John Kim is managing partner of Amasia, a cross-border venture capital firm based in Singapore. Before founding Amasia, he managed trading and investment strategies across commodities, public and private equity, fixed income and derivatives for Mercuria Energy Group, Goldman Sachs, and Korean National Investments.
Recently, in his role at Amasia and managing the family office of his wife’s family, Kim has started researching the agritech sector for investments.
Here he tells me about the journey so far and his particular method of sourcing agritech investments.
When did you start looking at food and agriculture as an area of investment interest?
I used to be a commodities trader and ran the agriculture trading book for Goldman Sachs in Asia, so it’s a space I’m familiar with, although it never went further than commodities.
My wife’s family business, for which I’m now starting to run an investment portfolio, started out life as a food processing business. It’s since diversified into pharmaceuticals, retail, and real estate, but agriculture is certainly still in their DNA.
But it’s my day job managing Amasia, a cross-border venture capital firm, that’s really pushed me further into the sector. The firm is a quasi-multi family office as all the LPs are families from Asia, including my wife’s family.
I believe it makes sense to look for investments in the industries the LPs are involved in because we might discover a technology that will help them improve yields or even disrupt them; so look for both strategic value and an investment return, much like a corporate VC. And when we mapped out our LP families, we realized that many had significant agriculture holdings.
Have you made any investments yet?
We are approaching the sector with a slightly different model to a traditional venture capital firm. When I was first exposed to the venture capital industry, one thing struck me about the process of firms investing in startups that I wasn’t used to. In my previous finance and banking roles, the guy with the money gets pitched, but in venture capital, it’s often the VCs pitching the startups to take their money. For startups, it’s all about getting the right people around the table to turn the business into a unicorn [worth $1 billion].
As an investor, you need to be crystal clear what value you bring to the table to make sure you’re getting into top tier companies. The barriers to entry for startups are much lower, though, and there’s a much wider band of quality.
So, as we thought about how to get to the top tier of startups and ensure we’re value-adding investors, we realized our strength was our LP base and our ability to help with cross-border expansion from the US to Asia.
But even then, after lots of research and getting to the term sheet stage with a couple of companies, we decided to pursue a different model and incubate companies before investing in them first.
What does this incubation involve?
I think it’s safe to say that some investors have been a bit disappointed with the returns and promise for how technology can impact agriculture in the short to medium term, bar, of course, the few big exits like Climate Corporation to Monsanto in 2013. That will change, but a way of de-risking it for us now is to bring the startups over to Asia to meet our agriculture families and see what partnerships we can arrange between them before we make any investment. It could be that they give us a percentage of their revenues in exchange for us distributing their products, for example. This is a nice way to “date” each other before investing.
We have engaged one agritech company with this approach so far. It’s an aerial imaging company. We brought them over to meet the families, and that gave us an order of magnitude more comfort in working with them; it was much more visceral than calling them. Here we have folks that are on our side, with a real business interest in this startup, and when you see their excitement, it’s very comforting. We haven’t invested yet as the company hasn’t had an open round, but it’s now quite likely for a future round.
Which areas of agritech are you looking at in particular?
Broadly speaking, you can split agritech into two main categories; biosciences and information-driven technologies. I think there are some great opportunities in biosciences, but in general VC returns in IT have outperformed those in biotech and clean tech, because in IT you have exponential curves where the power of computing is doubling every 18 months or so, and you can scale much faster if you’re leveraging on that technology. There are some interesting areas of integration between biotech and IT, but in the broad sense, it’s harder to find returns there.
Why did you go with an imaging company for your first collaboration and possible investment?
To optimize the farm and increase profit over the long term, you need to know what’s going on in your fields and there are a few ways to do that: put sensors into the soil or on the plant, or take imaging from above. All of these have their own place and agribusinesses can use them together. The ground sensors can take a very exact reading from a very specific point but can’t necessarily get an overall view of the field. A lot can happen in between sensors and plants, whereas imaging provides a broader view. The combination of the two things would be very powerful, so we might build a portfolio of complementary technologies.
We have a few other agritech companies in the pipeline at the moment and expect some more activity this year, but we haven’t decided anything yet.
I’ll never forget the first time I told my business partner Ramanan that I’d be fasting for the first 21 days of the year. He’s probably the most devout atheist I’ve ever met and I thought he’d be violently opposed to the idea because it would take away from my productivity at work.
RR: “So what does this fasting entail?”
JK: “Well everyone from our church fasts for the first 21 days of the year. You’re supposed to give up something that you place great value on. I used to wrestle and we cut weight before each match, so while I’m going to fast from food it’s not as huge a deal for me as it is for some others. As you know I’m also a total workaholic and that’s much harder for me to give up, so I have decided to also fast from work.”
[Long awkward silence]
JK: “I mean I’m not going to eat but I’ll be drinking liquids every other day. The other off days I’ll be drinking water so I'll be plenty hydrated. And with work I’ll just take half of each day off to go hang out with God, so I’ll still be online.“
RR: “Ok I’m very supportive of you taking time to recharge but I’m also really worried about your health. Also isn’t this the worst possible time to be fasting? The most important deal in the history of our firm just went live!”
JK: “Well in my way of viewing the world, which is admittedly different from yours, the best thing I can do to get this deal done is to fast. I know it’s counterintuitive, but as a way of recognizing God’s primacy in victory, the Israelites used to fast before entering into battle, just when they needed sustenance the most. So it’s actually kind of the best time for me to fast now.”
After explaining to Ramanan he fully supported me that year and every subsequent year, and we’ve hit more and more milestones after periods of fasting.
I don’t believe it’s a transactional thing where God says “if you fast, I’ll give you a deal”, but it’s more about getting my heart into the right place. Once that happens then a natural outflow of that is that all this crazy cosmic stuff goes down.
Most spiritual disciplines have a history of fasting that goes back thousands of years, but only in more modern times have the health benefits of fasting also been well documented. (Check out BBC’s documentary "Eat, Fast, Live Longer")
While I’m a fan of more modern day productivity systems like GTD, maybe it’s worth trying out fasting as a tool to live a more efficient and meaningful life. It’s worked wonders for me and billions of others throughout history.
When Beijing, some months back, announced new regulations to legalize app-based ride-hailing services in China, Uber Technologies Inc. hailed that move as a “historic starting point.”
Indeed, the removal of regulatory uncertainty seemed to set the stage for Uber for an expansion in China that could boost that San Francisco-based firm’s existing $62.5-billion valuation sky-high. No surprise, then, that Uber chief executive Travis Kalanick told theFinancial Times that China was “the number-one priority for Uber's global team."
The ride-sharing giant even announced new services aimed at differentiating its Chinese offering, including boat rides, hot air balloon rides and even a puppy-delivery day, where the company would bring a cute canine to offices for a 15-minute play date.
The new rules in China, announced earlier this summer and intended to take effect later in the year, seemed to set the stage for a David vs. Goliath battle between Uber and Didi Chuxing -- the Chinese transportation company, which dominates more than 80 percent of the market and has backing from Apple, plus a partnership with Uber's biggest U.S. rival, Lyft.
But, then, shockwaves erupted: Within a week of China's announcement, Uber merged its Chinese operations with Didi, bowing out of the battle altogether, in return for a 20 percent stake in the combined company. The deal valued the combined firm at $35 billion, according to Bloomberg, bringing together Didi’s $28 billion valuation with a $7 billion valuation for Uber China, which will continue to operate as a separate brand.
So, what were, and are, the lessons for other companies seeking to build businesses in China? Here are three.
1. Don’t go it alone.
Some have said Uber's deal is a bad one. These naysayers include Tech in Asia’s Charles Custer, who rightly pointed out that Uber could have invested $15 million for a 20 percent stake in Didi in 2013, back when that Chinese concern was valued at $60 million.
Instead, Uber plowed billions into building a failed Chinese operation. Still, it got a lot more right than most internet companies that have previously tried to enter China, such as Microsoft, Google and Facebook, which all tried to go it alone and failed. Instead, Uber learned from LinkedIn. LinkedIn was probably the first U.S. company to succeed in penetrating China, generating great success by ceding control and joining hands with a number of local strategic partners.
Those partners included Chinese internet giant Baidu, which gave LinkedIn access to its mapping and search services, and China Broadband Capital (which also invested in LinkedIn China). Since China is a much more relationship-driven market than the West's rule-of-law-based jurisdictions, finding good partners is absolutely essential.
2. Understand authority.
The U.S. and Chinese cultures differ in their attitude toward authority. The United States was founded by rebels breaking free from their rulers and creating a culture that values adventurers who push the limits of what is acceptable.
By contrast, China’s culture is based on Confucianism, which values filial piety and deference to authority. Government in China has a much stronger hand in the affairs of businesses and can help companies scale, or conversely, shut them down. Uber has a prototypical American culture, led by a chief executive with the self-styled image of a cowboy who shoots first and asks questions later. Uber’s modus operandi is gaining market dominance before dealing with regulatory issues.
Robert Salomon of NYU Stern School of Business has said that Uber should have asked authorities in China for permission, thereby showing respect and understanding of the cultural differences involved. The reality is even more complicated: Chinese companies have operated in gray zones with implicit approval from the Communist Party for years.
What matters is bringing advisors on board who can help navigate the closed-door sessions that characterize the Chinese Communist Party. Uber did this by partnering with numerous state-owned enterprises, including CITIC Securities Co Ltd.
3. Check your model.
Everyone knows that doing business in China is difficult for outsiders, but few entrepreneurs think about how their own business models might raise even more barriers. Tech companies focused on pure software, for example, can cross borders more easily than those like Uber that incorporate physical assets, such as cars, logistics and local payments, not to mention the regulatory headaches disrupted taxi drivers may cause.
Businesses like Uber can still win in overseas markets, but they require incredible commitment. As one example, Amazon deals with physical assets, logistics, local payments and regulatory issues but is quickly gaining ground in India. However, China probably presents an order of magnitude more difficult to penetrate than India's; and Amazon is an order of magnitude larger than Uber. As Anthony Tan, chief exec of Southeast Asian ride-sharing service Grab, told CNBC of ride-hailing apps, "There is a clear advantage of being local."
The story is far from over. Uber’s problems in Asia may not end with its deal with Didi. News that Grab is raising $600 million from Didi and other investors suggests that while the anti-Uber alliance is still intact, we can expect more consolidation in the space.
Interestingly, Uber’s Chinese merger is actually evocative of the sale, in 2005, of Yahoo! Inc.’s business in China to Alibaba, along with its $1 billion investment there. While the deal was initially seen as a failure, it turned out to be one of the best assets Yahoo! owns.
Similarly, Uber will save the $1 billion it was annually plowing into building its China business, so it can now shore up its finances for a potential IPO. Essentially, Uber can now effectively ride Didi’s coattails to a growing valuation for its one-fifth ownership of a company that looks set to dominate ride-sharing in China for years to come.
Today after landing at London Heathrow Airport and sorting out wheelchair assistance for my pregnant wife, I found myself chatting with our buggy driver, a lovely young lady who migrated from Punjab India to the UK 7 years ago.
The conversation naturally gravitated to the Brexit decision, and when I asked her if she had voted she turned and said with a smile, “leave… definitely leave”.
“I know it will be difficult for a couple years, but I just wanted change. We work so hard to make an honest living, and we can’t even afford to get ourselves a decent home. I hope after we exit the EU housing prices will come down and we’ll get more quality jobs as people leave.”
I didn’t sense an ounce of xenophobia in her, and I found myself thinking that if I were in her shoes I’d probably feel the same way. But what troubles me is that this could be the beginning of a global phenomenon. Note supporters of a certain presidential candidate who promises to build a wall and kick Muslims out of America.
If the wildly volatile equity and fx market reactions to the Brexit result are any indication, it seems that isolation and uncertainty will likely not bring the desired effect of a stronger economy and more jobs. The fact that countries that trade with each other don’t go to war has been frequently referenced. But beyond the spheres of macroeconomics and world peace, the impact of a structural shift to isolation would make perhaps an even more pronounced impact in the sphere of technology and entrepreneurship. To understand why let’s take a look at what has happened over the past few decades.
With the paving of roads, proliferation of free trade agreements and increased flight frequencies, companies who have dealt primarily with physical goods and services (what we venture capitalists call the realm of atoms) have come to experience more unified markets that have brought cheaper products to consumers and cheaper costs to businesses. But if tighter supply chains rolled across national borders like barrels of molasses, a flood of information crossed those same boundaries to encompass every cavity with just a crack of an opening. Companies that were engaged in selling digital products experienced much more unified markets much faster simply because bits travel more seamlessly than atoms.
A list of the world’s top ten retailers shows a group of players with relatively balanced market capitalizations across Europe and the United States (with some from Asia certainly a bit further down the list). A freer movement of atoms has certainly helped them to integrate globally, but compare that to Google’s near categorical dominance across the world, which illustrates the winner take all dynamic of seamless digital markets.
(A reversion to disparate markets would have a much more pronounced impact on information based businesses, the dominant domain of innovation and entrepreneurship)
Unified markets lead to more innovation because successful startups can achieve escape velocity faster and reach much larger scale than those targeting disparate markets. This leads to more venture capital for startups and more entrepreneurs who are motivated by outsized financial returns and the chance to make a global impact. If every country had a national intranet like North Korea we’d have fewer venture capitalists, fewer entrepreneurs, and many more sub-par search engines targeting each country. Globalization and innovation are two sides of the same coin.
Also, while the displacement and disruption do hurt in the short-term, history has shown that in the long-term society does benefit from globalization and innovation. Gutenberg’s printing press dealt a blow to bible copying monks. They were pained for a while but eventually they made more beer and lived a good life. More importantly, bibles and books in general, which were reserved for the elite became available to the masses. Though it may not feel like it right away the eventual beneficiary of globalization and innovation is the average citizen.
Unfortunately our buggy ride did not last long enough to articulate this to our driver, but somehow we must address the growing urge towards isolation and create as efficient, as peaceful and as connected a world as possible for generations to come.
A few years back it dawned on me that internet activity was moving to video, and I wanted to be a part of it. After consulting some friends on the virtues of Finalcut Pro vs Adobe Premiere, I signed up for a Premiere class on Lynda.com to start my production journey. While the content was thorough, I found the presentation a bit dry and not well suited for mobile. So within a couple months I experienced what usually happens when I discover a new earth shattering idea. I forgot all about it. My hopes of riding the video wave to the height of vlogger stardom were dashed in an instant.
Then six months later my college buddy Mo Koyfman revived my machinations over dinner when he mentioned Skillshare to me. Mo was a partner at Spark Capital at the time, and I had asked him about which of his portfolio companies was considering international expansion. I went home, signed up for one of the many Skillshare classes on Premiere and found the content much more digestible especially on mobile than some of the other platforms I had tried. Skillshare was also focused on the creative class, so beyond the ability to improve my technical chops I could also learn about design leadership from John Maeda or social media marketing from Gary Vaynerchuk.
As a very happy customer of the platform I told my partner Ramanan (who leads edtech efforts here at Amasia) about the company and CEO Michael Karnjanaprakorn with whom I had been tremendously impressed. In addition to a great product that fit my specific needs, a couple macro trends got us excited about the opportunity.
1. While historically intelligence was measured by the ability to store and recall information, in an age of infinite computing what sets capable people apart from incapable people is increasingly creativity. A platform focused on training the creative class prepared the world to go where the proverbial puck was heading.
2. In my parents generation folks worked for one employer their entire lives. My peers seem to be hopping around much more but the big trend for the next generation is a shift towards entrepreneurship and contract work. We can start to see it today in everything from photojournalists (leaving newspapers and working freelance) to mbas (choosing the valley over wall street) to uber drivers and airbnb hosts. In an era of large organizations and deep specialization, the finance guy didn’t need to know how to build a website. But in tomorrow’s world entrepreneurs of all backgrounds will need some basic skills around creativity. (Case in point: Yours truly… the VC who wants to know video)
Ramanan developed a great relationship with Michael and ended up co-leading the Series B financing. We're excited to work together on their expansion efforts, and perhaps as importantly just wanted to say thanks to Mo, Michael and the team for reviving hope in my video ventures. I’m definitely still a novice, but thanks to Skillshare I’m excited about the road ahead. Please feel free to view a couple Skillshare enabled videos below.
The Valley has long propagated the idea that nowhere else on planet earth matters much. The thinking goes that “since we are the center of all innovation and everyone follows what we do, there’s no need to draw inspiration from overseas and no need to focus on the distraction of international markets.” This may have been true for most of history because our universe was largely disconnected but today insular founders may disrupt themselves with the very technologies they create to connect the globe.
In the world of today and even more so in the world of tomorrow, entrepreneurs must adopt a global mindset to thrive and survive. How?
Inward – Out: Global Markets
The truth is that companies with limited resources are well served by attacking a small market segment and dominating it before branching out into other areas. In the world of yesterday where bits and atoms incurred significant friction traveling across geographic boundaries, it made sense to segment markets based on those same geographic boundaries. But as that friction deteriorates with advances in technology, market segmentation by geography makes less and less sense.
As one example, consider that a father and son in asia had more in common with each other than they did with a similar duo in the west up until even a generation ago. But now many would say that millenials around the world, because they are connected like never before, have much more in common with each other than they do with their parents in the very same country. As products, information, and culture travel across borders more seamlessly, CEOs must understand the nuances of global markets to survive.
Outward – In: Global Inspiration
Founders must not only focus on expanding outwards to a greater degree, they must also focus on drawing inspiration from the rest of the world like never before. As one example China for most of its history copied products from the US, but we’re now seeing the opposite flow in various verticals. Sources say Facebook Messenger’s product roadmap is essentially a list of current features from Wechat, which is far more advanced than any messaging platform we have in the west.
This is now more relevant than ever before, but the reality is that Silicon Valley always took inspiration from the rest of the world. Steve Jobs incorporated design elements into Apple products inspired by from eastern philosophy. In fact the foundation of almost every startup in the Valley (innovation accounting and the Lean startup method) was modeled after an Asian idea (Just in Time Manufacturing from Japan).
Heuristics can help as we build products and companies, but can also hurt if we fail to adjust them when necessary. The idea that international does not matter worked well in the local and linear world of yesterday, but in the exponential and connected world of tomorrow, entrepreneurs and investors who fail to adopt a global mindset are toast.