As an angel investor, it is important to construct a portfolio and not just place a few bets and hope for the best. Or worse: putting all your money in one basket and essentially gambling with your funds.

The chances of your sourcing and investing in the next Uber (and make a 50 or 100 times on your investment) are close to zero and there’s no playbook for finding those kinds of companies.

However, that doesn’t mean that with a lot of research and hard work you can’t achieve amazing returns (substantially outperforming the markets while getting the satisfaction of being part of growing a successful business).

The emphasis is on ‘hard work and research’ though, if you are not willing to put in the time & money, angel investing might not be right for you.

Why is angel investing risky and rewarding?

The reason that angel investing is so risky is that most startups do not achieve their founders’ goals and are closed. Among the successful companies, nine per cent provide investors with returns of 10 times their investments (home run), which compensates for failed investments.

Angel investing is both an art and a science.

The nine-per-cent-rule and other numbers mentioned in this article are by no means true for each and every portfolio. They merely reflect averages as measured in developed markets.

And so this article is not meant to preach an exact science and needs to be read as (realistic) considerations one can have when building a portfolio. Also, it is important to understand that you will still need to master the art after you understand science.

Do VCs have home runs?

Within VC funds the percentage of home runs is around five. Typically VC invests in later stages (less risky) where the valuations are higher and the company has more traction, so the chances of hitting of home runs are smaller.

Also Read: What should you consider before becoming an angel investor?

However, the absolute returns might be higher as they have more resources to diversify and get broader exposure in order to generate bigger home runs.

We will speak about diversification for angels in another article as we think this is a great method to try and amplify returns.

What did we learn ourselves?

With HH Investments VC we have been investing in early-stage (Seed/Angel and pre-Series A) companies with a focus on mainly Southeast Asia and we are seeing similar results in our own portfolio. This gives us confidence that the metrics and expectations as described in this article are correct.

Next to the nine per cent, data from our own portfolio shows us that 50 per cent of the investments is a write-off (simply because 50 per cent of new companies don’t make it) and the remaining 41 per cent return somewhere between three to five times (we will take the average of four times for sake of calculations).

Write-offs don’t matter

We don’t have to worry too much about whether those numbers on write-offs and mediocre returns reflect that of a successful angel or the averages for that matter. The best performing (seed & VC) funds actually have more loss-making deals than the average funds, as you can see in the below graph.

Source: Horsley Bridge

Conventional financial portfolio management strategy assumes that asset returns are normally distributed where the bulk of the portfolio generates its returns evenly across the board. Moving away from public markets and towards angel investing this wisdom does not apply.

Having the nine per cent that returns 10 times (or more) is the main thing that matters if you construct your portfolio properly. Below provides a tangible example of the Pareto Principle 80/20 law:

Source: Horsley Bridge

We know that better funds have more home runs (and as we’ve seen above, more write-offs too), but they also have even bigger home runs.

Source: Horsley Bridge

Investing in a unicorn

The chances of you as an angel hitting a 50 times returning investment in a unicorn company are slim. The probabilities range from 0.07-2 per cent. As this seems to be more a game of luck (‘spray and pray’: an angle followed by many accelerators) rather than strategy we are not including those types of returns as a realistic expectation while building our portfolio.

Fundamental portfolio strategy

Let’s have a look at two different portfolio strategies which I have named ‘active-passive’ and ‘active’.

Active-passive in Portfolio 1, because after you have deployed your funds you will essentially be passive while waiting for returns. Portfolio 2 on the contrary will need an ‘active’ approach and solid decision-making during the whole lifecycle of the fund.

Portfolio 1 (active-passive)

Let’s assume you invest evenly a total of US$1 million in 11 early-stage companies (US$90,000 per company) using the nine per cent benchmark and you don’t reinvest any of the returns:

• 1 will be a home run and will return you US$90,000 * 10x = US$900,000
• 5.5 will be a write-off so you will lose US$90000 * 5.5= US$495,000
• 4.50 will give you a mediocre return of4x: (US$90,000 * 4.50) * 4 = US$1,620,600

Total return: US$2.5 million on US$1,000,000. The average return of a good performing angel portfolio is 2.6 times the original investment, hence with the above strategy we are slightly underperforming the statistics and because of that, we have no room for mistakes.

Portfolio 2 (active)

Let’s assume you invest a total of US$1 million in the same 11 early-stage companies, again using the nine per cent benchmark.

This time you only invest US$500,000 in the first stage (US$45,000 per company) and you reserve the other half for the home run company that might develop within your portfolio (we are still not reinvesting our returns, so there’s no compounding which could amplify our returns even further):

• 1 will be a home run and will return you US$45,000 * 10 + USD$500,000 * 5 (the return multiple is adjusted as the US$500.000 was invested later so you will have to pay a higher valuation) = US$2,950,000
• 5.5 will be a write-off so you will lose US$45.000 * 5.5= US$247,500
• 4.50 will give you a mediocre return of 4x: (US$45,000 * 4.5) * 4 = USD$810,000

Total ROI: US$3.7 million on USD$1 million invested, a stunning return of 3.8 times. Again, the average return of a good performing angel portfolio is 2.6 times the original investment, hence in the above example we are outperforming while even keeping a margin of safety allowing us to have a worse performance and still be better than average.

Also Read: Confusing Angels with VCs is a common startup mistake

Keep in mind that in both portfolios we invested in the same companies and we never hit a ‘unicorn’. However, the difference in returns by applying a different portfolio strategy is staggering.

I didn’t take into account any tax benefits you might have while writing off your losses.

Do you see the challenges and why this is hard but rewarding work?

• Both portfolios: every investment must be made with a separate mentality of whether it can be a home run deal while sticking to the portfolio strategy. Note: it would be a mistake to invest smaller tickets in companies that you think have less potential than others. You simply should not invest and wait for a deal that matches your expectations.
• Portfolio 2: this portfolio is not just generating a higher return (3.8 times vs. 2.5 times), the downside is also lower as the losses are only half (USD$247,500 vs. USD$495,000) the size of portfolio 1, giving effectively a bigger margin of safety in case things don’t fully work out with the home run or we pick too many write-offs
• Both portfolios: had we invested in less than 11 companies we would likely have made a loss on our invested USD$1,000,000 as it would be hard for the statistics to work out and find a home run
• Both portfolios: it would have been better to increase the number of companies (up from 11) and leave more room for the statistics to work out. This we could have accomplished by decreasing the average ticket size per company or by increasing our total fund size.
• Portfolio 1: we didn’t invest enough in the home run and we were too concentrated on balancing our money evenly across our investments. Instead, it’s better to invest less money in each company and then double down on the winner as proven in Portfolio 2.
• Both portfolios: how to find 11 companies that all individuals have the potential to deliver a 10x on your investment?
• Both portfolios: we could have tried to control the downside and have even fewer write-offs by trying to pick better, or maybe we would have picked the wrong companies and have even more write-offs. The bottom line is that it doesn’t matter. We needed the one big home run in both portfolios to get a decent return.
• Portfolio 2: how do we know who is going to be a home run and when to double down? This is an art more than science and we will discuss it in another article.
• Portfolio 2: it might not always be possible to invest more money. The company might not have given you ‘preemptive rights’ or even if you have them you might not be able to invest as much as you’d like as these rights are typically connected to the percentage of ownership

Can I not have a portfolio that is smaller than USD$1 million and/or invest less in each company?

You can. You could invest the same USD$45.000 from Portfolio 2 in less than 11 companies or you could invest smaller tickets per company.

However, there are a few challenges with doing that:

• The companies that are at an “investable stage” (we will discuss in another article what we think that is) might not let you invest less than US$45,000 (rule of thumb: successful companies don’t need your money, you’ll have to fight to get on the cap table and bring experience rather than only money), and;
• Even if they do allow you to join, they might consider your investment not substantial enough to give you the preemptive rights to re-invest more money later on, and;
• If you go ‘very’ early stage with smaller tickets you’ll find companies that are still in the idea stage and I personally think you’ll be taking an unnecessary risk of the company not even being able to launch a product or service. Instead, there are sufficient good companies with traction out there with at least 6 months of data that we should focus on
• If you choose to invest in fewer companies than suggested, it brings us back to the problem where we can’t let the statistics work properly and you might not find a home run

Obviously, you do not need to have US$1 million in cash right now to get started. It will take you time to find the right companies and the follow-on investment for the home runs might also only happen one or two years after you’ve made the initial investment. Commit to being an angel for the next 10–15 years.

How about a bigger fund?

You could increase your fund and invest bigger tickets in each company. Assuming you are still looking for the same companies as in our example above, I would still recommend to not only increase the ticket size but also the number of companies you will invest in so you can substantially increase the chances of hitting home runs.

Also Read: Angel Investor: The right catalyst for your startup

At the same time, you should ask yourself if you can still handle this by yourself or it’s time to build a team or perhaps work together with other angels.

Do the above strategies apply if I’m just getting started as an angel?

If you are just getting starting as an angel investor, I do not recommend you to immediately implement the portfolio strategies as described in this article. I suggest you participate in an angel network or syndicate first and do at least three deals investing small tickets (US$10,000–US$20,000 per deal).

The main reason for this is that you will take less risk while trying to understand the dynamics and learn from other angels.

1. Getting exposure to home runs matters most
2. An active approach during the whole lifecycle of your fund matters. Generating good returns is a combination of science & art
3. You will need to create enough (diversified) exposure and allow statistics to work in your favour
4. Be prepared to lose all your money on half of your angel investments
5. Hard work and research is needed to set yourself up for success

I will go more in-depth in the next article on how to actually start building your own portfolio and discuss topics such as qualifying potential deals, compounding, balance and diversification, the art of follow-on funding & setting yourself up for a home run.

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Genesis Alternative Ventures, a private venture debt fund in Singapore, has secured an undisclosed amount of investment from American global investment fund Capria, as it looks to double down on investing in impact-focussed startups.

The firm, founded in 2018, has invested in a significant and diverse number of startups till date, including cybersecurity company Horangi, coworking space GoWork, co-living startup Hmlet, cloud-based platform Matterport and mobile connectivity company Lynk Global.

Moving forward, Genesis plans to leverage on Capria’s expertise in impact investing to fund companies that have meaningful objectives such as financial inclusion, sustainability, small business digitisation, and gender diversity as it accelerates its growth across Southeast Asia.

On the other hand, by infusing capital into Genesis, Capria marks its first entry into Southeast Asian waters.

The Seattle-based investment fund’s primary focus has always been in private funds and companies operating in emerging markets.

“The idea of investing for superior financial returns coupled with sustainable impact is catching on in Southeast Asia, and Capria is proud to partner with Genesis to further this wave,” Capria co-founder and managing partner, Dave Richards said in a statement.

Also Read: MC Payment takes controlling stake in Genesis to tap into Chinese commerce

“Until recently, ‘impact investing’ was very nascent and mostly associated with concessionary financial returns in Southeast Asia. This has started to change with more leading funds implementing impact strategies to tap into underinvested sectors and companies,” he added.

As the challenges of COVID-19 unravel, Ben J Benjamin, co-founder and partner of Genesis Alternative Ventures, believes that “fleet-footed entrepreneurs can tap opportunities that emerge during a crisis to create
meaningful products and services to be accessible during turbulent times,”.

Dozens of Southeast Asian companies such as Kopi Kenangan, NinjaVan, Nium, and Tanihub have continued to raise investments despite COVID-19 unravelling and ravaging daily life across the globe, cites Benjamin.

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Image Credit: Genesis

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The pandemic has shaken the world, sunk economies and forced many to reset their businesses. A calamity like no other, it has perhaps influenced all to never take things for granted and spotlighted the importance of always being ready for disruption.

Running a blockchain business with my business partner has been an eventful journey, one which has demanded us to stay nimble and flexible, owing to the nature of the emerging technology, which is growing every passing day. In the face of the pandemic, we are motivated to put more resources in massively pushing blockchain applications to solve real-world problems, especially in the fields of healthcare and supply chain. But not everyone has been in that fortunate position.

Singapore’s labour market has been showing a strain with retrenchments and withdrawn job offers on the rise, as companies including startups look to conserve capital. For fresh graduates, this is a challenging time, as they look to start their careers amidst a pandemic.

Specific industry growth has been hampered, businesses are having to manage cash flow problems, and existing professionals are worried if their jobs are secure.

Though the overall job market looks grim, all is not lost in the face of adversity, and there exist opportunity areas in industries especially e-commerce, with companies still holding their doors wide and apart, for tech talent with specialised skills.

The tech industry players such as Shopee, Foodpanda, and Zalora are looking to hire up to 150 IT experts and programmers amidst the pandemic in Singapore which has seen one whammy after another, as several other employees lose jobs and are put on unpaid leave by companies in the industry. But where is the talent needed?

Also Read: ‘Southeast Asia has the talents to make it a global AI hub’: Skymind Founder Shawn Tan

According to the SEAcosystem.com, the database put together by VC firms, in the current environment, the bulk of the roles that firms are hiring for are related to the specialised field of engineering. 46.2 per cent of the startups are hiring for engineering roles according to this report.

Ironically, in the region though, there has been a huge demand for sophisticated programmers but not enough talent.

GoSchool, a digital programming school based on income share agreement launched recently by OpenNodes (powered by Tribe), Ngee Ann Polytechnic and Indorse intends to help bridge this talent demand and supply gap in the technology space.

At a time when graduates are hunting for jobs, they can use their Skills Future Credits to learn this new skill and pay the remaining amount upon getting a job. Designed for success, the virtual learning programme will kick off with the first batch in June and has onboarded hiring partners such as Shopee, Foodpanda, Zalora amongst others to secure jobs for students.

GoSchool was built through a collaborative endeavour, with the aim of empowering developers to learn and upskill without having to worry about the common issues faced before making the decision to embark on an education – cost and employability. This is even more compelling given the times face.

This is an approach meant to treat students as investments rather than cash cows — a fundamental shift that could finally lift the crippling debt load we routinely push onto students. At the same time, it also ensures that the talent and skill demand of the market are being met.

The concept of “Income Share Agreement’, was first proposed by economist Milton Friedman in the 1950s as a “human capital contract,” and has been heralded by some as a market-based solution to student debt. One of the early proponents of income share agreements was Lambda school based in San Francisco – a buzzy coding boot camp that promised world-class instructors and a top tier curriculum.

But such a model of education is not static and needs to be reared carefully to ensure the desired impact. If there is a time to really push through with this and make a change, it is now. It is evident that for it to be a success, a critical lever is having a strong network of hiring partners and sealing lucrative employment opportunities for the students, amid the tectonic shifts in the market.

Also Read: Is Indonesia killing its local talents’ potential with the new proposed law that allows startups to make more foreign hires?

Virtual education has arrived. Online learning and education had been taking precedence slowly over traditional classroom setups, primarily due to its ease of accessibility and the quality of teachers it can attract. But internet speeds and connectivity, as well as reliance on set methods, had been dissuading the growth of virtual classrooms. The push induced by COVID-19 is seeing digital learning grow by leaps and bounds, and newer avenues for education access.

We must not forget that fuelling the Asian growth engine requires us to overcome talent challenges that the markets within are facing, especially the tech talent that will be responsible for facilitating the smart nation vision.

It is imperative to watch for the tech demand and supply like a hawk and drive public-private-academia collaboration, to furnish an accessible higher education system that caters to the market as well as keeps student interests at the centre.

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Companies are scrambling as their day-to-day activities are disrupted by the coronavirus pandemic. For many businesses in Southeast Asia, this is a real fight for survival. To adapt to this uncertain “new normal”, some of them are looking to diversify into new areas, such as logistics.

There are many good reasons for this. Southeast Asia is a rapidly growing market, the demographics support increased consumer spending, and it is the world’s manufacturing heart.

However, it’s not an easy place for new businesses to launch. Competition is fierce, and the region is burdened by unique obstacles, including the lack of zipcodes, developing infrastructure, and a lack of digitalisation in comparison to more developed countries.

To help bridge these gaps, those businesses are increasingly turning to startups such as Quincus. Over the last two months, we’ve been receiving regular inquiries from those looking to expand their operations into the logistics industry and seeking our technology, experience, and expertise to help them overcome the unique challenges of the Southeast Asian supply chain.

Why startups are positioned to help the supply chain adapt?

Startups are about specialisation, about finding a problem in the system and then fixing it. It’s a concept that the entrepreneur Paul Graham astutely summarised when he said that “The best startups are the ones that are tackling an urgent issue.” In Southeast Asia, that sense of urgency is palpable.

Startups have the right tools and the experience to progress the supply chain forward now.  E-commerce startups are at the forefront of this innovation. In response to the coronavirus pandemic, their acceleration of contactless deliveries and paperless payments are reducing transmission risks and will revolutionise the logistics industry’s best practice.

Also Read: Roundup: Singapore’s e-commerce market expected to reach US$9.5B this year

In addition, these kinds of innovations will enable it to mitigate disruption, increase the amount delivered, and ensure the health and safety of their workforces and the customers.

Beyond a startup’s willingness to embrace new technological innovations, what I’ve discovered is that the unique values and culture of startups give us a vital leg up with innovation and creativity. Forbes famously asked the question: “Why is it that many of the brilliant ideas of the last decade have come from start-ups?”

Startup teams are usually full of ideas, waiting for an opportunity to apply their problem-solving skills, and always looking for a way to simplify business processes that will improve customer experience and satisfaction.

Data will unlock the region’s supply chain

The effective use of data will be one of the keys to unlocking South East Asia’s supply chain potential. However, for the most part, logistics businesses in this part of the world are struggling to collect the data they need to make informed strategic decisions.

All too often, however, companies recognise the need for more data but do so without a clear understanding of how they should collect the data or smartly apply it.

An example of the right kind of data and its effective implementation can be seen by looking at driver experience. There is a lack of data shared with many drivers which could make a big difference.

One example I’ve seen consistently at Quincus is the value of knowing the best time for a driver to be ready at a warehouse to collect her packages. Our partners often tell me that this information makes the difference between a driver making her quota or creating a happy customer.

Also Read: E-commerce trends: What to expect in 2020

There’s a motto in the e-commerce world: traffic makes you innovative. Countries throughout Southeast Asia struggle with infrastructure that is not capable of dealing with the increased traffic leading to congestion.

E-commerce startups, using data from the drivers and roads, can translate it into optimised routes and times allowing drivers to avoid delays and therefore achieving their target.

Innovate to survive

The coronavirus pandemic has exposed the fragilities of the South East Asian supply chain, and it will have a significant short-term impact on the region’s economic health. The challenges presented by the pandemic are not insurmountable, but for the supply chain to flourish it will require partnerships with startups that have the necessary skills, experiences, and technology to reinvigorate core capabilities and establish new competencies.

No matter where a company falls on the supply-chain maturity curve, supply chain reinvention will help it become a leader.

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JD reportedly secures US$3.87 billion in Hong Kong secondary listing

Chinese e-commerce retailer JD reportedly has priced its shares at HK$226 (US$29.16) each and raised about US$3.87 billion in its Hong Kong secondary listing, according to a report by Channel News Asia, in the wake of Chinese companies delaying plans for US listings.

JD is already listed on the Nasdaq in New York but recently warned that it would sell 133 million shares. Citing sources familiar with the matter, the report said that under the terms of the deal, one of JD’s American depositary shares will be equal to two Hong Kong shares. This means the Hong Kong price represents a 3.9 per cent discount to the firm’s closing share price of US$60.07 on the Nasdaq on Wednesday.

JD stock will begin trading on June 18 which coincides with the company’s annual sales festival.

KoinWorks, Mandiri Manajemen Investasi to provide lenders with fund automation

PT Lunaria Annua Teknologi (KoinWorks) has announced a collaboration with PT Mandiri Manajemen Investasi to manage lender funds which will be automatically invested in the capital market instruments of the Mutual Fund Mandiri Investment Money Market 2 (MIPU2 T + 0).

Through this partnership, KoinWorks users are allowed to be capital market investors under one single financial platform.

In the overall process, the lender funds that settle on Koinworks for more than two days will be automatically converted into Mutual Funds managed by Mandiri Investasi. Lenders are allowed to use their funds directly without having to disburse their mutual fund units.

Also Read: [Updated] Indonesia’s KoinWorks raises US$20M from Quona Capital

The lender funds will be invested in Mandiri Money Market 2 (MIPU2 T+0) mutual fund instruments and will be saved and recorded by a trusted Custodian Bank that has been licensed and supervised by the Financial Services Authority (OJK).

Benedicto Haryono as the CEO & Co-Founder of KoinWorks said, “We believe besides offering alternative funding for the productive sector, the growth of capital market investors that can be seen through the ownership of Single Investor Identification (SID) can push the financial inclusion in Indonesia.”

Thailand approves draft bill for foreign digital service providers to pay VAT

On Tuesday, Thailand reportedly has approved a draft bill requiring foreign digital service providers to pay a value-added tax (VAT). The move put Thailand into the list of other Southeast Asian countries that seek to boost tax revenues from international tech companies, just after Indonesia and the Philippines.

According to DealStreetAsia, the bill still has to be voted on by Thailand‘s parliament, requires non-resident companies or platforms that earn more than 1.8 million baht (US$57,434.59) per year from providing digital services in the country to pay a 7 per cent VAT on sales

Deputy government spokeswoman Ratchada Thanadirek said that Thailand’s main industries include music and video streaming, gaming, and hotel booking, and it’s only fair if foreign businesses also paid the tax just like the Thai owners.

MatchMove, KPMG partner with Expand Group to facilitate foreign migrant workers’ e-remittance need

MatchMove, Singapore-headquartered fintech companies, and KPMG, has announced their partnership with the Expand Group, a homegrown building construction group with integrated civil engineering and construction support service capabilities, to facilitate Employer Assisted contactless e-remittance for foreign migrant workers quarantined in dormitories.

The COVID-19 pandemic and heightened number of cases amongst the foreign migrant worker segment has led to them being quarantined in dormitories. As they are unable to leave their dormitories due to the Stay Home Notice, they are unable to make the trip to their usual remittance centres, which has accelerated the adoption of cashless digital payments among the foreign migrant workers.

Also Read: MatchMove acquires stake in P2P lender MoolahSense to strengthen its SME financing capabilities

With the partnership, MatchMove and KPMG are collaborating with Expand Group to onboard their foreign migrant workers onto the Boss Mobile Money remittance application and training them virtually so they can carry out the transaction at ease. MatchMove’s Boss Mobile Money application is a B2C application that enables cross-border transactions to more than 10 countries including India, Bangladesh, and the Philippines.

Alibaba to support the globalisation of Singapore’s SMEs

Alibaba has launched an initiative to help businesses in Singapore go online and go global. Small and medium-sized enterprises (SMEs) in Singapore will be among the first beneficiaries outside Greater China of this programme, which is part of the broader 2020 Spring Thunder initiative by Alibaba Group to help SMEs survive and thrive via digitisation in the wake of the pandemic.

Project Sprout Up will help existing and potential Alibaba users in Singapore better access B2B trade opportunities available in the vast global market. Over 90,000 products from Singapore-based businesses are currently listed on the platform, including items in key local industries like food & beverage, machinery and home & garden.

Alibaba will help lower the barriers to entry for SMEs looking to kickstart or accelerate their online B2B trade operations. Eligible SMEs can apply through Innovative Hub, Alibaba’s local channel partner, to enjoy a one-time 70 per cent subsidy for a solution package, enabled via Enterprise Singapore’s grant under the national Grow Digital initiative, available before July 2020.

SMEs interested in learning more about Project Sprout Up can click here to fill in a survey form, after which a representative of Alibaba will reach out to them with further details.

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Picture Credit: JD.com

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Everyone knows the importance of online marketing especially social media campaigns as a common way for tech companies and startups to convert new customers and increase tractions.

No wonder “growth hackers” and “SEO experts” are getting so much demand by companies nowadays.

If you are a  startup or a technology company selling products or services online, take a look at this short online marketing legal primer so that your online marketing efforts are legally compliant.

Know your business

An easy way to know if you have to pay extra attention to your online marketing efforts is whether you are operating in a regulated industry.

Startups in areas such as fintech, healthtech, foodtech, and e-commerce generally have to comply with additional marketing and advertising restrictions.

These laws are designed and imposed by regulators to protect the general public from any misrepresentation or false advertising and to let the public make an informed decision when they choose to buy a product or service.

So if you are already regulated by a regulator, it will be a good idea to take time to really make sure that you know the dos and don’ts before you start publicising your startup on the internet.

Also Read: What you need to know about digital marketing for the new normal

Have a social media policy and branding guidelines

Every company should have a social media policy and branding guidelines.

A social media policy usually applies to all the directors, employees, and independent contractors that you work with which includes confidentiality provisions.

Branding guidelines set out your official branding collaterals like logo, official font, formatting including the dos and don’ts when your social media team post contents online for online.

This not only helps you to ensure consistency within your team, but also when working with external parties.

This helps set out clear expectations on how a company’s collateral and digital assets can be published and used by third-party online marketing or social media houses or influencers.

Know the personal data protection laws

All companies now need to comply with the personal data protection laws.

Essentially, they are a set of rules that companies need to follow so that the customers’ personal data are used in accordance with what they’ve promised to the customers as set out in the privacy policy or in the personal data protection notice.

Many countries now have their own version of personal data protection laws in place. All Southeast Asian countries with the exceptions of Cambodia and Bangladesh have their own respective personal data laws.

When drafting a privacy policy for your online platform or your mobile app, it will be good to engage a privacy lawyer to understand personal data protection compliance.

You should at least know the differences between a ‘data user’ (ie a company that obtains personal data like full name, date of birth, contact details, and so on) and a ‘data subject’ which is a customer providing the personal data.

Also Read: Surviving COVID-19: How to adapt your digital marketing strategy amidst a global crisis

If you are engaging a company or a customer within the European Union (EU) territory, you may also need to check if you have to comply with The General Data Protection Regulation, a regulation on data protection and privacy with a wide coverage extending to personal data outside the EU continent.

Furthermore, common sense may also help when you want to publish online content on your social media postings. For example, unless there is clear consent by a customer, you should be careful when posting contents that may contain personal information belonging to customers as they may be a breach of personal data protection laws.

Know consumer protection laws if you are selling products online

If you are an e-commerce platform and involved in promoting products or services, take note of the consumer protection laws as well.

For instance, Malaysia has the Consumer Protection Act 1999, which protects consumers against a range of unfair practices and enforces minimum product standards. The scope has been updated to cover e-commerce transactions and additional safeguards to protect consumers from unfair terms.

To cater to the growing e-commerce platforms, online sellers need to put up certain necessary disclosure to ensure consumers can make an informed decision before they buy a product online.

For example, in Malaysia, someone who is selling an online product needs to include:

• name or name of the company or name of the business that operates the online business
• company or business registration number, if applicable
• contact address (email, telephone, and address of the person or company)
• description of the goods or services provided
• the full price of the goods or services. This must include shipping cost, tax, and other costs that the seller intends to charge the buyer.
• payment method
• terms and conditions for the sale
• The estimated time of delivery for goods purchased, which must include estimated time for all shipping options that you have offered, if any.

A company commits an offence if it fails to comply with any of the above disclosure requirements. This also includes if you gave false or misleading information to the public. Take note that the law does not discriminate between a startup or a normal company so the penalty is the same.

Also Read: 7 common legal pitfalls startup founders should avoid

An unhappy consumer can file a claim with the Tribunal for Consumer Complaints. If the claim is successful, the e-commerce company may be liable for a penalty imposed by this tribunal.

Know the local online contents regulations

Depending on where you currently operate your tech company or startup, there may be local online content regulations that you need to follow too.

In Malaysia, the Malaysian Communications and Multimedia Commission (MCMC) is a statutory body tasked to regulate the information technology and communications industries. To summarise, they regulate online speech, providing that “no content applications service provider, or other person using a content applications service, shall provide content which is indecent, obscene, false, menacing, or offensive in character with intent to annoy, abuse, threaten or harass any person”.

The  Communications and Multimedia Content Forum of Malaysia formulates and implements the Content Code, which is a voluntary guideline for content providers concerning the handling of content deemed offensive or indecent.

If you already have a social media team in place, everyone should know the Content Code regulations including outsourced digital agency so that they do not violate these online content regulations.

If you outsource your online marketing efforts, formalise the engagement

Every influencer or online marketer that a company wants to engage needs to sign a formal engagement letter in place.

The engagement letter is a formal agreement setting out the expectations between the parties. Things like the scope and the fee can be set out in the document.

As a company, the  engagement letter should have the following commercial terms:

• Clear description of the scope of work including timelines for the deliverables by the social media agency
• Guidelines for acceptable postings and comments
• You agreeing to give access to social media accounts 
• Granting the limited licence by the social media company to use your  logos or brands
• Contingency plan in the event of disaster 
• Obligation to report of any incident 
• Deliver up of account and materials upon termination 
• Indemnity by the social media to you in the event of any negligence or misconduct 

As online marketing gets more sophisticated allowing companies to target customers based on behaviours, activities, demographics, and so many variables, it only makes sense that these online marketing laws exist to promote a level playing field that is fair for all.

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Before investing in a startup, investors will first conduct a thorough analysis and due diligence on the business. Investors’ approach to this process differs depending on their investment motives.

Financial investors such as angel investors and VCs invest for financial gains whereas strategic investors such as corporations invest for other strategic benefits.

We explore what goes on in an investor’s mind before he or she decides to write the cheque.

While what is discussed here would be more relevant for the financial investor, the strategic investor will have many of these in their evaluation toolkit as well.

The product, the market and the team

With pre-seed to seed stage startups, we assess whether there is validation of the pain point the startup is trying to solve. We look at evidence that the pain point exists and see if the solution is a ‘must-have’ or merely a ‘nice-to-have’. This can be determined from analysing user growth, feedback, customer interviews as well as user engagement levels.

For seed stage to post-seed-stage startups, we focus on whether product–market fit has been achieved, i.e evidence of a market worth serving. Studying the evidence of traction, we analyse whether it is driven by early adopters or a broader market. We would also like to see how high the pain point ranks as a priority among customers in the broader market.

Also Read: gojek names Facebook, PayPal as new investors in latest funding round

By investigating the market the startup is in, we evaluate whether there is an opportunity to build exponential growth in a market that is sizeable and robust. We gauge whether market conditions enable the company to build value much faster than it is incurring the expenditure.

We compare the product against the competition and determine if there are distinguishing factors that matter to the customer. To disrupt a market, the product should be perceived to be multiple times better, cheaper or more efficient than the incumbent solution.

After understanding the market the startup is in, investors would analyse the go-to-market strategy. What we’re looking for is a plan and business model that allows the company to acquire customers cost-effectively. This is influenced by the channels relied on for customer acquisition. We compare the costs of acquiring customers against the future revenue they bring in. This sheds light on how scalable the business is.

In a tech startup, we need to find out how the current software would cope if there is a multifold increase in customer traffic. Is it a question of adding additional equipment with no material changes to the framework or would the software need to be rewritten? This can impact on scalability.

For tech startups, there needs to be a plan and procedure for product management. Markets and customer requirements constantly change thus companies need strong product management to accommodate such changes speedily.

Whether the startup has in-house technical resources rather than outsourced ones will be key to its adaptability and profitability.

Also Read: How e27 Pro helps startups remain in view of APAC key investors

We need to understand the skillset and experience of the founders – their strengths and weaknesses. We find out why this particular founder has chosen this particular business, how committed is the founder and what are the chances of the founder persisting with the business and succeeding (as explained in Angel by Jason Calacanis).

Also, the founding team should ideally be equipped with a combination of selling, technical, and product management skills.

Growth plans and projections

An important part of a startup’s investment case would be its growth plans and projections. This includes the user growth required to achieve its growth targets given the user engagement, customer acquisition and retention. In addition, we also focus on the revenue growth required given factors like customer lifetime value, pricing, product mix, etc.

With projections, investors would study the critical assumptions carefully especially those relating to growth, margins, and capital expenditure. The current financing round needs to help the company hit the benchmarks for the next round of financing.

Next, we evaluate how the growth plans and projections relate to the future valuation of the business. We analyse the basis and value drivers behind the valuation.

Estimating an exit valuation, we assess whether the investment returns make sense given the entry valuation.

Also Read: Qualgro Partners: Southeast Asia is home to the next big B2B tech companies

Further due diligence and deal structure

Due diligence on a startup will not be complete if investors are not mindful of the regulatory environment and its impact on the business. We should see if all relevant approvals and licences have been obtained and the conditions attaching to them.

Also, it is useful to know if regulatory requirements provide any form of barriers to entry against future entrants.

Together with legal advice, we determine if the technology or solution is capable of having intellectual property (IP) protection. This goes towards building a moat against competitors. We should also find out if any aspects of the business are infringing on the IP rights of others.

Additionally, check whether current and past employees have assigned to the company all IP rights for work they have done.

Investors would also analyse the structure of the investment including the financial instrument to be invested in, be it equity, convertible, SAFE note, etc. and its terms. The idea is to have the terms provide downside protection for the investor, good governance as well as an efficient exit for profit realisation.

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Register for our next webinar: Meet the VC: iGlobe Partners

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Tuas Capital, The Hive to launch venture builder fund for SEA

Malaysian private investment group Tuas Capital Partners has signed a partnership with US-based venture studio The Hive to form a new fund, called The Hive Southeast Asia.

The venture builder fund will be domiciled in Malaysia and investing in the co-creation space dedicated to provide startup launchpads and utilising The Hive’s venture studio model.

It will be one of the funds under Dana Penjana Nasional, a Fund of Fund to be launched by the Malaysian government. Half of the the capital for the fund will be provided by Dana Penjana Nasional and the other half by private and foreign LPs brought together by The Hive and Tuas.

Dana PENJANA Nasional was formed as part of the Malaysian Short-Term Economic Recovery Plan (Penjana).

This fund will function to mobilise a programme which will match, on a 1-to-1 basis, institutional private capital investments with selected venture capitals and early-stage tech fund managers for various stages of the startup funding lifecycle.

The Hive Southeast Asia is one of the international groups that will be participating in the programme.

Malaysia’s personalised travel app Tourplus ventured into food delivery

Tourplus, a personalised travel app based in Malaysia, has launched GetFoodPlus.com, a delivery service that specialises in frozen foods.

The deliveries will be carried out by tour guides, who were displaced by the COVID-19-induced lockdown and the government’s movements control order.

Currently, GetFoodPlus offers more then 100 frozen food items with Halal certificates.

The services are available in Kuala Lumpur and Klang Valley.

Malaysia’s e-commerce enabler Everpeaks targets to raise US$376K via crowdfunding platform pitchIN

Malaysia-based e-commerce solutions provider Everpeaks has announced that it plans to raise further funds, targeting US$376,000 via equity crowdfunding platform pitchIN.

Currently, the campaign is at the pre-live stage on pitchIN.

The firm plans to use the fund to strengthen its operations, especially its marketing effort.

Also Read: ScaleUp Malaysia kickstarts 3-month programme with 20 companies in first cohort

Everpeaks combines e-commerce expertise with a duty-free global distribution hub that integrates to the e-commerce platforms.

According to Digital News Asia, Everpeaks has US$234,000 in funding from an angel investor ahead of the targeted June 15, 2020 date of being live on the pitchIN platform.

Singapore’s NTUC Income launches bite-sized insurance service SNACK

NTUC Income has launched SNACK, an insurance proposition that seeks to revolutionise the way consumers engage with, purchase and obtain insurance protection in Singapore.

Typically, an insured is required to pay insurance premiums at a fixed quantum either monthly or annually, and sometimes over a fixed duration of time, in order to be covered for a specified sum assured.

With SNACK, the insured gradually builds or stacks his insurance coverage by paying micro-premiums at either US$0.30, US$0.50, or US$0.70 and accumulate micro-policies that offer a specified sum assured — based on the insured’s profile — that corresponds with the premiums paid.

The SNACK insured can also decide when and how frequent premiums are paid by linking them to his preferred lifestyle triggers, such as ordering a meal, exercising or simply by taking public transport.

Each micro-policy, which is issued when a micro-premium is paid, covers the SNACK insured for 360 days, which means that the insured stays protected by insurance coverage that has been accumulated over time even when he stops using his lifestyle triggers or if the weekly cap is reached.

Additionally, SNACK offers the customers the flexibility to build insurance coverage at their own pace by setting a weekly cap of up to a maximum of US$50 on payment triggers, if they wish to ease cash flow.

SNACK is also looking to enhance its insurance offerings by offering options that help insureds save and invest for their future.

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It’s been 87 days since the World Health Organisation declared COVID-19 a global pandemic. As the weeks have progressed, it has become abundantly clear that there is no going back to a pre-COVID-19 era.

A new normal has formed and it has shifted the way we interact, work, live, and even consume and buy products. Famous English naturalist and biologist Charles Darwin once said, “It is not the strongest of the species that survives, nor the most intelligent; it is the one most adaptable to change.”

Adapting has been a key theme at PatSnap since the onset of COVID-19. From shifting to a new WFH model, managing the COVID situation in both our East and West offices, and adjusting to the needs of our customers during this unprecedented time, we’ve moved quickly and adapted expertly.

As a B2B SaaS business, adjusting has also meant rethinking how we sell our products and forge ahead with growing our business.

While the pandemic has been the source of a number of pain points, a silver lining has emerged. COVID-19 has allowed us to make a pivotal shift: go from being a sales-led driven company to a product-led growth company.

Also Read: Singapore’s R&D analytics company PatSnap raises US$38M led by Sequoia, Shunwei

Out with the old, in with the new

The lead up to this shift has been a few months in the making. As a global organisation with operations in Asia, Europe and North America, our exposure to COVID-19 has spanned across three continents for the last seven months.

When the pandemic first broke in China, we began to see immediate effects on our business. I knew that I had to revise our current business strategy and time was not on my side. It was apparent that the buying and working habits of our customers were changing and our current sales methods were not going to suffice.

The APAC leadership team and I made the strategic decision to make all of our products/services free for a limited time to businesses in China, in order to support and minimise the disruption to their IP and R&D initiatives.

While our decision to provide free access was based on our desire to be customer-centric, it unintentionally set us on a path to shift our culture and business to focus on product-led growth.

Product-led growth (PLG) is an end user-focused growth model that relies on the product itself as the primary driver of customer acquisition, conversion, and expansion.

Industry tech leaders such as Zoom, Slack and Dropbox are great examples of businesses that have successfully put this model into practice. Blake Bartlett, from OpenView, wrote an excellent article on product-led growth, here’s a snippet on why he thinks PLG is the future of company growth:

With our outbound sales teams feeling the impact of companies shifting to WFH models, moving to a PLG strategy empowered our sales team to revamp their approach to sales.

Also Read: How a startup founder in China tackled the COVID-19 crisis –and what you can learn from him

Opening the door for innovative sales methods that strongly positioned PatSnap’s products enabled us to generate a pipeline of leads during one of the most turbulent economic times. Our success in China laid the groundwork for us to offer a similar free access campaign in our PatSnap West regions, solidifying our commitment to PLG.

Product-led growth is the future of B2B businesses

During the most recent Microsoft quarterly earning calls, Microsoft CEO Satya Nadella, mentioned that “We’ve seen two years’ worth of digital transformation in two months. From remote teamwork and learning, to sales and customer service, to critical cloud infrastructure and security —we are working alongside customers every day to help them adapt and stay open for business in a world of remote everything.”

This acceleration of digital transformation is happening, and fast. For B2B SaaS businesses, such as PatSnap, it means that we need to even further “digitise” every aspect of how we develop and distribute our products to end-users. We need to evolve ourselves from a traditional sales-led user journey to a product-led user journey.

For the past 14 years, PatSnap has predominantly operated on a sales-led business strategy. Similar to other B2B software companies, our approach required SDRs to contact prospects and introduce PatSnap’s offerings.

If a prospect showed interest, a demo of our product would be booked to illustrate the business case for PatSnap. If the demo was successful, we’d offer a short free trial period with the end goal of signing the prospect up as a customer at the end of that trial.

Don’t get me wrong, this strategy has been successful, it has served as the foundation in which our business has been able to scale and grow. But the reality is, it’s no longer the way forward and it will not be the golden ticket to our continued growth.

Customers are more strongly positioned and educated, which means the new user journey for B2B businesses needs to focus on the PLG user journey: get the user to try the product before you sell them on it.

Also Read: Singapore’s R&D analytics company PatSnap raises US$38M led by Sequoia, Shunwei

Users need to see the value of a product themselves; this is beneficial not only for sales but also for retention. PLG places this notion at the center and enables companies with strong solutions to let the products speak for themselves.

Part of a successful PLG strategy is timing. In the early days of PatSnap, we had a good product but it likely wouldn’t have withstood the rigorous user reviews and criticism of a PLG model.

Today, after years of perfecting innovation intelligence, I am extremely confident in our products and their ability to sell themselves to prospects.

I also believe allowing users to test our products from the start will enable us to be more efficient in increasing product adoption. In turn, an increase in product adoption helps lower customer cost acquisition (CAC) resulting in better retention overall.

How is PatSnap approaching PLG?

PLG strategies are not cookie-cutter. Companies will often pick and choose various elements to suit their customers and end goals. At PatSnap we’ve decided to approach PLG by implementing the following:

Offering all our products for free within a limited time frame

Our free access campaign, which first launched in Asia in February and has now been launched in Europe and North America, was started as a method to support the IP and R&D community and generate leads.

Since launch, our leads have grown 2-3x more than pre-COVID days and we’ve seen consistent traction on weekly sign-ups from prospects and customers to try our products at no costs. The below chart shows PatSnap China’s lead generation growth since launching the free access campaign earlier this year.

Providing users with a sneak peek into the product outputs while generating leads and brand awareness.

Later this month, we will be launching our new lead generation freemium website www.connectedinnovation.io. Inspired by HubSpot’s Website Grader, our website is intended to provide users with information on any company’s innovation profile. Users simply type in a company name, click generate a report and after submitting a few contact details, they will be provided with a one-page report on the company’s innovation strategy for free.

The report is intended to be high-level and provides users with a taste of the outputs that PatSnap can provide. The goal of this site is to provide an additional avenue for lead generation while expanding PatSnap’s brand awareness among a wider audience.

Note: Lead generation freemium models are not the same as a self-serve freemium model like Zoom, where users can try the product out and buy it using a credit card if they like it.

Also Read: 3 much needed mindset shifts to thrive in a post COVID-19 world

Letting users discover the “aha” moments.

Offering free access to a product is only one half of the equation. Ensuring that users can quickly and easily onboard is the other. PatSnap is often praised for having a very simple and user-friendly interface but learning to navigate the product in its entirety isn’t always intuitive for everyone.

We want to make the onboarding experience so easy and so friendly, that customers can navigate through the experience on their own, at their own pace. By incorporating automated and user-friendly sign-ups and onboarding, we can enable users to discover the “aha” moment of PatSnap on their own (ideally within the first 5-10 minutes after login).

This moment is powerful because it often leads to users becoming brand advocates who will willingly refer your product to others because they can easily articulate the value and use case from their own experience.

Just like sales funnel metrics but focused on product

Lastly, just like how Sales and Marketing teams use the sales funnel concept, product teams within PLG environments use growth funnels to track acquisition, activation, retention, and revenue.

This is known as know as the AARRR funnel. We want our product teams to not only understand the product but see how these metrics relate to the product and use them on a more regular basis to enhance the user experience.

Also Read: PatSnap raises US$3.6M funding led by Vertex Venture Holdings

While COVID-19 continues to unfold, I believe that the new digital transformation will be PLG. Relying on outbound sales and inbound marketing may not disappear but we will likely see its effectiveness decline, making way for other opportunities to connect with users and prospects.

I strongly believe that if SaaS organisations want to continue to survive in the post-COVID world, we all have to adapt, and for PatSnap that means leaning more into PLG and showing the strength of our expertise through the power of our products.

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Last year, Reuters came out with an exclusive report about the Southeast Asian ride-hailing giant Grab’s plan to merge OVO, its e-wallet service with DANA– an Indonesia-focussed e-wallet platform run by a joint venture between Ant Financial and Emtek Group.

On Friday, Bloomberg reported that the two companies have agreed in principle to merge, as part of its effort to challenge the domination of GoPay, the digital payments service owned by rival gojek, in the Indonesian market.

Citing people familiar with the matter, the two companies have “ironed out” their differences over valuations and structure as they aim to reduce cash burn.

The signing of the deal was delayed by the COVID-19 pandemic but the report said it “could happen soon” once details are finalised.

Both companies have declined to comment on the matter.

Also Read: OVO launches crowdfunding campaign for flood victims of Greater Jakarta

Winning Indonesian market

According to a recent report by Rapyd, Indonesian consumers strongly prefer e-wallets to cards and cash with 33.8 per cent choosing one of three e-wallets (OVO, Go-Pay or Dana) as their preferred way to pay.

Among these users, OVO is the number one frequently-used payment method with 69 per cent respondents claiming to have used it in the past month. It is also the country’s most preferred one with 17.8 per cent respondents choosing it.

A merger between OVO dan Dana would result in the creation of an even more powerful player in the market.

In a recent interview with e27, OVO CEO Jason Thompson mentioned “a positive shift towards digital payment adoptions” in the Indonesian market as a result of the COVID-19 outbreak.

Previously, in July 2019, GoPay has announced a partnership with LinkAja, a digital payments service by state-owned mobile operator Telkomsel.

gojek itself has recently named Facebook and PayPal as new investors in their latest funding round. The investment included the possibility of having PayPal integrated into the gojek platform, opening up access to a network of merchants worldwide.

More on this story as it develops.

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