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A heart set on taking the venture capitalist route
COMPANIES were taking bets on star venture capitalist Jenny Lee way before she began getting onto the ground floor of Chinese tech wonders such as Xiaomi and YY.
In late 2001, Ms Lee walked into her boss' office at ST Aerospace to tender her resignation and break her 11-year bond - or rather, negotiate a smaller sum to leave the firm. According to Ms Lee, her boss nearly fell off his chair.
It didn't matter that she was a rising star after more than four years in the company, which had sent her to do her MBA at Northwestern University's Kellogg School of Management. Neither did it matter that the world had just witnessed the burst of the dot-com bubble. Ms Lee, an ex-Hwa Chong Junior College girl from Toa Payoh, had her heart set on being a venture capitalist.
After a one-year stint at Morgan Stanley, she landed a job at Jafco Asia where she learnt to invest in startups in China, Taiwan and South Korea. In 2005, US-based venture capital firm GGV Capital took a bet on her and offered her the chance to kickstart its operations in China.
Today, Ms Lee, 46, is known for being the only female managing partner at the global firm, which focuses on seed to growth investments across the sectors of consumer/new retail, social/digital & Internet, enterprise/cloud, and frontier tech. GGV manages US$6.2 billion in capital across 13 funds and has backed 52 "unicorns" - startups that have passed US$1 billion in valuation.
One of Ms Lee's triumphs was when she led the investment into smartphone maker Xiaomi, which went on to list in Hong Kong.
The private market is known for being opaque, which is why Ms Lee emphasises the importance of having additional knowledge about a sector or investment theme in order to gain an edge over other investors.
"When I led our GGV investment into YY, the leading live streaming company in China listed on Nasdaq, I conducted a local survey of the Internet cafes to poll the users on their choice of product. The survey was conducted in the wee hours in the morning when users are most active playing games on the Internet," she tells The Business Times.
As YY was a new product back then, there was no third-party data indicating its growing popularity among gaming users.
"Our survey findings gave us additional confidence that YY was indeed the leading product in the market, a key data point we used for our investment decision."
Her knack for spotting winners has earned her accolades several times since 2014 in the Forbes Global 100 VC Midas list. In 2016, she was recognised by The New York Times and CB Insights among the top 100 venture capital investors worldwide and in 2018, she ranked 87th in the Forbes World's 100 Most Powerful Women list.
The latest feather in her cap is the Singapore Business Awards (SBA) Outstanding Overseas Executive Of The Year 2018. She was awarded for blazing the trail in driving GGV's growth in China.
Ms Lee might be known as an investor with a "Midas touch", but it was plenty of hard work that got her to where she is today. When she was a seed investor in LAIX six years ago, she worked with the chief executive to discuss product and strategy as well as organisation structure, and helped recruit the current chief financial officer.
She also discussed how to design the right Employee Stock Option Plan (ESOP) and helped them navigate the volatile initial public offering (IPO) market last year.
"The venture capital business is a 'learn-as-you-invest' sector with very few shortcuts available to acquire investment acumen," she says.
Her advice for younger venture capitalists is to be patient and focused on developing expertise in one or two vertical sectors, and to work with startup CEOs to solve problems.
Though venture capital promises the rush of adrenalin from exiting a portfolio company on high returns, this glittering lure often masks the toil of battling imminent failure.
The toughest roadblock, according to Ms Lee, is when startups cannot fundraise and are about to run out of cash, yet possess an interesting product that may fit with the market needs.
When push comes to shove, Ms Lee would typically work with the CEO on a cost cutting plan to reduce headcount, explore new cash inflow tactics including selling key assets, and see if the cash runway can be prolonged so that there is a bit more time to figure out a business model pivot or secure additional financing.
Zero to IPO
"Many venture capitalists give up when their investments run into challenges and either shun their CEOs or move to another VC firm to avoid having non-performing investments be part of their track record. A good venture capitalist is usually a tough, resilient, persistent and problem-solving person, able to help a company from zero to IPO," says Ms Lee.
After being with GGV for 14 years, her best memories include ringing the opening bell with her startup CEOs - eight times, for that matter - and spending time with her partners and teammates on offsite sessions, debating the next new trends.
She tells BT that China is entering a period of change where it needs to reinvent itself to tackle fundamental challenges like slowing growth, increasing labour costs and an ageing population, in a market that has already seen full mobile adoption, cheap data rate, a mature talent pool, and increasing consumption.
"I am excited about the changes that startups are tackling in the robotics space that covers transportation to industrial automation, artificial-intelligence-enabled services that are customised to each user in industries like education, finance and healthcare, and new processes in the food and health technology sectors," she says.
As more investors dip their toes into the budding startup scene in South-east Asia, Ms Lee reckons that there are lessons from China that can be applied to the region.
"In certain sectors that are highly dependent on capital, like food delivery and ride-sharing, we saw in China that the network effect generated by early market entrants would be key to their further success," she says. Hence, GGV expects players in South-east Asia to be highly concentrated among a few winners. A key evaluation criterion is the management's ability to adapt and execute their strategies according to the needs of each city or country; startups should also have a strong ability to interact with investors and fundraise quickly, Ms Lee adds.
"In other sectors like game streaming, we found that users in South-east Asia were similar in gaming behaviour to users in China, especially in countries with a strong Chinese culture such as Singapore, Thailand and Vietnam. So similar games titles and game plays that had worked in China may also work well with users in these countries."
That said, the region is also highly fragmented by country, culture, consumer spending power and government policies around content and Internet-related services and products.
The investor with the patience to learn about the market and stay close to the grassroot talent with an eye to leveraging global insights should benefit over the long term, she says.
So is the secret of startup investing simply innate, or is there some sort of formula that can create "the next Jenny Lee"?
"I don't have an answer to this but I think it's probably part innate - you have to love the stress, the ideas, the people and the ability to see the founder's vision and dream - and part learning via experience, which is why it takes time before you know if the person is a good investor," says Ms Lee.
"I guess we are like athletes; it takes some talent and a lot of hard work and training to consistently get that gold medal."