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- [00:00]
A
And I thought, you know, it doesn't matter what happens, like a couple of years into the future, if things don't work out, you can always come to go back to Europe and, you know, Europe will be here. Then the Crisis hit in 2000 and Europe was not really there. And then I discovered like, the opportunity here. And it was, it was amazing. That was early stages of the startup community where it was so easy to get access to people. It was so easy to get connected with people.
- [00:30]
B
Welcome to the Investor, a podcast where I, Joel Palo Thinkle, your host, dives deep into the minds of the world's most influential institutional investors. In each episode, we sit down with an investor to hear about their journeys and how global markets are driving capital allocation. So join us on this journey as we explore these insights. We'll go live. We'll. It takes a second for it to push to YouTube, but once it does, then we should be okay to go. I think we are live actually, because I see it here. So yeah, it looks like we're live here. So, you know, everybody, you know, there's other people that are streaming on YouTube, but it's 7:30am in New York City. It's, it's what time over there? 8:30.
- [01:16]
A
It's 7:30pm in Shanghai.
- [01:19]
B
So we're exactly 12 hours different. It's just I'm drinking a coffee and you're drinking what? A beer?
- [01:25]
A
I'm grabbing a beer. Yeah, we have craft beer in the office. So it's happy hour time. Happy hour. People move somewhere else. Yeah, some they continue work. Some of them going to have their lives exercise, always very important. And I'm here very, very happy to be able to connect with all of you guys.
- [01:44]
B
Yeah. And the good thing is, you know, I'm a morning person, so, you know, I think we're both energetic here. But, you know, you're with sosv. We're actually, you know, you and I are looking at a deal together that I'm excited about. So before we get, you know, deeper into, you know, the portfolio companies you guys are looking at and your structure, you know, I'd love to learn a little more about you, you know, where you grew up, where you studied, and how you ended up in, you know, sosv.
- [02:12]
A
Yeah, I'm Spanish. I was born in Madrid, raised in Barcelona. I spent a third of my life in, in Barcelona. Then I moved back to Madrid. We spent another third of my life and then the last third, I actually spent it in Shanghai. So it's been 13 years for me Already in Shanghai. There's also a couple of years that I live in other parts of the world. But I spent most of my initial years of my life in Spain. I went to school and then eventually once I started, then I worked there, always in a relatively international environment, in R and D for multinationals. And then in one of my roles where I was working in Telefonica, in the R and D department, I had the opportunity to start working on something called business model innovation. So we had a bunch of engineers working on something that was pretty cool, like new, new radio frequency technologies that could potentially enable new products. That itself was like, hey, it's not just about the technology, it's actually about what you build. So that moved me closer to the user and made me think, well, it doesn't matter if you can build it if nobody wants it. But what really popped my mind was when we had to think about, yeah, you know, as an operator, we need to think about everything that will potentially be profitable. So that was in the early 2000, 2001, I think, or 2000. So we had this bunch of engineers that already had like, oh, fuck, it's not about the technology only. We need to think about the business. And I thought it was interesting enough. So I started to look into this idea of business model and nobody was really working on that. I didn't find anything that was interesting until I found like a PhD student that was working on trying to identify the different elements of a business model. And I found that explanation super clear, super interesting. That was Alex Osterwolder. That was, I think at that time the business model campus concept didn't exist. So that was, that opened my mind and from there I jumped from multinationals to startups and well, the whole thing didn't never stop. So you work in startup, then you want to build your own startup, move to China to find the opportunity and work in a market where there were a lot of options.
- [04:44]
B
Why'd you move to China out of all the other countries? What, what, you know, triggered your decision to move there specifically?
- [04:50]
A
So this is this, this kind of like very dangerous family dinners where, where you're talking about everything. It was, it was like a Christmas 2007. And so in my family, I'm kind of like a, like a black sheep. No, everybody in my family studied like humanities or law, psychology, and they all, they're basically, almost all of them are public servants. They believe a lot in public service. So it is, it is great. But, but I'm kind of like on the opposite side So I studied engineering and I wanted always to play more on the innovation side.
- [05:25]
B
Sure.
- [05:26]
A
So I was having that dinner, dinner with, with my uncle and my uncle is, is kind of like very, very important person in terms of influencing me. So he's an engineer and he's an entrepreneur himself.
- [05:37]
B
He was also a black sheep as well. Out of the family.
- [05:40]
A
Well, in his family is different things. So he's my father's sister, husband, so we're related, but it's not like blood relation.
- [05:51]
B
So his family is more of an entrepreneurial family versus your family that's a little more conservative.
- [05:56]
A
Yeah, yeah. And basically he said, you know, I was talking about moving to the US and he said, well, if I were your age, I'll move to China. And he never came to China ever in his life. He just thought, you know, that's interesting. One week after that dinner, me and back in the day, my girlfriend, we decided to make the move. And it took us like a month to basically wrap up everything and move to China to build something. We don't know what, we don't know anything about it. But that was what propelled the change.
- [06:30]
B
And well, where you moved, were they, you know, the region where you moved to in China, did they speak English or did you have to, you know, actually learn the language?
- [06:40]
A
So I moved to Shanghai, which probably is one of the cities where English is more accessible. But I can tell you that the level of English that is spoken right now is not the same. So I moved here before the Olympics, which kind of like change and, and improve the overall level of English across the country. And then the expo in 2010 also changed in Shanghai. So basically I had to learn a lot of Chinese to be able to get by. I am actually a lot of my Chinese was learned back in the day. I also like to be able to be self sufficient and do things on my own. So Chinese a difficult language to master, but it's actually not that difficult to be able to get by because grammar is very simple and there's a lot of words that are kind of like generic enough that you can use for a lot of practice.
- [07:32]
B
Mandarin pretty much.
- [07:33]
A
I don't speak fluent Mandarin, but I can basically get by and do whatever I want. So my first, I love food. So my first motivation to learn to read was to be able to go to restaurants that didn't have English menus. So I could. So I knew, I knew the character for, for a chicken. But then are you eating like chicken legs, chicken wings, chicken what? Like, because China has a very rich Cuisine where they eat everything. So you might end up having like a very weird type of fish. It's chicken. But you don't want to know what is a part.
- [08:02]
B
Yeah, sure.
- [08:04]
A
So. So that was kind of like what, what made made me doing that. And now like for your life is way easier. If you can use Chinese apps, your life is much better. So.
- [08:13]
B
So can you read Mandarin as well?
- [08:16]
A
Yeah, I can read, I can type, I can participate in. My kids, so my kids go to local schools so I can participate in the meetings, which is what probably my latest achievement and what I feel the most proud of. I can go to the parent teacher meetings and be able to participate and understand 80% of what they talk about.
- [08:34]
B
Yeah, no, that's amazing. I mean there's just a very rich ecosystem there and you can just imagine all the tech companies that are booming over there. So I mean, there's a lot of opportunity, I guess. Why did your uncle recommend to go to China? Was there something specific or a specific reason or was it just that he just thought it was exciting and he just saw a lot of opportunity there? Was he doing business there?
- [08:58]
A
He was not really doing business here. I mean, he was sourcing a little bit from China, but never came here, never had any kind of business. But the way he thought about it is, you know, the US is obviously, I mean, we're talking about 13 years ago and even today is a place where I traveled back to the US in the past. I had a lot of connections, I had a lot of dealings with the US but very limited exposure to Asia. So his point was like, you go there, whatever you do, you're gonna get exposure to an area of the world that is rising right now, it's racing and it's gonna be playing an important role in the future. Yes or yes? I don't think. I mean, he maybe was the visionary. I wasn't. I just came here because I thought was an interesting option and I thought, you know, it doesn't matter what happens, like a couple of years into the future, if things don't work out, you can always come back to Europe and you know, Europe will be here. Then the Crisis hit in 2008 and Europe was not really there. And then I discovered like the opportunity here and it was amazing. That was early stages of the startup community where it was so easy to get access to people, it was so easy to get connected with people. The English speaking startup community was relatively small and you could hang out with the American or overseas educated founders of some startups that they wanted to play football. They thought, hey, we've got the Spanish superstar to play in the league where you have like all the top tech companies in Beijing that were playing football together. So that was like a very, that was like a very interesting opportunity. And then you were able to see the speed of things, how everything was changing so fast. I mean, I came here and remember, first time I tried to buy tickets online, it was impossible to pay online. So I had to book the tickets online, wait for a person to come to my home with the tickets, and then I had to pay that person cash. That was the only way to pay online. If you look at China today and digital payments, the way they leapfrog, everything's.
- [11:12]
B
Mobile first pretty much, right?
- [11:14]
A
Yeah, it's mobile first. Is digital cashless payments perfectly integrated into society? But that, I mean, for me that change was a year. So the world is realizing about this right now, but in a year everything went from, yeah, you have to pay this person with cash. You had digital payments enabled in a quite secure way, very, very flexible. That were accessible in lots of different places. And those were originally a bit more restricted to the online world. But very fast they moved to the offline world. And that was a game changer.
- [11:51]
B
Sure. And then how is it in Europe has. Europe had been kind of overcoming the issues that they had a couple years ago and then, you know, just specifically in Spain, you know, how is that, you know, because I'm only asking because I think I spoke to you a couple, couple weeks ago. I actually traveled to Spain, you know, had a really good time, but, you know, didn't really hang out in the tech ecosystems, you know, went through the, more of the touristy areas. So maybe you can talk a little bit about, about Spain and you know, that region as well and just kind of how that's, that's evolving and then just Europe in general.
- [12:22]
A
Yeah, well, I mean, we, as a, as a company, we have a global, as a company, we have a global, global investment approach. So we are based in Asia and we obviously have a lot of Asia exposure and we're in China, so we have a lot of exposure to China, but we look at everything globally. So in the last year actually made quite a few investments in Europe, particularly made a few investments in Spain. So the tech ecosystem in Europe is obviously not as developed and there's certain reasons for that. Like you talk about Europe, but Europe is a group of countries and even if the European region is the largest market in the world, you don't have the same level of Unification that you have in other parts of the world. You have different languages, you have different vendors, different providers. Everything is quite fragmented from that point of view. The regulations help out a lot, but for certain types of businesses still does not have the way that the approach that you have in a market like US or China, where you can get like 300 million users, a billion users with the same language, the same payment systems, the same logistics, is very, very, very fragmented. And that creates a challenge for companies that want to scale and become relatively large. Then I had a feeling sometimes in Europe that. So in Europe, we don't talk about venture capital, we talk about risk capital. So whereas in certain markets, you think more about the potential return of taking that, like embarking yourself in this journey, in Europe still, the risk perception is relatively high. And that's something that is slowly changing and is changing for the better. We have a Spanish company that was listed in NASDAQ a couple of weeks ago. We have another unicorn. Our company became a unicorn also, like in the last month. So to a certain degree, the fact that this current economic downturn happened made the cost of opportunity for talent to start companies lower. So there's more people building companies right now, and there is a very strong competitive advantage because this talent that is very, very cheap, like the access to talent in Spain, is super affordable. It happens in other parts of Europe, too, but I have more exposure to Spain. You have people that have experience managing international teams across multiple time zones, different cultures, et cetera. So that makes it a very, very interesting area. I'm actually very positive about what could come from Europe in the years ahead. I think one of the key things is decide that they need to look at the world in a bit more global way and realize that opportunities, sometimes your next market might not be the one that is next to you. So thinking about that strategic move could be quite interesting.
- [15:28]
B
Yeah, yeah. And I think a lot of the people that are more, you know, risk. Risk friendly, you know, most of them probably. Would you say most of them are still leaving Spain because of the, you know, the perception of risk capital, you know. You know, even your family, right, you guys are a little more conservative. Look, my family's the same, right? My dad worked for the government, you know, for 25 years. My mom was a nurse. So, you know, everything that I did, my parents thought was really risky, you know, and I pretty much did every. I did the opposite of everything that my parents advised me to do. And. And I'm happy that I did. I mean, I listened to them about A lot of things. But you know, with my career, you know, not to like put my parents on blast publicly on the Internet. I love my parents, but you know, look, I love my parents, you know, and I, and I'm grateful for my upbringing and just an amazing childhood. But a lot of times too, you have to, you gotta make your own destiny, right? And I think it's interesting because I had an uncle that was like the poster child, you know, he, he was an engineer, he got his, he got his master's and then he worked at a very stable company for like 30 years, you know. So the reason why I moved to New York, I think one time when I didn't even have a job was because, you know, the, the potential, you know, the potential opportunity that, and you're betting on yourself, right? Even if, did you have a job lined up when you moved to China or you just move there and try to figure it out?
- [16:54]
A
No, no. I mean, I came here to build a company. I didn't have a job.
- [16:57]
B
So you don't have a job?
- [16:58]
A
I didn't have a job. I actually changed my destination two weeks before, like one week before landing in China, I changed my destination. So originally I was moving to Shenzhen, which is relatively warm weather, and arrived in Shanghai and it was snowing, so I didn't even have the right clothes to, to, to land in China. So I mean the story of coming here was a be like, I mean I survive it not and whatever, whatever, whatever does not like destroy you, make you stronger. And that's, that's what happened now that created this feeling of resilience that now we need to make it happen. It needs to, it needs to be something that, that I want to do. So from that point of view that was a, that was a great experience and it, it allowed me to, to, to have like this certain freedom to. Once you are in an uncomfortable situation, you know, okay, I just need to find something. And that, that helped me to learn a lot by doing, exploring things and not be really tied to anything specific. Which I think was great to be able to change the perceptions of what you wanted to do. I did, I did have like some projects so I didn't. Came totally empty handed when I was moving. Basically said, okay, I'm going to let everybody that I know know that I'm going to be here in case there's anything I can do to help out. And that was how I had like my first projects that allow me to learn by doing, explore opportunities and eventually connect with the SSB community. That was being part of that very dynamic ecosystem of people trying to build things. Helped me connect with the founder of China accelerator 10 years ago. And then originally I joined as a mentor of the program and I got involved into the process. I was building my own companies, had some success, I raised a small fund, start to make some investments with that, things went relatively okay. But I did realize that I was missing really the startup, the billing process and be able to get my hands dirty to the things I rub my sleeves and get, get to build these type of things.
- [19:08]
B
And it's just when you're in that community, there's so many startups, they're trying to do so many things, they're always managing a never ending to do list, right? So if you can come in and help some of those startups, you can just learn by doing and then eventually you can probably charge people for services, right? Once you become an expert at SEO, because you did it for free, now you have an SEO company, right? And same thing if you know how to do prototypes. And I do this sometimes too, just as a fun little side gig, you know, I help people with their pitch decks and then, you know, I've just learned over the years how to build a prototype. And that's a skill, you know. And I can imagine, you know, what are some of the skills that you picked up by doing maybe in your early days when you just kind of immersed yourself in the community?
- [19:53]
A
Well, I mean, I brought already a few skills that were directly applicable. So as an engineer I was always really good at fast prototyping. So building things really fast was something that hacked something together. That's something that I was doing even when I was back in school. That was one of my hobbies. And then I also spent some time working in medical devices, which is, you could say that is on one stream is the fast prototyping where you want to test things really fast, but at the end of the day, you cannot deliver any medical device that is not tested on every single area that could fail. So also being very detail oriented and be able to find issues in products or be able to find bugs or things that might break, that was also something that was really good. So come in and say, hey, I have those skills. I also did some work on product. I love medical devices or medical systems. They will require multi stakeholder. So you've got the doctor, you have the patient, you have the family, you have the nurses. There's so many angles that you need to consider that, that you can have a really good functionally Valuable product that nobody uses because it's scary or because it's not easy to use or because it doesn't support whoever's agenda. So bringing that, that was really good. What I think was really great for me was to apply those skills in the actual Chinese market and be able to get a very deep understanding, hands on understanding on how different things were here and be able to fail and learn with direct interaction with the market. That was really what was great. So I get to travel, to explore areas, to work in different industries, to test things in a real environment. So that was really what more than picking up new skills, it was more about localizing those skills because that's what happens in China. Your existing skills are obviously a competitive advantage. But believing that everything that you know how it works is going to translate and transfer directly to this market is what makes a lot of companies that come from outside to fail here. I mean, you need to be a bit more humble and understand that when certain things are done differently in China is not because there's no skill for it, because there's so many situations where there's actually a lot of skill. There's probably a reason behind. So when I came here, a lot of the websites were designed, was actually from, from a, from a western design perspective, they were really bad. Everything was crammed and there was like a lot of flashy lights everywhere. But if you understand how was the Internet back in the day and you understand the density of information that Chinese people is used to get when they read a book, you realize that it's actually not that it's not that bad, it's just that to be able to walk on your customer shoes, the first thing that you need to do is you need to take away yours. You take out yours. And that was a key thing. Like you look into a book, the English version could be like this, the Chinese version could be like this. And it's the same content. It's just that the density of information that Chinese language has is very high. So a lot of Chinese people is used to handle that density of information and that doesn't look as bad from their perception.
- [23:33]
B
You know, I'd love to just unpack the regions of China, you know, and just kind of understand a little more about the ecosystem. So you're in Shanghai, you know, just tell me the dynamics of the different regions. I mean, I can imagine some of the. There's just polarizing differences between some of the regions, right? So can you just unpack the ecosystem? Like, you know, biggest differences between Hong Kong and Shanghai and you know, other regions of that area, especially with the tech ecosystem and then with the innovation ecosystem. I have people in my program that, that are in Hong Kong. But you know, people have just told me that there's just so much opportunity in mainland China. The challenge is, you know, with the platform that I'm building, right? People don't use, people don't use WhatsApp, people don't use Zoom, people don't use Facebook. So there you have. From my understanding, if I really want to build what I'm building and make it hyperlocal to mainland China, I really need to translate it into like all of the, the tools and, and platforms that they use there. That's, that's my initial perspective if I were to, you know, kind of build, you know, what I'm building there. But you know, would love to learn your perspective on, on that observation. And then just in general how the tech ecosystem is spread out all through China and then maybe even like some, some other parts of Asia.
- [24:51]
A
Well, I mean, I could get really, really granular on that. That's basically my, my, my day to day. Nobody.
- [24:56]
B
Yeah, because I think it's important because I'm, you know, I'm all the way in New York. A lot of other people in the audience, they're, you know, some of them are in the US Some of them are in Europe. So we don't, you know, that's the thing, right. We don't know the granular details of the hyperlocal environments. Right. We read stuff in the news and we talk to friends on Slack, but you're there in the weeds, you know, you know exactly what's happening kind of like in that region. So, you know, I think that'd be really helpful if you have any insights on that.
- [25:24]
A
Yeah, well, I mean, there's definitely a very big difference between mainland China and everything else, like the fact that, that you have certain limitations. So you are in one side of the firewall or you are in the other side of the firewall. Things could be very different. So the payment systems are different, the social networks are different, the common habits here are very different. And firewall is a limitation, no question asked about that. But a lot of these solutions that are hyperlocal in China, they have something that makes them very unique. They're extremely localized and they're, they're large enough. The volume of business that, that some of these companies have in China doesn't make them, doesn't, does not. They don't have to, to expand anywhere else to be Able to reach the volume to be able to go public.
- [26:13]
B
Yeah, there's just so many people.
- [26:15]
A
Yeah, like, well, I was looking through something like I think right now 50% of the global e commerce is happening in, in, in mainland China. Wow. So like, I mean as an e commerce company, if you have a market where you have 50% of the global e commerce market at your fingertips and you know, there's certain barriers of entry because even if foreign companies can operate in the e commerce space here, it is just different that you'll have to integrate. It's not just the payments, it's also that the logistics systems will work differently. The user experience that you have to create will be very different. The way you display your products could be very different. There's so many things that could be different that sometimes one thing I'll say.
- [26:58]
B
Too, this reminds me of something before I forget. So the ui. So I spoke to a friend of mine that was from mainland China and you know how like when you look at Google and you look at some of these websites, right. There's a lot of white space. It looks really clean, you know, like flat design. Right. In China. And correct me if I'm wrong, this is my feedback that I got. So in China, you know, they, they want to, they want to use up all of the real estate so like none of the space is wasted. So for us like you and I, you know, especially you're at the accelerator, right? Like all the, all the apps and websites need to be beautiful, right? Needs to be like minimal design. But the feedback I got was in China it's like the websites are very, very busy because they want to make use of like every single pixel of real estate. Is that, is that something you've noticed as far as kind of the design?
- [27:45]
A
That's what used to happen. That was what used to surprise. So, so at the end of the day, what people want is something that is valuable for them. Value is something that is very relative. So design has an element of value as much as it is usable and practical. So UI and ux, they kind of go hand in hand. But you can have something that is from a UI perspective is beautiful, but from a UX perspective is horrible and it's difficult to use. So at the end of the day, usability is critical. But I think that approach is, I mean today websites in China are actually not very relevant. Most of the Internet in China is mobile. China is a mobile first and for a lot of things it's a mobile only type of platform. Even for me, as A foreigner, I don't remember. I mean most of my interaction with the Chinese Internet, which I have every day multiple times happens through mobile. So I don't remember last time. So when I do grocery shopping, I'll do it on my mobile phone. When I do, when I buy anything online, it's going to be in my mobile phone. Almost any transaction that I work on, I do it on my phone. So if you look at that from that perspective, I think that the UX and the UI of Chinese apps is just far superior to the UX and the UI that you have in Western apps. Sometimes I actually feel a bit frustrated when I have to use some of the Western apps. I feel frustrated because I find this, there's sometimes so many like, like, like, like walls and so many friction points that, that in a very Chinese market is extremely competitive. So anything that creates friction is very, very competitive. Anything that creates friction will basically be a killer. Yeah.
- [29:33]
B
Whatever goal you're trying to achieve, it needs to happen in maybe one step.
- [29:37]
A
Yeah.
- [29:37]
B
Versus now, you know, some of these apps that you, you know, use in the US or other countries, it's like just to change a setting or just to change something you got to maybe tap four times. Right. But you're saying in China, because it's so competitive, it needs to, it needs to literally just happen immediately. Right?
- [29:53]
A
Yep, yep. And Chinese, Chinese app developers and are masters of data driven decisions.
- [29:58]
B
Yeah.
- [29:58]
A
So I mean there's a, I remember like one of my friends, he. So he built a couple of companies, exited in China, mainland China, he exited both of them. And then for his third company he wanted to build a company in India. India is another like pretty large data, like mobile first and mobile only market is large. Southeast Asia is not a relevant market. But Southeast Asia has the same issue that Europe has. There's a lot of fragmentation. And Southeast Asia is even more difficult because it's basically a bunch of islands, so many islands that even Kommune makes things a bit more difficult. But India is a relatively large market. It's early. And some of the way that the Indian market is developing is way the Internet market and cyber market is developing is way closer to the way the Chinese market developed back in the day. So he built a company in India because China has so much talent and skill to, in terms of mobile app development and the UX element of it, they were running things in languages they didn't know just based on data. You have enough users and you start testing in a very systematic way, you can get apps very, very Very solid, that actually work extremely well with concepts that sometimes are relatively foreign. So I remember him telling a story. We had a, we had with our program with the companies in our batch. He came to share a bit about data driven design and data driven product management. And he was sharing a story about how India has a lot of languages. So even if India is a large market, there's a lot of small languages internally. And although English is spoken in the more educated group of people commonly spoken in certain part of the population, English is not as common. But they had, in this app which was targeting mass market, they had all the local languages plus English. So speaking English is a sign of status. If you have your apps in English, it will make you, oh, you speak English so you have better education, etc. So they run a test. They saw that a lot of the data showed them that a lot of the users, they changed the usage pattern of the app. Once they change to English, so they have a usage level, they change to English and the usage level goes down. And they realized that the problem was that they were having the app in English to look better, but then they couldn't use it because they couldn't understand, actually. So by removing English as an option, usage of the app basically tripled. And that's something that they found because they literally just use the data. The data show them something that took them to have some customer interviews and see how people use the product. And those customer interviews told them, okay, there's an issue here, so let's try this. They tried. It worked perfectly. So these type of things are so embedded in. And some people will look at these and say, like, hey, why don't you have English? That's, that's a good, that's bad product. You're making the product worse. Well, that's not true. They're actually making the product more valuable and better. Because since there's no option for English, there's no pressure of changing the app into, into English and then you can continue using the product.
- [33:29]
B
Yeah, I think, look, you're an expert at this, but this is what I feel too, right? I mean, it's, it goes, it goes back to Henry Ford, right? If you, if you keep asking the customer what they want, you know, they're, they're just going to ask for faster horses, right? So how many times do you see these founders just not listen to their customers and just try to make better judgment based on the data? I mean, because a lot of times, you know, to your point, you can't just ask your Customers what they want because half the time they don't even know what they want. Right. If you ask them, they're like, hey, just give me faster horses. They don't even know about an automobile. Right. So is that a common thing where they just focus on the data and, and really just use their instincts to make the product decisions? I mean you have to a lot of times, right?
- [34:12]
A
No, we always tell them that your gap will start and data will decide. So it doesn't matter if the data says something is wrong, it's wrong. But most of the most relevant breakthroughs happen through conversations. We always say, hey, conversations are very important and hopefully you'll. So I mean this company was doing, was identifying potential areas for interviews. They raised like $50 million. Like I mean it was like a two time serial entrepreneur. One exit to Baidu, one exit to Alibaba.
- [34:46]
B
Wow.
- [34:47]
A
He got like $50 million with a napkin from Tencent to launch a company. So like he didn't have any problem in terms of scale or access to data. And he still he continue working on customer conversations to be able to get insights that they never thought because data will not tell you why something's wrong. They just will tell you something here is funny or something here is not working well. But you have to then go and find out. And it's very difficult that customers will tell you the solution. So you go to a problem assumption and problem hypothesis and from there you'll start having solution assumptions or solution hypotheses that you want to prototype and test as simple as possible. So for mobile apps, relatively simple just build up like a, a B test where you have a control group and you liberate this new function to a set of, set of users and then you track behavior between the groups and also the previous behavior that the users that the users had. And if the data shows that it works, then it works. This is a very, very common thing and it actually applies to everything. So having this empathy of communication works with your customers, with your partners, with your investors. So many times with investors. Listening is a very, very, very valuable skill and how to actually extract information without guiding people because you can very easily guide people. So you need to be very open for everyone to criticize your product. So if you very upfront let people know what you're doing, they might somehow change the way they talk with you because they might not be willing to hurt your feelings. So it's always better to be as agnostic as possible during these conversations. So ideally people doesn't know that you're talking exactly about this thing.
- [36:48]
B
That's a good point, because the data is also qualitative. Right. So the qualitative is really the conversations. And then I think one thing I'll say too is you have to break it up into different Personas. Right. Because one Persona may be a married couple, and then another Persona may be a millennial and then a Gen Z. And each of them, like you said. Right. Have different. Have different workflows. And then I think that's a good point. When you put together the survey, you need to make sure that you're not leading them on. Right, right. And forcing them to kind of say the answer that you want them to say. Right?
- [37:17]
A
Yeah. Well, I mean, I'm not a big fan of surveys. No. I think that quantitative data is valuable as part of an experiment, but I do believe in conversations, conversations that are open as much as possible, particularly for early stage. They're fundamental. And you can find so many surprises that could potentially change everything. Even as what you said, you define different customer segments and you could potentially, when you look at data, aggregated averages in general are not very relevant. So when you're able to create some segmentation, you will potentially identify that this specific type of customer that converts faster, that's more loyal, that is less price sensitive, et cetera. So if that customer today is working well and is a big enough segment, it could be potentially good to spend a bit more energy on growing on that stage and then in parallel trying to figure out, okay, what can you do with another with a different segment.
- [38:20]
B
Yeah. And then walk me through how you formalized your role at sosv. So I think you immersed into the culture and the ecosystem, and it looks like you were helping some of the startups and then they had an opportunity for you to, to help run the accelerator.
- [38:38]
A
Well, I mean, it was, I think that, I mean, there was a couple of times in the, in the past before I decided to join four years and a half ago full time, there were a few, few opportunities for me to join, but things didn't work out well. Sure, I was running my fund and I was doing another startup, so it was not the right time. And I was like, there was kind of like in between things, I was helping one of my friends that was taking his company public. Company was more in the, in the traditional business space. And I said, okay, I'll help you with the transformation of the company and with the pitch to the investment bankers for the ipo, but I really want to do something that is a bit more like I really want to go back to launch things. And I realized that that was the most interesting part of my, on my job. So no problems talking with the bankers, but not the thing that I like the most in comparison with working with small ideas that could turn into something, something amazing. And I remember we launched a project that went from zero to a million dollars in revenue in seven months. And we were running that with like two people and like some of my time. And I thought, this is what I like. I mean, this is what really like makes me jump out of bed every single, every single day. And the transformation is interesting. But having to, once a company reaches stage with a few hundred employees, so much, so much culture. That is more like a standard culture. That was not my thing.
- [40:14]
B
That's a good point. Actually. I think the CEO of Digg was on this week in Startups and I think he's running a fund now. But he said the same thing. He's like, look, I love the beginning parts. When you're building the product, you're prototyping and you're just kind of creating something. But then once you get to, you know, employees, you're really just focusing on culture. You know, you're hiring, firing employees. There's more, there's more infrastructure. Right. So it's not as for some people, it's not as exciting. So I think you're the same way. I think I'm the same way too. I don't think I would be as excited, you know, trying to pick out which air conditioner, which air conditioner unit we need to put into the building or, you know, what color the floor should be. But I'd rather focus on the product and look at the data. Right? Look and see how fast the app is growing and look at the insights and focus on the customer experience. So I think I'm the same way. So then let's talk a little more about sosv. So then you had a couple opportunities. Before we talk about sosv, I'm also interested about the fund that you started because I actually started an emerging manager accelerator, of course, first time fund manager accelerator. So always excited to hear about fund managers, how they got started and then how they raised capital and then how did you deploy the capital across the portfolio?
- [41:32]
A
Yeah, well, those two opportunities to join SSB eventually led for me to join, to replicate. Exactly. So joining ssb, where is an accelerator VC gives you the advantage of being early stage investor and at the same time being very hands on. So that was one of the things that I missed when I was running my fund, so that originally started. So when I was building my initial companies here, I was potentially exploring raising some capital for these companies. But I thought, okay, I mean, I will raise money once I have something that is worth funding that process. I connected with some people that was in the space and eventually we kind of reached the conclusion that there was actually a really big opportunity investing in early stage Chinese startups. Back in the day there was a lot of investment. So the Chinese venture capital market started instead of starting from the bottom and small investments, it actually started the opposite way. So the initial understanding venture capital as a subset of the asset class of private equity. The initial private equity investments in China were literally very large companies that were either state owned and they were going privatized or relatively large companies that were managed not very efficiently. So you could actually have venture capital returns with private equity investments by investing in those companies, working in all of them just to streamline the process, making sure everything was clear, and then packaging them properly and take them public. But so because it was starting that way, people was going basically downstream as they were less pre IPO deals, they were working, okay, let's do bigger deals. Bigger deals. Because there were enough companies looking for, for that opportunity. So I saw that app and so I partnered with, with a fund back in Spain and they became my anchor.
- [43:40]
B
Oh, nice. Okay. So I think the key and then they just kind of were an LP and your, your micro, I guess. Right. So that was raising for the fund.
- [43:48]
A
So I was raising five mil.
- [43:49]
B
Okay.
- [43:51]
A
And, and so, and, and that was, that was the initial anchor. Then I got other people. So I connected with people. I connected with some of the LPs in the fund that was decided to back me individually. I connected with some high net worth individuals in the fund and we're always trying to look for deals where we were invited to the deal. So at the beginning we're trying to be a bit more aggressive in terms of leading deals, but we actually, it was not bad. We had a deal that did really, really well. We had an opportunity to exit the company with a 40x return two years into the deal. But the founders didn't want it to sell. It was a long story that could lead for a whole podcast just talking about how this became horrible. But it was back in the day the largest social network for football fans in China and we helped them get partnerships with football teams, football clubs from, from Europe. So things went really well. But there was some clash with state owned media, etc. Eventually everything we should have Sold, but we did not. And it could have been like an amazing return, but that didn't happen. So that, that's a case where we, we took a lead in that company, but we could bring in something that, that made a difference for the company. So we're able to get them like, like a swag from the teams, partnerships with the teams and lots of things that for them were very difficult to acquire and for other people in the ecosystem were also a barrier of entry. Then we start to work with companies with deals where we were invited to the deal because we could bring in something on the table.
- [45:30]
B
Yeah.
- [45:30]
A
So leverage a lot. I think very important for emerging markets to treat your emerging managers, to treat all your LPs as angel investors.
- [45:39]
B
Sure.
- [45:39]
A
So work with your LPs to see they are looking for potential return, but they're also having some interest in what you're doing. So communicating with them. One of my LPs actually he was an angel investor, relatively famous angel investor in Europe. He won in 2009, 2010, he won Angel Investor of the year in Europe. And he developed a very interesting methodology for exits. And the same way that you work with a client for sales, thinking about planning for exits, he was actually really very solid coaching us in terms of how to work with sales for the portfolio companies once they reach a stage where the founders were starting to think, okay, maybe that's the way to go.
- [46:29]
B
Imagine taking this down as a note. So that's good advice to treat all your LPs as angels. And, and how could they do that? Just involve them closely on the deal and give them all the diligence instead of just have them invest in your fund. Right. Because with angels you're giving them the memo and you're giving them all the details of your thesis about the company. Is that what you're saying?
- [46:50]
A
Well, also have conversations for them to understand what can they bring on the table. In some cases they might not be interested in getting directly on the deal, but get some exposure to it. Learn about the industry, help you identify opportunities that maybe you haven't thought about. Because my thesis was trying to find businesses that could have a cross border opportunity between Europe, where Most of my LPs were in Europe. I have a couple of them in the us, a couple of in Latin America, but most of them were in Europe. So the point was always like what Chinese companies have at China, Europe type of angle and try to focus on that area. So having a lot of these was coming mostly from, from, from the LPs so having that communication with them was, was really valuable. And then having conversations with them, that was like critical in that case. So having that communication, very important. You also build trust. You learn you got a lot of support from, from them. And I also think a lesson that I learned is track record is everything because raising your first fund is, I'm not gonna say super easy, but I think it's easier than racing. It's way easier than raising follow on funds because you're raising the first fund on a promise. But then you need to show track record for the second and the third fund. And the second might be okay if you have book value, if you're able to show that the companies are actually raising funding and you have like. But you need to realize those returns. So being able to have early exits where you can prove actually liquidity and distribution to the LPs, I think that's very, very important. That's my experience. Maybe other people have different experience when you say, well, I cash enough to be able to pay back to the LPs, and I still maintain my position here to continue having a bit more growth. So I had a couple of opportunities. When companies raised at valuations north of 100, $150 million, I had opportunities to exit and we didn't because there was obviously a potential extra feature on those companies. And then one of them particularly crashed dramatically. And we could have done, we have done in that case, 100x return in three years.
- [49:08]
B
So when you said they had an opportunity to exit at 100 million, they just. Did you just advise the company not to take the exit opportunity? Is that.
- [49:17]
A
No, no, I had it. So one of the. So the company closed a $50 million round. Sure. And some of the investors offered to buy out some of their. Because when I invested in the company, they were not even online. So I invested on not. Not paper, but prototype.
- [49:32]
B
Yeah.
- [49:33]
A
So it was a model that. One of my LPs had a lot of experience. He built one of the, one of the largest companies in Europe running that, Running that model. So I thought about, I mean, it was not a full exit for the company. Could have been an early exit. So if I, if at that time I could have sold like half of the shares.
- [49:52]
B
Yeah.
- [49:52]
A
That I had in that company. That could have been a 50x return overall on the deal, realized on 3 years after investment and still could have the potential of the upside for the remaining part. So that was something that, as a, as an early manager, I think it's important to show that you have. Because there's the business of investing. But at the end of the day, every business is about sales. So you need to make sure that you consider the exit as an opportunity. At the stage that we were, I thought that was quite important to do.
- [50:27]
B
Sure, that's really helpful. And emerging managers, it's just a really huge thing now in America. I mean there's thousands of emerging managers, right. And what I learned is just a. Of couple, couple years ago, maybe 12 years ago I was talking to a manager now that is on fund five, so very more senior. A lot of their capital is coming from institutions. But this person was just saying 12 years ago you could count on your hand how many other funds there were. Now there's thousands. And because there's so much of a lower barrier for first time fund managers to get started and start a fund, they can build a track record with angels. But like you said, even if you don't know real LPs and even though you're saying that we should treat LPs like angels, you can just get a syndicate of angels. You can use AngelList. So how is that ecosystem evolving in East Asia? Are you seeing a lot more funds? I've actually got two funds in my emerging manager program that are in East Asia as well. But how are you seeing that ecosystem evolve on the fund side?
- [51:26]
A
Yeah, I mean there's definitely more, I mean there's definitely more. More like micro VCS or new funds that are happening, I think also. So that process happened in China like maybe five, seven, eight years ago when suddenly the number of funds exploded by one order of magnitude. There was a lot of government LP backing for a lot of the funds and that had a massive disruption in the ecosystem. But there's definitely, I will not say the growth is that big, but there's definitely more and more early stage funds that are happening. Most of them, they have some specific angle to what they do. So I also see more specialization. There's a few emerging fund managers in female specific area. There's more on the impact side of things. We also look just because a lot of my investments are in the enterprise and B2B software, we also see a few people that have strong experience in that area and they understand that particularly early stages of enterprise tech, good guidance makes a massive difference because sales cycles are very long and feedback loops are also longer. And the opportunity to get feedback and conversations from your conversation with your customers are also more difficult. Navigating organizations is also more complicated. So these fund managers sometimes can make a big difference into companies. When you are Closing your first five clients for enterprise. The way you sell is very different than the way when you're going to go from your first five to your next 15, 20 because you're selling to a relatively closer group where you might have an internal champion that you know directly. But as you grow, things need to, need to evolve. The way you manage the whole customer journey is very different. There's also a shift from sales to retention and make sure that you don't have churn and this great value into. So there's a lot of shifts and the organization needs to move account management besides like developing new accounts. So those are quite interesting. We've seen also a few that are more specialized. So I personally like also to invest in traditional industries that are going through digitalization and technification. So we've also seen a few that focus on logistics or manufacturing, construction. Some of these industries that are doing pretty okay. We have good experience with some of these fund managers. They come with a very strong support element to their capital. And I think that's great.
- [54:11]
B
Sure. No, that's great. And then real quick, I know we got a few more minutes. So sosv, maybe you can walk us through the structure, the criteria to get in and then the program. Right. So it's like three, four months I guess and then there's a demo day. So maybe just a quick, quick overview on SOSV, how to get accepted.
- [54:29]
A
Yeah, SOSV is a global VC. So we're actually US VC. We have right now almost $900 million under management. We're very actively active investor, but all of our investments are matched with an accelerator. So we're a VC that provides support. And for us, accelerators are the system that we can provide consistent scalable support to our portfolio companies. And also these accelerators become the onboarding to the platform where funders keep to work with us because we, we are not like traditional accelerators that they work with you for three, four, six months. We work with our companies forever. We have a more structured way to work with the companies during the first few months of our engagement through the cohorts that they work together. But then we continue working with the companies afterwards. So in terms of investment, there's three main areas of investment that we have. So all of the SSV accelerators are industry agnostic and geography agnostic. So it doesn't matter where we are. We are investing everywhere. The location has a connection with historical reasons or strategic reasons. But that doesn't mean that because we're based in Shanghai, we only invest In Chinese companies or Asian companies. We invest in companies everywhere. And the same happens to our colleagues in Shenzhen for hacs or hardware arm, or the New York and San Francisco for biotech. And these are actually the three areas of specialization. So we have biotech, hardware and software. So for me, I'm more involved in the software space where we have two main programs. One of them is for consumer Internet where we focus mostly on mobile first, mobile only type of markets. So we do a lot of like Southeast Asia, India, Middle East, Latin America, et cetera. And then the one that I run from Shanghai is the enterprise and B2B software, which I mean basically is based on the fact that China is very, very competitive. A lot of companies want to come to China to be able to sell or maintain their market share. And if they are not productive here, they will lose market share. So innovation for them is critical. That's why a lot of companies run pilots in China. And we have so many companies that are able to get their first customers in China. Getting in from getting, I mean getting into the programs is actually closer to how most VCs work. The best way is to get a referral. We have thousands of applications every year as programs. We're more venture capital with a platform than an accelerator. So we look at companies that already have initial. For the software side, we're with companies that have product ready, have some initial traction and their help is mostly on how to, how can they scale. So we work on scaling the companies. We have a strong focus on growth, helping the Companies on the B2C side acquire users without having to pay for them. In the B2B side, getting pilots and new clients as fast as possible and in terms that will create a really good foundation to be able to make that happen.
- [57:37]
B
Well, I see this also being valuable. I think you hit on it a few seconds ago. Just correct. Corporates and other big startups that are just trying to expand in China, you know, do you guys have like a services arm or other people that can help them if they really want to? You know, because a lot of people in, you know, people in New York and San Francisco, they just don't know the ecosystem. So are there support systems for just general tech companies or just other entities to kind of try to immerse themselves in China? Or are you guys only interested in startups in China?
- [58:06]
A
No, we invest in companies from all over the world. I mean, we invested. So recently we invested in two companies that are based out of San Francisco, one company out of Montreal and a few companies from other parts of the world. So we invest in companies everywhere. They don't need to have a China angle. But the fact is that once you start exploring China, you always will find out the China angle, because China is such a big market that even if you are a niche, even if the Chinese market for you is a niche that could be potentially really, really large, and it's surprising how this could happen. So the companies don't need to be in China. They don't need to have a China angle, but we need to be able to help. Because for us, the help that we provide the companies is our risk reduction. So we reduce our risk by bringing the companies additional support that will help them achieve something faster and the whole service actually end to end. So even if the goal eventually is to scale faster, every single company that we invested that raises usa, they did so with a business model that was different than the one they had when we originally invested. So the first two weeks of the company, we really turn everything upside down and we look for opportunities, bottlenecks, areas that could be changed. And as we find those opportunities for change, we start experimenting. We start having different conversations with customers, and companies start finding breakthroughs during the first month where suddenly they realize, oh, maybe I can try this differently, and something suddenly works much better. We work on focus, bringing best practices for scaling up. Scaling up, like building the foundation for scaling up. That's kind of like, very, very relevant for what we're doing. There's a lot of companies that, they want to come to China and they. They come to a program because of that. But there are companies that will use China as a way to. As a way to potentially explore other markets or get, get, get kind of, like a whole, like, redesign of what they do.
- [60:12]
B
Yeah, that was amazing. Hey, I know we're at time, and I know you're, you know, starting your. Well, you're kind of. Wait, you're kind of midway through your happy hour. And, you know, I'm honored to enjoy it with you. Next time, we'll be both drinking beers in the same hour. Cheers. With my coffee mug here, but hope I either make it to New York. I mean, hope I either make it over there or you make it over here in New York and we could do a beer in real time.
- [60:36]
A
Definitely looking forward to that. Thanks for that.
- [60:41]
B
Yeah, thanks for coming in. I loved your story and I learned a lot, so I appreciate your time. And, Oscar, I might just give you a ring in a few minutes. I have a couple questions for you after this call, if that's all right.
- [60:52]
A
Good. Well, I'm going to be starting. I'm actually doing a keynote in, like, 20 minutes, so if you take two minutes, it will work. Otherwise, might not work.
- [61:02]
B
Okay. All right. We'll catch up later and we'll. We'll hang, you know, we'll. We'll keep you posted in the ecosystem. And thanks for all your time.
- [61:16]
A
Sam.