The Jay Kim Show #25: Alan Chan (Transcript)
Today’s guest is Alan Chan. Alan is the founder and managing partner of Vectr Ventures. Vectr Ventures is an early-stage investment fund that he launched in 2013. They are Hong Kong based, and he focuses on some cool market sectors, such as [inaudible 00:01:00] data analytics, VR, and med tech. So for those of you who are familiar with the startup scene here in Hong Kong, you’ve probably heard of Alan. He’s quite famous. He won the Asia Investor of the Year award in 2015, along with Sequoia and GSR Ventures.
This episode is for startup founders, because we talk about specifically what he looks at when he invests into startups, so make sure you’re taking notes. Let’s jump right into the show.
Jay: All right Alan, thanks so much for being on the show. Why don’t you just take some time to introduce yourself to the audience. I know you’re quite well-known within the Hong Kong ecosystem, but for our listeners abroad, maybe you could just run us through who you are and what you do.
Alan: Sure, thanks so much for having me. I wouldn’t say I’m famous locally or anywhere, but I run a firm called Vectr Ventures. We invest in early-stage technology companies across the globe. And early-stage, we pretty much call everything from [inaudible 00:02:11] all the way up to Series B, we still look at. So we try to take a slightly more hands-on or different approach to investing in early-stage, so we jump in on business development, product, and really just try to be helpful to our founders after we invest. So, we’re structured in a way so that our company can work with our portfolio companies, truly from, like I was saying, from product design, product build, business development, sales, expansion in Asia, and we really try to get in there to help them on whatever it is they need, and to be their first call whenever a problem needs to be solved vs. calling us when it’s … Trying to put out fires. We try to get in there early, and try to build good relationships with our founders.
Jay: Right, and it’s Asian-focused funds, right?
Alan: Well, we actually … So we invest everywhere right now. More than half of our portfolio is based in the United States. We’ve got around a quarter of our portfolio based in Europe, and another quarter based around Asia-Pacific. We don’t really mind where the company is from, but at the end of the day, we try very hard to see what in our network, and who in our network, can plug into our invested companies, and we try to be the voice of reason when considering expansion into Asia-Pacific. Either in proper and steady strategic planning together, or to be the voice that tells them this is not going to happen, Asia is not one place, and this is gonna be a lot harder than you think. Not always good stuff, but we try to be there to be realistic.
Jay: Yeah, I think there’s definitely a need for investors such as yourself. There’s a handful of guys that are kind of doing, trying to accomplish the same stuff, and especially for startups that are not based regionally, and they’re based whether in Silicon Valley or maybe abroad in Europe or some of the other ecosystems. China is always on the radar, so to speak, and so is Asia, and a lot of times they try to charge in prematurely, or maybe they don’t have the resources or a partner for that, and they end up being out of business within the region in a year. So there’s definitely a need for a firm like yours. So how many people are on your team now?
Alan: So right now our team is up to 15 full-time, but we have a few venture partners and advisors that are spread out around the world. We keep in close contact with them as well.
Jay: Okay, wow. And you only started this firm in 2014, is that right?
Alan: Yeah, we started in the summer of 2014. The idea of it came around, and the name and whatnot, I think came around in June if I remember correctly, something like that. So yeah, we started around then. We moved into our office here in Hong Kong near the end of November 2014, so almost two years now.
Jay: Almost two-year mark. Yeah, and you guys have a beautiful office space there, I’ve been there personally and I love it. So why don’t you talk, can you share a little bit with us about your … Before you launched Vectr Ventures, what were you doing, and how did your prior experience lead you down this path?
Alan: Sure. Coming to [inaudible 00:05:40] for me, back into investing, was very full-circle. I first applied to university for information systems at Carnegie-Mellon. Early decision, but I got deferred, didn’t get in. So I ended up going to a different school and studying political science, philosophy, and economics, and just went a totally opposite way. So a very early love for technology, going through high school during the first tech boom in the year 2000, right? We were weighing everything by clicks. So even back then, with my family and some of my family friends, seeing them involved in the space, I was very into it very early.
So I ended up going to Duke University studying all that, came out, was an investment banker based in Hong Kong and China for around three years, just doing very typical investment banking. Then after the financial crisis, I left in around 09, and then went to Shanghai and joined a company that was founded by my then chairman and now a good friend, trying to build an amusement park in China for children.
Jay: Oh, interesting.
Alan: So I joined in there as a product manager and helping plan out the program that’s inside, and program meaning the economy, and how the game works once you get into the arena and not so much a computer program. So I did that for around half a year or so until we realized that our property wasn’t going to work out, so investors and whatnot pulled out, which was very unfortunate and heartbreaking for myself, being the first time I jumped into a company, it sunk in a hole right? So, it was a bit painful.
So that didn’t pan out as we wanted, which was unfortunate, because I still love the product to this day. Even though it’s not a tech start-up per se, like the way we see it. So after that happened, I moved back to Hong Kong and got a bit involved with my family business. So I was looking at real estate and some just general investments across the board for alternative investments. And probably within a year or so, this was around 2010, got a bit antsy. Well, very antsy, and then moved to China with my then co-founder and started a company called [inaudible 00:07:54] which was doing ticketing and entertainment in China. So it was a bit like Fandango, Ticketmaster, and maybe E-Online and some other entertainment news site, all rolled into one product.
And we did that for around four years or so, before we sold that to a Chinese media group in early 2014. And in the meantime …
Alan: Yeah, thanks. In the meantime, I was working on a few things as well on the side, which sort of led me to what Vectr is now. So what happened was, in the meantime once I started that, got back in touch with the tech world and with my investor sort of mentality too, just started looking at a lot of early-stage technology companies from all over the place just through the network. And I started taking a look, and this was around 2011, maybe, so as you probably know too, around that time in Asia in this part of the world, there wasn’t that much tech.
Alan: Investing, or tech talk, or non … I think people were still reallocating their resources back into the world after the financial crisis.
Jay: That’s right.
Alan: I ended up [inaudible 00:09:05] and different things, talking to my ex-bosses, ex-colleagues, some of my buddies, mentors and advisors or whatnot at the time, and sort of friends that have worked a little longer than myself, just saying, “Hey, I’m looking at this stuff, seeing these really interesting companies, and I’m gonna put in some money here at a very early stage.” And one thing led to another, and eventually, I pretty much started running a private syndicate there are a dozen people, you know, six or seven deals later, just with people that found it interesting. I didn’t charge anyone anything, and we were just investing together as a club.
Alan: It was great. I got to learn a lot about talking to founders, doing due diligence, learned how to live my life around Pacific time in Hong Kong.
Jay: That’s right.
Alan: Right? Which is still a big part of our lives now. Early in the morning, late at night, I’m usually on the phone. And just trying to look at companies and having people invest alongside me, which was a really good experience, because it taught me a bit of responsibility, it taught me how to really think through things and present them to others. So we did a few investments like that.
I also tried to launch another company in the middle that was trying to be a tech platform for NGOs, which was an NGO itself, and so that’s how I met one of my team members now, my VP of technology, that’s how we met back then.
Alan: So we started building this platform. And by the end, when I sold [inaudible 00:10:36], full circle back to [inaudible 00:10:38], when that sold, I had a good think, just spent some time after that to have a good think about what it is that I want to do I think From being a part of a big company, to being part of a family business, to being a part of somebody else’s business, to running my own business. I feel like it was a … And running a private syndicate, it was a quick sprint in a few years I would say, to go through a good amount of experiences, so I was able to draw on that and just think to myself, okay, what do I like here, what are the things that I’m good at, what are things that I’m not so good at, what are things that I actually can do, what are things I can’t do no matter how much I like it, or whatever … And spent some time to just think through everything, and sort of ended up with the beginning of Vectr.
Jay: Yeah, that’s awesome. And you guys … The speed at which you, after you did your thinking and whatnot, this speed at which you guys, in 2014 to now, the impact and whatnot in the marketplace … It’s quite impressive. So congratulations on that. Going back to what you were talking about, the syndicate. How did that actually work, was it just like a club thing where people would bring deals to the table, and everyone would take a look at it, and if you wanted … Or was it actually more formal where there was a pool of money and it was managed like a fund?
Alan: It was actually more casual than both. We just did companies … Back then, I mean, I didn’t go through a proper fund structure, any of that, and I was the only one suggesting and bringing the investments and deals. So we were just being contacted all the time, and whenever I found a company that I really liked, I pretty much would just copy and paste all of my notes into an email, and tell everyone, “This is how much I’m putting in, this is how much we can go up to, this is the timeline, this is what I think.”
And I usually ended up … The email eventually started with it saying, “If you’re not interested, please don’t ask me questions, and you don’t have to write me back,” and we just started holding companies in just random BVIs and whatnot, and I would just parcel it out that way. I mean I only did it with those investments with people that I really trusted. I joke around saying, “I only co-invested with people that I knew where they lived,” so I could just stand in front of their front door, in case anything happens.
Alan: And vice versa. So we kept a very tight group, and we did it very informally. A lot of it was based on trust and it was really good. I’m very thankful for that, all the friends that joined in with me at the beginning. And luckily, many, if not all of those investments are still around right now.
Jay: Did that portfolio eventually fold in Vectr, or is that completely separate?
Alan: Yes, I did fold it into Vectr.
Jay: Okay. So the interesting thing is, you were able to somewhat have an education because of this syndicate that you ran, which I think is great, because basically, angel investing, for people that don’t know, and want to get into it, it’s basically like throwing your money in a trash can. I’ve been an angel investor in the past, and I’ve lost a lot of money in the past. And I realized, you know what … The biggest thing is actually time, and like you said, the conference calls and the due diligence that you have to put in to actually meet these companies and get to a level of comfort where you can actually … You can feel that it’s gonna be successful. And then, taking that one step further, is now what you are doing at Vectr, where you actually provide resources in addition to money to ensure that … It’s kind of like an insurance policy on your investments, like I’m gonna help them take it to the next level, right?
Alan: Yeah, exactly. Our whole mentality is … The way I describe it, it’s also sort of … I try to keep it light-hearted, but this is honestly how I feel about it, is … Everyone’s worked really hard for their money, so I’m not totally into just signing over a check and saying, “Good luck,” and waiting for it to come back. It may not be [inaudible 00:14:56] that I get involved and be hands-on, but … You never know, right? Even companies I really like, sometimes, and I try to be very helpful, if it doesn’t work, it doesn’t work, and some that you do nothing for actually go far.
But we try to mitigate, I call it mitigating risk, to see how we can help the best we can, to allow the founder to do as much as they can so that everyone’s happy at the end of the day.
Jay: That’s right. And interest are aligned, for sure.
Alan: Yeah, we hope so.
Jay: Yeah. So I want to talk about Hong Kong for a bit. You’re from here, so you’ve seen the ecosystem here evolve. When I moved here in ’05, and there was virtually nothing, like you said, and around 2010, 2011, is when I, as well, noticed and observed the uptake in activity and interest in early-stage investing. And then now, fast-forward five or six years, here we are. However, I feel like there’s still a long way to go here within Hong Kong, especially. I think there’s other ecosystems within Asia that are more advanced than we are. So, what do you think the largest challenge that we have here in Hong Kong is, and what will it take to get our ecosystem to the next level?
Alan: Well it’s sort of two-sided. As far as ecosystem goes, what people perceive as our weakness, in my opinion, is also our strength. And what does that mean, right? So, I personally am a strong believer in the private sector, and the private sector driving business and innovations, and things forward, which, I would say, not all other comparisons we have in the region are that way.
And the perils of having private sector drive something, sometimes, is it goes slower, and people are a little more cautious, and it just takes time, because especially in a place like Hong Kong, where in our previous lives, all the different ways people can monetize, invest, and take care of their wealth here, and take care of their cash and investments … It makes something like early-stage investment and tech very related to how investors are feeling generally, which means, is it like bull markets, is the market riding high, is property riding high? And if it is, then everyone’s got a little more spare money, because everything thinks everything is all good.
But on the downside, like where we are now where the world is a little shakier, and everyone across the board is being more cautious, then it makes it a little tougher in the ecosystem. But I think, as far as companies and what we’ve noticed over the past few years, is we’ve seen a lot more companies now, if not all of them, we see directly tackling a problem and building a product out of their own insights, and out of their own experiences. So at the first wave, we saw a lot of copy, ABCDEFG to Hong Kong, because it works somewhere else.
And as far as we’ve seen, that doesn’t always work, no matter if you copy it to China, copy it to here … Some work, some don’t. And then we eventually saw a group that was doing that, but then with a slight local twist, with a slight Hong Kong angle, and they have to change it up, because people then realize, okay, this doesn’t work. Hong Kong doesn’t have the same issues as the Bay area. I don’t need everything delivered to me when I can just walk downstairs and pretty much buy anything that I want within five minutes. And 90% of the population in Hong Kong lives in that circumstance, right? Just go downstairs. So it’s not a big deal.
But now, what’s really comforting and really inspiring and great to see, is that more and more teams and founders have done it once, are building something again, and maybe really allowing people to sort of reach, and say, “Hey, I want to do this and solve this problem, and I don’t care if it’s done somewhere else necessarily, and I just want to do it.” And I think that’s been a really good, a nice progression over the past few years.
Jay: That’s interesting you say that, I think part of that is maturity of the market as well. When founders, like you say, they fail once or maybe they’ve had a couple different ventures, and then finally, they’re like, okay, let’s not, we don’t need the Uber of Hong Kong, we don’t need the Postmates of Hong Kong, we need to build something that is for Hong Kong, right?
Alan: Exactly. So if you think about it, I tell this to my team sometimes. Chances are, no matter what you can do, it’s not gonna work anyways statistics say. So you might as well swing for the fences, right?
Jay: Yeah. That’s right. That’s a good point. So let’s talk about what every founder that’s listening to this, or is going to be listening to this, wants to hear. They want to know, they’re a young, aspiring founder, they’re thinking about launching a company, or maybe they’ve already launched a company, and they want to get money, and they want to fundraise, and they want it from Vectr Ventures. What type of companies do you look for, what do you specifically look for in founders, in companies, in entrepreneurs that you will back?
Alan: Right. So let’s start with seed stage and very early … A mentor once told me, for very early-stage companies that never fall in love with a product or never fall in love with a specific pitch, and a specific problem that … Or a method in which a team is solving a problem, because … Especially if it’s consumer, but it really doesn’t matter, because if that’s wrong, and you’ve bet on the product versus the team, then you may be in deep trouble, because who knows what the market really picks up. So what I was taught very early on was, make sure the team gives you the confidence that they can sort it out, and they will figure it out, and you know they’ll battle and fight til the end to make sure that they can fit into the market.
So very early on, for us, a big thing for me for founders is obviously a big of pedigree, of past experiences, what they’ve done before, and part of, “Why you,” of all people, because any sort of idea that you can come up with, I’m sure at least a hundred other people have thought about it in the world. So why you, for this problem.
So secondly, I like to take a look at founders to see, in their vision of where the company is going to go, I like to know that they’re very clear in terms of what they’re good at and what they’re bad at, and how this is going to happen. And what does that mean? And not in like showing me huge projections, and you know, the company’s gonna be worth like a bazillion dollars in a few years, but more of, so how are we gonna use this capital, what is this going to do, what are we addressing with this time and capital for this seed round, and to really give me a sense that they know that this is the beginning, and this is like an uphill battle, if not the steepest part right now. And I really need to get comfort that the founder has thought about that, and realizes that too.
What I’m most afraid of, is the feeling you get when the founder’s got a seed grown, and it almost feels like they already won the entire battle, or the entire war, right? Which is, you’re not even like in the first battle, you’re just getting ready for the first battle. But you get this …
Jay: You’re warming up.
Alan: Right. But you know, there has been … Which is hard, right, because the thing with growth and fast growth in an ecosystem, is there are a lot of different peripherals, events, and all types of things that happen, and inadvertently, there are times when I think some founders get carried away, and spend their time doing things that are really not that important. So we like to tell our founders, other than if it’s an event which borderlines on a trade show, which allows them to grow their business, which gets them in touch with people that they need, we tell them, “Don’t talk about anything, don’t go on panels, don’t go talk about entrepreneurship, because you just started anyways.” And just, “Go to work, build your product, go get the market. Don’t waste our time doing these other things.”
So I really like to get a sense of how these teams, and how they work together, and how the leader or leaders of the team are driven towards actually achieving their goal and not being to distracted, right? I’m sure you’ve seen too, there are some companies, sometimes, they’re in this pitch competition, that pitch competition … There in so many different competitions, and sometimes, I’m just wondering …
Jay: Where’s the focus, right?
Alan: Yeah, like why are we doing this? Or, I saw your pitch like a year ago, and you’re still at a pitch competition this year … It makes me ask a lot of bigger questions other than about the product, and the company. I’ll be asking more questions about the founders, and at that point that’s an uphill battle for a company, and I think any investor too. You want us to be focused on the product, and believe you and the plan, versus asking questions about you.
Jay: You, right. There should be no questions. There should be 100% confidence in the jockey, so to speak, right?
Alan: Well yeah, exactly. I just want to be clear of your plan, and I mean yesterday I was talking to a founder, and he’s like, “Well, I thought rounds should be this size,” and investors like to do it this way, so I didn’t want to like step across the line, and my point to him was, “Look, don’t listen to what other people say.” It’s like writing an essay in school. You tell the teacher why what you write has a point. You don’t wait for her to tell you what it’s about. If that was the case, then you’re not gonna get top marks, you’re not gonna get … Because there’s nothing new.
So I told this guy, “Look, you just go back and think about how much you need, but you need to tell me what that does for you, and what that does for everybody. And if you can clearly depict that scenario, then we can talk about anything.”
Alan: It doesn’t matter, right? Don’t play within a box, because at the end of the day, there is a lot of standardization in what we’re doing now, but every business is different, every team is different, all investors are different. So what’s important is, you as the founder, you convince me what is happening, and then I’ll decide if I agree. But don’t just do whatever I say, because then the only difference between us and you is that I chose not to do what you’re doing, and I just do what I’m doing, which is, why would I invest in you at that point?
Jay: Yeah, that makes sense. So I know, can you give me like two or three of the startups that are in your portfolio? Maybe, let’s say, I know you’re global, but let’s say Hong Kong, companies that you’re particularly excited about at this point?
Alan: One company I’m very excited about in Hong Kong is [inaudible 00:26:19]
Jay: Yeah, Norma, yeah, she’s great.
Alan: Yeah, she’s great, she’s amazing. One of the founders, I’d say, I have to worry the least about. She is doing super well, broke 100 million plus views in the past few months, and she has really come a long way since we invested in her. And she’s grown her platform a lot, tons of fans, even to the point where someone stopped her on the street in Shanghai and said, “Hey, I know you,” which is sort of crazy if you think about how that works nowadays, right?
And that one has made me very proud, and we’re very happy to be a part of it, especially talking to traditional media and whatnot too around town and in different regions. It’s just really interesting to see how are they doing, that [inaudible 00:27:08] company, blah blah blah, and then you give them the statistics, and the room goes silent for a bit.
Jay: Yeah, in awe.
Alan: Which is very satisfying for us at [crosstalk 00:27:17] yeah, that’s right.
Jay: Yeah, exactly.
Alan: So Norma and [inaudible 00:27:23] we’ve been very excited about, and we are working with her to hopefully come up with a lot more exciting things in her business. That one, based out of Hong Kong, is something we’re very happy to be part of. For many in Hong Kong, they’ve probably never even heard of Norma, which is sort of what we like, because she doesn’t run around doing things, she’s too busy working. She’s the type if you ask her “Can you come on a panel,” she’s gonna turn you down, because she’s too busy and will be asking you “What am I gonna get out of this? What does this do for my business?” And if it doesn’t do anything, she’s out. And that’s one thing that we love about her.
Jay: Great founder. She’s crushing it, and fortunately, she’s agreed to actually be on this podcast as well. I haven’t booked the time yet, because she’s probably too busy working, which is good news for you, but yeah. I know Sam as well. I’m really happy to see her success.
Alan: Great entrepreneurs, frankly speaking.
Jay: Yeah, awesome. So listen, we’ve got to look to wrap up. I really appreciate your time. I have just two more questions for you. So the first is, what is one final piece of advice that you can give to aspiring startup founders, or maybe people that actually are working at a startup right now looking for some growth, looking to get the next round of funding. What’s one piece of advice that you can give them today?
Alan: I think the most important thing is to be clear, meaning be clear about your plan, be clear about why you’re heading towards your milestone. And be clear and honest to yourself, and to your prospective or existing investors about what the roadblocks and what the difficulties will be, because nobody believes in the entire projective plan ever anyways, because that’s just not how everything works I suppose.
Alan: So what I think is really important is, make sure you stay honest and well-planned about all that, and make sure that … We have one company which we really like the founder of too, super hustler, but what he does is, at the end of every month, he’ll send a very simple email that says, “Hey, this is what we’ve done. This is what we’re doing, or in the middle of, these are things that we’re having trouble with,” and will send a very short list of, “These are things I need help with,” from whoever. I was reading this email right now. It’s just, you know, the investor group, but … Very open to constantly be saying, “Hey, I don’t know how to do this,” and “Hey, I’m having trouble with this,” and just … We’re invested, or want to invest, and so we’re there to help.
But there’s a lot of times that I think founders don’t open up as much as they want, as at least we want them to. So I would say, just stay active, stay vocal, and stay well-planned. And when you talk to investors, make sure that you convey that so that we’re debating parts of your plan, but we’re crafting a plan, and the vision was you. That would be something to take for everyone when talking to any investor.
Jay: Great advice Alan, thanks for that. Last question is, where can people find you, follow you, and where is your homepage?
Alan: So different members of my team, we’re on AngelList, Twitter … I don’t post much on [inaudible 00:31:12] different accounts, but I sort of retweet interesting articles here and there. We have a Vectr Ventures account too, on Instagram, Twitter and whatnot that you can follow, and Facebook as well. And our website, you can just search us, Vectr Ventures, and we should pop up.
Jay: Awesome. Great. Thanks for your time, Alan, I really appreciate it, and I enjoyed the talk today. Best of luck with all your portfolio investments.
Alan: Thanks, and for your podcast too, thanks.
Jay: All right, thanks.
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