ABR#002: Chris Chae — Nextrans: Why investors should not look at companies from a judgmental point of view.
Note: This transcript is heavily revised and shortened. Please listen to the podcast for the full version of the interview.
Hi everyone, welcome to Always Be Raising podcast, a podcast series in which we will interview investors and founders in Vietnam on venture investing and fundraising, as well as other tech and startup related matters. I am Louis from G&H Ventures.
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In this episode, we’ll have Chris Chae from Nextrans, an early stage venture fund in South Korea. Formerly Chris worked at a Private Equity Fund, but join Nextrans to focus on investing in early-stage companies since 2015. He is in charge of Nextrans operation in Vietnam.
Nextrans has invested in thirty-eight companies in total and nine companies in Vietnam, which had raised thirty-five million US dollar after receiving the investment.
Firstly, hello Chris and welcome to Always Be Raising podcast, so glad to have you here today, the first foreign investor on our podcast.
To get started, could you introduce yourself a little bit: how did you get started as an investor? And maybe a short introduction of Nextrans too!
I’m Chris Chae from South Korea. Nextrans started in 2004, after the dot-com bubble in Korea. My boss Eddy (founder of Nextrans) founded the company after spending time as a venture capitalist, invested in companies such as Naver, which became 6 billion dollar company. Then he moved out from venture capital and founded the company. At that moment, there’s not many venture capital in Korea who has a large amount of money. Dot-com bubble burst and there were not many investments for IT company, but manufacturing companies had been rising. My boss supported them in getting investment from foreign investors. We’ve been operating in 15 years, raised 350 million USD for really early stage startups, Series A and Series B.
From 2015, I joined. I formerly worked at Private Equity Funds, in charge of the operation of the portfolio companies. One of the company had 500 million USD dollar in revenue, there net income is quite huge. Then they acquire a company which is not related to their core business. After 3 years, they went bankrupt.
So I realized: Big money — big investment — big failure. This is a really tough game, and what is the big hurdle? At that moment, I also realized that technology can make a company a dominant player in the industry in just 3 years. So I decided to move to the early stage for supporting early-stage founders.
We have 38 portfolios by now, and they raised about $200 million. 9 companies we invested are in Vietnam, and those companies raised about $35 million after being invested. We supported them to raise fund from Korea, from GS Shop, LINE, Bon Angels, Access Ventures… We try to be the gateway between the Vietnam market and the money from Korea.
Nextrans has invested in 9 companies in Vietnam. What makes Vietnam such a hot destination for investment for you?
In 2015, I participated in a program, a competition in a university in Vietnam. There are a lot of talented guys that are able to make real IT products. University students are able to make real products, we don’t have the same thing in Korea. I realized that human resources are really great here, and they are quite competitive, they really want to become a winner of the competition. What should I do for them?
I met almost 500 companies in 4 years, I also met the big IT companies in Vietnam: VNG, VCCorp… I realized that the opportunity for mobile is going to be big in Vietnam. The growth rate here is quite great, human resources are good, and there are 4.5 million Vietnamese who live overseas coming back to found companies.
There is a lack of infrastructure. Transportation and logistics are quite bad. However, mobile penetration is over 70%. Wow! Amazing. We can focus on those kinds of companies that are built around the smartphone. We started by the investment in 2 companies: LeFlair and Chopp.
At that moment, we realized there are many investors wanted to come. That was really good timing for bringing them to investing in growing companies, and we can invest in new kinds of mobile infrastructure. The first area is logistics, we invested in OkieLa and EcoTruck. After that, Ecomobi, Base, Jamja and Luxstay.
We focus a lot on the founders. The ability of founders to identify the problems and solve the problem is the most important thing.
Are there any particular segments or verticals you’re keeping an eye on? And what are your general criteria, what qualities are you looking for in Vietnamese startups?
I think venture capitals are the interpreters, we never judge the company, we never judge if the business will grow or not. We only care what kind of solutions are already made and how much you’d be focusing on that area. There are a lot of the proxies and demand changes in overseas, and we are able to adopt these kinds of ideas for understanding. However, sometimes they don’t match. We also focus on the founders first, we listen carefully what they are doing now, what problems they are solving now, what situation happens out there and why they’re so painful, and why existing solutions cannot solve the problem. We always listen, again and again. Then I cross-checked the problems, I talked to other people to see there are really big problems, what is the existing solutions, what are the key success factors, why the big guys are not able to take it.
All of the best investors I’ve ever met, I realized that they only focus on that thing, they never made judgments.
I don’t know if the solution is the right solution. Even the founder doesn’t know if the solution is right. It’s just a trial. If they are able to touch the fundamentals of the problems and build a solution that scale, the business could really be growing. But we’ll never know if it is true at first. So instead of focusing on anticipating the solutions, we focus on the founders.
As venture capitalists, most of the cases, we have to work very closely with the founders after the investment and leverage our network and expertise as an investor to support founders. Are there any difficulties for you as a foreign investor, working with local startups? And how do you solve those problems?
We try to communicate with them really frequently. CEO has tons of work to handle, they have to focus on customers, team members, and everything else. So what is the most important thing for the investors is that we have to be a supporter of the founders.
Sometimes I talk with our Vietnamese founders at night time, maybe 1 AM, 3 AM. We were talking to each other about life, about what is the problem with your team and what is the solution, what I’ve learned from Korea. Normally, the founders know about 80% of how to run the business. We know 10%, about market landscape/investment landscape and focus on supporting more about that.
As an investor who has invested in many startups in different countries, what do you think are the strengths and weaknesses of Vietnamese founders, compare to founders in other countries, say Korea or the US?
It’s really hard to say. I would say there are not many differences. The biggest thing in comparison with Korea: Korean men have to spend 2 years on military services, so they basically start their career later. So there are not many young entrepreneurs and not many serial entrepreneurs. However, there are a lot of serial entrepreneurs who are over 40 or 50, or even late 30s. The founders in Vietnam that I’ve met are much younger. There are many young founders that are already succeeded with their business and really experienced in managing a team and finding solutions for tough problems.
What about the start ecosystem, is the ecosystem in Vietnam different from Korea?
Totally different.
Firstly, in Korea, the government puts a lot of money to boost the industries, they build an agenda for building a creative society in the 4th industrial revolution. 70% of funding comes from the government and only 30% comes from the private sector. This is quite conservative, a lot of reports and paperwork, and I think this is not good for the ecosystem.
Secondly, the learning environment is stronger in Korea. There are a lot of serial entrepreneurs willing to share their knowledge and wisdom. They became some sort of brothers that young entrepreneurs can seek advice from. There are also a lot of learning materials for entrepreneurs from many good universities in Korea. Those are things I haven’t seen a lot in Vietnam.
What is your plan in the next year in Vietnam?
We are partnering with NEU to deliver a free online course about entrepreneurship. The problem is, as I already told you, there are not many lectures about entrepreneurship, unlike in Korea. We will have both Vietnamese and Korean entrepreneurs to share about particular topics about what you need to focus on in a really early stage business. After that, the entrepreneurs will be able to apply what they learned to build the real business, and we will be able to invest in them in the pre-seed stage. Once they grow larger, we will be able to support them by connecting them with larger investors. We’re already talking to ESP Capital, 500 Startups and many Korean investors like Bon Angels, GS Shop, KB, Softbank. Those are investors we want to bring into Vietnam. Our target is 100 pre-seed investment in 3 years.
Who is the venture capitalists that you like/admire the most in the world?
- Masayoshi Son, founder of Softbank.
- Warren Buffet.
- Don Valentine, founder of Sequoia Capital.
If there is a book that you’d give to any founder you’ve met, what book would it be?
There would be 3 books actually:
- Zero to One by Peter Thiel.
- The Zero Marginal Cost Society by Jeremy Rifkin.
- Managing by Harold Geneen.
Thank you, Chris. Thank you so much for coming to ABR podcast today and for your interesting stories. Hope to see you again in another episode of Always Be Raising podcast, and wish all the best to you and Nextrans in the next year. Thank you!
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G&H Ventures is an early-stage tech startup fund. We invest in early-stage tech startups that can leverage Artificial Intelligence (AI) to solve big problems in various industries, focusing on the Asian market.
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