U.S China Investment Trend fireside chat: Catherine Liu, Jay Eum, Nathaniel Jewell | SVIEF
11:09PM Sep 30, 2018
Alright, so for our fireside chat, we're going to welcome our moderator Catherine Catherine Liu. She is the founding partner of Magstone Law and we are going to welcome the amazing panelists which will be accompanied her which include Jay Eum, co Founder and Managing Director of TransLink capital, and Nathaniel Jewell, board member of the Wharton alumni angels. So I'm going to gradually welcome you all to the stage as we get set up here. Thank you again,
angel investing Wharton alumni, we started. Okay.
Oh, wow. Yes,
hello, everyone. This is
a founding partner of magstone law. We are a full service law firm here in Silicon Valley, our service including corporate information, m&a, venture financing, and tax litigation and the intellectual property. My own practice focus on cross border transactions, bring Chinese investors in the US market and also help us local startups receiving funds from investors from China and, you know, all over the countries and expand their business into China. today. We have a very exciting panelists joining here and who represent venture capital vis different focuses and sectors. So, let me I'm inviting our panelists to give a brief introduction of themselves and first behind me, Jay Eum, who are the founding partner of CO Founder and Managing Director of TransLink capital city.
So thank you so much and I appreciate the opportunity to get a chance to speak to everybody today,
TransLink capital is a venture capital firm based in Palo Alto with offices across Asia in Seoul, Tokyo, Taipei and Beijing. What we focus on is working with innovative technology startups in the US and bringing them to customers and partners in Asia. So my partners and I all have a common background. We all used to be on the corporate investment side representing some of the leading tech companies out of Asia like Samsung SoftBank Foxconn UMC, he got decision and what we do now, collectively is to work with multiple corporations across that region of Japan, Korea and Greater China and we, on behalf of them look for innovative startups in the US we make introductions. And during the course of making those introductions, if we get strong validation about the market product technology, then we'll invest in those companies. From an investment perspective. We are investing out of our fourth Fund, which is about 150 million dollar fund. We typically invest in series A opportunities again, with an angle of the company's reaching out and expanding into Asia.
Thank you today.
Second is Nathaniel jewel, who is a board member of the Wharton alumni angels.
Thanks. Thanks for having me here today to it's a pleasure to be here. So Wharton alumni angels, is about a year and a half old since forming it in December of 2016.
We now have chapters in New York, So Cal Brazil and opening some other ones around the world. It's still a bit different than a traditional VC. And as a collection of Wharton alumni, and a few non alumni or angel investors, we tend to focus on pre seed and seed doing smaller investments really help entrepreneurs really figure out if the ideas can be viable before going for that institutional money or they might go to a TransLink or someone else and the past 18 months, I think we've already done over 2 million in that funding with our average check size, about 100 K. So we're doing a lot of small deals to try to get entrepreneurs off the ground.
Thank you. Um, I actually have a few questions that I've written down, the attendees might be interested, but feel free to expand to the areas you feel appropriate. And
first, what do you think what the most key investment industries next year, and do you see that changing in the near future, so
I don't know if these are the key industries that everybody should be investing in, I can only tell you where our firm is focused on my Personally, I'm interested in based upon what our strategic partners from Asia are seeing as exciting areas that are emerging out of Silicon Valley, I would say probably the three most interesting areas include naturally AI, artificial intelligence. Secondly, blockchain and number three would be robotics. So as a firm, we spend a lot of time in those areas, there's been a lot of advancements with various startups that I think many of them are here present that we're very excited about. And a lot of the technology hasn't matured enough to a point where there are actually cost effective ROI generating solutions that are being adopted in various consumer as well as enterprise use cases that make it very interesting. I know, it's very difficult to generically cover all these areas. But for example, ai adoption, I think, has really gotten to a point where I think for technology development has become relatively challenged, because a lot of the existing algorithms and infrastructure has been widely deployed. So a lot of the AI opportunities that we see are mostly around applications, whether they're horizontal applications across enterprise functions, for example, from sales and marketing, automation, to HR, resume, screaming, as well as vertical applications, from agriculture, to advertising. and everything in between. blockchain is still very relatively early in its development. But we're very excited to see some very accomplished entrepreneurs with proven track records that have shown that they can execute not only put together with white paper, but they can actually execute and implement opportunities. So we're interested in investing in those kind of entrepreneurs. And then finally, I think can robotics I think everybody would agree that the
various solutions out there in terms of cost and impact now are getting to a point where whether it's delivery robots or cooking robots, there actually is an ROI argument the above and beyond just having a robot for marketing purposes, to get people's foot traffic into the stores. I frankly, think that those opportunities are short term, and once you see the robot once or twice, and it's not that exciting. But if you see, for example, a robot that has an application around inventory management or warehouse delivery, or potentially around security applications, I think there's some very interesting opportunities that make sense from a business perspective. Oh,
definitely agree with that. I mean, a lot of enterprise SAS applications there, I think maybe adding to it there too, in the consumer front, a lot of what we try to do as a consumer focus we're in I'd say, in the past maybe six months, you seen a lot and transportation. So from the autonomous driving investments to all electric scooters, you might see up in San Francisco that we're off the streets with line and bird, etc. So I think just worse consumer going with with using AI using autonomous and just, you know, natural growth of city and kind of on demand transportation,
and the In your opinion, do you think those industries will still be like hard for the coming few years are
seeing it's I personally think all the areas that we discussed, I think card just in the very early stages of development,
obviously, it's difficult to predict how hot those areas will be from an investment perspective, for example, and I was very hot two or three years ago, but a lot of the AI investments I think, are either one or two, one either there so advanced, and they're so expensive, like sense time. And others said, it's very difficult for new investments and money to go into those similar areas, because you have dominant established players. On the other hand, you know, there's a wide variety of early stage blockchain opportunities that have gone through a rapid financing phase, many of them will fail, but some of them that are starting even as recent tests past few months, again, started by experienced entrepreneurs, I think, are getting a lot of funding. So I think it's still going to maintain and for me, personally, I think the robotic space is continually going to get invested over the next two or three years. And I think that's going to be a big opportunity,
I think next year and area that we might see an uptick in investing was something we invested in a few years ago that end up burning a lot of VCs, which was AR VR. So VR, especially virtual reality was something that was pretty hot few years ago and ended up not returning a lot of capital, a lot of closed down shops. I think what we're firms are right now, in companies like Apple investing in AR, we could see AR VR making a resurgence halfway through next year, in next year, which I think could be really interesting. You add that on top of the AI in the blockchain space, we might see come back.
Yeah, you both mentioned about blockchain, you know Icos and you know digital currency having a hot topic for a long time. And you see like Ico and all these different sources of funding have any impact on the VC rolling Silicon Valley? And
yeah, it's a good question. And I'm sure a lot of folks yet during yesterday's session must have talked about this.
As many of you know, there's a big difference right now between blockchain based projects fundraising in the US versus outside the US I think in the US everybody's well aware that the SEC has made it clear that they see literally every single token ization opportunity as a security token, regardless of how much you argue it's a utility token. And because of that, literally every us domicile project will be scrutinized by the SEC from that perspective. So what that means is that unless you are following the SEC regulated reg D process for the registration and fundraising, you are risking a potential reversal of whatever capital of your race or an Ico and
they may have to return all the capital. So because of that, what's happening is that in the US at least, many projects that are trying to do the Icos in a proper manner, realize that they need to follow a proper sec reg D process and that requires time and money, especially legal fees as you would appreciate and because of that, a lot of the projects aren't able to immediately raise an Ico round they are now actually coming back to the seas to raise around a seed capital in order to do an Ico so in many cases today, in the past six months, I would say a lot of the blockchain projects have now been coming back to the seas because they can't go directly out and crowdfund in the same format they used to. Now having said that, in Asia, it's still very prevalent that the Ico route is happening. Many Chinese Korean other entrepreneurs are setting up shop outside of their jurisdiction, whether it's in Switzerland or Singapore or Estonia or Malta, and they're running their Icos out of that I
do believe that over time, those kind of Icos are still going to be able to raise capital. But as was just mentioned, if these projects that have raised capital do not deliver results, and you're already seeing a number of projects that are running out of cash that have no further prospects that are shutting down people are leaving, then I think the average investor is going to be much much more careful about investing in these Ico projects going forward. Thank you.
The only thing I'd probably add to that too is I think especially in the US the average person has a lot of confusion between cryptocurrency and blockchain so as a result blockchain as a pretty among the average investor Miss connotation with what it really is and the associated with with cryptocurrency with the highs and lows of that I think people are getting more nervous to go into blockchain. So it's taking the more savvy investors to invest. But you know, to the point that that was mentioned around, you know, as that money dries up in the in what companies are doing, and there are no exit and return on that what's going to happen in the future kind of those investments. And the SEC is definitely just making it incredibly hard in the US at least, I
think that's also a trend for a lot of other jurisdictions. Yeah, you guys probably take the first step.
so sweetly end of our second quarter of 2018, we noticed that over 570, 57.5 billion has been investing a VC backed companies in the US. So a number that exceeds a full year total four, six of the 10 years in the past. So however, it seems since some people think the investment industry
such that we have fewer deals, but higher value deals, what do you think whether that's her right characterization of you know, the current market.
So I think over the past number of years, the reason that so much for additional capital has come into private venture backed companies is pretty simple. It's because a lot of the big giant companies that are private that should have gone public years ago or not going public. So what that means is that public investors, and these are institutional investors that typically wait to invest in IPO shares and whatnot, they are forced to go earlier stage and the fidelity fidelity's of the world's and the T Rowe Price is for the world they actually have to go ahead and invest in these massive private rounds that are valued at several billion dollars in order to generate the growth returns that their investors are looking for. So that's one aspect so institutional money has gone into the private sector. The second aspect is corporate money has really increased in terms of their participation in the venture capital ecosystem. So I personally have been on the corporate investment side for at least 15 years and
if you look at the recent statistics last year and this year corporate investment as risen in terms of a relative basis to the overall sector to its highest peak so one out of every four deals now includes corporate money and so
a lot of the corporate investors have jumped in and it's not only the traditional technology corporates but frankly even regular industry players from retail industry to consumer packaged goods product companies and so on and so forth they're seeing impact of their businesses and so they want to basically partner with preempt or acquire these disruptive startups before the starters disrupt their businesses so
like TransLink, you mentioned that you breach a lot of deals like a helping entrepreneurs to introduce them commercial partners or even funding from overseas. Do you have any advice for those startups like receiving funding from overseas?
Yeah, I think the well let me put it this way. So any startup in the US I would say that Asia is going to be relevant for them at some point in time, regardless of when that is. And so for example, for a hardware company that could be from day one where you would need supply chain partners, you would need a manufacturing partner as well as the Asian markets being a huge market for consumer hardware opportunities. And even in software, the largest markets for consumer software. And this includes mobile apps and games and other areas. The US is only one out of the four large markets. The other three are in Asia, China, Japan, and Korea. And then enterprise software typically, as always early adopted in the US, but Asia has become also very an aggressive early adopter. So the bottom line is, the important thing is Asia will become relevant. The key is to figure out the right time of when you have the right references. When you have the right internal resources to consider doing anything International, the worst thing you can do is try to go out international too early. When you're not ready, you put a half baked effort into it, it doesn't go well. After the first two or three months, you pull back. And when you actually are ready to swim out there. You're scared because you had a near death experience the first time you went out to swim into the water. And I've seen so many startups miss the right timing to go out that I really encourage you to talk to people that have done it before, hire people that have done it before before you make that leap and start diving.
this is for for Nathaniel, I know you from like Wharton alumni angels. So you have like you pan and Walton is, you know, very famous for their alumni system. How you What do you think of how your farmer can help, you know, people, you know, get found, you know, by using the network, how the network, I help for those startups.
I mean, the reason we started it was simply because of that, the network and trying to get back to local communities. So it's a, it's a global organization. But we have chapters all over the country and opening all over the world to try to get back to the local startups and those different places. So be at Brazil, us, we have one opening in India. So what we're looking for is, you know, any, anyone that can just benefit both enterprise and consumers and, you know, just reach out, there's plenty of ways to kind of bring it in. And we're going for those super early companies that probably don't usually get looked at by traditional VCs or even a lot of the other, you know, bigger Angel groups. So I think it's a good avenue to have access to that Wharton alumni. And then once they come in, you have the power of the entire alumni. So once you're inside, there's so many people that can help you across the world. You know, expand it maybe does even going international, like what you just mentioned. Thank you.
So your experience in investing startups? What are the key Microsoft success you looking for when deciding to invest? I trust a lot of people ask us questions. But I think there's still a lot of entrepreneurs would like to know, from your
perspective, I mean, for how early we invest? It's really tough on the metric side. I mean, ultimately, it comes down to the team, there's a million good ideas out there, and how how easily we think they can execute it because execution is huge. In terms of metrics, it will just depend on you know, is it a SAS business as a consumer business, you know, user base, that kind of thing, but really comes down to team and ability to execute.
Yeah, I would agree with everything I would just encourage, if you're an entrepreneur pitching a business idea, it's a lot more credible, if it's an area that you already have background and familiarity with Sephora semiconductor background engineer is pitching a social mobile app, it's kind of a stretch so it's only makes sense to focus on an area that even though other areas may sound attractive, it really is more credible if you show an opportunity within a domain of expertise that you're familiar with.
Thank you. That's very helpful. Thanks a lot.