Desmond is a second-generation business owner, and after leading his family business for over 12 years, he is now focusing on Angel Investing, aiming to empower the next generation of startups.
In this article, Desmond shared with us his entrepreneurial journey, and how he got started as an angel investor.
As an angel investor, our role is to be a cheerleader for [the startups].
Hello Desmond, thank you for joining us today! Please introduce yourself and share with us a little about your background.
Desmond: I’m IT trained, I studied computer science in the UK, and after I came back to Singapore, I worked as a software developer, [doing] desktop applications, then I transitioned to software, then transitioned into web applications, and full stack development. Eventually I led teams to do software projects, and also a bit of business development. I think that makes the first half of my professional career.
The second half was [when I] joined my family business, which was in commercial tyres. And I think one of the reasons why I joined it is because innately, I wanted to be an entrepreneur, and I was intrigued with running businesses – so that was a natural decision for me to go in. But on a more personal note, I think it’s because my dad was diagnosed with lung cancer then, and so I wanted to go in to help out [with my family business]. And I think one good thing that came out of it was that I got to spend time with him – we had a common topic. It was like a father-son bonding time – so that was something that is precious to me.
As a second-generation business owner who led your family business for over 12 years, what were some of the biggest lessons you learned from that experience?
Desmond: I think in terms of lessons learned, I would have to say cash flow, because we are not a startup, so we do have revenue and customers – not that revenue is not important, but I think cash flow, in terms of giving credit terms was something that was tricky, and something we had to manage really carefully. Because I think in my industry, some of the customers may take up to 60 days, 90 days, some even up to six months to pay – so we really have to chase for payments without wrecking the relationship. At the same time, when new customers do come, we have to be careful about giving terms as well – because we wonder if they have had a bad relationship or bad paymasters with other suppliers, so we really have to manage the credit terms very carefully to make sure that we get the customers to pay on time, and also on boarding new customers too.
What was the most challenging decision you had to make while running the family business?
Desmond: While running the family business, I think [the most challenging part was] when I have to let people go. It could be for a variety of reasons – maybe the staff was underperforming, maybe the role has become redundant, or maybe it’s simply just because of cost cutting. But whatever the reason may be, letting go of someone is never an easy decision. Even if the person was underperforming, it can still be very emotional. I think in my experience, I learned that you really have to make it not about yourself, but you have to be empathetic with them.
How did you get started with angel investing? Was it a specific startup that got you interested?
Desmond: A bit embarrassed to say this, but one of the reasons is because I watched Shark Tank, and in that series you get to see a lot of things – you get to see greed, not just from the investors, but greed from the founders as well. On the other hand, you get to see empathy, and why the founders are doing what they are doing. There are also special episodes that show how the angel investors are helping the founders to grow, from a few thousand dollars of revenue to millions in revenue – it was really inspiring to see that.
And I think locally [in Singapore], you’ll see some of the success stories like Grab, SEA, or NinjaVan, and it’s inspiring to see that. These are companies that were nurtured in Singapore, but I think the startup that is most memorable for me is Creative Technologies, [founded] by Mr. Sim Wong Hoo, who built his Sound Blaster technology and got into Silicon Valley, I think he really was the pioneer, and was an inspiration to us all. I think that, coupled with my interest in entrepreneurship, converges to this one point where I realised I could be part of a startup ecosystem, play my part, and hopefully have a positive impact on the startups here.
When you first got into the angel investing space, what challenges did you experience and how did you go about it?
Desmond: Firstly, it was really about finding out more about angel investing – it’s not just investing X amount of dollars and getting a percentage of equity. As I started to learn about it, [I realised that] there were so many things you need to know – you need to know what a SAFE is, what a C Note is, what SHAs and SSAs are, need to know about tag-along and drag-along rights etc. I was thinking to myself: what in the world is a Right of First Refusal – what am I refusing here? It was a steep learning curve, and I think for me personally, I’m the kind who likes to get involved – get my hands dirty – and because of the lack of opportunity to invest, I couldn’t really internalise some of these nuances.
So what I did was I started to talk to people – venture capitalists (VCs), and then I got introduced to AngelCentral, and that’s how I [came to] know that they have a community of angel investors, and [I realised that] I could learn from other angel investors, from the founders of AngelCentral themselves (Der Shing, Shao-Ning and Teck Moh). I think that really helped, especially when I got more involved [in the AngelCentral community], and I was able to invest into startups.
Coming from a very operational, brick-and-mortar family business, do you find yourself leaning toward certain types of startups or industries?
Desmond: I think [coming from] a brick-and-mortar family business, I understand the need for CAPEX and OPEX, and that there is a lot of funding that is required just to get started [in business], and after you start, there is no guarantee of profit or revenue. So I think in that sense, I tend to be a bit biased towards tech-based startups because really all you need is sweat equity. Once you have your MVP, you do your iterations and you’ve got traction, then that’s where we can talk about funding – where it will help you to be able to scale, to move beyond the Singapore market and into the neighbouring regions. On that basis, I suppose I’m biased towards tech-based businesses. But I would consider myself [sector] agnostic, because I would still explore other verticals. I think I mainly look at the founders [when deciding to angel invest]. In fact, I recently [participated in an] AngelCentral syndicate that invested in a FMCG company.
How would you describe your current investment philosophy?
Desmond: I try to avoid investing in startups that require high CAPEX (eg. F&B businesses), and look at their potential to scale. I also look at [their potential] market size, whether there is a market [demand] for it – because it can be scalable but if the market doesn’t have enough demand, then you can’t really grow.
How was your experience taking part in your first AngelCentral syndicate? What made you invest with a syndicate?
Desmond: For me, it felt a bit underwhelming, because – maybe I was a bit too idealistic – I think that angels need to really get their hands dirty and do a deep dive [into the startup] to understand the founder and the business. But I think that because AngelCentral has [helped their members] facilitate syndicates for so many startups over the years, they’ve already refined their processes. All we need to do is just to attend the pitch day, the office visit, then you get access to the startup’s data room, and you can also ask the founders any questions you want. It’s a very easy process – not that that’s not good, but it’s that AngelCentral has done all the heavy lifting. And this gives me the space and time to evaluate the startup – I get to meet the founders, and look at the data room that they shared. On top of that they have a syndicate lead, so I get to ask questions why they want to invest into the startup, and also [speak with] other member- investors that come on board.
I think the good thing about investing into the startup as a group is, there’s that confidence, and for the founder, they get access to a list of investors – they can tap into their expertise or their network. For all the abovementioned reasons, and because [the process is] so seamless, it’s easy for me to make the decision to invest. Of course it’s still entirely up to me to make that decision [to invest] – I do not rely on anyone else, as I have to take responsibility for investing into that startup.
You’ve recently joined the Angels Review Committee (ARC) at AngelCentral too – how has your experience been evaluating startups alongside the team? Has it helped you to form your own evaluation processes?
Desmond: Regarding the ARC – though It had a very steep learning curve, I enjoyed it very much. I remember one of the first few startups that I reviewed was in the biotech space. I knew nothing about the biotech space, and so I had to do a deep dive – by deep dive I really mean scratching the surface – but doing that helped me to understand that vertical a bit better, and also gave me a new perspective into what they were doing. When evaluating another startup, I got to visit their central kitchen (it was a FMCG company), and I got to see how they prepared the food. I enjoyed learning all these different domains, and getting a fresh perspective on it.
I started off [in the ARC] with reviewing one or two startups at a time, and it took me some time because I had to really understand the domains that they were in. But by and by, I got better at it, and now when there is a list of startups, I would review the entire list, balancing between speed and accuracy – because I can’t spend hours or days on one startup – using my own review processes, and I will be able to quickly identify which are the startups that I think I have the potential, then delve further into the business.
I think doing all these helped me to be able to refine and sharpen my thinking, and to be able to identify which are the startups that I would want to spend a bit more time reviewing.
What do you enjoy most about this journey/angel investing?
Desmond: First of all, I like learning, not just from the founders, but also from fellow investors, learning about new industries – I think that really intrigues me. Another part about angel investing I enjoy is talking to founders, being able to bounce ideas off with them and sharing some of the experiences that I have as well.
I think angel investing is perfect for me because it’s when the company is in its early stages, and that is where I think I can add value, and hopefully I could journey alongside [the founders], until maybe they reach Series A. Working together with [the founders] in their startup journey is very meaningful to me, and hopefully, [I can have] a positive impact in this ecosystem as well.
To end the session, what would be one suggestion you would give to new/aspiring angel investors?
Desmond: I’d say, firstly, angel investing is a high risk asset class (they say nine out of 10 will fail or plateau), so you’ve got to set aside a budget for it, and be disciplined about diversifying your portfolio – invest into a range of startups, in order to get that possibility of a return.
Another thing I want to mention is that, I do hear some of the angel investors wanting to be very involved in the startup – so they might micromanage or they might ask for very detailed reports or frequent reporting. But I think as an angel investor, our role is to be a cheerleader for them, walking alongside them in their journey in running a startup, and to share experiences where possible, open up doors for them. I think our role is just to cheer them on and help them along the way, not to micromanage them [even though we have invested in them].
I think the whole point of angel investing is to help the startup ecosystem flourish and continue to grow, at least in the Singapore landscape.
Thank you for your time, Desmond. Where can people reach out to you?
Desmond: You can find me on LinkedIn.
