Nick: You're listening to the Growth Islands Podcast, a show about what it takes for businesses to truly seize the opportunities that exist in diverse and exciting Southeast Asia, or SEA, as we like to call it. My name is Nick Nash. I'm one of the co-founders of Asia Partners, our growth equity firm focused on tech and tech-enabled businesses here in Southeast asia.
Rovik: And I am Rovik from Singapore Economic Development Board, also known as the EDB, the lead government agency responsible for strategies that enhance Singapore's position as the global centre for business innovation and talents. In each episode, we have the unique opportunity to talk to a business leader in a fast-growing startup to understand how they are scaling their businesses in the region. We get to the heart of the issue and hear first hand real stories that we hope will inspire you to similarly take the journey to capture growth in SEA.
Nick: Do give us a follow on whichever podcast platform you're listening on and feel free to reach out to either the EDB or Asia Partners to find out more.
Rovik: Today's episode is all about raising capital. Southeast Asia is home to a vibrant funding ecosystem that is perhaps a bit underrated and Singapore tech startups raised $11.2 billion in the first nine months of 2021, more than double what was booked in 2020. It's a clear sign that startups who choose Singapore and SEA as their home will get access to the balance that they need to grow at scale.
Nick: But given the myriad of options from which to raise capital - from angels to venture capital firms, even family offices, how should businesses think about strategically finding partners in this region?
Today, we chat with my good friend, Juliet Zhu, group president and CFO of Carsome, which is one of Southeast Asia's leading used car trading platforms, and which recently raised its series E funding round, bringing it to a very impressive $1.7 billion valuation.
Prior to her current roles, Juliet was actively involved in the venture capital space. She was a director or board member in multiple funds and companies, including Fosun RZ Capital, a global VC under the Hong Kong conglomerate Fosun group, and she's lived and worked in Singapore for the past 20 years.
We're really excited to talk to her today about her views on the capital ecosystem and entrepreneurial ecosystem in Singapore and Southeast Asia. Juliet, welcome to the show.
Juliet: Thank you for having me.
[02’23”] - Juliet’s Background
Nick: Well, Juliet, it is so much fun to do this podcast together and I've had the fun of getting to know you these past two or three years as business partners together in Carsome. Before we jump into some of the questions that we're really keen to ask you, tell us about Juliet. How did Juliet happen to be here in Singapore, co-leading one of the most interesting e-commerce businesses in Southeast Asia?
Juliet: I wasn't born here, came from Northern China. So when I was 15, a few months after finishing my middle school exam, I got a call from my school principal. I was a diligent student. I scored pretty well in tests and they invited the top 20 students to a room and told us about this country called Singapore and this scholarship program. Initially, there wasn't a lot of information that was shared to the students and the parents. So the school principal literally told us, “We don't know much who will be open to take such an exam.”
And out of the 20 students in the room, I was the only one that put up my hand. and then I realised, actually, I need to make a decision whether I want to take this opportunity to a completely different country. I got my first computer in 2000, started my first email address to apply for this exam. So, that was the beginning of the journey – lots of fun, lots of struggles and you become a very different person from who you would have become if you stayed home.
Rovik: Cool. So we're going to fill in the gaps in your journey in just a bit, but I want to fast forward to today, where Carsome has just concluded its recent series E round. Congratulations.
Juliet: Thank you.
Rovik: And just to get our listeners familiar, maybe you could share what Carsome is and what you guys do.
[04’12”] - What is Carsome
Juliet: We're the largest used car e-commerce platform in Southeast Asia. We are present in four countries currently, Indonesia, Malaysia, Thailand, and Singapore. Our mission is to bring trust, transparency and choice to consumers in the region, and to use data and technology to empower the decision-making. We really want to change an industry that has not changed for the past 30 years.
Rovik: Yeah. When I think about used cars, I think about the major economics problem, which is the lemon issue, right? Like people selling cars without actually knowing full information. So trust and transparency seems like a big part of it and in Southeast Asia, where I can imagine that the market is still developing, you guys have really done a good job at bringing a lot of light to areas that needed transformation.
Juliet: We try our best. We're still at a very, very early stage of accomplishing our mission. But it's exciting, it's rewarding to see how what we're doing actually impacts lives of people who, especially now, can't wait to move forward with their lives after COVID.
[05’18”] - Female Leadership in the Automotive Sector
Rovik: And you being a female founder and part of the leadership team is also very cool, especially in the automotive sector, which traditionally you think (of as a) male dominated sort of space, right? So how has that been like for you being a female leader and to negotiate and talk to a lot of the folks who are also in this space who are probably male executives?
Juliet: Yeah, exactly. So, fun fact, in automotive industry, the average female representation in leadership roles is less than 10%.
So I think as a company, the tone at the top is extremely crucial. I think the biggest challenge for our industry is actually to attract more female talents to join the company, to join the sector. That was the biggest challenge, but through our efforts and consistent communication and leading by doing, today we have about 35% of our leadership positions filled by females.
Rovik: That's very cool, definitely an inspiration to a lot of leadership teams out there. Now, one of the cool things about Carsome that I was definitely drawn to was your story of how you were able to find partners to do fundraising and raise capital for your business. What strategies and practices have been helpful in your fundraising journey that you can share with companies out there?
Juliet: The experience can be very different for each company, each founder. If you interview any founder, they will give you a very different fundraising experience. So, love at first sights do happen. I think what I want to probably share today is how the rest of us build the systematic approach to a successful relationship, not just at the deal level, but also post-deal. Loosely I want to put the fundraising phase into probably three, four phases.
[06’59”] - Fundraising Step One - Plan the fundraise
Juliet: Number one is plan the fundraise. Do not underestimate how distracting the fundraising process can be for the company . Build a dedicated team and a pool of resources to the process. Do not fundraise casually – that's something , I have seen, as an investor, that founders occasionally do.
Rovik: Is that because fundraising can take up so much time that you lose sight or you may be distracted from your core business?
Juliet: You are definitely going to be distracted from your core business. So you need to prepare the team who is going to be making certain decisions, who is going to be running regular organisational, operational calls, and how much time do you spend on fundraising everyday? Because another danger of fundraising casually is you are not controlling the process and things spiral out of your control. You start to develop your pitch with investors at different point in time, and the investors they end up in different phases in their own decision-making. So then you need to make very complex, very difficult decisions, with limited input, when you need to make the decision. And plan it at least six months before you need money to give yourself the flexibility.
[08’09”] - Fundraising Step Two - Research
Nick: Juliet, one of the things that I find so interesting about the fundraising journey is that there are some investors, because of the homework they've done ahead of time, who in really just a matter of weeks can come to a very sensible decision, and of course there are other investors, because maybe their attentions have been elsewhere, they'll need a little bit more onboarding. The investors that are able to make a decision to partner with you quickly– do they ask different and maybe even better questions?
Juliet: They do. They definitely do. And actually that's the second phase I was going to talk about – the research, the selection is mutual.
So, as a founder, as an entrepreneur, what helps you a lot is actually proactively doing this research and filtering of the investors you want to talk to and do not wait for the lucky investors to stumble upon your company. Actively build a relationship. And I think that's the same for a good investor.
Not every investor consciously approach companies and propose a deal, when the company is not actively fundraising. It happens, but it's not very common. So the investors, they will show their interest in a few sectors and stages. but generally, if the company is not fundraising, the investors leave you alone.
So you still need to plan your fundraise and understand how to make the time spent with the investor most efficient for both. So talking to the right investors at the right time is extremely important.
The reality is there are more investors a company can choose than probably companies an investor can choose in their segment of investments. (laughs)
Rovik: It's like, would you say it's a buyer’s market in that sense?
Juliet: I think for our region, historically, the leverage has been with the investment side. I'm hoping to see that changing in the next few years to come. And the founders of the companies will have more options, more choices to choose the right investors to add value that the company needs for the next few steps, next few years.
Nick: You definitely see it, Rovik, in terms of the way venture firms and growth firms are organized in Southeast Asia. In Silicon valley or New York or London, they'll often have within their firms sector experts. So I'm the e-commerce person, I'm the software person; here, I would say we're still in the earlier stage of that.
And once you start to see that, then you'll recognize that they actually need to build that capability to market to Juliet, to put their best foot forward.
Rovik: So you've had people basically trying to offer value in very different ways. and how do you evaluate some of those offers?
Juliet: Certain investors, they're better at a beginning, like zero-to-one type of investor. They have the venture builder type of capability that can give you the network connection to make your first product to market.
There will be investors who are great at giving advice in terms of corporate governance, in terms of public market plans, in terms of the right construct of board and share and cap table. That's definitely more valuable towards the later stage. When you're just starting, those things don't make sense.
Nick: Juliet, you mentioned that there were two more phases. You told us about step one and step two. Tell us about three and four.
[11’19”] - Fundraising Step Three - Develop the Conversation
Juliet: So three is actually developing the conversation with the investors. Just like in a relationship you want the communication to be transparent and concise. As a founder, as entrepreneur, you know millions of data points about a business and you can zoom into any of them. But the investors, they don't have the full picture, the context of what you're talking about. So it’s really important to paint a bigger picture to guide the investor to appreciate what you're building.
And be transparent. So if there is any area that an investor wants to zoom into, of course, be upfront and concise about the strength and weakness of the company, and most investors will appreciate that.
I think trying to defend, trying to argue in a conversation is usually less than productive. There are investors who told me, "You mean you can sell cars online? I don't believe it."
And the most effective thing you can say, “ I see why you don't believe it…and let me paint you a picture. So-.
Rovik: Selling that vision, basically.
Juliet: Yeah. And instead of arguing and debating, like you just even seeing different things and it's a mistake to think everyone knows what you know.
Nick: But I'm not even sure I would use the word selling. It's super interesting. There's a bit of a myth in entrepreneurial circles that it's a selling process. We worked very closely with Juliet for many years, getting the investment off the ground, and then of course working hand in hand. And I always think of Juliet more as a really well-informed museum guide.
Rovik: Oh, I like that.
Nick: She's almost more of like a docent-
Rovik:Metaphor. Yeah.
Nick: Right. So she basically says, look, these are some of our better paintings. These paintings aren't quite as good, but I'm going to try to make sure that after you've walked the halls of the national gallery with me, you have a pretty good sense for what we've gotten here.
And that's actually incredibly confidence building. Never once did we feel like, you know, she was the gift store-, you know, cashier.
Rovik: Right.
Nick: She was the museum curator.
Juliet: I completely agree. And this is not just because selling generally doesn't help build confidence. But also, what's most critical for a founder is to keep the relationship strong and growing post-deal.
So if you're selling at a deal-making process, there will be a point in the journey that the investors found out that they'd been sold.
Nick: Isn't there Juliet a parallel to selling someone a used car? Because actually what you guys do is you have a 175-point inspection. And what I always loved about the offering was you almost have like a medical blood test on the car. So, you know, if the cholesterol is a little high or if the A1C is a lil’.., but you sort of know what you're getting.
Juliet:: So we show you the car. We show you the profile of the car and why you need it and how can it improve your life. But we also show the defects, the imperfections in really high resolution pictures, just in case you miss it. Let me tell you what are the things that are wrong.
Rovik: No one can blame you for hiding all of these defects.
Nick: And not just that they cannot blame you, they actually trust you more. They actually really appreciate the fact that you're super open about what it is that you're getting. So what's the fourth stage?
Rovik: Yeah I'm excited now.
Nick: You've built anticipation on the side of the room.
[14’36”] - Fundraising Step Four - Closing
Juliet: So, I'm just talking about the deal here. There is a lot I want to talk about post-deal relationship, board management, but the conversation for today is – closing. So fourth stage - closing. Pick your battles. So you can't win everything in the negotiation.
Nick: I thought you won everything in negotiation. That was my recollection.
Juliet: (laughs) Well I won what I thought was most important for the business. And actually the negotiation stage is the best stage to align with the investor – what the long-term vision for the company is; what kind of flexibility you want to create; which direction – be it M&A, be it country expansion; where do you want to go?
During that negotiation stage, you understand the expectation of the investor in terms of their timeline, their return profile, what they hope to see, what's success looks like for the company, and whether it's in alignment with the company's own vision. That's extremely important.
And there will be compromises you make. And this is the stage where both sides are on different sides of the table. So there is interest to protect, there's interest to protect, and understanding that and finding middle ground on that and not compromise on the long term vision.
I've seen this stage drag on for a very long time. And remember the first thing – this process can be very distracting for the running of the business. So there will be a point you say, “Let's compromise on some of the commercial terms and get it moving, so we can continue to build the business.”
[16’08”] - Timeline for Fundraising
Rovik: What is that timeline looking like for you? I guess it differs from stage to stage, but if you could kind of give some texture to that.
Juliet: The whole process?
Rovik: Yeah.
Juliet: A well-run fundraising process from the beginning to an end, that's initiated by the company, ideally fits within a six month window - from the initial planning. So I'm not talking about like a first conversation with an investor, which is already in the middle of the process. So, from the planning, from building your data room, then to the initial outreach to the investor community, to shortlisting of the conversation and deciding who you spend more time with, to term sheet, discussing the initial set of terms towards closing and then closing the conversation and completion.
Rovik: And I guess it's pretty cool that we have both sides of the negotiation here, with Nick in the room as well. So I was going to ask Nick, you know, based on everything -
Nick: You are giving us too much credit. We just gave Juliet what she wanted.
(laughs)
Rovik: Well, you know, what stood out for you about this process? What was some of the things that you thought were done well and that you think other companies should try to emulate?
Nick: Well, first of all, Juliet acquitted herself, magnificently. I mean, it was really a very professional and thoughtful approach to solving what is almost like an intricate clockwork sort of puzzle. You know, one of the things that was really interesting about the way we did it is we actually created a little Excel calculator tool that basically helped to crystallise what was important for us and what was important for her. And we, we all became owners of this thing to sort of press a button here, or press a button there and see how on a weighted basis it ended up in the right place.
[17’41”] - What is unique about the SEA fundraising ecosystem
Rovik: So before this role, you've also had a lot of experience in the VC space and the financial space. It's quite interesting that Carsome was doing a lot of the fundraising in what I think a lot of people are saying is sort of a promising era of the startup ecosystem in Southeast Asia.
So I'm curious, you know, given your background and experience, and then also seeing some of the early stages of the ecosystem being built in Singapore in Southeast Asia, what would you say is unique about the fundraising ecosystem here? What should people take note of ?
Juliet: I think we're still at the early stages, really exciting era. So the biggest challenge I've personally had is not just specifically to Carsome, but overall is really to explain the nuances of the region.
It's not one country. It's not America and it's not China. And explaining that, sometimes can take up 90% of the whole first call. So there will be investors – when I explained how fragmented used car market is, how in each of the country, the largest used car retailer sells 200, 300 cars a month, and the US investors are here to look for CarMax.
And the questions will be like… What do you mean there isn't one? What do you mean there isn't a database that keeps track of everyone's credit score?
Rovik: It's a lot of education.
Juliet: It's a lot of education, ya.
Nick: I think it will get easier though. When we went public back in 2017, I kept having to remind people that, you know, we're not just Asia’s Caribbean, where you go on a honeyoon. I mean, we actually have 650 million people. There's a lot to do over here. And then one day when you know – and I can say this, I think you're not allowed to say it – one day when you go public, again, it'll be just that much more education. By this time, five years from now, people will be asking you about your Surabaya strategy. It'll be based in Midtown Manhattan, just as today people are asking Chinese companies about what's their shared plans for Chengdu. So it's just a matter of time I think.
[19’41”] - How SEA companies are positioned for global expansion
Nick: Juliet, the question I want to maybe ask you a little bit about, all of us in Southeast Asia have learned talking to potential investors or stakeholders, if you will. It's complicated enough to get them to understand a regional strategy. We should keep our mouth shut when it comes to getting beyond Southeast Asia, ‘cos that'll just confuse them even more.
But I look at, for example, what my old friends at SEA have done. Garena now has game launches across India, Latin America, in fact, on a global basis, Shopee is looking at, you know, certainly India, it's very deeply entrenched now in Latin America.
Tell us about the kind of DNA of a Southeast Asian company, around incremental and plus one country launches. That might be a little bit different than the DNA of an American or a Chinese company.
Juliet: I think it's really learning by practising. The challenges, once you overcome them, they become strengths. So, for entrepreneurs who are starting from one country and have to learn a completely different set of culture and scale into another country– for us as an example, we started from Malaysia, we scale to Indonesia, Thailand, Singapore. Each of the markets are very different from a macro environment point of view.
And it's necessary. You can't stay within your own country. When you want to build a company of a certain size, from day one, you want to start looking at the region and thinking about a regional strategy. You come from a place that you don't have assumptions about a different market being the same. You start with a fresh pair of eyes, you try to find common patterns, try to find things in your strength that can be repeated, accumulated, built on, in a completely different market. And when you successfully do that a few times, it does get a little bit easier the next time.
Rovik: That's a certain muscle you're building, just by being here yeah.
Nick: And it's not a muscle that many other countries have the opportunity to build because one of the things that people forget about the success of Silicon valley is that it's not just a place to find programmers, it's a great place to find sales people that can cover a 50-state country.
You know, your west coast regional manager, your central regional manager. All those people can be hired in Silicon valley, but there's so much opportunity in a multi-trillion dollar economy like America, that many American firms are maybe a little slower to go abroad. Whereas I think Carsome went abroad in its first few years of development.
[22’07”] - Finding the right fundraising partners for regional expansion
Rovik: I'm curious how was the process of finding the right partners for regional expansion? Because I think there is a specific type of capability or value you're looking for in some of these partners. So how would you raise some of those conversations – regional expansion with fundraising?
Juliet: So we do look for regional expertise in the investors we bring on board. But this builds upon the fundamental values we're looking for – long-term alignment on the mission; really strong chemistry and the way people work together. We do on our cap table investors who have very specialised country-level resources and knowledge, and they can be very, very helpful, especially in the early stages of market entry. And again, this is outside of the specific case, but, from experience from both investor and an entrepreneur, it is better to have partners who are aligned with you on a group level, not subsidiary level.
Nick: Now, Juliet's exactly right. When I moved to Singapore in 2011, the modus operandi for the region was you'd start your business typically in Singapore (or) KL. And then you'd set up a 49-51 JV, country by country, by country. And that sounded appealing because that's how it had been done and the brick industry and the glass industry and banking industry. So why not do it for tech? And it was incredibly unwieldy.
You found that -- it was never a true partnership. You had a bunch of people that helped you with a few relationships from the beginning and they wanted to clip dividends. From that point forward, you were running it, but you only owned 51% of it or 49%.
But the second thing that was really important is they didn't think holistically. And one of the things that we worked really hard on in SEA – and I'm so glad that Juliette's doing the same thing – is we would bring in important local partners, conglomerates, families, but at the whole co-level. So then they would be the beneficiary of Carsome's overall growth, not just the growth in the Philippines, or in Thailand, or what have you.
That requires some selling, because in as much as there are some venture capital firms and private equity firms that like growth, many of the partners think in terms of their country.
Nine out of 10 questions are about “So what are you doing in Bangkok?”
But you have to convince them – Juliet has to convince them – to come in at the whole-co. And she's had a really good job at that.
Rovik: I think that's something that I've learned today. Right about exactly how you work with partners in that regional sort of strategy, because-
Juliet: That's the only thing you learned today?
Rovik: No well-
Juliet: Not doing a good job, Nick….
Nick: Has nothing else we’ve been saying been useful or whatsoever?
Rovik: Everything has been a learning experience
Juliet: Just kidding.
(laughs)
[24’37”] - How Singapore enables effective fundraising and growth
Rovik: Yeah. I want to pick up on something that Nick talked about, which is, I think in Southeast Asia, a lot of companies have always started out in Singapore. Why did you choose Singapore as a home for you to do a lot of this work and then to do a regional expansion from?
Juliet: So, I've been in Singapore for about 20 years now. And for me, Singapore, besides what I’ve just shared about – the trust, choice and transparency this ecosystem provides – it's also strategically located in a place that's easy to travel from, easy to travel to, and very strategic from a time-zone point of view.
So, it's very productive for our regional leadership team to be based out of here and to still make day trips, before the pandemic, to any place that we need to be. The pool of talents here is mature, sophisticated. It increasingly gets more so, from graduates, from Grab and SEA, and more and more companies in this regional HQ.
Rovik: And from a capital and fundraising perspective, how has that helped?
Juliet: So, any company that's incorporated here is under the spotlight. So investors sees you, you're in a very small kind of island together, and you build a very close-knit network. And that network is very helpful, especially in the early stages of sharing with the world about what Southeast Asia is, because you know, they're also here and it's easier to build a relationship and the patience to let things evolve and play out.
Nick: Want to build on what Juliet’s sharing. I mean, the beauty of Singapore, and I say this as an American citizen, is that, much like the United States, Singapore stands for the rule of law. And from a capitalism and an entrepreneurial perspective, what you want to have the comfort of knowing as a founder, as a senior executive and, of course, as an investor, is that if things turn out well, you'll be rewarded. There are many countries in the world where the better your investment turns out, the more scared you get, because a whole bunch of people come after you trying to sort of erode that. some of which are the government themselves, in different parts of the world without naming names.
And likewise, on the flip side of it, if things turn out poorly, but not because you made the wrong decisions, but because they were really elements of legal issues, Singapore's a great place to get all that sorted out in an efficient and straightforward way.
At the end of the day, that's all an investor asks for. A fair referee.
The investor's job is to get players onto the pitch and play a good game. But if the refs are fair, then there's no limit to what you can accomplish. I think actually Juliet's got a kind of role as a very senior executive, but for a company that was originally founded somewhere else, I think that's going to be mirrored over the next 10 years.
There's going to be a lot more, not Juliets, as good as Juliet, but like-Juliets in this part of the world that are going to be Singapore based and on some ways be the ambassador to their country, but based here in Singapore.
Rovik: Well Juliet, thanks so much for coming on our show.
Juliet: Thank you so much Rovik for hosting me. Thank you Nick.
Nick: No, and congratulations, Juliet, what, what you're doing and the role model that you're serving for a lot of other entrepreneurs in the region. Really grateful for that.
Juliet: Will keep trying.
Rovik: Awesome.
Thanks again for tuning into growth islands for more great content and resources on expanding your team in Southeast Asia, check out a growth islands micro-site and the podcast description link.
We'll see you in the next episode.
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