Infocomm Investments Pte Ltd (IIPL) is a venture capital firm, managing a fund size of more than US$200 million, and a startup ecosystem builder. As a subsidiary of Infocomm Development Authority of Singapore, IIPL also manages BASH, a.k.a Build Amazing Startups Here, Singapore’s largest integrated startup space. With offices in London and San Francisco, they are strategically positioned to help startups grow and access markets in the east and west. Venture capitalist, Tong Hsien-Hui, shares more about their strategies.
You manage accelerator programmes at BASH. Tell us about that.
Back in 2014, , we put in place the Accelerator initiative that IIPL runs in partnership with commercial accelerators, corporations and institutions of higher learning, to speed up the creation of more high-quality, innovation-driven startups in Singapore.
A result of that is us establishing eight partnerships/investments ro run acceleration programmes. Right now, there are four accelerators based in BASH – there’s StartupBootCamp Fintech and the FinLab, both are fintech focused accelerators; SPH Plug & Play, a media-tech focused accelerator; and TAG.PASS, our in-house pre-acceleration programme. The accelerators are a way to help early stage startups achieve three things in three months: validate their business model and product with customers, develop a minimum viable product (MVP) and prepare a polished pitch to investors to take their startups further.
Before acceleration was introduced into our ecosystem, startups typically go through incubation only, and the success rate of them getting follow-on funding ranges between 2 – 8 %. After bringing in acceleration to take place before incubation, we saw that startups have a significantly higher, between 62% – 87%, success rate.
How do you choose which startups to invest in?
Fundamentally, a startup needs to be solving a problem that people are willing to pay for (i.e. a problem worth solving) and they need to demonstrate scalability in their product and business model. On top of that comes all the other factors being considered in the due diligence process. Through and beyond investments, we’re also chartered to build and grow the Singapore startup ecosystem. With that context in mind, it’s not hard to see then that we are not in for a quick flip or for short-term gains.
IIPL typically invests in growth stage startups, Series A onwards, with a ticket size ranging from $1m to $5m, depending on the stage of the startup. We also indirectly invest in early stage startups through our investment into accelerators; sometimes we do follow-on investments into some of the startups that graduated from these accelerators.
So for early stage startups, we look at a combination of the team members and the product they have. We have turned down a strong team with a weak product as well as a weak team with a strong product. To us, these two elements must match before we make an investment.
For Series A investments and further, the companies must have traction. Due diligence must also be fulfilled before we commit to an investment.
In general, we drill in on questions about the market size, the business model, revenue streams, traction numbers etc. If a founder gets rattled by these questions, it’s a red flag for us because if a founder can’t deal with this, it makes us question whether he can deal with the stress of running a startup or with dealing with stakeholders.
Those who make the cut – how do you negotiate term sheets with them, since that aspect is not as developed as Silicon Valley.
The Silicon Valley ecosystem is a very mature one, so there are lawyers who specialise in term sheets for startups and investors. Here, most founders go online and download a standard, cookie-cutter term sheet to hand to us for signing which can be dangerous if you don’t understand what’s on the term sheet.
It’s important for founders to understand the basic terminologies in term sheets as it can affect their business down the road when they want to raise additional funding or exit. Fortunately, we at IIPL are in this to help nurture the startup scene in Singapore so we are not predatory with term sheets. I have even gone back to the founder and advised them to relook their term sheet when I find problem areas or when the terms are not fair to founders.
And what if investments don’t work out? How do you deal with startups when you have a problem with the founder or when they are not meeting their projected numbers?
Sometimes, a startup grows to the point where the founder is unable to provide for it anymore and it is time to hire a CEO who can take it to the next level. In this case, we will advise the founder this course of action. However, we do not take a heavy-handed approach – we do not interfere with the running of the business and ultimately all decisions are for the founders to make.
Any industry that is over-hyped / over-invested in now? And what new areas are you looking to invest in?
Advertising exchange, marketplaces are common investment areas now. Currently we are interested in the next wave of digital which includes AI, IoT, horizontal sectors that cut across industry verticals such as smart energy and health-tech.