Jeffrey Paine, managing partner at Golden Gate Ventures, a leading Venture Capital firm in Singapore, shares the story of how he started in the VC world, what he would recommend to people looking to break into Venture Capital, how he learned to read people, the different types of startups in South-east Asia and how to achieve product-market fit in multiple markets.

Transcript of the Interview

Jeff we saw you a couple of months ago, at the Silicon dragon event in Hong Kong and one of the things that people kind of immediately notice about you is the depth of your experience. You show yourself to be well-connected, well-spoken, well-versed in anything startups in the region. But once upon a time, you started as a KPMG consultant and over time you took leadership positions in a range of venture funds. So, today you’re a founder and managing partner at Golden Gate Ventures, director at the founder institute in Singapore as well as a mentor in Chinaccelerator. Can you talk to us a little bit about how you got where you are today?

Jeff: I’m born and raised in Singapore, went to school here and then started in the IT consulting field in LA and Mountain View for a while. So, there after we had clients in the startup space, I got recruited back to Singapore to start a fund for a listed company so that was like the beginning of learning how to start a fund and how to set everything up from nothing. Sharpest learning curve yet. It took me a year to figure out what’s going on and how to do things and what’s the landscape like in Singapore because I wasn’t in the venture space before.

That’s how I started in 2001 and ever since then I’ve always been in funds or around private equity and came back to venture capital. I tried my hands in different industries but ultimately still attracted to the technology space. So, like technically came back down to technology in 2009 and that’s where I brought a program called Founder Institute from the Valley to Singapore.

At that time, Singapore was the fifth chapter globally, first in Asia, again didn’t know what I was doing. Learned from the best in the West and tried to take what I can and bring a bunch of mentors to South East Asia because I thought there was a big gap there and thereafter, gradually you know, we opened a lot more chapters. 

Thereafter, I met my co-founder now at Golden Gate Ventures when he was backpacking. I asked him to mentor in Singapore, Jakarta, Hanoi. So, he did that and after his one year off from backpacking then we had a few insights from like 2011 and then we figured out that there were very good teams in South East Asia but very little money. Especially early stage money that understand technology or technology investing so instead of him start a new company and me trying a fund, we thought of starting a fund together just so we could fill this gap. We didn’t know whether it would be big, whether it would work, we just knew there was demand for smart capital.

Very cool, so you said when you first got into it. It took you around a year before you’d fully get the hang of it. If you could give your younger self a little bit of advice like what would that be in order to reduce the amount of learning time you needed?

Jeff: Good question. I think there isn’t any – so my two cents is you have to read a lot, meet a lot of people and do a lot of things because the venture business changes all the time. Startups and tech, how it’s created, how it’s run, how it’s managed, it changes all the time. So, from what I know now then it doesn’t apply back anymore. So, everything changes, so I would only say always keep up to date, always read a lot and read if at all possible start a company but be a kind of that’s the way.

And what would you read if you started out today?

Jeff: If it’s today, I will not read books, I will read blogs. So, I’ll read blogs from the people that you want to be, potentially want to be, read what they write. I’ll be pretty religious at subscribing to good content from Medium.com.

Anybody particular like Ben Horowitz, Marc Andreessen, Kleiner Perkins?

Jeff: Yeah, most of them are good. There’s a newsletter from Mattermark.com. Just subscribe to that and read, read whatever they curate. They curate stuff extremely well so just do that and then figure out – I think there’s one, what’s it called, Dealsheet or Dealflow or something by Thompson, where they track all the news being done; Venture, PE, all the exits, all the people moving around, It’s a daily email which is good.

You can aggregate a bunch of tech blogs from different countries like US, where you can subscribe to TechCrunch and China where you have Technode . In India, you have 36KR and there’s a bunch there. And South East Asia, you’re talking Tech in Asia and E27 so I would kind of subscribe to a bit of everything. Especially regions that you are not familiar with, like Russia and South America. Places that you would probably never ever go but you just need to be kept aware of what’s going on.

So, if you were starting out, just in terms of a couple of tips for people looking to get into your space and basically become your competitor, what would you tell them?

Jeff: Maybe three things, Like, you have to be a scholar of businesses and business models which means you have to read a lot, you have to be interested in new companies, you have to be interested in why this company make money? Why this company fails? So, inherently you have to be a curious person trying to figure out shortcuts, trying to figure out like just cool stuff, right? It’s just a personality kind of.

Number two, if possible, you should have some kind of experience launching something. So, whether you started a company, whether you started a side project or whether you know you and two classmates pulled in money to launch an app or a site, it doesn’t matter. You have to try to do something, you don’t have to literally sell your house and start a company. But, you just have to experience of launching something because most people don’t have that and they think it’s easy but once you have done it before, then you know how hard it is.

Then you have something we call founder empathy. You understand what founders go through, what things are in your head, whether they’re prioritizing or not and how they spend money, the correct way or smart way, stupid way, whichever way. So, that’s the second thing. So, I would recommend people just to start and build an app for yourself that costs 500 bucks, just try it, just learn the things you’ll learn from that.

Third one is the hardest one to do with to learn how to read people. This is the hardest thing to do so I think I --.

What does it mean, reading people?

Jeff: The ability to judge people within 15 minutes. When you meet someone for the first time, you put people into a few buckets, that takes a bit of time, a bit of experience, a bit of mistakes, you trust somebody wrongly. The thing most of you with experiences, you know social or professional you have been down some kind of a route, you have trusted the wrong people, you have trusted right people, you have seen a certain pattern of people that you like. Sometimes they may not suit you as a co-founder but they may suit you as an investee, invest in them but actually not work with them. So, just figure out – Yeah, I think along life and along your career path you have to kind of learn how to judge people.

The best way is actually to have a mentor slash someone senior and every time you meet somebody new you just ask him like: “What do you think of this guy?” Is he full of shit, is he green and he doesn't know anything, but pretends he does?  Is he trustworthy and he actually can’t lead at team because everyone will agree with him or her. You have to compartmentalize different people.

You touched on it a little bit and when you say you put people in certain buckets. From the perspective of Golden Gate Ventures: what’s somebody who fits in the right bucket from your perspective? Like, what do they have in common?

Jeff: I think it’s trustworthy, extremely transparent, hustler, go-getter kind of guy or girl. Sometimes, they break down walls to get things done. Sometimes the good things, the bad things. So, it’s many personalities who touch the line or actually cross the line. So, different people, like different firms sometimes like certain types of people. Some of them you know like more senior guys some firms like intricate hacker types. Some firms like more intricate, suave, sales-y types.

So, it depends but I think we tend to like more hacker type people, more hustling, more grit. They get things done without asking, they know what they can do, what they – they know what they’re good at, what they’re bad at and they’re very honest about what they’re good at and what they’re bad at. They don’t try to pretend,

So, if I was a startup founder what would I have to come with in order to convince you?

Jeff: It changes over time, right? So, I think in the beginning everyone is trying to learn, including us, trying to learn what works and it goes by waves and now with four-five years of data we can kind of tell what companies will be big. What companies will be small or SMEs, what company will fail. So, I would say the company needs to understand what they’re thinking, In SEA there are four types essentially. So, there is the type that, no matter what you do, you will die --.

What does that mean exactly?

Jeff: Unless they completely pivot to a consulting company they will die. That means wrong idea, wrong market, wrong people, just everything wrong.

Then you have the global from day one guys which is less than 10%. So, they are a global company, global app, global product but they hapen to come from South East Asia. They are very few and far between those guys; the dynamics changes – you are now global, you have multiple competitors everywhere and with different levels of funding and sort of competitive landscape.

Then, the third one is they are regional from day one. So, they have aspirations to be in South East Asia, they have to start from one country before they go out and they kind of know what to do if they dominate one country. So, those are probably 20-30%. Majority actually are one countries. So, number one in this Thailand etc.. Some of them know that – some of them don't. So, the problem comes where they think they’re regional but they’re actually local. So, that's where the disconnect comes in and some of them know that, they go: “Oh, I’m happy with just one country, like no aspirations, don’t care, don’t ask me to do anything, I just want to listen.” So, when you have these four types then the investors just need  – they need to know what to take, obviously the first one will be what to touch.

So, maybe 80-90% of companies don’t raise money is because that’s the reason or they don’t raise institutional money, right? They raise money from friends and family and then they can’t raise money anymore and then they will either die or they will take a loan and pivot to a consulting company. Then, the global from day one guys, our investors don’t know how to help them because we are a lot more local and a lot more regional. So, it’s hard to help them to go to the US or Europe or whatever. That’s why there's not a lot of them to begin with because it's extremely hard to be, to be immediately in the top 5 of the world, it’s extremely hard to do that, but the outcome might be bigger so there are still investors willing to take a bet on it.

Then the last two are the ones that are tricky, everybody wants a company to be regional because you have bigger market size, but the reality is very difficult to be regional and if you’re only one country then it’s too small and I might as well don't invest here because it’s an SME and you give a 3X return. So, that is the problem, the problem is. Investors may know what they want, but might not find the companies they want. Or the founders think they can be regional but they actually can’t be regional. So, that's where the disconnect comes in.

Talking again about the small guys, right, let’s say you’re a couple of months in, you’re starting to think of, you know down the line you’re going to tap into some of the capital that’s available but you’re still some ways from setting yourselves up for successful interviews. So, what do you need to do, in order to achieve that product market fit across multiple countries in the region?

Jeff: So, now it’s slightly different, right? So, this year has been a slow year and a lot of people have been checking on their criteria. It depends on countries as well, if I’m from South East Asia and I’m kind of early stage. Generally, there is two buckets, there is the big money bucket and there is the fast growth bucket. So, there will be investors that now prefer a little bit more, the placement money, tell me when you’re breaking even bucket. And then there is still investors who like the: “ok, growth for seven years, don't to make money, never mind bucket.” Two, three years ago, I think the the growth story is a bit more interesting because they have seen it everywhere: India, China, US. Now, I think especially B2B, they want to see the money like very, very quickly. B2C as well, where they want to make sure the monetisation is clear, there is no guessing it is quite straight forward. So, product-market fit is one thing. In fact, there is product-beachhead-market fit plus unit economics fit plus founder fit. So, all these fours will line up.

So, the product that you really want to build may not work in the country you're born in. That's where the market fit comes in. You have to fit – maybe you should exist in Myanmar and you should move to Myanmar. So, the first thing is I’d have to move to Myanmar. Maybe you want to work for a bank instead. Ok, so that’s the first thing. 

The founder pitch market may not fit the product and the market may not fit the founder and then once these three align, then your unit economics need to be little bit clearer, much earlier. So, there lies the need to bootstrap, there lies the need to launch fast, there lies the need to raise small amounts to go to market and try to test all revenue models, all pricing models and quickly realise whether it’s a worthwhile business to do. So, some business you only need one-two rounds of family money and you bring them, you don’t ever need our [VC] money because you’re going to be a small SME, which grows three percent a year and that's fairly ok, right?

Ok, you give us all the equity but the trick is to get their high growth, which is extremely difficult. So, everyone should yearn for that, right? I mean, you're spending ten years of your life building something big and meaningful, why don't you reach for the stars? It’s extremely difficult to figure out a way to get there. You sometimes need a fall-back plan, you sometimes need something that is more realistic but it may fall out of the venture model completely.

So, just be aware. Right now what pisses me off with a lot of tech founders is that they always want to raise money, everything they do, they have to raise money. They have to raise money to raise a company, that's a no. I have this, so I have to raise money. No, you don't have to raise money. They don’t understand because they’re newbies, they don’t understand.

So, how do you balance it out. You look at the books when somebody comes in like and they haven't achieved the break-even state yet, but what needs to be seen, in terms of potential, in order to make that a valuable investment for you?

Jeff: I think the first things is the teams, what they’re building and are they going to be number one? And is the country big enough? Are they going to expand to it? So, the first few things, that’s kind of like early stage stuff, like people and teams are key, ok and if they can build things, they can launch, they can make money, they can actually be number in one country, that’s extremely hard to do.

For us, if it’s a one country play, we can invest but don’t invest so much because the valuations aren't going to be very high. They should expect high variations because they’re not going to go out of one country anyway, right? So, it could be a decent bet with a decent return, but in a small way. Now, some investors would not do that, but that's up to them, right? Because if you’re going to raise a 100 million fund, you better return a lot. To return a lot, you can't doa one country play, right? But, if you have a smaller fund you cant because, you can do 20, 5 and 10, 5 to 10 can return a lot, the rest can return 3-5X. So, it depends on how criteria is set for funds and VC funds and venture fund. Right now, most people are kind of like regional or nothing but for founders, it’s actually extremely hard to have a regional thing.

One, either you have to move super fast so the copy cats won’t catch you, that means you have to launch in two cities, you have to raise the money up front and then try to outpace the copycats  because the copycat will come. Or you have something that nobody has which doesn’t exist. 90% of things here are copycat so there’s nothing that you have that nobody has, right? You give me money, you give me six months. I go to Vietnam, I’ll have it. There’s no such thing as you have to make it. So, it’s about speed. Then, it’s about timing and it’s about who likes you more, right?

Like, which investor likes you more sometimes. It’s not a completely different play from the US, the US also have the same kind of thing. Serial entrepreneurs can raise money before they launch something, they can raise a lot of money and then take it to a much higher degree than somebody new, fresh out of Stanford. If it's your fourth company, you know what you’re doing. You have maybe 10 VCs who have backed you before so if you want to raise money, it's very easy. So, as the ecosystem becomes more dense, it’s worse because there’s more serial guys coming to launch things and then the newbies are fighting the serial guys instead of another newbie. Right, so it gets harder and harder. So, over the last five years it gets harder to start a company now.