The fintech space is seen as a sexy and cool sector – and potentially very lucrative. Investors think so too. In a recent report by CB Insights, it found that 1Q2021 was the largest quarter for fintech funding. This is despite ongoing COVID-19 uncertainties globally.
As a result, people may also think that start-ups within the space are automatically flooded with investment cash. We caught up with Hiro Kiga, co-founder of Wallex, to find out more about his entrepreneurship journey.
Today, Wallex has grown into an international payment solutions provider for B2B businesses. The group hires over 80 employees across Singapore, Indonesia and Hong Kong, and has processed over US$1.7 billion for more than 17,000 customers. Unlike platforms built for consumers, Wallex is a product specifically designed for businesses to use and solve their pain-points.
Read Also: 5 Questions With…Ow Tai Zhi, Co-Founder & Chief Investment Officer, AutoWealth
Originally From The Other Side – A Venture Capitalist (VC)
Before starting Wallex in 2016, Hiro was sitting on the other side of the table – as a Venture Capitalist (VC) – investing in entrepreneurs and their businesses.
This opportunity came by chance as he was looking to come back to Southeast Asia after working and studying in Sydney, Australia for about eight years. A good friend of his, Ryu Suliawan (Founder of Midtrans) alerted him to a Japanese social gaming company that was setting up a VC arm in Singapore. His friend told him “they’re looking for someone familiar with Indonesia (and/or speaks Bahasa), can speak Japanese and English, and understands tech. The only person I could think of besides myself, was you.”
This was GREE Ventures (now called Strive Ventures), which invests in tech start-ups across Asia. Hiro spent two years there before joining Yello Mobile, “a Korean start-up doing something similar, and more on acquiring start-ups” for another two years.
What VCs Look For In Companies They Invest In
As a fellow start-up ourselves, and within the space of finance (at least writing about it), we probed Hiro for insights into how he decided on or passed up investment opportunities as a VC.
He shared that apart from a mandate to invest in different stage or geography, VCs tend to look for three common things in a business:
1) the founders, and more specifically, “execution capability, previous experience”;
2) market size and growth; and
3) questioning the business model – “is this something with low barriers to entry, what are your moats, (are you) building (a) defensible business?”
We couldn’t help but ask him about companies that he passed on that got real successful. “We call this the anti-portfolio. Traveloka was one that we passed on. Reason being that there was a surge in travel-related companies, various different models and we weren’t able to place a bet on any of them.”
At the same time, Hiro told us that there were also companies that didn’t fit into the normal profile for investments but did so anyway. The common theme behind these type of investments was that “founders really matter and we (were willing to) invest in great founders”.
In his four-year stint as a VC, “I’ve seen founders get funding on just an idea (this is rare but happens especially if you’re a serial founder with proven results, e.g. Turochas Fuad.) Other than this, there are programmes such as Sequoia Surge, Iterative and YC that funds at very early stages of the company.”
However, Hiro is quick to caution that founders need to think if VC funding is the route they want to take. He says that some businesses are perfectly capable of generating revenue and being profitable without VC funding.
While being invested into is definitely a pro, there are some common disagreements that VCs will have with their investee companies. “2 common things we debated about (is) product market fit – how sticky is the product, are end users getting value out of this and founders on execution – building out the company, focus and understanding competitive landscape.”
He also says that when VCs pass up on an investment, entrepreneurs should take it lightly and move on to the next one. “It doesn’t necessarily mean they think your business is not worth investing (in). Could be other reasons such as not having funds to deploy. They’re also comparing you with other current opportunities, and future opportunities as well. Sometimes, they are forced to say no.”
After his four-year stint on the investor side, Hiro began working on Wallex.
Becoming An Entrepreneur (VS Being A VC)
Having sat on the VC chair for a few years, Hiro haboured ambitions to become an entrepreneur. His interactions with the companies he was looking to invest in and their founders also impacted his way of thinking.
When he was a VC, founders that he worked with would often turn to him with questions or for advice. This made him reflect: “I’ve never been in your shoes, never had to go through what you went through, who am I to give you advice?”. It was in those moments Hiro made it a personal mission that if he were to ever invest as a VC again, he needed to be a founder first.
At that time, fintech was an up and coming sector. “When we did a scan across various opportunities, remittance/cross-border payments was an interesting one. There were retail focused players already such as Wise and several others but we saw an opportunity to focus on B2B as it was still underserved.” Hiro said that it offered a large enough market and good opportunity, and “having the right co-founder were key drivers of wanting to start Wallex”.
During the course of speaking to him, Hiro unabashedly shares that he thought it’d be easier being a founder, and found that it was definitely more challenging.
At the same time, sitting on this side of the table also gave him a different perspective on how he was as a VC – he reflected that he “don’t think I was a good VC. I was a first-time VC, so I didn’t know what were the best practices.” One of the things he shared is communicating with a founder, even if they’re not part of your portfolio companies. He says that this reveals a lot about the VC themselves and separates the VCs that are willing to add value in any way compared to those who don’t.
Having had a few years of entrepreneurship experience under his belt, he also shares that “I’d definitely be more mindful of the founder’s time as I wasn’t really thinking about that when I used to be a VC.”
Even though he’s enjoying his time as an entrepreneur, he wouldn’t trade his time being a VC. “Being able to interact with different founders (and) most of my learnings about building businesses was from these conversations I had with founders.”
As an entrepreneur, Hiro also learnt that VCs may mistakenly think that “founders are always doing ok, which is rarely the case”. He now knows that even during the best of times, there are a ton of other things going on in a founder’s life that may (or may not) impact how they run the company.
Having been a VC and with connections in the space, we asked Hiro if he had an easier time raising funds for Wallex. His response was stoic: “We never had an easy journey for our fund raising. Every round posed it’s challenges and the fact that there were others (international payments services) in similar space that raised 10s and 100s of millions, we were always being ‘passed’ as not being able to compete with them – purely from a resource point of view”.
In 2020, Wallex raised its third round – Series A funding – from Ant Financial-backed BAce Capital and Indonesian-based SMDV and Skystar Capital, as well as existing investors Singapore-based Beenext and Amand Ventures, Indonesia’s Central Capital Ventura and Indonusa Dwitama.
Being an entrepreneur, failures are also par for the course. Hiro openly shares that he’s encountered many of them. Some were learning experiences, such as pushing for early features he thought would be valuable but weren’t. They were created based on assumptions rather than data.
He also shared one of the occasions where his personal failure led to much wider repercussions on letting his employees down.
“There was a time during one of our fund raises that the drafting of the agreements were taking longer than expected. We were virtually out of cash and tried to scoop up whatever we can to make payroll. We were late on payroll 2 months in a row, and that resulted in couple of our new joiners leaving immediately. To me, as a founder there were a ton of things I could’ve done better reflecting on what happened. It’s one of those things that you just need to overcome and learn from your mistakes.”
Entrepreneurs learn from their mistakes and have to move on if they want to succeed. On the other end of the spectrum, Hiro also advises young bootstrapping companies to “focus on building great products” rather than solely looking for funds. In his words, “a product that solves real pain points (i.e. painkiller products vs vitamin products) will never lie. Everything else will fall in place”.
Subscribe To The DollarsAndSense Business Pass
Enjoy what you are reading and want more? Join The DollarsAndSense Business Pass and unlock access to valuable tools, exclusive networking opportunities, and tap into the wisdom of industry experts to fuel your business expansion!
