Learning when to take a step back

MOST entrepreneurs seek to maximise the value of their exit from their start-ups, waiting for the initial public offer stage, for instance, when they stand to reap a payback at large multiples of what they had invested.

Bucking the urge to hold on, Spark Systems founder and chief executive Wong Joo Seng decided on a partial exit from M-DAQ, a company he co-founded in 2010, after he led the firm to a successful Series C funding round.

Alibaba had made an investment at that stage, raising the company's value to a stunning S$250 million. Alibaba's entry, however, effectively put him out of a job, as they wanted to run the firm. "It meant my role as founding chairman was over. I felt they were more important to the next phase of the growth of the company than me staying on as chairman. So I took the hit. The venture capitalists understood my reason; they respected my decision."

He retains a "significant" share in M-DAQ. In 2016, he co-founded FX platform Spark Systems.

Thanks to the decision to bow out of an executive role at M-DAQ, another door opened. He so impressed Vickers Venture Partners chairman Finian Tan that he was offered a role as a venture partner with Vickers, giving him a front row seat reviewing potential fintech deals for the firm. Vickers is an investor in M-DAQ and Spark Systems.

"Finian saw me handle my exit from M-DAQ. If I was worried about my day job, I wouldn't have gone for it. Finian was quick to explain to us - that as the company grows you may find that your CFO or CTO is out of his or her depth, and at some point it becomes a problem. You may conceivably get a tap on the shoulder one day and be told - I think it's time for you to go to the beach, and leave the rest of us to find someone duly qualified. It's a tough conversation to have. A fight for the job is extremely unappealing and it hurts the company's image."

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He says venture capitalists may have Ivy League degrees but may not have themselves toiled in the trenches to build companies from scratch. "They may be beholden to founders who proclaim that we're good and the best - until they find out they're really not that good ... The focus always has to be on the company."

Vickers, he says, "tend to use me for fintech deals''. "I also have a pretty decent deal flow. In a year I see around 30 companies. It gives me a good feel of the landscape."

He believes a good business model is key for a start-up. But even so, it is tricky for founders to discern when they should call it quits. "You can have a very accurate business model. The model tells you that once the product is built, you can expect 1,000 clients a week. But in the first three weeks you get 12 clients. You've figured something wrong.

"It may not be the product. Maybe you have the wrong sales people who don't know how to sell it. But after you've tried a few things, you still don't have 1,000 clients a week. Maybe you have 20. It's a good time to say, we've tried. It doesn't work, and you don't go into debt and financial destruction.

"It's something I tell the team. Do most of your thinking up front. Because by the time you are hands on doing it, you won't feel like giving up. You plow into a dead end street and it becomes very difficult to detach yourself."

He says the fintech landscape has evolved, from finance and crypto to blockchain and big data. Now the new frontier is life sciences. "In my short time doing this, I've seen the landscape morph many times. Fundamentally you must remain able to learn.

"You have a great job as an investor because you meet people who need the money, and they will explain to you as many times as you need to get it. It's a great way to learn new things."