yip. “We’ve achieved some of the most amazing things in this cohort,” said Lo, adding that in the past few years of Zeroth’s operation, he’s seen startups “turn critique into conviction, and doubt into determination.” Hong Kong Secretary for Innovation and Technology Nick Yang also gave a brief speech, highlighting what appeared to be the theme of the event: internationality. The Hong Kong cohort already boasted teams hailing from Europe and the U.S., and with the addition of Indian and Japanese teams, the #Z04 event was the most global Demo Day yet. “Hong Kong, contrary to what many people think, is actually developing very fast,” he said. “The ecosystem for innovation and technology has flourished. I’m happy to say about 30% of the startups in Hong Kong are [founded] by entrepreneurs coming from outside Hong Kong.” All the teams on stage had impressive pilot contracts or user stats under their belts. The overall quality of the teams in #Z04 was something Yip commented on as an example of the program’s growth over the past years. His hope for #Z05, which will start in summer 2019, is for Zeroth to continue on its track of becoming more international, and to attract the innovators and creative visionaries–the “crazy ones,” as Lo referred to them. Zeroth isn’t looking for “something that’s just[…]another app, or another game,” but companies that “actually make a lasting impact–10, 20, or even 50 years down the line.” –NB zeroth.com

Top: EF Hong Kong General Manager Lavina Tien. Photo courtesy of EF.

Top: Dapp.com CEO Kyle Lu presenting on the day. Photo courtesy of Zeroth. April 2019

JUMPSTART MAGAZINE

ONE LAST QUESTION

What happened at your most memorable pitch meeting? Our contributors and interviewees share their stories I met a 16-year-old programmer, who was pitching in between classes and seeking to raise money to disrupt the fintech industry–very inspirational. Vincent Tan

“Launching Human-Centered Ventures” (pg. 19)

I won a pitch competition at the Southern Taiwan Science Park Innovation Festival in Taiwan back in 2017. My colleagues and I went out drinking and found out that my passport went missing a couple of hours before our flight. The celebration was worth it though. Russ Malangen

“Pearl of the Orient” (pg. 62)

Since 1999, I have been pitched over 15,000 business plans. Once upon a time, I met an entrepreneur named Jack Ma. He had a 25-person startup called Alibaba. I championed his deal to request US$3 million in early-stage funding, but my investment committee said “No.” Today, Alibaba is a global driving force. The fund I used to work for isn’t around anymore and no one else but me controls my destiny. Derek Kwik

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It was during my second week at BABEL Ventures. Even though I was new, the general partner asked me to lead a meeting with one of the most famous Brazilian entrepreneurs. It was a great meeting and it helped me to develop more confidence in myself.

Kevin Nguyen

“Latin America’s Era of Innovation” (pg. 16)

There was a pitch where the CEO and investor got into a heated argument. People were shaking, voices kept getting louder, and the room was as tense as a guitar string that’s about to snap. It’s a reminder that teams are made of people, not products. Behind the decks and numbers are emotions; investors need to respect that more. Stephanie Tang

It would have to be M17 Entertainment. When the founder’s phone dies before noon, you know this deal is hot. I had to physically chase him down. The founder then said, “We have more users than Periscope and Meerkat and we are number one in the U.S. and China.” How do you respond to that? Joseph Huang

“Trading Places” (pg. 11)

“Supporting Youth Innovators” (pg. 78)

One time, I was pitching with Type A influenza in the middle of Winter in Korea. The investor took me down to get medicine and gave me his jacket. Lesson learned: investors are not that scary. I still have his jacket at home. “Now I Know My ABSeeds” (pg. 25)

April 2019

Pedro Vieira

“The Talented Mr. Danang” (pg. 15)

Soravis Srinawakoon

“A Tale of Two Cigarettes” (pg. 32) 96

My first pitch was with JobHop’s first angel investor. It didn’t feel like a pitch meeting because I spent more time asking her for advice about solving the talent problem in Vietnam. She ended up investing US$50,000, which encouraged me to move back to Vietnam and work on JobHop full-time.

In 2012, we kept hearing from founders that they loved this new customer relationship management tool called Pipedrive. We reached out to the company and we hit it off immediately. Their pitch had no fancy buzzwords or catchphrases, as their numbers and customers did the talking for them. Furuzonfar Zehni

“You Don’t Need Venture Capital” (pg. 12)

“Night summit in three words… get deals done”. Hong Kong July 8-12, 2019

www.riseconf.com

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The Entrepreneur’s Magazine

Issue 25

April 2019

The Investment Issue Southeast Asia’s Overvaluation Epidemic

How Fashiontech is Addressing Fast Fashion’s Sustainability Problem

10 Minutes with Jason Calacanis

What’s to Come for E-cigarettes

Asia’s Family Offices

The Tokenization of Everything

Now I Know My A, B, Seeds

What You Need to Know About Generation Z

Transforming Microfinance Through Technology The Evolution of Crowdfunding

A c onv er sation with 500 S ta rtu p s Fou n de r

Jumpstart Issue 25: Investment

Articles inside

Family Offices: Asia's Biggest Open Secret

Now I Know my A, B, Seeds

The Dropbox Story, Retold

The Evolution of Crowdfunding

Southeast Asia's Overvaluation Epidemic

500 Reasons to Lead

A Tale of Two Cigarettes

The Mysteries of Gen Z

More Miniskirts, More Problems

You Don't Need Venture Capital