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How mentors can give startups an edge

Apr 30. 2018
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PANELLISTS agree that new entrepreneurs need mentoring to tell their story and hone a business plan that excites investors.

In a digital era where entrepreneurship is the engine of technological innovation and global markets are more connected than ever, successful entrepreneurs are those who can adapt while staying true to their roots.

At a roundtable event in Hong Kong, held during the Internet Economy Summit, panellists shared their views on how startups can achieve success in today’s innovation-driven and fast-changing market. The theme of the event was Investor Dialogue: Powering Tomorrow’s Entrepreneurial Success.

“The concept of local doesn’t exist anymore; the world today is one marketplace,” said Yossi Vardi, chairman of Israeli investment firm International Technologies.

Innovation and technology areas such as fintech, artificial intelligence, smart cities and medtech are gaining more and more momentum among entrepreneurs. And regional tech hubs like Hong Kong’s Cyberport are creating new ways to support these startups.

“We are going to make it a new industry in the digital economy that can help young people upgrade their digital technology skills, but our biggest problem is how to actually make sure we have enough smart money in order to attract the best entrepreneurs,” said Lee George Lam, chairman of the Hong Kong Cyberport Management Company.

Operated by professional management teams, Cyberport helps startups build their companies and scale up faster, rather than focus on the time-consuming fundraising process.

“We’re evolving now into an investor,” said Lam. “We have set up funds and investment networks.”

Lam said a green channel for pre-revenue digital tech companies should be established on the Hong Kong stock exchange, making one of the biggest capital markets in the world more accessible.

“Entrepreneurs go through various stages of psychological development. And that is something for both entrepreneurs and investors to take into consideration,” said Kersten Hui, vice-chairman of Infinity Equity Management Co. 

“Some of the early-stage mistakes entrepreneurs tend to make are often driven by very dynamic situations, especially first-time startups,” he said. “If we can reduce some of these mistakes and offer some input during their psychological development, this will bring both investors and startup companies a higher success rate.”

Startups may have very different expertise, but they are all intended to offer solutions to their customers from the get-go.

“The size of the market or the opportunity to solve the problems of the customers was the No 1 thing on our list when we started Illumio,” said Andrew Rubin, CEO and co-founder of the Silicon Valley-based cybersecurity specialist. “You can collect a group of great people, but you don’t have control over the market.”

“In the cybersecurity space, we focus on segmentation, which has quickly become a multibillion-dollar business just a couple of years ago,” said Rubin. “If you have great people and great technologies, it would be a huge opportunity to build a sustainable, durable and valuable company because the market needed a solution.”

Attracting investors is the next step. “People often forget the No 1 thing on the list for whatever company, especially when it comes to fundraising, is the ability to tell a story,” said Rubin.

Cyberport’s Lam believes this process is usually harder behind the scenes than it may seem from the outside. “As a smart investor, we also need to help our startups understand their shortcomings, particularly their business plan, team and approach,” said Lam. “There is a learning process as well.”

Vardi from International Technologies said: “I don’t think the rules of attracting investment can be generalised — it has to do with the market size, and the opportunity. But it mainly has to do with the decision of the people behind the project.” 

Vardi raised the question of whether the amount of money raised by startups at the beginning stage would have a significant effect on their decision-making process later. “Because companies tend to spend a lot at the beginning if you raised too much and you’ll be at the mercy of the funders,” he said.

Rubin from Illumio disagreed, however. “Companies are very much like people and they have DNA. DNA is part of the makeup of who we are. Companies are the same,” he said. “Having raised US$267.5 million in less than five years doesn’t determine how we make decisions on what to spend or what to invest in.”

Rubin believes a startup company’s decision to accelerate growth or ramp up investment does not start with how much money is in its account. 

Instead, it begins with its business plan and whether or not it is effective. 

He added: “Much like we all have DNA, if the DNA of the company is built around that premise, then it doesn’t matter how much money it has.”

Backing up Rubin’s comment, Hui from Infinity Equity Management cited a study his firm did on the psychological development of entrepreneurs pre- and post-funding.

“People’s DNA doesn’t change because of money,” said Hui. “Entrepreneurs that didn’t grow up in an environment of rich capital would use money in a proper manner. Most entrepreneurs don’t use capital to solve their problem, they always go back to what they grew up with.”

Lam spoke of the need among startup companies for technology directors and mentors. 

“Tech companies need good directors — even the best team with the best DNA still needs guidance and oversight,” said Lam. “Mentors will tell startups the dos and don’ts — even the best teams need to be brought up.”

This was echoed by Vardi who said: “Good mentors are more important than investors.”

As the market evolves, it is no longer enough for entrepreneurs to focus only on one particular field and lack knowledge in other areas.

“To be cross-disciplinary is one of the key success factors for entrepreneurs — those who can adapt to new technologies are the winners,” said Hui. “It’s definitely a differentiating factor between winning and losing companies.”

The panel noted that there are now more ways to tackle challenges. In the past, problems gave rise to singular solutions, but now sets of solutions are being created.

“In healthcare, for example, we’ve had a singular path for so many years, but now technology is fundamentally changing that,” said Rubin.

Lam said that Cyberport may have to “refocus on digital technology”. “Even half of the biotech industry now is computing, digital is the new English, and artificial intelligence is the new software,” he said, recognising the increasing weight of innovative technologies in the world’s development.

“We have to fully adopt the regional tech potential, but domain knowledge is also important,” he said.

“The opportunities are many and it’s up to our imagination. The most important thing is to nurture the entrepreneurial spirit with the help of smart money and all the mentors we can bring,” said Lam. “It’s a collective effort — not just government but society at large and the business sector.”

Rubin said: “We are living in a global economy, there’s no more ‘US, Europe, Asia’ … and as an entrepreneur we have the responsibility to remember those things and that we’re all connected. The opportunities should be looked at through that lens.”

“Your mind-set is your biggest weapon,” Hui suggested to entrepreneurs. “So, open your mind and don’t stop learning.”


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