[Interview] “The hottest consumer Internet and mobile markets are here in Asia”

Interview with David Shelters, author, “Startup Guide for the Technopreneur”

David Shelters is the author of the book “Startup Guide for the Technopreneur” (see my book review). He has over fifteen years of entrepreneurial experience as a founder, cofounder, or financial advisor to numerous tech startups in both the US and Asia. Currently based in Bangkok, he provides financial advisement services through his company, Karon Business Consulting. David joins us in this exclusive interview on the startup and investor scene in Asia, attitudes towards risk, and the importance of flexible planning.

YS: How was your book received?

A: I have received several favourable reviews from some Singapore and Thai-based blogs and online media outlets. People are also sending good reviews to my website at www.financeforgeeks.com. A few weeks ago Hubba, a local co-working space, hosted a book launch. It was a very nice reception. I did receive an invitation to speak in New York City. Unfortunately I am living on Thai income and do not have the budget for international travel to promote the book! I am hoping my workshop series will afford me the opportunity to do so.

This book is not written from an American perspective as with many other startup books. The tenets of the book apply to tech entrepreneurs everywhere and it is gratifying to hear from you and know it is being read in India. I would appreciate any feedback from you on any reactions in India!

YS: What investment trends do you observe with regard to startups in Asian countries? 

A: I am very optimistic in regards to India and Thailand. China remains a risky place for any foreign investors. However, they have an advantage due to their sheer size which makes any online business based in China an attractive partner for larger global corporate investors. Singapore has plenty of investment funds but few tech entrepreneurs. Singapore will continue to be a source of venture funds and an attractive base for any startup in neighbouring countries looking to improve their brand, protect their IP, reduce potential taxes, have a great hosting environment and incorporate an entity under Singapore law.

Many notable startup organisations and venture capitalists are taking notice of India and Thailand because the hottest consumer Internet and mobile markets are here in Southeast Asia, the costs of operating a startup are relatively low and most importantly in southeast Asia we have an abundance of tech talent whereas the rest of the world is experiencing shortages.

YS: Which Asian countries are raising their own venture capital as compared to relying on US venture capital?

A: Up to now there has been very little American-sourced investment in southeast Asia. This will change. 500 Start-Ups has just arrived for their Asian tour this month. I had the opportunity to meet some of their team already and will meet them again, including Dave McClure, this week when they arrive in Bangkok. To my knowledge they are the first American institutional investors to actually be willing to make a direct commitment here.

I have received many inquiries from American investors and organisations. However they mostly want promising Thai startups to re-locate to America. This does not make any sense and our pitch is they need to come here where the hottest online and mobile markets are, where there is an abundance of tech talent that can be sustained at far lower burn rates than re-locating them to America. I think more and more American investors will begin to realise they will be missing the boat if they do not come here. Singapore has been and will continue to be the top source of venture funds in the region. Indeed, Singapore-based VC firms have been the first institutional investors to establish offices in Thailand, Vietnam and other neighbouring countries. The Series A funding Gap I first talked about in 2008 is progressively shrinking but much of the progress can be attributed to the pro-activity of Singapore-based investors.

YS: What trends do you see in venture capital movement from mature to emerging economies?

A: As the costs of funding startups have gone down considerably, the larger VCs are finding themselves investing in later rounds into ventures that have already achieved some traction. The trend in venture capital is turning in favour of more nimble incubators and accelerators who can efficiently make smaller investments in larger numbers and directly provide startups with valuable non-financial resources as well. The Asian Tour for 500 StartUps is a perfect example. The JFDI Accelerator in Singapore (founded by my good friend Meng Wong) has been very successful and in Thailand I believe the emergence of incubator programs will become the preferred way for investors to invest.

YS: How should innovators strike that delicate balance between ‘Stick to your vision’ and ‘Adapt to a changed world’?

A: I think innovators should be very open-minded. Initially you should be strongly committed to finding a solution to the problem you have identified for your target customers. However, this focus is primarily for the benefit of instilling discipline in your development efforts. Innovators should be open-minded on what a solution may ultimately look like. Often in seeking a solution to a specified problem, founders may discover that another problem faced by their original customers is needed or their original solution is more appropriate for an entirely different set of customers.

Thus, being adaptive is preferable as long as the focus is always on the customer. Only customers should be allowed to change your vision. The wishes of prospective investors, strategic partners, public funding agencies, etc. should be honoured and respected. Indeed, they may offer valuable advice on how to approach a problem. However, only customer feedback should be allowed to change your vision.

YS: How should startups change their funding or business model in the face of pivots and changes to market realities?

A: In the Lean Era, startups need to realise that their business plans are working documents. I strongly advise having a financial plan concurrent to the business plan. Testing hypotheses may indicate when to do a pivot. However, it may not tell you if such a pivot is financially feasible and what overall effect it will have on your business model. I often quote General Von Moltke of the German Imperial Staff over a century ago when he said, “Planning is everything, plans are nothing.”

Often startups do not bother drafting business plan because prospective investors no longer demand it and all they have to do is identify and test hypotheses. However this is often a fatal mistake. Although things almost certainly will not go as planned, having a plan will guide you on making informed decisions in a holistic manner when the decision to make a pivot or react to a change in the market arises.

YS: What is your assessment of how failure for entrepreneurs is regarded in Asian culture as compared to the US, or Europe?

A: This is a great question. Unfortunately, it is true that Asian entrepreneurs in general are much more risk averse and do not readily accept failure as maybe their Western counterparts. The notion of “saving face” and strong financial obligations to family contribute to this risk aversion. This is a big problem because every successful startup will need to experience plenty of failures before they succeed.

Failure is an essential part of the learning process and a central reality in the prevailing Lean methodology. Carrying the title entrepreneur is much more a badge of honour for Westerners than Asians. This is changing because the title “Geek” is worn as a badge of honour by Geeks everywhere and Geeks are increasingly accepting their entrepreneurial role in society. This is just my opinion.

YS: What are your findings with respect to financing strategies in social enterprises and NGOs who are also adopting disruptive technologies?

A: I do not have much knowledge on financing strategies for social enterprises and NGOs. The only observation I can make is that social enterprises and NGOs are increasingly realising that they can do their work much more efficiently by using an online platform to reach a larger audience faster. I have seen that many startups have commenced taking advantage of this by offering platforms that service NGOs and social enterprises. I have just become a partner in one such a startup.

YS: Is there such a thing as the ‘ideal age’ for an entrepreneur, or can the startup bug strike you at any time? How should people keep themselves open for adopting an entrepreneurial career later in life?

A: I believe there are no bug and no ideal age. I think most entrepreneurs have been entrepreneurs at heart since birth. At least that it was what I have witnessed countless times. Entrepreneurs become entrepreneurs usually via an epiphany. This is how I became an entrepreneur -- through a realisation, not an inspiration.

YS: Who are some of the entrepreneurs you admire today? 

A: I think Khun Patai of Builk.com and Khun Natsakorn of ShopSpot are two Thai entrepreneurs who serve as good role models because they were trailblazers in their country. They were willing to think in regional and global terms and participate in startup events outside their home country. They continue to play an important role in the local startup community, sharing their story and encouraging aspiring entrepreneurs.

YS: What are some successful exits we are likely to see among Asian startups this year?

A: I have worked with and seen many promising startups. However, I do not see any notable exits this year. Many of these startups are either in the early stages or are post-revenue and I expect will be cash cows for the foreseeable future. If there are to be any successful news making exits they will likely be startups in the consumer internet space and who can capture a niche market. What is interesting is we will see many highly successful mobile apps generating nice revenues. However, unless app developers use their own platform it will be difficult to have an exit whereby they are acquired. Due to trends in the VC industry I previously mentioned, I see no big IPO exits in Southeast Asia.

YS: What is your next book going to be about?

A: I am currently writing my second book on bootstrapping for startups. I feel compelled to re-define what bootstrapping is and relate it to current realities in the online markets and trends in the venture capital industry.

YS: What is your parting message to the startups and aspiring entrepreneurs in our audience?

A: The time is right to strike for innovative Asian startups. Assemble a strong and complimentary founding team, follow lean methodology and agile processes, always maintain the focus on solving customer problems, seek strategic partnerships and execute all of this in accordance with a plan. Embrace failure as progress!

[ Follow YourStory.in’s research director Madanmohan Rao]