How to Discover Global Investment Gems? — 3 Simple Tips
For our regular blog readers, you would recall that back in July, our managing partner, Ben Weiss, attended the Inaugural CreditEase Overseas Investment Summit in Beijing. There, he presented on the topic “How to discover “Investment Gems” in Global Investments?”, covering 3 simple investment tips which was very warmly received by the Chinese audience of CreditEase VIP clients.
Without further ado, here are our 3 simple tips;
Tip #1: Travel far and wide
You might have heard of ancient Venetian merchant, Marco Polo, (no, not the TV Series currently playing on Netflix with a 24% review on Rotten Tomatoes) and his travels. Throughout his lifetime, Marco travelled to 26 destinations across Asia and Europe, completing an astonishing 23,339 miles over 8,767 days, exposing him to a world few other Europeans had ever seen.
And did you know that from his travels, Marco brought back to Europe the concept of paper money, coal and even eyeglasses — forever changing the lives of people in their homeland?
Figure 1: Marco Polo and a Screen Capture of His Travels
Source: National Geography (left), Google Maps (right)
Indeed, travelling is key to finding investment gems. Many ground-breaking and exciting opportunities lie beyond our physical borders. Yet without breaking out of these physical borders, we are constrained and limited to see only the opportunities around us. Therefore, we need to travel to expand our horizons.
And that is how we came to know about Cimagine Media, an investment gem that we discovered in early 2015 after one of our colleagues attended an online media trade show in the UK. In short, Cimagine is an Israeli-based tech company that provides retailers with an augmented reality (AR) platform that can be easily integrated and used across multiple sales channels to boost conversion rates. As just one of several practical examples, this tool can help home owners visualise how different furniture will truly appear in their homes.
Figure 2: Cimagine’s AR Technology to Visualise Furniture
Fast forward a year later, AR has now taken off and Cimagine is one of a handful of companies at the forefront of this megatrend.
Others include the Florida-based AR headset manufacturer, Magic Leap, which recently raised $800 million from Alibaba, valuing the company at $4.5 billion before shipping a single product. Also recently added to the list is Nintendo, which launched the wildly popular AR game PokemonGo. PokemonGo became the most successful mobile game in the US overnight, quickly surpassing the likes of Twitter and Tinder in terms of daily usage. Since its release in June, it has garnered more than 20 million daily active users and generated close to $200 million in revenue.
And to think that our discovery of Cimagine and AR came from just a short international flight and an all-day event pass!
Figure 3: PokemonGO’s AR technology
Tip #2: Talk to people and learn their pains
We believe that a good company can only become successful if it addresses the pain points, or needs of its customers.
In a recent article from Fast Company, this was very eloquently put:
“Think of things that people find disturbing, frustrating, urgent or uncomfortable. Then, with the pain clearly recognized and in mind, switch gears and develop cures. Focus on healing. Let that be your guide as you try to invent a venture that will make the pain go away.”
So as a venture capital fund, we continuously talk to as many global industry experts as possible to understand common pain points and the critical market needs. These insights become valuable assets for us when evaluating companies for investment.
And this was what led us to discover Silentium, another of our investment gems in the making.
During a business trip to Hong Kong we met with the General Manager of one of the world’s largest appliance makers who emphasized the need for a solution to solve the energy efficiency and noise pollution of its products sold in Asia. He explained to us that with rising temperatures and dense living, residents often have to sleep with the mind-numbing sounds of a heat pump hot water system, a room air conditioner and a dehumidifier all churning at once.
Enter Silentium, the innovative technology leader in the field of active noise reduction, with its range of solutions for the computer server, air-conditioning, refrigeration and automotive industries. After conducting thorough due diligence with the help of our global industry experts, we made the investment and Silentium is now seeing growing demand for its solution in Asia and across the world.
Figure 4: Silentium’s ANR Solution
As a final point on this subject, it is worth pointing out that while identifying a market need or pain point may seem like common sense, the inability to do so is actually the #1 reason why start-up companies fail.
Figure 5: Top 20 Reasons why Start-ups Fail
Source: CB Insights
So a good venture capitalist will often need to share their market insights, and work closely with the CEOs of their portfolio companies. This brings us to our 3rd tip.
Tip #3: Build relationships and establish trust
While it might sound like a cliché, venture capital investing is very much like a marriage — there needs to be complete trust and commitment to ensure long term success.
Interestingly, the average time for VCs to exit via M&A is 5 years, and via IPO is 7 years which is greater than the average number of years before divorce in some countries. It seems like a venture capital investment can be said to be longer-lasting than a marriage!
At CE Ventures, we believe that trust and relationship building with management is often the single biggest factor in closing an investment transaction. And this is echoed in a nugget of wisdom from US motivational speaker, Zig Ziglar,
“If people like you they will listen to you, but if they trust you, they’ll do business with you”.
So in short, discovering global investment gems boils down to 3 simples “Ts”: Travel (far and wide), Talk (to people to find out their pains), and (build relationships and establish) Trust.
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Till next time!