Steering startups

Steering startups

Tech entrepreneur and venture capitalist James Tan casts his eye across Southeast Asia for new opportunities.

James Tan dropped out of school before his final year at National University of Singapore (NUS) during the first dot-com boom to chase his entrepreneurship dream. He did not regret the decision at all. In the end, he says, we only regret the chances we didn't take, and life is too short to wake up full of regrets.

"I did not finish and I only had a year left," he tells Asia Focus. "But, opportunity only comes once in a lifetime and when the first dot-com boom came around (in the late 1990s), we didn't know how long it would last, so I took the chance."

Mr Tan was studying information systems and computer science at NUS but he began to think that the computer languages he was learning would be "useless" in the kinds of jobs he was looking for in the real world at the time.

"I could not imagine, if I had graduated, doing whatever my seniors were doing, and that is when I realised, what's the point?" he says.

Nevertheless, Mr Tan did not gave up on education completely. He went on to graduate from the University of South Australia and received scholarships from both the Chinese and Singapore governments to pursue an MBA at Tsinghua University. He has made digital technology his career, but mainly on the business side.

A co-founder of the Chinese web development business, Mr Tan is also a managing partner at Quest Ventures, a Singapore-based venture capital fund, and deputy chairman of the Action Community for Entrepreneurship (ACE) in Singapore.

Before 55tuan, Mr Tan co-founded another company that combined his passion for photography and his IT skills.

"My CEO at that time was a well-known photographer and he saw a gap in Southeast Asia where there wasn't a platform like Getty, so he decided to start one and he needed technical help, and that was when I came in with my skill set," he recalls. As it turned out, the company was later acquired by Getty Images.

"We founded the company during the dot-com boom but we sold it during the dot-com bust; therefore, it was a small sale," he acknowledges. "Nonetheless, the company gave me the first taste of entrepreneurship and a little bit of comfort in looking forward to what I wanted to do next. But that was also when I realised that I didn't have the skill set to scale a company."

Mr Tan decided to join various companies to learn more about programming, product management and marketing for a decade before he co-founded 55tuan, which is now a Nasdaq listed e-commerce group that has grown to more than 200 cities and 5,000 employees across China. China is also where he learned the art of scale, of building and expanding a business.

"If I had continued to do what I was doing in Singapore, I would only be a big fish in a small pond, so I decided to go to China in 2008," he says. "It took me two years to study for my master's degree in China and with half a year left to go, that was when I met my co-founders at 55tuan."

As the first Singaporean and one of the few foreigners to found a public listed internet company in China, and for his investments in the next generation of entrepreneurs, Mr Tan was recognised as an outstanding overseas Chinese by the Overseas Chinese Affairs Office of the State Council of China.

Back in Singapore, the Action Community for Entrepreneurship had taken notice of his achievements and invited him to be on its board. Launched in 2003 by the Ministry of Trade and Industry (MTI), the organisation works to foster innovation and entrepreneurship in the city-state.

"ACE wants to encourage more Singapore startups to be more global from day one," says Mr Tan. "When we say global, that means more than 170 countries and we can't afford to be in all of them. You want to be in large economies, so you either go to India, the US, China or Southeast Asia as a whole."

ACE was initially government-driven before it was restructured in 2014 as a business-led initiative, though it is still supported and funded by the government.

"The public sector realised that it should be driven by the private sector, so ACE still survives and is now driven by a group of private-sector people like myself, where the MTI still oversees the functions," explains Mr Tan. "For us, we are trying to identify a longer-term goal in terms of where we see the challenges and what we want to see develop in Singapore to address those challenges and, hopefully, opportunities."

ACE now operates in 16 hubs around the world and in Thailand, it is now working with True Corporation at True Digital Park, Southeast Asia's largest digital innovation hub, to provide a complete ecosystem for startups and tech entrepreneurs under the Global Innovation Alliance (GIA) initiative.

"Singapore is small but we have been blessed with many opportunities and an ecosystem that has the ability to put its money where its mouth is to drive certain areas where we can see trends developing," says Mr Tan.

"On the challenge side, we know we are small so we have to look outward and the best place is our own backyard which is Asean. So we should be tapping into those [markets] and ACE wants to lay a foundation for this region to be a perfect ecosystem as a whole. We are doing that with the GIA."

Besides his volunteer role as a deputy chairman of ACE, Mr Tan also serves as an adviser, board member or trustee at other public and private organisations such as the Applied Innovation Institute, Business Angel Network of Southeast Asia, Beijing CYL Joint Committee on Entrepreneurship Development, Beijing Software Industry Association, National Research Foundation CGAP Fund, and Sports Excellence Business.


In Singapore, participants in the startup scene are now trying to figure out what will emerge next in terms of business opportunities. Five years ago, everyone was jumping into e-commerce but because Singapore is so small, startups there have to be prepared to go regional from day one.

A successful regional operation needs a reliable payment system, logistics and fraud detection to allow for cross-border transactions. That foundation has already been laid in Singapore, and is present to some extent in Thailand Indonesia as well.

"Singapore is now looking at deep-tech such as AI, and the challenge there is what real solutions are we creating and is there enough talent to solve it?" says Mr Tan. "What we don't want is solutions that are looking for problems to solve."

In Thailand, Mr Tan believes there are many real-world challenges to solve given the great variety of industries present in the country, from automotive to agriculture. For the latter, many interesting applications are starting to take hold.

Indonesia, he says, is "a bit further along". It already has unicorns -- a digital startup worth US$1 billion or more -- such as Bukalapak and Gojek because it started one or two years ahead of Thailand, and because of the size of its population.

"They also have a really supportive government in terms of letting the private sector sort it out without interference at first. The government will only come in when things are going to have a negative impact on society, such as in microfinance where there is a lot of fraud," says Mr Tan.

"The challenge there is inflation of startup valuations because everyone wants to be the next Bukalapak and they are neglecting the smaller funding at the beginning; it's a happy problem to have," he added. Bukalapak is Indonesia's first unicorn and one of the largest e-commerce companies in the country.

In Vietnam, Mr Tan says the startup community is still in the early stages but is "moving along so much faster" relative to other countries including Thailand. This reflects top-down direction from the one-party government, similar to what has happened in China.

"They can decide to give an opportunity and a platform to their university students almost instantaneously," he says. "They can immediately fill the gaps that were missing in their ecosystem such as creating a platform and avenues to reach investors via accelerators.

"And, when there are no government incentives, they can immediately go to countries such as Singapore to attract [businesses] to look at deals in Vietnam as well," he added.

Vietnam is very welcoming to foreign business ownership, he says, allowing up to 100% in many sectors.

The country had only 400 startups in 2012 but now has more than 3,000. The startup scene receives a lot of local news media coverage and investors have been flocking to companies in the market of 95 million people.

In 2017, 92 startups received investments worth $291 million. The most attractive industries are e-commerce, followed by foodtech and fintech. The local e-commerce sector is growing rapidly and reached $4 billion in value last year. This year at the Vietnam Venture Summit in June, 18 funds committed to pouring $434.8 million into Vietnamese startups over the next three years.

In terms of human resources, Vietnam has a much larger pool than most countries in Asean, and some of the world's highest-performing computer science students. It also offers cheaper labour cost than China, which is attractive for foreign investors as well.

One country that many people overlook, says Mr Tan, is the Philippines, which he believes will be the next happening place for a vibrant startup scene. Demographically, it is very similar to Vietnam with a large young population, though the countries differ geographically.

"The Philippines is scattered across hundreds of islands where Vietnam is one whole landmass, where it is much easier to get around, and commerce is the foundation for a startup ecosystem," he says. "But once they can do that, they will start to show up on the map. What the Philippines can do right now is to find ways to better attract foreign investors to go there."


In terms of government policy, Indonesia and Vietnam have clearly different approaches with Vietnam being more hands-on, similar to what is happening in China. In Mr Tan's view, there is no perfect recipe for success, but each country has to find its own role models, such as Airbnb in the US and Alibaba in China.

"A role model is important as a guidepost that you can try to aim toward, and Southeast Asia should have our own," he says.

Mr Tan's preference is for the public sector not to interfere too much. Startups should be allowed to bloom and compete within the private sector, and government only needs to step in if it foresees some kind of systemic or social harm.

Mr Tan also stresses the importance of education and training that go beyond just coding or robotics. Companies may be base on digital technologies but they still need people who know about marketing, public relation and business operations to be functional, not just lots of programmers.

"What we can do is to provide a mindset to be always learning, such as night classes to continue education for adults. Hopefully they will take them because they want to learn," he says.

The lifelong learning mindset can be instilled by letting people know that it is okay to fail, but there should also be limits in terms of budgeting and timing.

"Before I send a person on a project, I will give them a budget and that budget is something that I am prepared to write off totally," he says. "This way I have controlled my risk and if the project fails, it will now be about salvation in terms of the learning experience, which can be used to encourage other people in the company.

"In venture capital economics, all I need is for one business to succeed out of twenty and I hope that will happen."

Mr Tan's Quest Ventures, is now operating in 150 cities with more than 40 startup companies in its portfolio, employing more than 4,400 people globally. They include Shopback (e-commerce), Carro (automotive), TranSwap (financial) and Vulcan Post (digital media).

Mr Tan's recommendation to would-be startup entrepreneurs is for them to begin with a clear goal in mind and to "re-milestone" themselves every year. Step by step, they will get where they want to go.

"The lack of planning is something that should not be left to chance, where you need to know how to get from the first milestone to the next without just fumbling along and wasting your time," he says.

Mr Tan draws from his passion for photography to offer an analogy: It allows you to capture a moment in time, and every moment can be looked back on, if you have captured it. It's the same with trying to capture that once-in-a-lifetime opportunity that comes into life.

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