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Jeffrey Paine

Become – High Profiles
November 19, 2015

Today, Jeffrey Paine is modelling for Grana, a Hong Kong-based portfolio company of his. “They get their cotton from Peru, cashmere from Mongolia, linen from Ireland, and they’re very affordable,” he plugs. He’s seemingly in a state of deep contemplation – Zen, probably. The non-trivial stash of alcohol sitting on the counter possibly hints at the secret ingredient. Natural light gives this office a cheery beat; the exposed brick walls and cement floors lend a “San-Francisco-ish vibe”. “When we got the place, they had those old office carpeting and walls. We just said: Aiyah, hack everything lah!”

As a venture capitalist who previously ran the Singapore chapter of Founders Institute, he has seen all varieties of founders. I imagine his unruffled and self-deprecating style helps ease any butterflies a pre-pitch founder may have. This however, does not mean he sugar-coats. “Start-ups are wartime shit; it's fire-fighting – that's the way things are,” describing the experience to me, before expounding on the pitfalls which ensnare so many start-ups: alluring distractions, especially when all seem to be going well. “Founders get distracted.” He pauses. “Then they lose their first market, while being in two other countries.” Other times, he says, founders think they have a fit, but because they don’t have enough data, it’s not a certain and secure fit. “A lot of them tell me everything is fine – growing what! ... but they don’t see what’s round the corner. People can just delete your app!” This lack of focus, he says, is the main reason for venture-backed companies to fail. “Many also don’t know how to defend their turf or change directions quickly.” Unsurprisingly then, he exalts the virtues of focus. “The founders of Carousell don't appear anywhere because they are very, very focused – we like that.” Carousell is another portfolio company. "If your users love you, they will talk about you. You don't have to talk about you.”

He also advises start-ups to choose their first market carefully, saying that Singapore may not be a start-up’s best first market. “In fact, it's usually not the best,” citing high costs and a small market. This means a Malaysian or Vietnamese start-up can “kick your ass” as they need to raise less money and have local advantage. “Each time you raise money, you need to justify a higher valuation, if not your equity will be gone,” he explains. “To justify this higher valuation, you need to be in bigger markets such as Indonesia.” But he says many are not ready.

“By the time you are ready, Indonesia has five clones raising less money than what you need, and have local advantage. When this happens, you'll be spinning around waiting for a slow death,” he concludes, not mincing his words. With so much more money in the ecosystem, surely valuations are being inflated. “Slightly, for the hot regional companies,” he says. “It's not crazy, but selectively higher valuations do occur. They are typically started by serial entrepreneurs.” As the photographer shoots him, members of his team come over to encourage a smile from the model.

Conversations with Jeffrey Paine

Founding Partner, Golden Gate Ventures
Text by Yong Hui Yow
Photography by Yew Jia Jun

YONG HUI YOW: Do you get founders dropping by to pitch without an appointment?

JEFFREY PAINE: No, but once in awhile, friends do drop by when they happen to be in the neighbourhood, or in Singapore for a day or two. In other cases, please do let us know. I don't really mind though if I'm free. If not, they’ll have to wait.

YONG HUI: How did you meet Vinnie [Lauria]?

JEFFREY: Vinnie cold-emailed me. He was backpacking in Asia for a year, and in each city, he tried to meet up with people from the local ecosystem. At that time, I was running the Singapore chapter of Founders Institute, and I invited him to become a mentor. After he returned to the US, many local start-ups started emailing him about the possibility of raising money in the US. He was puzzled that these start-ups could not raise money in Singapore, so he thought of starting a fund in Singapore since the demand was there. 

YONG HUI: How is the South East Asian thesis panning out?

JEFFREY: It's panning out fairly correctly but it's not uniform. Unlike China, which is a lot more uniform in language and culture, in South East Asia, languages, cultures and demographics are different for each country. The Governmental system, rule of law, and way of doing business are also different. There's no doubt about the potential of the sheer size of the populations here. Economies are also growing for most countries in South East Asia. The average age is young, and will become increasingly affluent over time. In general, it is getting there, but it is not going to be uniform across the region.

YONG HUI: Is palm-greasing something start-ups looking to expand to say, Indonesia have to deal with? 

JEFFREY: Not in general, but in certain B2B sales, it can happen, but it's called 'token of appreciation'. Five years ago, it was more rampant. I think the new President is trying to clean up the GLCs [Government-linked Companies]. Start-ups have to choose whether or not to do it, but if you don’t, they should still be okay. Hopefully, the business does not depend on it.

YONG HUI: What has been below expectations then in South East Asia? 

JEFFREY: Nothing really. Different countries simply grow differently. Some are PC-first, others are mobile-first. Many markets don’t use mobile the way we do. For one, they may not trust buying things with their phones, and may want you to have a physical shop. Slowly, once your brand is more trusted, they become more comfortable. For us, it’s common to transact online, but for them, it's common to get cheated, so it takes time to build trust.  So some countries and markets take a longer time to penetrate. In rural areas especially, the rates of adopting technologies vary widely.


Investors are getting savvier, and start-up employees are learning to ask the right questions.

YONG HUI: It’s been four years since Golden Gate Ventures started. How has the Singapore ecosystem evolved?

JEFFREY: It’s getting there. Now, we have people from all over the world based here, so it’s becoming very diverse. About 50 per cent of founders here are not locals. In the past, that was about 30 per cent. Singapore has also become a financing hub with a lot more capital. Some entrepreneurs have exited, become angel investors, and are now helping younger founders and start-ups. The number of tech talent has also increased. They are getting better, and are starting to tackle more difficult problems. Investors are getting savvier, and start-up employees are learning to ask the right questions. The ecosystem is slowly moving forward together. 

YONG HUI: With a lot more capital now, are valuations being inflated?

JEFFREY: Slightly, for the hot regional companies. They are typically started by serial entrepreneurs, and are backed by famous angels. So they see their valuations being pushed up because there are multiple interested parties, resulting in some bidding. It's not crazy, but selectively higher valuations do occur. 

YONG HUI: What advantages does a serial entrepreneur have?

JEFFREY: My data shows that of the top 35 start-ups in South East Asia, 60 per cent are founded by serial entrepreneurs. These founders may or may not have started tech companies, but other businesses such as import/export or service businesses, a development shop, or maybe a consulting agency. They know the whole three-sixty of running a company. First-timers have to learn along the way. And having that know-how is why serial entrepreneurs don’t do so bad in South east Asia as the majority of companies are ‘copycats’. The skill-sets for executing a ‘copycat’ start-up, are different from the skill-sets for executing ‘new’, crazy ideas. Crazy ideas are typically not pursued by serial entrepreneurs, except Elon Musk, but that's different. Crazy ideas tend to come from first-timers who are very young. Of course, this is a generalisation. In doing a 'copycat' start-up, the speed of hiring people, growth rates, and ability to do deals quickly matter. You also see that many of these teams have the same people for different start-ups because after they exit from one, they stick together and do another one.

YONG HUI: Would you say ‘copycat’ ideas are less risky from an investor’s point of view, and thus more palatable?

JEFFREY: It does take some risk away because you know the model works - you’re not trying to reinvent things. You also learn from people who have failed at the model, or have changed directions before. However, you don’t necessarily eliminate market risk, so choosing the right market is important. When you are ‘copying’, the idea is usually from a more developed market, and implementing in a developing country may not always fit. The other risk is competition. If you can think of an idea, so can 20 other people. This means you need to run faster. If you have prior experience, you are able to do it faster and better. This is why serial entrepreneurs have an advantage. They can go: okay team, let's launch tomorrow. If you are fresh, and you want to copy a concept, it will take you forever, especially in B2B. B2C might be more suitable, and even so, you need to understand your competition and market very well.

YONG HUI: What are the main challenges of starting up in Singapore?

JEFFREY: Singapore isn’t cheap. You have to launch fast, listen to users, pivot a couple of times, and keep developing a better product all on Singapore’s cost of living. This means a Malaysian or Vietnamese start-up can kick your ass. If you spend too much money, you will probably die, because you will have to raise even more money. Each time you raise money, you need to justify a higher valuation, if not your equity will be gone. To justify this higher valuation, you need to be in bigger markets such as Indonesia, but if you're not ready, you cannot raise. By the time you are ready, Indonesia has five clones raising less money than what you need, and have a local advantage. When this happens, you'll be spinning around waiting for a slow death. Singapore may not be the best first market. In fact, it's usually not the best.


Most founders operate out of their own comfort zones – this is the place I function best, and there are no funny occurrences like the internet going down for hours.

YONG HUI: It sounds like they would be better off if they'd just moved to a bigger market to begin with.

JEFFREY: Yes, but most founders do not just move to Jakarta. Some do, but most do not. Most founders operate out of their own comfort zones – this is the place I function best, and there are no funny occurrences like the internet going down for hours. The downsides are of course that the market is small, it is expensive, and you cannot find developers.  

YONG HUI: What is Singapore's advantage then?

JEFFREY: It depends on the business. In Singapore, try to do essentials which everyone needs. Don't do niche ideas in Singapore. Everybody needs toilet paper, so your market is big. If your market is small by default, your ceiling is maybe 10,000 people who make a purchase every three months. That means you have to be outside Singapore and global. A niche market can still make a fine business, but that's not something we normally look at. The other advantage in Singapore is in B2B plays such as adtech because many marketing budgets sit here. For software, some businesses here do pay for it but that’s tricky. Many SMEs may not know anything about technology, and they will ask you: what is SaaS? Why must I pay using credit card? Why can't you come and meet me in my office? So you are left with selling to other start-ups and tech-savvy companies with younger founders, or ad agencies. These SME issues are the same regionally. Unlike more mature markets that are already familiar with SaaS products, it will take more time here. MNCs may have criteria which are too stringent for a young start-up as many are GLCs who want to work with NCS for example.

YONG HUI: When do you think we’ll see Singapore's first billion-dollar exit?

JEFFREY: I think we have some potential ones. A few hundred million should not be an issue. Give them time. You will see some in Indonesia. 

YONG HUI: How many pitches do you receive a year? 

JEFFREY: We get more than 800. Right now, we are at about 740. 

YONG HUI: How many of them do you meet?

JEFFREY: I would say around 20 to 30 per cent of them.

YONG HUI: Out of them, how many do you fund a year?

JEFFREY: This year, we have done about 10 deals – slightly below two per cent of the total deal flow including cold pitches and emails, which is quite normal in the industry.

YONG HUI: Do you actively reach out to companies you like?

JEFFREY: We do, but not a lot because our deal flow is keeping us busy. If we see, hear, or read about something which piques our interest, I might get one of my guys to reach out, but that is rare.

YONG HUI: Are most of the deals you have done a result of a referral?

JEFFREY: Yes. It's a good way, but it depends on the round. The later rounds tend to be referrals. The earlier rounds tend to be a mix. Sometimes, it's a referral by a portfolio CEO who says, ‘I met this crazy guy who built this crazy thing – you might want to check it out.’

YONG HUI: Would you say cold-pitching a VC isn’t the best strategy then?

JEFFREY: My feeling is that it's self-selecting. If you mostly cold-call or cold-email investors, it means you are probably quite new. If you have been around and have started a few start-ups, you would rarely cold-call as a first choice. Personally, I don’t mind getting cold-emails. I get many people who message me on Facebook. If it's a decent well-thought-out message, I'll give them my email so they can send me a proper deck, or I’ll give them some feedback, if I have the time.

YONG HUI: How do you judge a founding team?

JEFFREY: The number one for me personally, is coach-ability, especially if we invest early on. This is because we need to work closely with the founders. Most ideas are never perfect in the beginning, so you need to change and tweak them. In terms of skills, it’s a wide range: there are good hustlers, super-tech people, crazy marketers, or super-salesmen. But the parts have to be there. A lot of it is gut feeling. 

YONG HUI: What about the chemistry of the team? Can you tell if a team is going to fall apart?

JEFFREY: Yes. Usually, it’s when the team came together without some history. Teams stick together usually because they have known each other for awhile, and have worked together. They are likely cut from the same cloth. The founders of Carousell, for example, went to school together. RedMart too, went to school together. It’s a good sign if the founders complement each other in skills, and can finish each other's sentences. One can be a designer; the other a hacker. You can tell from their body language how well they get along. Sometimes, it’s just a gut feeling that one of the team members is a bit 'off'.


YONG HUI: Does it matter if someone is loud and extroverted but the other is introverted? 

JEFFREY: It depends on the business. If you are quiet and you try to do a B2B business, it's going to be a bit difficult because B2B requires a lot of selling. If you do a B2C play, it's okay. When Instagram started, nobody knew who was behind it, where their office was, nobody knew anything about them. They are purely engineering-focused, making sure the product is good for the user. In B2B, you need at least one person who is good at selling. But nowadays, even in B2B, you need really strong technical people onboard.

YONG HUI: Is it viable if a purely technical team hires the sales people?

JEFFREY: Since they need to find out if people want their product, they will try to sell it themselves at least at the start, even though they know they may not sell very well. This helps them because they get the feedback they need to tweak and improve their product.

YONG HUI: What about the other way around?

JEFFREY: We don’t have teams made up of only salespeople in our portfolio. Either they don’t come to us, or we don’t like them – probably both. But, we have funded good online and mobile marketing people. Sometimes, the technology is a hire or outsourced, but that depends on what the business is. If you are doing ecommerce, you're not going to be reinventing anything, so it can be okay to outsource your technology, but you need to be good at branding and marketing, and get your unit economics right. In most other cases, you need a technical founder onboard.

YONG HUI: What's the average age of your investees?

JEFFREY: Late 20s or early 30s. My youngest is 23 years old. He's in Vietnam and he dropped out of school. In Singapore, it's rare to have people dropping out of school. Everyone tends to finish school first. 

YONG HUI: What's the most common reason for a venture-backed start-up company to fail? 

JEFFREY: A lack of focus. Sometimes, it means to focus on a city, or a demographic of a city. Sometimes, it means focusing on a particular revenue model, or a feature, or a product. You don’t have to do too many things. If you get the market and product right, you should be fine. If you don’t, and you distract yourself with a whole bunch of other things, you will never get that core thing right. Then, you will likely run out of money, and will try to raise a bridge round to fix it. But often, once you get distracted, you start spinning around waiting for a slow death.

YONG HUI: What blindsides founders?

JEFFREY: It depends on the problem they have. Some may have found a fit in one country, but have no idea what to do in other countries, so they start having ambitious expansion plans. Founders get distracted, and they lose their first market, while being in two other countries. Subsequently, they need to pull back from the new markets, while losing money in the meantime. Others have found somewhat of a fit, but not a secure fit, so they have to tweak. Or, you think you have a fit, but because you don’t have enough data, it’s not a secure fit. Sometimes, it’s the competition coming in to kill you. Things can change very fast every week, and they may not see what’s round the corner, how to defend their turf, and change directions quickly.

YONG HUI: Do bridge rounds usually work out? It seems they have to screw up their cap table for a last shot.

JEFFREY: Sometimes, the bridge round will get you over the hump. Usually, a mistake caused you to raise a bridge round. In a bridge round, you want to raise as little money as possible, if not you dilute yourself too much. With less money, this means you have to focus. Sometimes, that means downsizing. Start-ups are wartime shit; it’s fire-fighting – that's the way things are.

YONG HUI: What happens if they don’t raise the bridge round?

JEFFREY: They can downsize, try to sell the company, or shutdown. Next year, there will be a few shutdowns of venture-backed companies, but that’s normal. They shut down because they have not found a fit with the time and money they had, and they are burning more money than they are making. There’s typically no sign of user and engagement growth. They have tried a few things, and if it doesn’t work, that’s okay.

 If your users love you, they will talk about you. You don't have to talk about you.

YONG HUI: How much networking should a founder do?

JEFFREY: It's important, but distracting at the same time. Remember what I said about distractions. The founders of Carousell don't go anywhere because they are very, very focused – we like that. Some founders just love the media. When you are early-stage, you really should just focus. It's not that helpful anyway. If your users love you, they will talk about you. You don't have to talk about you. So don’t worry so much about being in the press. When you are bigger, then yes, you can do some of that. 

YONG HUI: Are you expanding your geographic focus?

JEFFREY: Our focus is still South East Asia. We have done deals in Hong Kong, Taiwan, South Korea, Japan, Portugal, and the US. Our secondary market is basically everywhere else. We would love a deal in Burma and Bangladesh. We might do Pakistan and Kazakhstan on an opportunistic basis. We don’t do India and China.

YONG HUI: Are you planning to raise another fund next year?

JEFFREY: Probably in a couple of years. Next year, we'll be investing the fund we raised in June, and managing the portfolio.

YONG HUI: Any start-up you would invest in right away if you had the chance?

JEFFREY: Ah, there are a few in Vietnam I'm working on. I've been chasing them for two years now. Zong you yi tian den dao ni.