Conversations with Ian Sikora

Venture capital (VC) funds, especially in this part of the world, are very much like the start-ups we invest in. The teams are very small, expectations are varied and as funds we have a lot to prove. We therefore have to wear a lot of different hats.

It is very difficult to describe my typical workday. Between the vastly different sectors of companies I’m covering or between different things that I need to do with these companies there is a lot of variety. I think for most people that look at venture capital, they assume that we spend most of our time finding companies and sectors that we think would be interesting. That is actually only a small part of where most people in the industry spend their time. Much of it is still focused on what happens after you invest in the company. My workday is spent being as an active partner with the companies we invested in, helping them figure out how to grow or get past potential scaling walls along the way. This can include issues such as how to scale teams and systems to keep up with demand or how to optimise the cash so that there is runway through the next round. The issues are varied and can range from being extremely positive to negative, but a lot of time is spent with the companies after you have invested in them.

Once all of that is done then I spend some time on deal-sourcing. This includes going out to meet start-ups; thinking about growth sectors and how the value chain works (i.e. what are the different touch points along the way to get the funds to the business, and products to the customer; and within the value chain, where do we think is the safest margin growth or protection). We think a lot about where people will actually make money; or where the power lies in the value chain.

I have been very fortunate to work at a fund that has backed some very successful companies. It is great to be around many successful entrepreneurs, and a privilege to be able to spend time getting to know them, learning from them and being active partners with them as they go through some truly incredible journeys with their companies. If I wasn’t around such folks, it would be harder to be motivated.

When managing a portfolio of companies, some benefit and some are severely impacted when there is a macro change in the economy like Covid-19.

There are companies in our portfolio which are really focused on healthcare, such as HaloDoc in Indonesia or Biofourmis in Singapore. These companies have been incredibly successful during Covid-19, with massive boosts seen in a lot of their numbers, because they are very central to dealing with or understanding the virus.

There are also many companies in the e-commerce sector who have been positively impacted. During lockdowns, e-commerce become a very important way for people to obtain their products. For instance, we have made two agriculture bets. TaniHub in Indonesia and FreshKet in Thailand. Both engage in business-to-business (B2B) and business-to-customer (B2C) grocery and produce. It is similar to Redmart, but it is more focused on products that comes from framers instead of packaged goods. Both companies saw a huge boost in terms of consumer demand, while also seeing a downshift in the business demand (due to the closure of many restaurants).

At the same time, there are also a lot of companies that have been badly impacted by the pandemic. For example, many travel companies have not fared well, including even ride-hailing and transport companies.

An important lesson was understanding how much impact can be driven by the Internet companies in Southeast Asia. The region has so much potential to be fundamentally transformed by these tech companies. That makes it a valuable market opportunity as an investor, but also at the same time has a true impact on people’s lives. Several million people are now employed by Gojek (such as drivers or bikers), who are making two to three times more than they were before. I think this applies to many of the companies in our portfolios. They have found a way where technology can essentially be an efficient means of wealth distribution from the upper middle class to the lower classes, compared to the past. They’re cutting out middle men that were taking too much value in between.

I studied Economics and East Asian studies, which didn’t provide an obvious foundation to enter the industry. However it was what I was doing after I graduated that helped me get into Venture. I spent a lot of time on the side learning how to program, which was a rather useful skill for a lot of the jobs I was in later. A college degree is great, but it is more about understanding the process of learning. Once you start to specialise with a Masters degree, then it becomes really about the skills that you are learning.

At the same time, I was also incredibly lucky with the timing. I got into the VC industry here in Southeast Asia quite early in the ecosystem’s development. There were some smaller funds that were doing mostly seed funding, but it wasn’t until Temasek funded five VC funds in 2014 and 2015 (coined the “Temasek babies”) that we really started to see a lot of early stage venture happening. At that time, there were not many people who ventured into the industry, and my timing of joining the firm in 2016 was very fortunate.

I would discourage someone from taking up venture capital as a first job straight out of college, for a few important reasons. As a venture capitalist, one needs to work very closely with entrepreneurs who have been in the business for around five to ten years, if not more. They are very established and seasoned people, and when they are raising capital, they prefer to work with someone who is more experienced, understands what they are talking about and who can help them figure out things that they may not understand. Often you’ll here them say, “I don’t just want money, I want value-add”.

Thus, it would be better to have experience in other industries and sectors before moving into the venture capital industry. For our company, we prefer to hire juniors in the finance and investment team who have a broader experience, for example having worked in an investment bank where they have learnt a lot of core skills well, or perhaps in consulting where they have learnt and seen a lot of interesting industries. Increasingly, we also prefer people that come from or have worked in tech companies in the region, especially from the most forward thinking and advanced companies in Southeast Asia. Direct operating experience in these companies has a lot of value.

One can try to acquire these experiences coming out of school by working in a larger company, which helps push one to understand certain business processes that tiny venture capital funds and startups might not. Working at such places also helps build up a base, which is an important step to building your profile as a venture capitalist who entrepreneurs would like to work with.

I started out working for Globe Telecom in the Philippines. My role then was to convince Filipinos to pay for the Internet on their phone. It was a challenging task because most of them understand that a call or text will require payment, but it is difficult to explain the same concept of payment to someone who does not understand the Internet. The logical thing to do would be to provide them access to Facebook for the day, while collecting 10 Pesos. After a year of trying different methods, it became clear that it was technically next to impossible to do some sort of smart packaging on our own. Our company leaders pitched the idea of internet.org to Facebook, by providing free access to Facebook on our network, and when someone goes outside of Facebook (such as clicking on a YouTube link), they run into a paywall. Facebook would integrate with the Globe billing system to charge the customers the data plan for accessing that part of the Internet. We ran it for a couple of months and it ended up being successful, we got millions of people on the Internet for the first time, which was a very good feeling. I got to work at the technical level with a lot of engineers and product managers over at Facebook and got to better understand how they think.

After that, I joined a startup in San Francisco. I went from getting a million people online from the first time, to spending my days talking about yogababble and different sorts of photo filtering apps, which I found quite frustrating. As such, I returned back to Southeast Asia with a video stream company, HOOQ. Spent a year and a half as the head of product before getting connected to Hian and taking the plunge into venture capital.

I would advise instead to consider taking a Masters in something more specific such as a Masters in Finance or Computer Science, because the skills picked up would likely be more directly applicable to your work. A lot of principles you will learn in an MBA, such as how to think about framing a problem and various frameworks, can be picked up while working at a large company for a while. I also do not see many companies prioritising an MBA as their hiring criteria, and I do not see it as a prerequisite of getting into venture capital.

There are no doubt advantages of taking an MBA, such as building up a network that you may not necessarily get easy access to. Nevertheless, you can still build up an incredibly strong network so long you work at the right company, at least in Singapore.

I would probably have started learning how to code at a younger age. Marc Andreessen has a very famous saying that “software is eating the world”, which in my opinion is absolutely true. If you know how to code a little, you can experiment with some interesting things online, to allow yourself to scale your impact. Coding is an important skill to have and it is going to become increasingly important.

Aside from that, I would say that I am rather happy with the path that I have taken. The path is usually not obvious for most, and I would not have predicted at all when I was studying in school, that I would be going to the Philippines and eventually returning to Singapore to work in the VC industry.

I think every VC partner and fund will have its own approach in terms of identifying opportunities. One of our advantages is that we have a relatively large team, 23 people and set to expand to 25 or 26, which is rather large for our size (two to four times larger than most other VC firms in the region). As a result, we have more people in the market understanding the ground situation. They are constantly meeting with start-ups and getting referrals. These kind of deals tend to be bottoms-up where we find startups that we didn’t know we were looking for.

Another way is to conduct sector-level studies every so often to understand a particular sector, the value chain and how it’s changing over time. Then we look for startups that are trying to enter that market. For startups attacking areas where we think there is value, we would evaluate those teams and determine which one we believe is the best in terms of the team and business model, as well as their approach and execution. These deals are more top down where we try to find the right company to fit the thesis.

Regarding follow-on capital, once you are invested you’ll have more data and you can start to better understand the challenges. I do not think that there is an investment that is ever perfect from the start or a complete home-run. You always have to go in knowing that there are at least some issues to work on, but usually after a period of four to six months it is quite clear how things are progressing. Over time, as you having more working experience with the management team, you are able to understand how receptive they are in terms of pushing the company in one direction or another. All of these factors go into an evaluation around follow on financing.

There are of course also situations, where you keep working at improving a start-up, but other macro factors (such as the Covid-19 pandemic) may impede progress. That is fine. An important thing to understand about VC funds is that we try to adopt a widespread or portfolio approach. The best funds in the world usually see 90% of the fund returned by 2-3 companies. Hence, it is alright to pursue some ambitious ideas that might not work, as long as you simultaneously pursue companies that have higher likelihood for success.