The Final Count – 8 YC Startups, More to Come from S15 Batch

One of the first things I did when I returned from Demo Day this March was to set up a SPV with my partner Firas (he’s the CEO of Marcella) to invest in YC startups. We named it BWB Ventures (‘Bubble What Bubble’, geddit?) and ended up investing in 8 YC startups, 6 from the batch that just graduated and 2 from previous batches. Here’s the final list:

Mashgin –
Lully –
Cinder –
Smarking –
Padlet –
GiveMeTap –
Unwind Me –
Kuhcoon –

We don’t necessarily believe all of these will eventually become billion dollar companies (if we are really really lucky maybe one will, we just don’t know which one), but we don’t think betting on the next billion dollar startup is the only reason to invest. Here are a few factors that informed our investment decision:

  1. We like the mission. GiveMeTap for instance. Not only does it help the environment by cutting down the use of plastic bottles, every bottle purchased gives a child in Africa 5 years worth of drinking water. Lully’s mission is to fix sleep. A fundamental human need.
  2. We like the product. Cinder is a really good looking smart grill. Steak tastes amazing too. Unwind Me brings high quality massage to the comfort of your home.
  3. We like the founders. Smarking is serving a market that’s as unsexy as can be – helping car park owners optimize pricing. But the founders struck us as really smart, really focused, and they obviously have thought deeply about the problem they are trying to solve. Padlet is the easiest way to stick something on the Internet. The founder has managed to bring the startup very far with a very lean team by focusing on the product.
  4. We like the tech. Mashgin uses computer vision to build a check out machine that recognises objects without the need for barcodes. Massive market if they can commercialise the product. Just think of Ikea cafeterias.
  5. We believe we can help. Kuhcoon automates and optimizes your Facebook and AdWord campaign. Lots of potential clients in South East Asia. We can help win those clients.

Some people think 8 is too many and that this is a spray-and-pray approach, but honestly whittling down from 110 really high quality startups that presented at Demo Day was incredibly difficult. In the end it came down to chance and chemistry – who we managed to speak to in person, and who we felt comfortable with.

Plus I’m Chinese. Has to be 8.

My First Y Combinator Demo Day

On a 5 hour layover in Tokyo Haneda airport en route home to Singapore from San Francisco. As good a time as any to write about my experience attending YC Demo Day for the first time.

Spent the last 2 days at the Computer History Museum in Mountain View watching over a hundred YC startups from the Winter ’15 batch pitch on stage. Each startup gets about 3 minutes to showcase their company in front of an audience of about 450 investors.

My thoughts:

  1. Diversity. The types of startups and the verticals they are going after is incredibly diverse. There were of course lots of B2B SaaS and B2C consumer marketplace startups. Also a fair number of startups targeted at the developer community (B2D startups). Beyond pure software, a handful of hardware startups (sous vide machine, smart cooking grill, personal training hardware, smart luggage etc), nearly of which are playing in the IOT space. What’s perhaps surprising is the three non-profits raising philanthropic rounds, as well as the relatively large number of biotech startups.
  2. Ambition. Many of the startups that presented are trying to solve incredibly hard problems. Spire wants to improve your well being by helping you breathe better. Lully wants to help babies (and eventually adults) sleep better. Transitmix develops software that runs cities. Diassess wants to have your DNA tested in 20 mins. Bagaveev is building rockets to launch nano-satellites into space. The list goes on.
  3. Traction. I have never seen so many hockey stick charts in my life! These startups are growing very, very quickly. I thought 85% month-on-month growth is impressive until I saw another startup growing 65% week-on-week!
  4. Accessible. Even though I’m not from a big name Sand Hill Road VC, nearly every entrepreneur was eager to engage and discuss funding opportunities. It probably helped that I had already invested in 5 Y Combinator startups, but the point is most of the founders didn’t know who I am but were still happy to talk. It probably helps that I am based in Asia because entrepreneurs want investors who can value add beyond providing funds. An Asia-based investor like myself gives them ready access to a business network in my part of the world.

All in all, my first YC Demo Day was a wonderful experience and I went away feeling incredubly inspired by the startups that I saw. This batch of YC startups has certainly lifted my bar for making investments. I am already in talks with a few.

College or Startup?

One of youngest team I ever invested in just decided to take a leave of absence from college (three founders from UPenn, UC Berkeley and Stanford) to work on their internship portal startup Glints. The last college drop out team I invested in Flightcar just raised $13.5m from GGV Capital, General Catalyst, Softbank and First Round Capital. Don’t know what the co-relation is between dropping out of college and succeeding as an entrepreneur, but my intuition is if you and your co-founders believe in your startup enough to drop out of college, your chances of succeeding are just going to be that bit higher.

Farewell 2014.. Hello 2015!

Kind of embarrassing my last blog post was in June. So much has happened over the last 6 months blogging simply hasn’t been anywhere near the top of my to-do-list. But today’s Boxing Day. I’ve given myself the day off. If I don’t write something today I probably never will.

First things first. Controlled Commodity finally launched on 10/10/14. The idea of starting an online fashion label premised on durable style and quality was conceived in late 2013. Considering we did everything from scratch – coming up with sketches, sourcing for fabric, preparing paper patterns, sampling the designs, manufacturing in-house – it’s not surprising it took nearly a year for the label to launch. Could we have done it any faster? Probably. Could we have outsourced some of the steps? Definitely. But what matters is that we are proud of this brand we conceived from scratch. As Vulcan Post puts it in their coverage of Controlled Commodity “nothing worth doing is easy.” We did it the hard way, and we can only hope it was all worth it.

In August 8Capita completed a successful listing of 8Common on the Australia Stock Exchange. This had been in the works for more than a year before we got it over the line and we are optimistic we can grow the newly listed entity into an important SaaS provider in Australia and beyond.

At around the same time 8Common listed on the ASX, Ninja Van closed it’s Series A round and I took on an executive position in a business development role. It was amazing to see Ninja Van grow from being an idea early this year to becoming a full fledged last mile courier handling thousands of parcels daily in a few short months. I am grateful the front row seat and look forward to contributing to Ninja Van’s growth over the next few years.

8 Capita invested in a bunch of Y Combinator Winter 2014 start ups after one of us attended Demo Day earlier in the year. Airhelp, Guesty and Camperoo join Lob on the list of YC startups in 8 Capita’s portfolio. I am looking forward to attending the next YC Demo Day next March with a couple of my partners.

Glints is a JFDI startup I mentored from the 2014A batch. The youngest team admitted into the program. I ended up investing in them both personally and through the fund. In September I participated in the friends and family round of Temasys and made that my last personal investment of 2014.

Maryanne and I welcomed Cory to the world on 21st July. It would have been an amazing year if not for the friend who unexpectedly left us. A reminder to cherish what we have and to make the most of our time on earth.

Goodbye 2014. Bring on 2015.

Be Nice Or Leave (Term Sheet From Hell)

Came across this great blog post by Fred Wilson.

I have found that reputation is the magnet that brings opportunities to you time and time again. I have found that being nice builds your reputation. I have found that leaving money on the table, and being generous, pays dividends.

Doing right by people is important no matter what field you’re in, but particularly in the startup space if you’re in it for the long haul, you need to take care of your stakeholders. Applies to both entrepreneurs and investors. At 8 Capita when we are making an investment decision, one of the most important considerations is whether we feel the entrepreneur(s) we are dealing with knows how to take care of his investors. A couple of months ago I received a Term Sheet From Hell from an entrepreneur that, amongst other things, included a call option for the founder (founder has the option to buy back shares from investor if things are going well) and the reimbursement of founder’s previous expenses in starting the company (which essentially means founder has zero skin in the game). Needless to say we passed on that investment, but more importantly it is a character-revealing term sheet that precluded any future engagements with the entrepreneur.

Investors are not all angels either. There are a couple of investors I avoid because of what I’ve heard about them from other investors/entrepreneurs. If I was a people person I probably would have tried interacting with these guys and make my own decision about them, but I’m not naturally sociable so it doesn’t make sense for me to spend what little time I have engaging with folks of dubious character. Which goes back to Fred Wilson’s point – being nice builds reputation, and reputation brings opportunities.


Problems Worth Solving

Just read a great article about how David Freidburg built and sold The Climate Corporation for $1 billion (apparently there’s only a 0.00006% chance of building a billion dollar company). Many lessons to be learnt from Freidburg’s journey, but the main takeaway for me is the importance of finding a problem worth solving. Here are some of David’s Freidburg’s thoughts on ideas and innovation:

I hear so many people saying things like, ‘Oh we can build a photo sharing app for students at Stanford!’ or ‘We can do something like X for Y!’ But just look around. There are problems in the world today that are more substantial than anything we’ve ever faced in history — and it’s not just in software, or in California, or for your peers.

When you look at the markets in the world today, you can probably break it apart market-by-market and say, ‘Here’s something fundamentally flawed with the way businesses in this market are operating.’ Ask yourself, what are they doing wrong? Beyond that, how are governments not operating efficiently? When you look at it this way, there are 100,000 different ways to break apart the opportunity that exists for you to solve the big problems of today. It might take more than a weekend in the library or on the Internet to see, but they’re there.

If information was once the grist for ideas, over the last decade it has become competition for them — we have started to prefer knowing things over thinking because knowing has more immediate value. This keeps us in a loop. It keeps us connected to our friends and our cohort, and this implies a society that no longer thinks big.

There are a lot of problems out there that can and should be solved, and not just because it’ll be great for you, but because it’ll be great for everyone. Once you have this premise — once you’ve found the right thing to do — the strategy is to first know what you don’t know, the tactic is to grind, and the value is to remember: there are plenty of places to innovate.

So before you dive into your next startup, first ask yourself if you’re working on a problem worth solving, and who you are solving it for.

Venture Capital versus Private Equity

8 Capita, the investment partnership I run with a couple of friends, plays in the VC and PE space. Couple of months ago we completed our second buy out deal, acquiring a Sydney-based expense management software company. Here are some thoughts on VC versus PE:


Early stage (pre-revenue) startups in South-East Asia are going out at valuations upwards of $2m. In Singapore, easy access to government co-funding schemes is pushing up valuations – when a startup is raising a $500k seed round, entrepreneurs naturally push for 7 digit valuations to avoid being diluted too much. How is the valuation justified? It’s a question I often ask entrepreneurs when they tell me they are valuing their startup at $2m or whatever, and I’ve yet to come across an entrepreneur who can make a convincing case why their startup is worth a few million dollars.

In private equity, companies are usually valued based on earning multiples. 3-5 times EBIT is common. Taking a 4x multiple, a potential acquirer will offer $2m for a company making $500k a year. Assuming stable earnings going forward, the acquirer knows that he will make back what he paid for the company in four years. Earning multiples seems to me a more conservative way of valuing a company. Granted most early stage startups are not profitable and therefor cannot be valued based on earning multiples, but the point remains that it is often times hard to justify why a startup with a small user base making no money should command valuations similar to a mature software company making hundreds of thousands in profit a year.

Forward forecast

Acquisition targets in the PE space tend to be mature companies that have been around the block. Financials are relatively stable, which makes it easy to project into the future. There are of course exceptions such as distressed assets, but by and large it is relatively straightforward to do a fairly accurate 3-5 year financial projection. Early stage startups are inherently risky. It is difficult to tell whether a startup will survive the next 24 months, much less make financial forecasts with any degree of confidence.


In South-East Asia exits upwards of $15m are still relatively uncommon. So say you invested in a startup at a valuation of $2m and along the way you were diluted by new financing rounds – when the startup exits for $15m four years after your initial investment, you may end up with a 4x return on your investment. That’s decent for an early stage investment in this part of the world. In private equity, unless you’re in the business of flipping an asset to a much bigger PE firm, double digit percentage growth in the top and bottom line is probably more realistic. Or to put it another way, you have a better chance of getting a five bagger from an early stage investment than a PE deal, but the risks are significantly higher too.


The startup space seems to be dominated by a relatively young crowd with ambitions to change the world, or if not to at least make their first million before their thirtieth birthday. This is a sweeping statement, but startup entrepreneurs can probably be characterised by three words – young, ambitious, idealistic. The founders we meet in the PE space tend to be older (and wiser?) with more realistic expectations of their business. Often times they have been running the company for years, getting it to a steady state generating stable cashflow, and are now looking for new personal or professional challenges.

This blogpost is not a criticism of early stage investing vis-a-vis the merits of private equity. I’m still an active early stage investor, both in a personal capacity and as a partner at 8 Capita. The point rather is that having seen the type of deals in the PE space, I am a lot more selective about the early stage startups and entrepreneurs I choose to invest in, and the valuations I’m willing to accept.


Sometimes Tough Love Is The Best Love

Attended a shareholders’ meeting of a portfolio company recently, during which the founder demonstrated a working product that is starting to generate revenue. The investors present were quick to congratulate the team and the founder, which is understandable. What surprised me is that none of the investors were willing to ask hard questions even though the product is late to launch, as a result of which the startup now needs to fund raise sooner than planned.

I am not a confrontational person, and I dislike playing bad cop as much as the next person. But when things are not going to plan, it is the investors’ responsibility to push founders to do things that may be unpalatable to them in the short term (e.g. cutting founders’ salaries) but will ensure the viability of the company in the long term. It is easy to pat founders on the back, but investors are doing both themselves and the entrepreneur a disservice by not asking the tough questions when there is still time to turn things around.

I’ve always been an advocate of investors maintaining a good relationship with founders during good times and bad. Building a startup is tough, and there will inevitably be bumps along the way. From personal experience I know that having investors who remain supportive when it’s tough going is invaluable. I also know that sometimes tough love is the best love.

Business Model Innovation

Nick Bilton postulated in a recent article that eager investors are perhaps guilty of overvaluing tech start-ups. Pinterest’s latest $225 million round of financing at a $3.8 billion valuation certainly surprised me, considering the company is not generating any revenue. As Mr Bilton rightly pointed out:

Once a start-up reaches a $1 billion valuation, they limit the number of big companies capable of acquiring them.

Acquisition potential aside, I wonder what the ceiling to digital ad spend is. It’s easy for startups to tell investors that with enough eyeballs, advertisers will come. After all, the business models of Google and Facebook – two of the Big Four in tech – are almost entirely predicated on advertising revenue. As Twitter goes on the road to pitch its stock sale to institutional investors, it is promising to increase profit margins more than fivefold, to up to 40 percent, predominantly by selling more ads. Pinterest, we can safely assume, is betting on ad revenue as the easiest route to monetisation.

How many billion dollar companies can advertisers support? Is there no limit to the amount of digital ad spend? Perhaps it is time for tech startups to look beyond ad revenue? To the entrepreneurs out there building the next great social network, or search engine, or whatever else you are building, perhaps the real innovation is not so much in the product but rather the business model. If you have a good idea, ping me at


Skin In The Game

The New Yorker:

Venture funds were growing yet most venture capitalists didn’t have skin in the game: only one per cent of the money in a V.C. firm’s kitty might come from its partners. Mulcahy discovered that it was a bad deal for investors.

It is worrying the number of VC funds out there investing other people’s money, with the partners risking little or none of their own money. Couple of problems with this model. One, the partners of the fund are incentivised by the two percent management fee they charge to go out and raise as much money as possible. Wouldn’t the time spent fundraising be put to better use looking for great founders and startups? Two, VC partners may make investments that they wouldn’t have made if they were putting their own money at risk (head I win, tails you lose).

At 8 Capita, we call our setup an investment partnership as opposed to a VC. It’s mostly the partners’ money, so we spend more time listening to startup pitches than pitching investors to put money with us. We think that is the way it should be.

p.s. If you’re curious about what goes on in San Francisco/Silicon Valley, read this fantastic New Yorker article.