Yes. I often see entrepreneur come to me and
say: “We are unique. There is nobody competing with us."
No, that's the first line that …
that’s a first line that I really hate and
many investors I know - my friends - they hate it as well
(That indicate that they really don’t understand the world.)
Yes, exactly, we … I'm sure we’ve seen a lot, you and
I, we have seen a lot of these things and
say, "Hey, I’m the only unique company, I'm the only company."
(Which by the way, we have just seen five of them, like, just before that.)
No. Oh, my God, okay. Yes, I tell the story that even like if you're building rockets
You're not the only company. So, Elon Musk
is building SpaceX that building company
and they are not the only companies that building rockets. (Even they …..)
They have competitors.
They have other companies that are building rockets.
So, unless you’re telling me that you’re actually building rockets or
building a spaceship, and … then don't tell me
that you're very unique, that something’s very special.
So, what else? You mentioned the business model and then the team.
Anything else that you look at when you make your investment assessment?
Well, that's the core basics that we’re looking into
those two areas. And the other thing that the due
diligence part is pretty much in terms of how
we spend time together, to work with with these
entrepreneurs and mentor them as they go along.
Because it's … I use the same analogy
like getting married. So, you just don't
go to a pretty little girl and say, "hey, I
want to marry you." Just by looking at you.
(Some people do.) Well, good luck.
Doesn't work all the time unless you have
a few Ferraris standing around you.
But we tend to see that we use the time to work out
some of the problems with these companies.
(After the investment or …? ) Before the investments
(Even before the investment.) Before the investment
because we have to test and see ... because in good… it is like getting married.
Before you get married, you have the date first.
And when everything is rosy, everything is good
there is no problems, then everyone is happy.
But if there's problems, if there's
certain things that "Oh! I don't have time for you or whatever’, then conflict starts to arise
And markets change. If the market
is good and consumers or customers come in and
pay you automatically, then it is a… then everyone is happy. But if the consumer or
there's no business, like what we are facing right now, the economic downturn right down,
so you spent much more effort in terms of finding new customers and even the customers
are not coming back, then you will start to see, okay, what the problems arise.
And we go in, they actually see, okay, we try to help you
but we may have to tell you to steer
to a little bit to the left or a little bit to the right, do something different, and
you have to work out with the management team in terms of
"are you moving in the right direction’
or "agreeing to together for new direction".
This is an interesting point because I often hear there’s a conflict or dilemma.
On the one hand, these are entrepreneurs.
They are supposed to be opinionated because
they are going to run their own company,
have their own say. But on the other hand, as a
investor, you want them to be somewhat coachable.
So, these two are a little bit conflicting.
Coachable and then they are opinionated
Self-driving or you have someone to steer them.
(Yes, how do you make a balance?)
It's it's really the balance in terms of how the investor is. For an entrepreneur
or a CEO controlling a company, of course,
you’re controlling company, you can call the shots
whenever you have. But we also look into how stubborn you are.
So, creativity and stubbornness is really just a fine line defining it.
So, if you are really stubborn and you can't see what's happening outside, and
you can’t actually be more flexible, open-minded
in terms of hearing other more experienced
people telling you, "okay, there are different
ways or what's the market is happening",
then we see that as a red flag.
Because from an investor, as an investor myself
and I tell to other investors as well,
when they asked me and say, "okay, how do you make the balance?".
"Okay", I say, "as an investor,
you should step back because you're not the capital of a ship. You are investing in a
company that you believe the captain is capable of
being professional in terms of sailing the ship.
But you can be a spotter on the ship
and tell them, "okay, I'm seeing … you may have a binoculars and see that there is
an iceberg coming after two months. And you can help the captain spot this and you tell
the captain "Captain, there is an iceberg coming along. There's market crash coming along.
There's new political policies coming along
It may affect you or it may not affect you
So, tell them to the management team, the CEO and the CEO will decide on, "okay,
should I take this information seriously."
And if they take it seriously and … and analyze it and say, "okay, this is … this will not
affect us or this will affect us", then they would make the right choice. But they will
have to as an CEO or as an investor, we take in different information and analyze it in
the most objective kind of way
And that's one of the things that I tell not just to the
entrepreneurs themselves, but also as the investors that they will have to step back
and not take too much control. Because it’s like, as I said, using back the analogy of
finding a girlfriend. You like the girlfriend as is
You don't want to change her later on.
If you want to change her, then your girlfriend will start getting angry and
probably just ditch you by tomorrow.
Because no one wants get …
You think the investors not taking the captain’s role.
The captain’s role belongs to the entrepreneur and then
your investors’ role would be, like, make sure that they are well informed.
Definitely, because as an investor we inject the money, we
we inject the expertise, we inject the connections
But of course no one wants to work extra time. Because it's a lot of work and
because maybe it's not in our professional
expertise in that area as well.
So, you can't ask me, say, for example, there are a
lot of cases where I see where investment houses
invest in a, say, for example, a jewelry business in China.
And it's big jewelry business, retail, very big retail first in China.
And the retail market once happy, everyone is happy.
No one touches anything.
You left the management team just keep on working what you're doing.
So, everyone happy, you can go sipping Champagne or cocktail whatever.
(When all goes well.) Yes, all goes well.
But the market changes and the consumer
retail side, luxury especially luxury side
it went pretty much bust, so which means that
there's a big problem in terms of management team
or how they are managing. And then the original
investment team came in and started
to inject their own people coming in.
And by that I mean that they’re injecting their own
investment people coming in.
(Start replacing some management.)
Exactly, top level management. When they’re replacing those people,
those are probably, definitely number one, they are not jewelry experts, professional experts,
they are not, they don't have the connections in this industry.
This industry, in particular the jewellery industry,
is very concealed, is very close connections. So,
if you don't have those connections, you will
never get what you actually want to do so.
And so, on number three, they would use their own mentality to dictate what is going to
happen in this company. So, if you're working
in the luxury retail and for that particular case, they are changing a luxury retail,
a consumer retail into a supermarket and
try to sell a lower level of product line, which I wouldn't say it's a total disaster;
but because of that massive change, what entrepreneur needs to understand as well
because change is sometimes necessary, but how
much change is necessary in that particular time.
Because it actually disrupted everything.
So, it disrupted the product development, it disrupted the channel, it disrupted the
front-line sales, so which means that the thing went spiraling down.
I can see the morale of the employees must reaching a low…
But the reason for why the investors are using
a supermarket kind of business model and
injecting into this original model is: number one
because the original model isn’t working anymore because of the market here
But why do they choosing the supermarket model is
because they invested in supermarkets before.
So, they’re using that mentality and say "okay,
this is my mentality. I think it's right.
You should be using it."
(Unfortunately, it’s not a transferable idea.)
Yes, it's never transferable and when I say it like this, it
it sounds ridiculous as well. But at that time,
the management team, the investment team because
they are investors, they decided "okay, we need something drastic." And they listen
to certain people, they listen to their own
management … the strategic investment management team
and say ‘okay, this is something we could do, so, okay, go in.’ So …
I think it may be like the analogy where if you are holding
a hammer, then everything looks like a nail so they …
(Yes, That’s a very good …That’s a very good analogy as well.)
They know those supermarket model, they apply that
to luxury model and it’s pretty …
Exactly, well we do a lot of like consulting with
the people as well, re-packaging companies
making them much more strategic investor-ready.
And when I go in and see this, I said "this is never gonna to work.'
Not because I'm dismissing everything.
Because I won’t say anything is impossible. Nothing is impossible.
But the fact is how probable you are, considering the time you have, the resources you have.
So, from my side, we work on very shoestring kind of resources and we do
things very efficiently and effectively as well.
But we also look into, okay, what’s the best way of not rocking the boat too much,
making sure that the front-line sales … front-line sales, they are just people,
they are just employees, they aren’t investors.
So, they have an employee kind of mentality.
So, as an entrepreneur from outside going in work in China, you have to be very careful
in terms of that, in terms of yes, you are the boss, you are the investor, or you are the
management team, but your people downstairs they are just employees and they are just
thinking about - okay, can I get food on my table?
Can I… will I have job security coming along?
(So, you really need to understand the employees. What motivates them? …)
Exactly, what motivates them… of course, people
say that money motivates. Okay, that's one thing.
(Up to a certain extent.) Up to a certain extent
because if you’re going into China
and if you have a really good person, then
the other person or the company giving you
much more salary, they will just take that,
head-hunt that person away.
And that was fairly easy.
And like I said, it's nothing that is intrinsically that you would be appealing
or motivating to that employee.
It is just like motivating your customers.
Only that your target audience is your your employee.
I think that’s an interesting point.
Let’s drill on that a little bit.
So, on the point of finding talent.
A start-up in China if it need talent,
it’s very competitive. How can they attract and retain talent?
Talent - well a lot of people say
that it's hard to find talent.
Actually, it's not that hard … to a certain extent. It depends on what kind of
business you are and where you are looking for.
It’s just like looking for
the right girlfriend or the right customers.
If you’re going to a men’s room,
you are not going to find a female inside.
If you are looking at the right place, looking for the right people
and talking to them at the right time.
When we talk about the
basics of …in Mainland China, we just mentioned that a lot of people are
willing or committed to becoming
entrepreneurs or starting their own business.
Now, if you can help these people to meet their intrinsic needs,
maybe it's not just as a employee, but more like a founding co-founding partner
or like a shareholding partner,
then that’s something that they will be much more motivated.
Mentality-wise, it is already there and everyone
or every university in China right now
these days are talking about entrepreneurship
building creative innovation companies.
The state is supporting it.
The university is supporting it.
Even the secondary schools these
days I know are supporting it.
And there's tons of incubators, co-working
spaces that they’re building up.
So, as a foreign company going to
China finding talent, these are all the sources that you can actually tap into.
(So, the supply side - that shouldn’t be a problem…finding the right match.)
Supply side shouldn’t be a problem…
Exactly, it’s a matter of
how you sell your story to attract that particular person
Because if your story … if your company is
not ready yet, the line that I mentioned
do you actually understand
what your company is doing.
If you’re just building up a hardware, fine.
People say that ‘ okay, hardware.
What happens after the hardware? Do I have
something more? Does that appeal to me?
Or hey, I just do develop the robot
or just develop the new microwave
and then I can just pop in or just
take that thing and put it on the
e-commerce platform and sell for
like two dollars.’ So, there is a lot
of these things happening around.
Would a foreigner going into China would have the extra difficulty because of their
culture and the language? I mean, where do they find the talent or to understand
how to retain talent that would be … Would that be a challenge?
Well, language is definitely one of the biggest challenge
But then again if you're going
to Tier 1 cities, there are a lot of incubators, there are a lot of, like,
universities which have their branches outside
in Tier 1 cities in China. There is a lot of
of people who speak English as well and
they are very welcoming to new companies
coming from overseas to set up in China.
Of course, how they connect to you, that's just the first step.
The second step should still be the CEOs or the
entrepreneurs, they will have to tell that
story and attract the right people. So, if you're working with a hardware, there is
like hardware incubators or in Shenzhen or Tier 1 cities that there's a lot of them.
And there's a lot of people who can help
You and I would…we’re here to help as well.
And … there is a lot of opportunities,
it is just a matter of realizing it