As a seasoned internet entrepreneur, Mr. Adrian Li has contributed to co-founding and operating six internet ventures that included media, eCommerce, market place, and product-based business in emerging markets of Indonesia and China. Presently he is the founder and managing partner of Convergence Ventures.
Convergence Ventures was started by Mr. Adrian in late 2014 and is an early-stage venture fund with a focus on Indonesian startups. With a portfolio of more than 30 business, the company has built a platform to bring together network, experience, and capital to help empower entrepreneurs to thrive. Mr. Adrian is a business mentor at several start-up accelerators and incubator programs including GEPI, Incyte, Ideabox, Endeavor, Founder Institute, and Sky Star Ventures.
Mr. Adrian Li started his first company while he was at Stanford in the year 2005, which was an online education business. After that, he had moved to China to build his business further. He ran the company for 5 years before it was acquired and then moved on to work with Rocket Internet. With Rocket Internet he started two online ventures in eCommerce and travel spaces before he helped co-founded Qraved, an Indonesian food directory.
Mr. Adrian has been working on internet-based business ideas while he was pursuing a degree in economics at the University of Cambridge. He has done an MBA from Stanford. Mr. Adrian is a great athlete and has completed a number of marathons in London, New York, Beijing, and Tokyo. Besides that, he has participated in triathlons comprising a full Ironman.
Read on to know more about Adrian Li ideas and philosophies, the startups he wants to back, and a lots more.
What background and domain expertise do you have? What makes you turn into an investor?
Adrian Li: I graduated from Cambridge with a degree in Economics and started my career in Investment Banking at JPMorgan. However, my long term passion and interest were in entrepreneurship and technology. After a few years in banking, I applied for business school and completed my MBA at Stanford where I started my first company – an education technology business – in 2006. The company was successfully acquired in 2010 and shortly after I left to join a startup incubator, Rocket Internet, where I built 2 companies one in China and one in Indonesia. Hence, my background for the past 20 years has combined entrepreneurship, company building with a foundation in finance and investment banking which is what provided me with a strong platform to become a venture capitalist in an emerging market.
As an investor, what kind of startups have you invested in? How did you find those startups to invest in?
Adrian Li: Convergence Ventures is a sector agnostic venture fund based in Indonesia, which signifies that we invest in start-ups that operate in various industries. We are an Indonesia-focused fund that invests in Indonesia and Southeast Asian companies that have the potential to win their market in Indonesia. We choose to stay Indonesia-focused as we believe we can deliver stronger capital, support and network leverage through a single market execution strategy.
In terms of the sectors that we find the most interesting for Southeast Asia, we base our thesis on long-term trends and proven models. The trends indicate that there is a proliferation of Southeast Asians that transact, bank and consume content online. Through these higher-level key trends, we find opportunities for vertical eCommerce providing category-specific items, logistics to support the growth of eCommerce, FinTech to give access to financial services and healthcare to improve access to quality medical services. We also look at China and India as proxies to assess the type of business models that would succeed in an emerging Southeast Asia and Indonesia.
Additionally, we find that the best way to source deals is via referral from our co-investors or our existing network of entrepreneurs. We also source through events and cold emails although we find that referrals from our networks are more effective.
What would be the core factors that you decide “Not” to invest in certain companies?
Adrian Li: Convergence Ventures is an entrepreneur-first venture capital fund, indicating that we place heavyweight on the team’s ability to execute. Oftentimes, we have turned down investments because we believed that the team lacked the founder-market fit, expertise, frugality, and grit to grow the company to a profitable and sustainable business. Our perspective is that business plans and models can change but much of the success of a company lies in the team’s ability to stay flexible, data-driven and focused on the big vision.
We also find that many times, we turn down investments due to market readiness and timing. Some ideas are fantastic and have a very strong message and impact, however social and economic triggers can suggest that the market is not ready for it. Additionally, we also analyze a company’s traction as it adds more color about the company’s market validation and adoption.
What would be the KPI that you usually check about the startups’ growth? It may diverse in each industry like LTV, CAC, MoM, etc. but would be helpful to understand more about your additional investment factors.
Adrian Li: KPIs and metrics depend on the company, it’s offering, its business model and the sector it operates in. However, many start-ups make the mistake of focusing on vanity metrics, instead of actionable metrics. If start-ups do not measure the right data, they will not understand the true health of their business.
What VCs want to understand more about a company through numbers is what is working and what is not. We can then correlate that to engagement, adoption, retention, and stickiness, sustainable and profitable growth. This often translates to the number of active users, number of recurring users and new users, churn rate, transaction and revenue growth, costs per user, burn rate and more. Again, the most constructive metrics will vary for different companies so it’s important for a start-up to choose their north star metrics wisely.
What is the investment range and In a typical year, how many startups do you invest in? And Do S.Korea headquartered startups have a chance to get investment from you or should be headquartered in certain countries?
Adrian Li: At Convergence, our ticket sizes are US$100K to US$500K for the first check, with the opportunity to receive follow-on checks up to US$5M. Our target is to invest in 10 companies per year over the course of our fund. We have companies headquartered around Asia. Our mandate is that as long as the company has the intention and potential to expand to and win the Indonesia markets, we are happy to consider an investment into them.
Can you list one company that you have passed (rejected) investment before but think you should have invested in that company. If there is any, why do you think you have missed that investment opportunity?
Adrian Li: Convergence VC is an Indonesia focused fund that invests regionally in companies that are looking to expand to Indonesia. Very often, we have passed on investments that did not view Indonesia as a primary future target market or had business models that would not work in Indonesia. Unfortunately, we cannot disclose the companies that we have engaged with.
What are the main factors that startups fail as per your experience after getting investment and how can they prevent mistakes in advance from your personal perspective?
Adrian Li: There are several factors that lead to start-up failing. CB insights did an analysis on the top 20 reasons start-ups fail, stating that 42% of start-ups fail due to lack of market need (based on an analysis of 101 start-up post mortems). Market timing and readiness are essential to the success of a tech company, as you could be ahead by a few years and customers are not ready for your solution at that stage. We find that this is often the case for start-ups in SEA. In this scenario, companies need to be able to sustain their cash flow if they choose to wait for the right timing, but a lack of capital support would often prevent them from doing so.
From our experience, we also find that the inability to pivot leads to a start-up’s failure. Pivoting needs to be validated through new business models, tested hypothesis, and measured results. The team’s ability to adapt to new changes and adopt big-picture thinking will determine the success of a pivot. A team that’s not dynamic and cannot persevere despite business challenges will ultimately result in failure.
What’s your advice to entrepreneurs who have a chance to meet investors like you? and What are the top 3 questions that you always ask the founders?
Adrian Li: There are some key things that we always want to learn about a company during our first meeting. As we are early-stage investors, one of the most important drivers of our investment decisions is the team especially as many of the business models we assess have more “execution risk” than market or innovation risk. Hence we ask questions about the team’s background, expertise and dynamics as this help us understand their track record and ability in executing. Founder CEOs have to demonstrate vision and a strong ability to attract and retain the very best talent. They also have to demonstrate passion and strong purpose for why they are attempting to build a business in the industry they are in. Early stage companies may not have their product or business model completely refined. Thus, we look for attributes in the team that will give us an indication that they can figure and scale their businesses and use data and information to power their learning and iterations.
What’s your general thought about the term “Global” and What are the important factors (criteria) for Korean startups to consider for international expansion?
Adrian Li: While it’s important for a company to have a global mindset and look up to peers and equivalents in other countries for ideas and strategies, the word that resonates with us more is “Glocal”. This means that a company must have an open and global perspective, but be able to execute locally. Oftentimes, the approach that works best in a high-context culture like Southeast Asia is a hyper-localization strategy. In many instances, the companies that succeed in the region are the ones with the most local knowledge, adapting to local tastes, cultures, and trends. For Korean start-ups to expand internationally, it is imperative to develop a strong local understanding and network in the region.
As you know, our company name is “beSUCCESS”, what’s your definition of the term “success” as an investor or as an individual human being?
Adrian Li: For Convergence Ventures “success” is working with talented and high potential entrepreneurs and empowering them with our experience, network, and capital to fulfill that potential. There is not a defined “end” goal for success but rather a journey in which we strive to be a trusted and valuable partner in helping founders build their businesses. In other words, success to us is delivering value every day to our founders and stakeholders and through that, we will also ultimately achieve the goal of creating value for all stakeholders in society.
What are the one or two things that you would do differently if you could go back to 10 years ago?
Adrian Li: 10 years ago I was in the midst of growing my education startup in China and after raising venture capital we decided to expand our service scope rapidly. In hindsight this was premature and a distraction to focusing on our product and service. We would have been better served in focusing on our core English training product and continuing to refine and expand. This is one of the pitfalls of raising venture capital which can enable embarking on growth strategies that one may otherwise not be able to pursue.
When you have a chance to come to Korea next time, what kind of Korean entrepreneurs and startups you want to meet?
Adrian Li: What we look for in Convergence Ventures are entrepreneurs that demonstrate a strong founder-market fit with product expertise as well as business models that could succeed in Indonesia and Southeast Asia. We look for individuals that have a strong passion, interest, and vision for what they are building, with the ability to stay focused on growth.
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