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MarketX recently launched Radiate Ventures to invest in fintech, deep tech, and vertical SaaS
Venture capital used to be a cottage industry, with very few investing in tomorrow's products and services. Oh, how times have changed! While there are more startups than ever, there's also more money chasing them. In this series, we look at the new (or relatively new) VCs in the early stages: seed and Series A.
But just who are these funds and venture capitalists that run them? What kinds of investments do they like making, and how do they see themselves in the VC landscape?
We're highlighting key members of the community to find out.
Cathryn Chen is General Partner at Radiate Ventures.
With over 11 years of experience with TMT investments across the US and Asia, Chen founded MarketX in 2015 to be a maiden cross-border investment platform, connecting global investors with private tech opportunities from the US, China, and Southeast Asia. She has facilitated over $250 million in primary and secondary investments for over 30 family offices and funds across Asia and the United States through this contrivance.
VatorNews: Let's start with the big picture, which is really about MarketX and also Radiate Ventures. Talk to me about your philosophy, your methodology, and where MarketX and Radiate Ventures fit into the ecosystem.
Cathryn Chen: First of all, just to give you a little background about our genesis story, I started out as an investment banker and I was helping companies go public between 2012 and 2014, and then I myself joined a three person startup back in 2015 and we raised $80 million from Lightspeed and Sequoia. I had a lot of experience working with investors but then, at the same time, I realized all the pain founders have to go through working with investors. So, in 2015, we had a bunch of my previous clients from my JP Morgan, Deutsche, and Rothschild days reached out to me and said, “hey, we want to give more exposure to technology companies in the US, can you help us?” So, we built out MarketX as a platform business helping folks, whether it be investors that want to look at companies in the US, or founders that want to get liquidity before the company goes IPO. So, we built a secondary liquidity market and, from day one, it was global: we had clients from Asia and then in the last few years we've expanded to the Middle East, LATAM, and Europe. It's been eight or nine years, next thing you know, time flies, we have a couple 100 companies we cover and also family offices from around the world. We've invested in 40 plus companies in growth and late stage, and also some early stage.
Radiate is a dedicated investment vehicle managed by the MarketX team, so we have four investors on the team right now, and we're looking at fintech, deep tech and vertical SaaS. Why do we pick these sectors? Well, first of all, we all understand that the overall macro is not great; in times like these, you need to invest in companies that are anti-fragile, that have resilience. These are the top qualities we're looking for in founders and teams. In deep tech we're looking at semiconductors, energy transformation, climate tech; these are companies that are really building for humanity in the long run. Then for fintech, financial services itself has gone through quite a bit of a transformation, but not enough. After the bank runs, after SVB, after First Republic, what's next? How will we think about our financial services industry in 10 years? We will see quite a bit of transformation happening in this field. Fintech really encompasses a large range of products, for example proptech, as in the real estate sector; some of the competitors or folks in the field, like Fifth Wall raised $3 billion. Also wealthtech, companies that are solving wealth management issues, this morning we just spoke with Wealthsimple, they're the largest Canadian wealth management online platform. And then we also look at embedded finance, and that's usually in emerging markets such as India, Pakistan, folks that have not adopted as much embedded finance in their economies. Lastly, vertical SaaS: this area is really exciting now because AI is transforming every aspect of our lives and SaaS businesses are a huge adopter of AI technology. With ChatGPT you see foundational models are really transforming the way we think about martech, the way we think about pretty much every industry, but SaaS has been hugely transformed by AI. So, looking at all the highest growing industries, naturally we come down to these three areas.
In terms of size and also stage of the company, we're a little different from other firms. So, in terms of size, we do a barbell strategy where we invest both in early stage and growth late stage, but we don't do Series A and B because there's just a lot of players in that space. We do early stage, such as we invested in a company in Israel that's focused on AI inference where we were the first check in. We would like to grow the company, helping them reach global scale. If a company has reached Series C,D, E, F, or G and they are trying to get some liquidity, whether it be the founders, or employees that are trying to find ways to support their families before the company eventually goes IPO, that's also where we come in with our secondary special situation strategy. So, that gives us a unique proposition given that we've been operating a secondary investment platform for the last eight years.
In terms of geographical focus, that's also where it makes us different. Our team has lived on so many different continents, we have 10 different nationalities on our team, so you can see our engineers are in Brazil, our marketing person is based in London, our investment team is in Dubai, France, Singapore, and we have now also folks that are working out Slovenia and Riyadh. Just having a very multicultural, diverse group of people working on one team, even though we're small, we cover so many geographies and that gives us an advantage by investing in geographies that normally people will not venture out to. So, this year, we've done a deal in Norway, we did a deal in Argentina, and a part of it is also because I like to follow the third culture diaspora play. For example, I am a Chinese American myself, I like to invest in the Chinese diaspora, so there’s a company founded by a third generation Chinese family that lives in Zambia, and they call that their homeland. And then you go to Bolivia, Argentina, there's a company that's focused on lithium carbonate extraction, again, Chinese diaspora. They were from Tibet before and the business was going well, but they decided to expand it to LATAM. More and more companies now are thinking global because the way for them to keep growing, whether it be public or private, they need to find a niche in what they do. Take the example of Sea Limited, which is run by Forrest Li, a Singaporean billionaire, he is now expanding aggressively in Brazil, even though his home business was founded in Southeast Asia. If you look at China, given the geopolitical situation, a lot of the founders we work with decided to shift their focus because they can't do business in the US anymore, so where do they go? The Middle East. I was speaking at a couple of conferences in Riyadh in Saudi Arabia and I realized it’s the headquarters for SenseTime, it’s the headquarters for Mawatin International. So, I thought that it was very interesting to see the movement of people due to geopolitical reasons, with the Russian/Ukrainian war breaking out, you see Ukrainian entrepreneurs, Belarusian, they're all over Europe now. People have moved to Zurich, people have moved to France. So, we're trying to look out for the underdogs, the diverse founders that had to uproot themselves multiple times, but constantly innovate and constantly build impactful businesses around the world. So, that's what makes us a little bit different in our perspective. Maybe it's because everyone on my team happened to be an immigrant many times, so all of us have moved around the world two or three times. We call ourselves shapeshifters; we just go from Asia to Europe to LATAM to Africa. So, that's also what makes us a unique group and we like to identify people who can adapt to new environments quickly and leverage the best of both worlds, if not multiple worlds. So, business model wise we like to pick companies that have unique play, for example, in India or China, but now they like to take that business model to LATAM time, where the size of the middle class is relatively similar.
VN: You're investing, like you said, around the world and lots of different markets, so how does that affect check size? Because even in the US, writing a check in San Francisco goes a certain distance versus a check in middle America. So, a check in Latin America might be different than a check in the Middle East. So, how does that determine how much you actually put into the companies?
CC: If I’m interpreting your question correctly, for us it's not really an issue, because, typically, as a VC, you get allocation from companies because they like you, because you add value. For us, we never had to really constantly fight for allocation because people see our value add.
If you're asking the sense of like, okay is an early stage check in LATAM versus the U.S. different, sure, there's a lot more VCs in the US, so therefore perhaps you have to have a bigger check to get any allocation. But, right now, we're also affected by the overall macro, which is that a lot of VCs are not deploying. Let's be honest: I went to a conference in LA a few months ago, I met probably 70% of Silicon Valley investors at this conference, and a lot of them are like, “Hey, have you been? We've been vacationing because we haven't deployed since August.” So, behind closed doors you hear these things, and then all the founders who previously did not need to worry about investment are now coming to us. Why? Because they're like, “a lot of our people, we thought they would be backing us now have ghosted us.” Founder stories are everywhere wow when it comes to fundraising problems. So, that also helped us in some ways.
VN: My question was less about the competition and more about, do they need less money in certain markets? Will the dollar, or the amount of money, go further in certain markets, so you don't have to invest as much? That's really what I was asking.
CC: Generally, if you want to run a business, you do need money to get started but, obviously, everything's case by case. There's never, “Oh, in this country it is always big, in this country it's always small.” Things are different. You can still run a pretty sizable business focusing on your market. For example, a lot Europeans think they need to go to the US market but the reality is, if they can build up a great business in Germany, they actually don't need to come to the US. Everyone has a little bit of FOMO, but for a European founder who has no previous advantage to start a business in the US, coming here is actually shooting yourself in the foot. They could probably build a much better business in Germany. So, everything is a little different but I do see that sizable checks have been written for founders in Southeast Asia, founders in parts of Europe, and that previously didn't happen. When I went to Indonesia in 2016 or 2017, there were not that many check writers. Most people were like, “What do you mean, Southeast Asia? Where is that?” There are 300 million people in Indonesia and people are like, “What? Seriously? I thought it's an island country.” There are a lot of emerging market opportunities that people normally don't look at, but now there’s so much money going into that world. In fact, so much money is going to certain parts of the world that there's a bit of a Series B, Series C crunch, meaning they will get plenty of cash in their Series A and then there are no follow-on investors, which actually really hurts the business because they cannot really grow the way they want to. So, that is a real issue that the entire VC industry needs to somehow solve. Otherwise, we're putting a lot of cash into work and then nothing comes out of it. So, that's what I see, but we don’t really participate in markets where the overall TAM is too small, then obviously, we wouldn't write a check. That, unfortunately, is also an issue for some countries, but typically, we play in the larger markets.
VN: What is an average check size for you, in the early and the later stages?
CC: For growth stage and late stage, which is where we started, our largest check is $40 million, so we wrote a $40 million check into ByteDance at a $68 billion valuation and then we sold it at around $400, so that's a pretty good return in one and a half years. For the smaller companies, we try to do anywhere between $500,000 to $1.5 million and we're very selective about the early stage companies we do, but when we do go in we'd like to put in more because the amount of due diligence you do is about the same, so you might as well invest a bigger amount. We also like to really be part of the journey. One thing that's different about us is, even from the first call we have with founders, we try to be helpful. We always say, “no matter whether we invest or not, we want to bring you a couple more customers, at least.” So, if we are participating, if we're looking at building long term relationships, we like to bring the founders in and help them think about who their product can be beneficial to in terms of our LP base, in terms of our network. So, with that said, for us $500,000 to $1.5 million in the earliest stage is usually pretty sizable in this current economic climate.
VN: When you're investing in those early stage companies, what traction do you want to see from them at that point? Are you looking for a minimum amount of ARR or a minimum number of customers? Are there specific numbers that you want to see from those companies at that point?
CC: It differs by sector. For example, deep tech, usually, it's harder to have numbers up front just because they're working on things that are years ahead but we do like to see, who are the pipeline customers? So, we tend to do at least five or six reference call, talking to their investors to understand who their potential buyers are. We also try to understand, with their technology, compared to all the other competitors, what else do you have?
When it comes to vertical SaaS and also fintech players, we do like to see some revenue. And obviously, if they're profitable, even better, but it’s usually hard. So, we look at their EBITDA number, their growth rate, CAC ratio, blah, blah, all the typical investment metrics but, funny enough, I guess I have a rule, I don't know if I can say it, but basically I have "no asshole" rule. Personally, so far, I have honestly stayed away from a lot of bums because I have this role. I was invited to invest in, maybe I shouldn't name names, but the last few blockchain companies that blew up; one starts was a “C,” and one starts with an “F,” and one starts with a “T.” I was invited to invest in all these companies in early stage seed rounds but the founders just didn't pass my test because I got to know them, personally. I was at a dinner with one of them in 2015 and I was just like, “Why is this person so cocky? I get it, a lot of founders are, but we are here to talk business. If I have a value add for you, why not? Free money for you, what’s there to lose? Why can't you just be a nice guy?” Another person just really didn't have any good answer for risk management. I also have a meal with founders if I want to really invest in them so, during that time, we get to know who they are. If something really bugs you, you’ve got to listen to your gut feeling. So, that's what has prevented me from investing in a lot of things that seemed like hype and then later a lot of investors will laugh in my face saying, “oh Cathryn, you were so early on, why didn't you invest? Look at how many multiples we made.” In Chinese we have a saying, “wait till you see who laughs at the end,” and we didn’t even need to wait that long, all it took was two years for me to prove myself right. Sometimes your investment is tough, investment is cutthroat, everyone is like a high roller gambler sometimes and I just feel like just not being that greedy actually helps. So, that's also part of my role. You talked about investment philosophy, maybe it's not a philosophy yet, but I really stayed away from some red flags early on because of that.
Another thing is, I like to see how these people adapt in difficult times. In the last two years, I'm sorry, but some founders think that they deserve all the money, but the overall background, the environment was insane. So, you're not going to get easy cash like that ever again, at least not in your lifetime so, I'm sorry, but the next few years are going to be hard, you're going to have to produce some numbers. Today, I had back to back founder meetings and, I have to say that, the tides are turning, people are finally realizing that a 30x multiple, based on very little ARR, is not going to work and their investors are finally saying, “Hey guys, we want to support you but, please, show some more numbers.” On the other hand, generally, it takes a few years for companies to get a real moat. So, what does the habit forming process look like for founders? I really try to think about what are the toughest problems that a founder is trying to solve? I look for people with really outside of the box thinking. Perhaps it’s that you are willing to go to a market that very few people are willing to go to. For example, we're seeing a lot of investors who previously had success in emerging markets, but now they're retreating because thanks to the China problem, what's going on in Russia, people are like, “the U.S. is the best, we don't want to play in these other markets anymore.” Well, that's perfect for us, because now we have less competition with people who weren’t there for the long term anyway and it's nice to see who are the true supporters for these founders during times of turmoil. This is a time we actually collaborate with funds that have been very consistent in supporting entrepreneurs and we have built a 40 plus global, international VC network that helps us in vetting the deals.
VN: You touched on the "no asshole" rule, and obviously that's served you well. I've heard that from a few other people that you have to have that personal connection with a founder because they’ve compared it to a marriage, in a certain sense, because you're going to be together for 10 years, so you have to like this person. But, obviously, there is more to it than that. You could be like the nicest person…
CC: You have to pass the intelligence test, you have to pass a capability test, for us to look at the second part, the personality test. So, for us, it’s like, “step one, get through the numbers, step two, you have to pass the personality test.”
VN: What experience, let's say, are you looking for from those people? What do you want to see from them in terms of their background? Do you want to see that they actually know this space? I mean, I'm sure that's pretty important; that it's not somebody coming into fintech who has no fintech experience. You want to see that they know this space and have some experience there.
CC: I don't know about that because I have seen people who are the type who say, “hey I used to be a dentist but, today, I'm going to do fintech,” and if they prove to me they can actually do it, then why not? Take an example of the Robin Hood of South Korea, where the guy literally was a dentist before. So, you can't really say that anymore, we cannot say that in this current environment. But what I do want to see is someone who would just really persevere. Coming from similar backgrounds, I love listening to people when they talk about what inspires them, what really makes them want to do this? What's your raison d'etre? You cannot just say, "Oh, I want to make money,” because usually that's not good enough to keep you going. Entrepreneurship is like chewing glass, if you cannot persevere, you will not survive. So, I look for people who have this zest for life, and they show it on a daily basis. They don't just show it to you, as investors, they show that to their employees, they show that to the partners, they show up in their daily life. Usually, people think that after that one hour VC call, we're good. Well, I'm sorry, I'm probably going to do 10 background checks on you, but you don't know, so get used to it, that's life.
I also like people who have a tough background, like if they came from military training. Why? Because It takes a certain type of person to want to do this to themselves. I mean, it's not a great life being an entrepreneur. How many of your entrepreneur friends are overweight, have mental issues? There's a lot of stress related to this job. So, unless you're the type of really tough minded person, it's really hard to persevere to IPO, to an acquisition. I was 24 when I started this company and now I have around 30 to 100 millionaire and billionaire friends. My friends are like, “how did this happen?” and I was like, “I like to hang out with people who are a little bit weird, a little bit special.” Like, they're not your normal guys. So, why is that? I look around my friends and it's because all of them have something to prove, they have a chip on their shoulder, they work extremely hard, they're extremely intelligent, and they're constantly learning. Life is all about learning. So, these people cannot stop, even if they want to; if you drop them off a beach, they will be figuring out how to survive. Similar minded people also like to hang out together, it's just how it is. So, when you put a bunch of really exciting, curious, founders together, you'll see magic does happen.
We also get a lot of referrals from other founders. Like, if someone exited his company for a couple hundred million and he's like, “I'm about to start again.” Guess what? The word’s already out, everyone knows who these people are, and we look for people who have shown basic capability at organizing, building a team, and understanding how to adapt in different environments. But mostly, ethically, they also have to pass the test. That's one thing people are not talking about enough. I joke around about this "no asshole" policy, but really, if you think about what's been going on in the past two years, I went to a drinks session in New York, I'm not going to name which conference, but these high flying financial guys, and I asked this guy, I was like, “Why did you invest in FTX?” Sorry, oops, I mentioned the name. And he was like, “I heard Sam is the person who would cut his mother to make money.” And I was like, “Wait a second, what? That's the reason why you invest in him? What's wrong with you? Why would you say that? You think he can scam other people and he won't scam you? Like, let's be honest.” That's also part of the reason why we like to really get to know our founders as people because, if you're a customer, imagine if that's your mom, what would you do? So, think about whatever products you're building, you would like your family, your closest people, to use it? Are those the type of people you want to work with? So, I generally find that hard to find, actually, in some people, because everyone wants to do something amazing but, if you ask them, “Hey, do you think your family members will use this? What is the use case there? How do you think that benefits the 99% versus the 1%?” it's hard to answer that question. So, I do think, in this current climate, we're going to see more and more people realizing this is actually a big part getting through the tests. How do you get through the ethical test?
VN: You mentioned the last couple of years a few times, and I'd love to hear what you think about valuations and where they are now. Across the board valuations are really down. So, where are companies now versus 2021 or 2020? What does it mean for the companies that raise huge valuations during that time now that it's harder to raise money than it was a couple of years ago?
CC: I feel like this topic, everyone's relatively in consensus with each other. Long story short, a lot of people are going to have a hard time raising money because they raised at such high valuation. Two years ago, if you went to some conference and talked about valuations being too high, some people would look at you like, “stop.” Now, you go to Milken, where I just was in LA, and on stage we're talking about how this is going to be bad for a while.
On the other hand, everything in life goes up and down. I mean, a lot of people look at me and think I'm super young but I actually started in 2009 and I remember those days when I was working for a global bank and one of my colleagues just walked in the door and his ID card didn't work and that's when he knew he got fired. So, we've gone through a couple crises already and, for me, this is just part of the cycle. Sometimes you have to take a longer term horizon to figure out how things are going to go. In the last few years, the reason why I keep saying that is because money came too easy for a lot of people. You see younger folks who maybe, I'm going to offend some people by saying that, but the money was just, like, boom, zero to a billion, right away. I don't think that's healthy because you don't deserve that, let's be honest, because anything great takes time. I'm not saying that there's no real innovation, of course there are real innovations being built in blockchain and AI. Some people might say what's happening right now in the AI revolution is even bigger than the internet. However, a lot of these short term booms and busts are happening way more often than, let's say, in 2015. We see Silicon Valley being constantly like this. I moved there in 2014 and I remember the energy, everyone wanted to do a startup, and then you see the cooldown period. And then from that point on you'll see new people coming in building new companies and then last year was like, “Oh, we have amazing validation, everybody's going to grow 150%," and I was just like, “where are we going with this?” So, I'm actually really glad people are realizing this is not the case anymore so let's just focus on doing what we need to do, let’s actually look at the bottom line and get back to more reasonable, rational investing.
Because of that, we launched Radiate Ventures because what we do is actually a lot of secondaries, where companies will actually do well, fundamentally, but they still need the money to continue. However, they're experiencing a harder time continuing because of that. And on top of that, employees, founders, are having a harder time supporting themselves, so this is a time for us to come in and inject liquidity in this relatively illiquid market. You heard about SVB, and the reason why they went bust is because a lot of the lending and what's happening with their loan program. So, that creates a huge opportunity for VCs who potentially do venture debt. Some would argue that the entire ecosystem is going to change fundamentally. Now, all the large players are out, so who's going to fill those shoes and do proper vetting of these companies who actually deserve venture debt versus not? I'm curious what was going to happen in that space.
VN: Companies raised at a huge valuation now they have to prove they have to go raise their next round, they have to prove that they're worthy of that valuation. I'm assuming most of them will not be able to do that, because they were overvalued. Do you see them taking down rounds as a result of that? Is that something that you're seeing happening or do you think that's going to happen?
CC: It's going to happen. It's not happening that much yet because everyone got a lot of money the last few years, so you can probably keep going for a while. If we put ourselves in the founders shoes, you would do the exact same thing because you don't want to take a down round unless you have to. So, the top players are going to emerge triumphantly, and be like, “Yo, guys, we did it right, no matter what we still hit our targets, we overperformed, therefore give us the valuation we want.” Then there's going to be 30% of people who totally miss the mark, and will be like, “Okay, guys, I'm willing to take a down round,” like Stripe, not to mention anyone specific, but that's already happened. So, the overall ecosystem is going to see some of that, you're going to have people who make it and people who don't and that's just a natural course of things.
VN: You talked early in the conversation about some of your differentiation here. So, when you go to LPs who have the opportunity to fund many different funds, what's your pitch? How do you convince them that you're the right partner for them?
CC: It comes down to just track record, that's the same with every VC. For us, we have spent more years doing cross border so, many people, when they think of me, they think about someone who's constantly between different airports. People ask me, “where do you live?” and I'm like, “That is a hard question. Terminal 3, international airport, that's basically it.” So, when you talk to my founders and people who can do our reference calls, they will also mention, “Cathryn is the one who will jump on a plane after meeting us and, in two weeks, she introduced us to the top families in Asia, the top families in the Middle East, these guys in Germany that could help us.” That's, honestly, our strategy from day one. We like to build a global village, that's what I call it. People used to feel so far apart; I remember when we were kids you're thinking, “Oh my God, it's so far to go to Africa,” but now, with modern technology, you're a WhatsApp away, so how do you connect people like magic? That's part of it. I remember when, at some point, people were really obsessed with this game of who you are. Like, are you a connector? It's like a personality test. And I was very clear, very early on, I knew that I was a connector. It was very obvious. I grew up on three different continents, and my parents thought I was insane because I finished UCLA in two years and I ended up doing a year abroad thing in London, and then in Shanghai, so I did three universities in four years. And, my mom's like, “Honey, can you just graduate so we don't have to pay anymore?” and I was like, “Well, Mom, I want to develop a global business, I want to live a life like meeting all these cool people.” When I was 16 I already planned out how I was going to do this. So, naturally, I went to three schools, three different continents, and met amazing people from everywhere. My college, the University of London School of Economics, had people from 110 different nations, so just based on that number, you can see who the people you're meeting are. So, with that, we can communicate and also connect people easier. So, instead of wasting two years to do your enterprise sales process, imagine every single person you have to go to, the line goes on and on, because I also did an enterprise sales job before in my life and I just thought that was so inefficient. What if we just go to the lead? What if you just go to the CEO and figure out the other way around? So, that's the value we provide in terms of getting the right people in the door so that they can do this more efficiently.
VN: Is it the same value to bring to the entrepreneurs? Because obviously the best entrepreneurs have a lot of different options for who they can get money from. I feel like there used to be this view of entrepreneurs begging venture capitalists for money…
CC: Now it’s the other way around. They’d say, “Cathryn is actually a professional beggar because she's in it for sweat equity, She just works for entrepreneurs.” So, now it's the other way around. I mean, at least for the great companies, obviously.
VN: Talk about some of those companies, maybe two or three of them, that you've invested in. What was it about those companies, when you first met the founders, or heard their pitch, that made you want to invest in them?
CC: When I first got started in this business, I realized that it's very hard for you to really stand out. The top guys already have the top VC crouching over them, so I tend to pick the underdog. I remember I was at a semiconductor conference, everyone was suited up, 56 years old, male, that's your typical semiconductor conference. There was one guy who wa like a professor hype, a little bit more academic, and he was alone in a corner by himself. I just walked up to him and struck up a conversation. Turns out, he was CEO of this company that focused on chip design and they had Google and Samsung, all these guys, as customers. I was like, “wow, this is amazing. This is exactly what I was looking for.” But, at the time, unfortunately, he just couldn't drum up that much interest amongst all the top VCs because he's not the most eloquent person, let's put it that way. He’s a very, very smart guy, don't get me wrong. So, for those people, I see myself as a supplement; I can help them talk to all these people and do the work that they may not, honestly, enjoy doing. So, let me let me do that part and when they think about international expansion, when they think about where to play geographically, that's another area I'm more specialized in because I see myself almost like an advisor or statesman, like in the olden days, where you advised kings and queens. They always need that person, not because they don't know the answer, but because they just want an extra pair of eyes, an extra pair of ears to listen. So, I'm happy to play that role. Because of that, I develop a very close relationship with the founders and I'm available for. If it's 11 pm, call me, I want to help you, I want to be that helpful hand.
The second thing is just I look for people who really have a grand ambition, they want to do something. People think they're the crazy ones, like, “why would you do that? It’s fine the way it is, why do you have to go that length?” My first LP, he met me in Vancouver, then in a train station in Beijing, and then he met me in Israel; the last time we finally signed the sheet we were in California. He made me literally go, as we say, up the mountains and down in the sea, just to get it done. So, this is a type of thing we are looking for too, someone who is willing to go high and far in order to get something done. So, I invested in that company, and eventually they exited for multi-billion dollars but, initially, nobody wanted to deal with them.
On the earlier stage side, it's a totally different game; at an earlier stage, they may not have customers and they may not have as much product to show. It’s more about the vision and what unique customer relationships they may have. So, we like to back founders even though there's nothing really concrete, but I can see a game plan already. It's like someone who is a game master; like when you play a board game and those people who, even before the game begins, they're already got everything in their mind, that’s them. I like to find this game masters and when you talk to them, the passion, the vigor they bring to the table. So, the founders have a very clear picture about how he or she would like to execute. So, I also look for people who basically have some level of just vision, vision is also important. As you can tell, I’m very international focused, so I don't expect the founder to go beyond so many countries right away but, at some point, like in a five year timeline, you’ve got to tell me, where are you going to go next? How can you grow a multi-billion dollar business? They call them decacorns, and we want to be investing in decacorns, so please tell us, where are you going to go from here? That's also part of the getting to know each other process, knowing how these people think and how they execute, because, down the road, just having a great idea is not enough. Just knowing how to execute is also not enough, you have to have both.
VN: Talk about some of the lessons that you've learned as a VC. Based on your background, it sounds like you made the transition from being in banking and startups to being an investor. So, along that way of making that transition, what are some of the things that you've learned?
CC: The way to invest is actually just learning how to not make the same mistakes over again. As an entrepreneur, hiring the right people, this is almost cliche, but it honestly changes your life. So, I was advised by some VCs, not to blame them, but they always want to see you grow, grow, grow, grow, and therefore they want to see you making decisions right away. Sometimes, in certain environments, you're just not going to make the right decisions in terms of hiring, because you go too fast. You have to spend time getting to know people to make sure you pick the right people to support you, to grow your organization. Otherwise, there's so many reasons why this person can be a detractor for your business and that, actually, takes you back years. That is really the biggest lesson I've learned. You have to find people who are willing to go the length, you have to find people who don't have excuses for themselves. I don't know how to say it in a politically correct way but sometimes you find a lot of people who come from very good backgrounds, always smooth sailing the whole way, until one point, then they're really bad at dealing with failure. Those people find it hard to pick themselves up and then do the over again. There are many successful cases as well, but what I've noticed from my own experience is that there are times I'm like, “How can this possibly happen? I thought I got it all, I have this and that,” but it does take some level of, “don't worry about it, everyone has made mistakes.” There are people who are willing to back you again, however, I learned not to make this mistake again. So, those are the ways that you can really learn to be a better leader.
For me, the constant growing pain is actually managing people. I really had to come to this knowing self realization that this is a part of the job that I was not born into naturally. I wish everybody had a mid tier, or maybe corporate, job before they become founders but sometimes that's not how it works. You're put into an environment where you need to learn how to communicate with everyone. It's almost like a marriage: I don't know if you heard of this book called Non-Violent Communication; it was originally written to be helpful in your personal relationships but, funnily enough, it's becoming a Bible among founders, because you realize handling some people is like handling your spouse. Can you solve the problem without getting mad? Can you get to the bottom without getting both people so riled up? So, that itself is like a must learn as a founder, as a VC, to identify those people who are talented but also not egotistical, or think too highly of themselves to not learn and improve based on who they are because everybody’s got something to learn. Everybody's got something to improve. So, I just really believe in that and I find people who are humble, who are down to earth, to be the best founders.
VN: What's the part of the job that you really love the most? When you're going to work every day as a venture capitalist, what really motivates you?
CC: Really, it's the people. The founders you meet, people who are just downright inspirational. I mean, life is hard, especially when you see our world is becoming more and more violent, so much negative news in the public domain and politicians, I'm not even going to go into that, but it's depressing news all around. You need that little bit of light and just feel like the world is still a beautiful place, we're so lucky to be on Earth and it's the people who, no matter what, they persevere. Again, it's about perseverance and antifragility, that's the book I constantly reference. How can you find inspiration in these people that they come up with, become this constant effect amongst everyone else and inspire others to be great. Inspire yourself to say, “I can be great as well.” So, that's why I love my job, and always meeting people like that. And hopefully keep myself in check as well. Always stay humble, stay true to yourself.
VN: Is there anything else you think I should know about you or the firm or the space that you invest in? Or anything you want people to get from this when they read it?
CC: I do like to work with people who find this whole global geopolitical situation interesting. Those people who have earned their place because they've worked hard, but now they want to leverage what they've learned, and then put that into developing markets, put that into countries where there's something going on, and they still want to help. I like to help people with that extra ambition. Besides the financial success that brings, can we do something to help certain parts of the world that's constantly unstable to become more of a peaceful environment? That's what I really like to do and hopefully will meet a lot of people who have the same mission or ambition to do so.
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