Dr. Jeffrey Chi is a vice chairman of Vickers Venture Partners, and he has been a member of the investment committee since 2005. He has also served as the Chairman of Singapore Venture Capital Association between 2013 and 2017. He is interested in startups that offer breakthrough technologies and are going to make a difference to the world.
How it's all started? How did you decide to enter the venture investment business?
Vickers started 15 years ago when I came together with my partner back in 2005 and started this firm together. We both have technical engineering backgrounds, we both have worked in finance before, and venture capital seemed to be at the intersection of engineering and finance. In both our cases, this was a mid-career decision. Personally I was a management consultant before and I had a lovely idea of working with young entrepreneurs and building something, so it seemed like a good career switch for me, going to venture.
How do you select startups to support? What industries are you interested in and what are your criteria?
We are the deep tech investors, and I like to describe our business as investing in breakthrough technologies that solve big problems. We find technologies that make a difference, that solve very big problems, and the reason for this is providing solutions for these big problems is often attached to the very large market, and that is basically how our strategies would drive returns for our investors.
What geography are you interested in?
We expect most of our deals to come through what we call hotspots of innovation. That would include the US, Europe, Southeast Asia and China. Nevertheless, we are not restricted in where we invest because we are a global fund.
At what stage do you prefer to enter?
We typically invest in the first institutional round, in the series A, our typical first check is somewhere between 3 to 10 million dollars. That is when we get involved. One of the things that we are allowed to do is to be able to follow on investments beyond the life of the existing funds. Therefore, we sometimes are able to enter very long-term relationships with our entrepreneurs. This is quite important because these days the exit events of the liquidity basically take much longer than the life of a fund, and funds who don’t have an amendment like us often invest at the early stages and are not able to follow through in the later stages of the company.
What a startup should have to propose to catch your attention?
Breakthrough technologies: what is the breakthrough, why is this technology better than anything else on the market and what competitive advantage is associated with the technology, but also – what big problem do you address? Because we want to see a big market attached to that. Yes, you are going to make a difference, and how profitable is that difference going to make the company?
Was there any unusual pitch that had immediately caught your attention?
We’ve been in business long enough, and there have been quite a few pitches that caught my attention right from the beginning. And if you think about it, they were able to articulate how they were different, how they were competing and where the big opportunity for them was to come in.
What qualities you are looking for in teams?
The ability to communicate, not necessarily through a pitch deck, not necessarily through a business plan. Sometimes it is just the founder being able to tell the story well, but the key thing is to get your key points across.
Investors prefer to work with teams. But have you ever supported a one-person startup?
I think we have. There are a few businesses where have sufficient confidence in the entrepreneur and at the point of time of our investment decision they had not built the team yet. But that being said, they had a very clear idea of who they would want to hire, what personalities they are going to hire. And typically it’s the type of company where the idea is more important than the actual permutation. So, in the early days of the formation of the idea, we might be able to invest. But I must say, it’s not very frequent that we do that.
How many startup projects do you review per year?
As a firm, we probably see more than a thousand deals.
How startup teams usually find you?
Our team is 36 people, so everyone in a way contributes to the deal sourcing. Very often it’s the relationships that the team has with either the founders or common friends of the founders and ours or intermediaries that might introduce the companies to us. So there are many various ways that companies find us. If they hear about us, they can always go to our website, so there are ways in which they can always get in touch.
Do you scout for interesting ideas and perspective startups?
We do a fair bit of research if we like certain fields at the particular point of time or we see a business within an interesting field going up and meeting the values of our company we might actually go and scout for similar companies out there. Alternatively, if we see a business model in a particular job field and see that that model might work better in Asia than in the US, we might look for a similar Asian company. So yes, we do scout.
What is your due diligence procedure and how long does it take you to cover the whole way from the first meeting with founders to contact and check signing?
On average, till the time the check actually hits the founders, it’s four to six months. The longest part of our process is that every member of my investment committee needs to meet with the founders. So that takes a while to arrange but it’s important because venture capital is a people business. You always hear VCs talk about the most important factor in decision-making is the people. So, we need to feel comfortable with the people. There’s no point founding a deal if one of the IC members have not met the team. Because we are investors in deep tech, we do a technical deep dive into the technology, sometimes read papers associated with that, we talk to experts in certain fields to get a better feel of that, we go through the history of the company finances, the performance, evaluate the strengths. All those form their part in our due diligence.
Your opinion: the best margin from investment to exit?
I think it really depends on the company. Sometimes because we do invest globally, we do sometimes exit in the local markets. We sometimes look for the buyers who are trying to enter specific markets. I think the most important thing to think about is how you extract the most value for the shareholders of the company. That’s not just us as investors but also the long-term viability of the company on the picked market.
And what are your red flags? What can you turn from investment or make you stop the cooperation with a company, if you’d already invested?
It is sometimes not easy to do, but we will not throw good money after bad money. And if it’s a business that we feel that it’s not going to work out, then we just pull the plug and stop investing. That’s one.
Other red flags are related to sort of integrity or ethical issues on the founding teams, so if there’s anything there, we would not invest in it either.
Have you ever rejected a cooperation proposal and then regret it?
All the time. Our investment strategy is to invest in deep tech companies, and we see a lot of interesting opportunities that don’t fit our strategy. So we sometimes have to make a tough choice, to say "Yes, we think this is going to make money, but it’s not a part of our strategy, we must stay focused on the strategy that we have". Our gut feel very often works out to be right and those companies did eventually make money, and there’s a little bit of regret: we could’ve made good returns for our investors, but we were not prepared to move outside of our investment strategy. You win some, you lose some.
Accepted and regret?
I think failure is part of the business, so I wouldn’t say regret. I think those tryouts were very decent. The industry average for a home run is something like 10–15%, ours is 30+%. The business is not about never losing money, it is about winning big on the deals that matter. If we make money on all our deals, one could argue that we are not making tough risks. The venture capital business is about taking the risk, it is about spreading the risk across different companies. I wouldn’t say that we actually regret having failures.
Can you name industries you really like, yet will never invest into?
I wouldn’t say we are crypto fund, or we want to do crypto stuff, or it’s definitely the way, but there are some quite interesting opportunities in that space, but we would not be able to touch those.
What was the most unusual startup you ever supported?
I think all our companies are fairly unique. They all are going to make a big difference. We have a solution to single-used plastic, a company that delivers geothermal energy and we have an X-ray machine that is a thousand times the resolution of the traditional X-ray machine.
We have one of our big companies, the US-based pharmaceutical company that is called Samumed. They, as quite a few other companies, will change the world. They are a true regenerative medicine company, and their drugs are pushing through critical trials and have an opportunity to regenerate parts of a human body.
In a not so hypothetical situation, when you see that several startups can perfectly complement each other and create an incredible product, what you do? Or would do, if it has never happened yet?
A lot of our companies tend to collaborate with each other, but I wouldn’t say many of them perfectly complement each other. If you’re sitting as an investor of one company and you’ve found a complementary company, I think the first thing that you start is establishing some cooperation between these two companies. Then, if it makes more sense, you think about having one company buying or selling it to the other company. And we have seen quite a bit of that within the portfolio. Not with our old companies but with other ones.
We have sold one of our Indonesian companies to the strategic Chinese buyer. The business that we’ve had in Indonesia was in a certain area, and the strategic investor initially was a tech giant in China and dominant in that particular field. The complementary came that we were able to improve our user experience and the performance of the mentioned company by the factor of five times when they got involved and started helping us with the backend and sort of AI they used. It started with a collaboration that they came in as a minority investor and ended with us selling them the whole company. Because we were able to penetrate our market that thee had been unable to penetrate. So the match was: they had better technology, we had better market access. So, one of the things that we do as investors is we help our companies to think through how to structure the relationship and ultimately succeed in a sale.
Have you ever started a business or invested into the one with clearly no existing demand, yet your guts said that there will be one?
Yes, I think we have when we involved early enough. Companies like that need to demonstrate that they have the ability to build the declared technology or that it is relatively easy to be able to build that up. If you think about the risk of developing the technology, I think that is something that we need to get around with, that there’s very little risk in that developing with the people that we have on board.
Have you invested in projects you do not expect revenue in your entire life?
Our liability is to generate financial returns for our investors. Even if you think about some of the larger companies in today’s tech world that are still losing money, they all promise to develop revenues and profits at some point in their life. We generally would need to see a path to profitability; we would not be able to invest if we didn’t see that.
Can you name three most breakthrough startups in history? Let’s limit it with the last 50 years.
If you think about the stages on which these companies are, a lot of them are probably what we see as the large companies of today, like Apple, IBM in their early days… I think a little further down the road, I look at a few powerful companies and I think that we have a good potential of being there. Like the Samumed I’ve mentioned, basically leading the world with regenerative medicine, RWDC is the only skillable solution we have found for the single-used plastic. Those are very powerful business models. We will see how they execute, but we are quite hopeful that they will generate very good returns for us.
And do you like where you are now in terms of your current career? Or, maybe, you would like to try something new to apply your knowledge and ideas to?
This career is very interesting and fulfilling for me. There are a few aspects of it. The first one is being able to work with the young entrepreneurs, to help them realize their dreams. The second one is to be able to help build a future together with the entrepreneurs, and in our case – not just build a new app or build a new business together with the founders, but also, in our case because of our investment strategy – making a real difference in the world. From that perspective, it is very fulfilling. As our business grows, the role evolves as well from not just making investments, but also to mentoring the team that we’re growing and making sure that we are bringing up the new generation of VCs. So yes, I would not think about changing my career.
