Dr. Finian Tan is a Singapore based venture capitalist. He is the founder and Chairman of a renowned international venture capital firm, Vickers Venture Partner. The company has its presence in Singapore, New York, Shanghai, San Diego, Hong Kong, Kuala Lumpur, and San Francisco.
Dr. Tan has played major roles in many of Vicker’s portfolio companies. Before he joined Vicker Venture Partner, he was Managing Director and head of CSFB (Credit Suisse First Boston) group of banks in Malaysia and Singapore. Prior to working with CSFB, Dr. Tan has also served as Managing Director of Draper Fisher Jurvetson Eplanet, a Silicon Valley venture capital firm. He was in charge of their Asia Pacific operations. During his tenure he discovered Baidu which was a small startup with no revenue and just one customer, however, he led all investment rounds into Baidu, and remained its biggest backer until IPO.
During his early career stage, Dr. Tan has also worked with Goldman Sachs for a period of three years, as a Vice President at J.Aron and Co. (Singapore) and then moved on to become Regional Director and Head of the company. He has also served Singapore Government as the Deputy Director of the Ministry of Trade and Industry.
Dr. Finian Tan obtained his Doctorate degree from Cambridge University. He received the Shell Scholarship and was the first Singaporean to receive the award. He has also been the President of the Cambridge University Singapore and Malayan Society and also represented the university in Squash. Dr. Tan received his B.SC degree in engineering from the University of Glasgow.
Read on to know more about Dr. Finian Tan’s journey so far as a venture capitalist, his investment strategies and philosophy.
What background and domain expertise do you have? What makes you turn into an investor?
Dr. Finian Tan: When I returned to Singapore after getting my PhD in Engineering from Cambridge University and doing a stint as the assistant director of research at the engineering department, I pursued a career in oil trading with Shell in Singapore and Japan (as chief trader) and later as head of J Aron at Goldman Sachs in Singapore. In 1997, I was asked to join the Singaporean government as Deputy Secretary in the Ministry of Trade and Industry. It was as an “eye-opener” for me and a first for the country – to take in somebody at that level from the private sector.
Part of my role was to help make Singapore into a Silicon Valley for the east. I made 3 recommendations. A $1B fund to jump start the VC industry, to build a science hub and form an inter ministry committee to change rules and regulations to allow startups to thrive. The cabinet approved all three strategies and made me the chairman of them. That started my life in VC.
I fell in love with VC. Venture capital is a combination of tech and finance, and so it was perfect for me since I was finance trained at Goldman and Tech trainee in Cambridge. The Govt gave me the macro view that is well suited for developing a long term vision – essential for investing in startups trying to change the world.
Right after being an investor like in early days, there must be some tough times in building up a first fund along with building up a second fund or giving back the good returns to those LPs, If there is any similar tough time like this, please tell me more about it and how you (or your team) overcome the difficult times.
Dr. Finian Tan: After finishing my term with the government, I became a founding partner for Asia at a famous Silicon Valley firm Draper Fisher Jurvetson ePlanet. My first investment was 7.5 million dollars for the young start-up Baidu in China. 5 years later, it debut on the Nasdaq as the best performing IPO in Nasdaq’s history till today.
We owned 28.1 percent of the search engine at the time of the stock market launch, more than Baidu co-founder and CEO Robin Li with 25.8 percent. Today, Baidu has more than 300 million users and is worth around 40 billion dollars. Eric Xu, co-founder of Baidu said that “Without My decision to invest in Baidu and support the company, it would not have been this successful.”
Inspired by Baidu’s success and that of the entire Asian portfolio, I started my own firm, Vickers venture partners, with a small fund 1 of only $9m. It was hard to get traction initially cause people invest in known names and we were a startup ourselves. But as we performed, we grew and today we have $3bn under management, with a Preqin rank of 7th most consistent in the world and with our fund 4, the best performing fund of its vintage globally. The main reason of our success has been the ability to attract really good people to join us. In particular my partner Dr Khalil Binebine who is an alter ego to me as we complement each other so well. I am very left brain and scientific whereas he is very right Brian and a total people person. The other partners compliment us other ways so we make a complete team to do what we are focused on doing.
As an investor, what kind of startups have you invested in? How did you find those startups to invest in?
Dr. Finian Tan: We look at risks in 3 ways – Tech (does it work?), IP (does it own it? Can it protect it?) Market (will people buy it?). We don’t take all 3 risks. We try to just take just 1 risk and prefer it to be in tech rather than the market because we can’t guess whether people will buy. However as we are very technically trained (we have 8 Doctors or doctorates in different verticals), we are pretty good at assessing whether a tech will work. In addition, the risk cannot be more than a third in our assessment and at least 10 times underpriced. And so our result is less than a third of our portfolio are failures and our homerun pool delivers an average of 16x.
At first we had to work hard to get the deal flow as we weren’t very known yet, but today it has become easier as we climb up the ranks. Deals come to us cause we are one of the oldest and largest VCs in our region. This is what VCs call the ‘halo’ effect. Where VCs who perform climb the ranks and attracts the best deals which in turn keep them performing well for a Long time. Hence only in venture do u get VCs remaining in the top quartile for over 5 decades.
What would be the core factors that you decide “Not” to invest in certain companies?
Dr. Finian Tan: We consider ourselves as deep-tech investors and invest in macro technologies that have exponential growth potential that are undisputed such as AI, nano-technology, regenerative medicine etc rather than linear growth potential (such as lithium battery technology, for example). We also invest in geographical trends such as the growth of Asian demand. We try not be distracted by ‘noise’ meaning companies that don’t meet the above criteria.
A good example of a recent deal is RWDC, a biodegradable plastics alternative based in Singapore and Georgia USA that matches all the 3 criteria – market is known and demand is almost unlimited, strong IP lead and little risk in technology. We are very excited about this company and believe that it will one day become one of the largest companies in Singapore and in this space, if not the largest.
What would be the KPI that you usually check about the startups’ growth? It may diverse in each industries like LTV, CAC, MoM etc. but would be helpful to understand more about your additional investment factors.
Dr. Finian Tan: We prefer to invest with the current rather than against it. So we always pick sunrise industries rather than sunset. There are several undisputed mega trends we mentioned above and we prefer to invest with these trends. KPIs are milestones that prove the hypothesis. For example if it’s a technology bet, then we will look at KPIs that show that tech milestones are being met. If it’s a demand bet then we would like to see that growth in demand milestones are showing growth by leaps and bounds.
What is the investment range and In a typical year, how many startups do you invest in? And overseas headquartered startups have a chance to get investment from you or should be headquartered in certain countries?
Dr. Finian Tan: We see about 6000 deals per year and invest in 10-15. We have a team to filter this deal flow and most of the deals we receive is via our network. We have seven offices globally, as we believe that technology is global and thus have offices all over the world: Singapore, Silicon Valley, Shanghai, London, New York, Hong-Kong and Kuala Lumpur. Our typical investment size is $10m upon first investment and for those that track the expected progress we may follow on up to our limit of 20pct of the $500m fund, so it would be a max of $100 m per deal. We do also bring co-investors alongside our funds, so we could organize more than 100m into one company as we have done with our largest investee Samumed based in San Diego California. My partner Dr Khalil Binebine is based there and has helped the company raise over $700m so far.
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?
Dr. Finian Tan: Failure is an integral part of the VC investment process and although our failure rate is about half (28%) of industry average, we are still trying to reduce it further. However as we can only lose 1X on a company that fails and we can receive 16x return from a homerun investment, it is really the size of the Homerun pool that makes the real difference in performance. We used to have an average of 30pct homeruns but have slowly been increasing this which is very encouraging. Our target is to have 50pct homeruns in our funds going forward.
There is no one common factor for startups to fail. Russian author Lev Tolstoy posited a similar analogy in his novel Anna Karenina: “Happy families are all alike; every unhappy family is unhappy in its own way.”
What’s your advice to entrepreneurs who have a chance to meet investors like you? What are the top 3 questions that you always ask to founders?
Dr. Finian Tan: When an entrepreneur meets the ic members, it means that he/she has already passed all our filters and his/her start-up meets all the criteria I mentioned earlier: technology with strong IP ownership, a known market, and a growth potential of at least 10X.
There is no standard set of questions that I ask entrepreneurs since every biz is different, but basically the intent is to get to know the unique value proposition and how it can change the world. It sometimes take a bit of time for us to get comfortable with the idea, but spending time before spending money is important for us. We invite the companies to our homes, sometimes over several days so that both parties get to know each other well which is helpful cause the partnership is intended to last a Long time after.
What’s your general thought about the term “Global” and What are the important factors (criteria) for local startups to consider for an international expansion?
Dr. Finian Tan: Some companies can scale globally but not all companies need to be global to succeed. For example, one of our spore companies is called MatchMove – an operating system for e-wallets, is already the number one third party Operating System in India and is now focused on Indonesia and other developing countries. We expect to IPO this company as a unicorn in a few years. On the other hand, KPIsoft, a Malaysian company we invested in is now headquartered in the states and have customers in America, the middle east, south east Asia and beyond.
The key is to scale to wherever there is demand for the product and to be big enough to command interest from large investors in an IPO. The magic size is to aim to be a unicorn.
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?
Dr. Finian Tan: When people ask me how I’ve been, I group my answers into 3, the first being the health of all my loved ones, the second is my relationship with them and the third is work – which includes both Vickers and the foundation that My Wife Fiona and I started last year.
Work wise things are going very well. Beyond what I had envisaged for this stage of our company development. We are especially excited about the world changing companies that we have in our portfolio and are negotiating to include shortly.
Samumed is one such company based in San Diego mentioned above that will truly revolutionise the world of restorative medicine. SiSaf is a drug delivery company based in London that we believe will improve the efficacy and toxicity of many drugs and therapies for all of us. Simo wireless based in Shenzhen is expected to change the world of wireless connectivity for all mobile phones and connected devices. And Agile PQ, based in Utah will make security of IoT devices cheaper and yet more secure than anything we have seen before.
What are the one or two things that you would do differently if you could go back to 10 years ago?
Dr. Finian Tan: It’s hard to do that because if we really could go back to the past and improve things then it may not just impact that particular event but change many other things that have happened that have resulted in much success. So my mantra is not to fret about things that are water under the bridge (meaning in the past) or things that we can’t change, but to look to the future and to always improve through lessons learnt. From success and failures.
When you travel internationally, what kind of entrepreneurs and startups (or industries) you want to meet?
Dr. Finian Tan: I enjoy meeting visionaries that are aiming to impact the world in good ways and we are fortunate that quite a few of them have chosen to become partners with us. We are terribly excited about the 2020s for we expect to see many of the visions come to reality in the next 10 years.
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