On 9th July, Der Shing and Shao Ning were interviewed on The Breakfast Huddle with Elliott Danker, Yasmin Jonkers and Ryan Huang. Here is an edited excerpt from the interview:
How is it that you have retired but still running a company?
SN: This is because we want to continue to paying it forward, and to stay relevant in the startup space. Also, staying at home and facing the four walls and facing the children alone tend to drive us crazy! Over the past 4 years, as we moved from being founders to mentoring and advising startups, we started investing in a couple of them. Currently, both of us have invested in about 22 companies that are mostly technology based, and three of those investments were made in the past two months.
DS: AngelCentral’s journey started slow, as we were training angels because people were interested in what we are doing in 2016. In 2017, we started organizing pitches because startups were just sending decks to us; we meet almost 200 startups a year! So, in 2018, Shao Ning suggested that we should just make it into a business and see what happens. That was how we incorporated the company, but I wouldn’t say this is a full-time thing, but we are definitely growing organically slowly.
What is the process of being an angel investor?
SN: The first thing is we look into is the founders’ motivation and from there, to assess how much thought and preparation has been put into building it. The key thing to convince us to invest in a startup is that the founders know what he or she is getting themselves into, and whether they have the relevant background in the space they want to move into. The second thing we look at is the market the startup is operating in. Is there a large potential opportunity or is the founder trying to solve a problem that is only relevant for 10 people in the market? We generally try to look for market sizing of at least minimum 30-40 million customers within the local space. We try not to be ambitious to look at the second and third market in the first two years, because it is already pretty decent if you can achieve a 10% share of a market that has about 30-40 million customers during that period of time.
DS: Also, it would be best for founders come to us through referral from VC firms or friends. This is because we tend to miss applications that come through cold calls or emails.
Is there more interest in startups now compared to years ago?
SN: Definitely a lot more compared to our time. We literally bootstrapped our own startup and we had only two angels (one is a close family, one is a family friend). Compared to the early 2000s and now, I think startups are a lot more understood and with the increase in number of success stories in the market, we have more people that are curious in this space.
Are you talking about the interest here in Singapore or even ASEAN for example?
SN: Growing startups used to be a very US centric activity but right now, you see a lot more interest in Asia, especially with the emergence of Asian success stories. They all have a bunch of angels at the start backing them. In Singapore, JobsCentral was one example, and then you have PropertyGuru, Razer, and other stories around which were invested by several unknown angels then. As angel investing is an illiquid and high-risk asset class, investors really need to go in with their eyes open and understand that the minimum lock in for a period of 6-8 years.
Being very active angel investors with over 5 million of your money was invested in about 22-30 startups and VC firms, can I ask what sort of returns are you enjoying right now?
DS: The returns we receive are two folds. On the financial side so far, we are up about one time over the past 4-5 years. That is considered decent because for the risk you are taking, you should be aiming for at least 3 times your money. That means if you put in a million dollars, you should aim to get back three million over a period of 8-10 years. Mind you, these are all unrealized gains. On the other hand, we tell angels during our classes that the key reason you angel invest is because you want to be involved in the startup scene. You either want to live vicariously through the founders if you are too tired to do another startup on your own, or because you are really bored with your corporate job and there is something more you want to do – the money becomes a bonus.
The secret is to diversify your portfolio, and that is why we have done so many angel investments. There is a lot of data from the US that says you have to do a minimum of 20 startups for you be properly diversified. This way, you would be considered quite safe and unless you are really poor at picking the startups, your downside should be rather well protected.
What’s the biggest lesson you’ve learn from running JobsCentral that you’ve brought along with you to running AngelCentral?
SN: The people. Although there may be a lot of theories on Family background vs personal drive,my personal conclusion is that there is no fixed model and it is really important we need to interact with the individual to understand their motivations. I have come to realize through the years that people who are from better backgrounds can be good founders too. This is because they have a safety net which allows them to go all out on the business and many of them want to prove a bigger point that they can be successful on their own too. You also realize that people who are more experimental tend lack consistency in what they do. They become too curious about everything and dabble into different areas every six months. As the first two to three years in a startup is way more than just a roller coaster ride, it is not going to work if you are just curious and not be able to focus.
I like how it comes back to that pitch process where you get to know the person that is running the start-up.
DS: I would like to think a key reason startups pick us to support their fundraising journey is because we have been in their shoes before. Through our experience in JobsCentral as founders, we have built a business up to 150 people which is profitable, and thus there is a lot of sharing that we can provide that is relevant for the first 5 years of a startup. And for every angel, you need to figure out what is your value proposition to the startup.
Sounds exciting! Let’s talk about the inspiration behind JobsCentral, how did it all start?
SN: We were fresh graduates, and that was the space we felt we could do and make a difference. We were in the States then and we wanted to come back and do that something we can control. At that time, naively, we felt that was the simplest space to get into, because at that time there was the Buy Sell platforms on Jobs, Books through Amazon, etc., and that was the space we thought we understood. We even thought we could move our focus from jobs to other areas like stocks, but it turns out we were stuck in jobs for like forever (laughs).
DS: It is pure luck that we picked a space that turned out to grow quite fast.
SN: We actually have two other co-founders, Eric and Michelle. With our complimentary skillsets, four of us were able to work well together for 11 years.
I know you’ve already left JobsCentral behind, but do you still keep tabs about how often people use these online platforms and what their habits are like?
SN: It is sort of becoming the de facto way of finding the new job, because as you are on the go through the mobile, it is the easiest way to flip through things and with the search engine, it is a lot easier for consumers. However, the industry is very different now from back then.
Okay, here’s a question from our lead investigator on the show. In today’s day and age, you can have a scam on any site, any information site for that matter. A place like JobsCentral in the past you wouldn’t think that, but in today’s day and age, what’s the likelihood of a scam job advertisement happening on JobsCentral?
DS: All along, there has always been scams running on the internet. We used to get people who advertise fake jobs and do so only to collect databases to sell products to them. It is the onus of the platform that when you receive such a complaint to blacklist such people and take down the advertisement right away.
SN: I am a very process driven person. When we had those issues, I actually insisted that all businesses that were registering to advertise had to give us their ACRA. We needed to know who the people behind the business are, and we always reserve the right to take the advertisement off as soon as we verify a complaint.
Besides checking and vetting on companies, tell us the toughest part of maintaining an online company.
DS: Actually, we try to tell companies not to make a distinction between online and offline channels and just to focus on building the company. Focus on hiring good talent as the landscape is currently very competitive, and choose and industry that is growing really fast. Back then, the job portal space was growing at 40-50% CAGR in the initial years and it subsequently slowed down to 20%. Generally, the principles of business are exactly the same. Form a good team, focus on developing the right people, make sure they are happy and alive, focus on setting the right KPIs and cascading it down properly, when going overseas find the right partners, etc.
SN: So this is one topic which I had a rather intense discussion on with my professors when I was doing a study on online businesses. From that experience, I realized that online businesses are a lot more open than the brick and mortar businesses, and it is thus important to be flexible and to validate your ideas quicker; it is a matter of speed.
DS: Some people say that online businesses have huge moats, which I find that to be untrue. If you think about it Google, no one thought they would be threatened by Facebook on so many fronts. Even old school businesses can build huge moats, such as SPH which focused on increasing its online consumption out of its print advertising business. In the online space, things tend to be accelerated and therefore, one’s skill sets and thinking needs to be adjusted accordingly.
And very quickly to wrap this up, why the decision to sell JobsCentral to CareerBuilder?
DS: (laughs) Yes, one reason was definitely because of the money, but being through such a long journey for 14 years, we could see that the CAGR was slowing down and we were hitting a slowing growth point. I think some of our partners got rather tired as well, so it was time to move on.
SN: And also, CareerBuilder presented a different perspective from where we were. It is a competitive space and the US counterparts presented new ideas that we thought could be implemented. However, we didn’t expect a founder’s mindset and psychology to be very different from an employee perspective, which posed a huge challenge for both of us.
DS: Yes, it was very difficult, but that is another talk by itself. (laughs)