Dzung Nguyen is the head of Vietnam and Thailand operations at CyberAgent Ventures, which is a subsidiary of CyberAgent Group, which has its headquarters in Japan. He is in charge of venture capital investment in these two Southeast Asian countries, giving support to Vietnamese portfolio companies and seeking opportunities to invest in Thailand startups in the online and mobile business sectors. I had a chance recently to ask him a few questions about his investment strategy and what types of companies in Thailand and Southeast Asia CyberAgent is looking to invest in.
Can you tell us a little bit about CyberAgent Ventures?
In Japan, we have an early stage fund called CA Startups Internet Fund, and we also have another fund for growth stage. And we have a startup fund in Southeast Asia. And in North America and South Korea we still invest with the money coming from the mother company. Besides that, in China we’re in partnership with JAIC (Japan Asian Investment Co.), I think they list on the stock market in Tokyo. We have a fund for each area, and when we are looking for good companies, we don’t just look at the local market. For example, in Southeast Asia right now the three big markets are Indonesia, the Vietnam, and Thailand. Of course sometimes we make investments in Malaysian or Singapore companies too. We don’t care where the company is coming from—we care if the company has potential or not, and whether they meet our investment policy or not. That’s our biggest concern.
So typically, what is your investment policy in terms of size? Are you doing seed rounds? And what type of companies are you looking for?
In terms of the Southeast Asia fund, the fund that I’m in charge of, directed to investment in Vietnam, Indonesia, and Thailand—that’s an early stage fund, so we make investments between $100,000 and $1 million per deal.
That can be a Series A round in Southeast Asia. Sometimes we see seed rounds of $500,000.
Sometimes we’re looking in a potential sector, but no company meets the requirements for a Series A so we may invest in the entrepreneur.
So the person and team involved may be just as important as the actual traction and the product market fit?
Of course we care about the potential of the sector, the market size, the demand of users—if it’s big or not. And of course the team—if they have traction or not. Right now if the business has users and a user base we can consider it like a Series A, or with more growth maybe we an consider it a Series B. So we combine the founding team, the market itself, the competitive advantage, the business model, and the return for investment.
Is there anything else that makes a deal particularly investable? Maybe you can think of a deal that there was something you were looking for and you found it with a particular company?
For example, the company called PriceZa in Thailand. We made investment in the company first of all because they had good traction. They have a really good user base and the business itself is growing, so the traction itself can tell you a lot. And the second thing is that the business model itself is already a proven business model. We already studied a similar business model in Japan and other countries, and of course after we research about the market in Thailand we can build a similar business. So the business model itself is proven—it helps us to understand that this market is really big—and more than that, the team itself is a really good team. They have a really balanced team. They have three founding members with a CTO, MD, and CEO they can balance their roles in the company. And more than that, they have a competitive advantage because they are the pioneers in the sector.
I have a quote where you said, “We’re looking for any Internet and mobile sector startups in Thailand that have big potential and a big user base. On the other hand, we prefer to invest in B2C or C2C type business models.” Why is it you prefer the B2C or C2C business models?
In Southeast Asia, especially for a country like Vietnam, a lot of startups mention the advantage of a connection with the government or a relationship with the authorities. so some things depend on those in control, or you depend on people’s help. it may make the business go up and down because when you go out to make a sale, you need a relationship with someone, and if there’s no relationship then you cannot make it happen. it means you don’t meet the client’s or the user’s demands. So that’s the first one.
The second one is—for the “B”, it’s usually only limited by your number of users. For example, you could have a million users. So for the B2C you can bring benefits to the users, and then you can use the users’ power to deal with the clients, to get the money to you. Or you can get money directly from the user. So we prefer a B2C model.
So to summarize, it makes a much, much bigger market because you kind of have an unlimited ceiling with the B2C type applications, which is something that CyberAgent is particularly interested in. What I find interesting is that you also invested in aCommerce, which is as much B2B as you can get.
That’s why in our portfolio companies, most of them are B2C not B2B, but we still have some B2B companies. For example, in Vietnam, we have an online advertising agency business. We invested in a company serving big clients. But we focus on a B2C model rather than B2B. And in terms of aCommerce, the team is really good, they have a solid team, and the market itself is really big. And from B, they can serve more users because for aCommerce, they are doing easy solutions. They built the website by themselves, and they can reach more users and brands for retailers. So it’s not like you go and serve only the B, you serve the C too. So that’s why it’s a little compromise between B and C.
What’s something that an entrepreneur can learn from this deal? Is there a point you can take away, such as the team really presented well, or they had a past history of success? What’s something that’s particularly memorable for you?
You mean what kind of entrepreneur we prefer most? Because we prefer B2C, the service you are doing and bringing to the user—how does it solve the problem of the user? How is user demand? And what solution do you want to bring to the user’s problem? is the market really big or not? And how is the founding team? What competitive advantage is there? For example, if the market is really big, maybe you’re not the only one who cares about that, and you’re not the only one who can explore that market. Another, bigger player can come into the market. So at that time, what’s your competition? And then the team has the strategy and plan that they show to us. Is it reasonable or not?
So what would you give as advice for entrepreneurs that are dealing with competition? How do you recommend that entrepreneurs deal with a new competitor that has come in to the marketplace? Do they try to avoid them and do something a little bit different, or do they try to go after them and try to win the winner-take-all battle? What would be your advice?
It depends on if the entrepreneur has a really good team and if the current idea doesn’t work, then we can advice them to change a little bit based on their advantage and experience. for example, Foody is the Yelp of Vietnam, and we launched it more than one and a half years ago. We made like a seed round investment because we founded the company together with the founders. And after that, we supported the company and made investments together with the follow-on investors. They came to us with the original idea that they wanted to do a Yelp type of business, but at that time they combined a lot of things, such as Google maps, results, and reviews, and restaurant booking—so they combined a lot of services together in one product. Our advice was to just focus on one product, and we discussed and brainstormed about the business idea and how we could monetize it in the near future. Then one year later, they came back and we spent more time to brainstorm with them, and finally six months after that they came back and we made the investment.
So it depends on the case. In some cases, we think it’s really hard for them, especially for students without any experience. When they came to us, we’re willing to listen to their business idea, but if they don’t have any traction it’s really hard to proceed for the investment. But some of them don’t have any traction for the current product, but they have experience that they can bring to the business idea, and we can discuss and talk with them, and brainstorm together.
It sounds like you’re a very hands-on investor and you like to provide some support, more than just financial.
Yes, that’s true. We are hands-on investors. If we cannot support the company, we will not make the investment in the company. So we assume before we make the investment, can we make the company grow or not? So that’s why we focus on early-stage like seeds, Series A, or Series B. We don’t focus on the later investment rounds.
Do you have the company that you didn’t invest in, but looking back, maybe you wish you had made an investment in?
We have some companies in Vietnam that we skipped, and we think if we’d have made the investment we’d get a return. But the return is not our only concern. It’s also how to bring the benefit to the user, to the customer. So from the side of society, if the team is not one that we think we can trust in, maybe we skip the investment, even if the business is growing.
So the personality and the trust that you’re putting in the person you’re investing in is very important.
Right, because the moral hazard is the biggest thing for any CEO or entrepreneur—if you don’t feel comfortable with that investment, it’s really hard for you to go along with the founder. Because you are there to support the entrepreneur for growth and you want to help him grow faster to increase the company valuation, but if you don’t trust in him or he doesn’t trust in you, how can you go into a partnership together?
Sometimes people’s thinking can be changed, but from the first impression, if we feel uncomfortable with the founder, maybe we need more time to understand him or her.
What are you reading? What book is on your bookshelf?
Right now I’m reading a biography of the Samsung chairman, Lee Kun Hee. And I’m reading the book Start-up Nation, about Israel.
What’s one piece of advice you would give to entrepreneurs?
When you want to start something, you should understand user demand. What is the problem users are facing. Raising the money to start a business—of course the final measure of your success should be gaining money, but if you just think about money maybe it’s hard to persuade investors. So if you start something based on your own demand, and if the demand is really big, then I think it’s not difficult to raise the money or to get people to help if you have your own solution to solve that problem.
And you should have a longer vision for your startup. A startup is not for one or two years. Even venture capitalists need a longer vision, like five years, ten years, or even twenty years when you start something.
Give us a business idea for Southeast Asia. What company would you like to see started, or what demand do you think there would be in one of these countries that no one has started yet?
Indonesia, Vietnam, Thailand, and Malaysia are all single markets. We look at Southeast Asia as a bigger market, but each market is really different. So when we look at Southeast Asia, we always think about the single local market, and we consider the advantage for this market. Any online business can leverage the Internet and mobile, and serve millions of users. Some of the businesses that are successful in countries like China, Japan, and America we can refer to as examples for study and then think about the demand of the users in each country, and see which has the most potential.
So it’s really hard to answer in specifics, but ecommerce is one area. In general it’s hard to compete with Lazada, but a lot of marketplaces exist now. So vertical ecommerce is what we should be looking for. If you look at online travel agencies for hotel booking like Booking.com and Agoda, it’s hard to compete. But if you have an aggregator like TripAdvisor that serves the local market, and have more due diligence, then you could see which is a good one to invest in.
Are you looking for a company that can solve a local or a worldwide problem?
I don’t think a company can solve a problem globally right from the beginning, even a company like Facebook or Google had to start small. Facebook started with a small community and then expanded outside after they thought they could go further. So we prefer a startup that focuses in one specific market, and then after they dominate in the market they can go further. Especially if you can’t succeed in your own country, how can you go out into the other markets that you don’t understand?
So you might advise entrepreneurs to focus on the first user base. How are you going to get the early adopters? How are you going to get the first users before you think about scaling? You have to have significant traction before you look to other markets.
Yes, that’s correct.
Can entrepreneurs get in touch with you?
Yes, we are very open to talking with entrepreneurs, so just come to us and we are willing to talk.
