Jessica Liu, Partner (劉侊縈 / 合夥人)

主導東南亞市場以及區塊鏈領域的投資，擅長激發創業者的潛能，熱愛與他們討論商業模式。2010 年進入渣打銀行負責數位行銷和產品線上跨售，讓她燃起對 Consumer Internet 的熱情，2014 加入 AppWorks 擔任經理，先後負責加速器、東南亞投資案等，2019 年升任合夥人。畢業於南加州大學 (USC) 商學系，談到美食和旅行時，眼睛會發亮。

NFT 在 2021 上半年經歷了雲霄飛車般的歷程。根據 NonFungible.com 的統計，全球 NFT 的成交金額，從二月份開始持續攀升，並在五月初月成交金額來到這波熱潮的巔峰 3.2 億美元 ，再回到近期的 5,000 至 6,000 萬美元之間。這段期間，包括 Beeple 的「Everydays: The First 5,000 Days」作品，以 NFT 賣了 6,900 萬美元；LeBron James 的一個灌籃動作，以 NFT 賣了 20 萬美元等令人瞠目結舌的交易。在這短時間內的巨大震盪，令人不禁懷疑，這會不會又是繼 2018 年 ICO 後，另一個區塊鏈的泡沫？

事實上，若我們回顧過往的歷史，當每一個泡沫過後，其實都能將產業發展推升到另一個高峰。例如，在 21 世紀初期的 Dot-com 泡沫後，仍然留下了 Amazon、Google、Netflix、PayPal 等創新不斷的偉大企業，甚至開啟了之後 Mobile Internet 典範轉移下 Facebook、Uber、Square、Snap 相繼崛起的美好年代。 

而 2018 ICO 浪潮退燒後，雖然加密貨幣走入熊市，但區塊鏈產業的長期價值，仍在持續提升，根據 CoinMarketCap.com 的統計，全球加密貨幣的整體市值，從 2018 年初高點的 8,300 億美元，繼續成長到 2021 年一度突破 2.4 兆美元，儘管資產價格上上下下，但區塊鏈產業的整體價值成長，並未隨著 ICO 退潮而結束。

與其探討 NFT 是否為另一個泡沫，我倒覺得，探討 NFT 實質上創造哪些價值、解鎖哪些成就，將更有意義。

從最基礎的來看，NFT 讓 Creator (創作者) / Curator (策展人) 開啟了另一個市場。不管名氣高或低的藝術家甚至是品牌，過去近一年來，都競相發行 NFT。有趣的是，實體世界的藝術品，對一般大眾來說，單純只有收藏、買賣兩個功能，但在 NFT 的世界，應用可說是百花齊放。以純數位的 NFT 而言，購買的方式則十分多元，例如要先解題或擁有某些東西，購買者本身也有機會成為藝術創作的一部分 (Programmable)，就像藝術品收藏項目 Hashmask，購買者能為藝術品命名。

這類在 NFT 發展初期，出現的各種原生消費行為，與其說是購買單一數位藝術品，這些行為更像是買了這個社群的會員資格，可說是數位身份的象徵。當人人都把 Twitter 上的個人頭像，換成自己擁有的 Bored Ape 時，另一種數位身份 (Digital Identity) 的認同與價值也就此展開。而在數位當道的時代，數位身份比現實世界的身份地位來得更重要。如同 Hashmask 在自己的 Blog 寫道：

Sometimes I feel that our digital sense of identity has already surpassed our physical sense of identity in terms of importance. This holds true, particularly among younger generations. Nowadays, having an Instagram-worthy photo of a moment seems to be more important than the moment itself. And the trend will only accelerate, not go back. In the near future, our identity will most likely be fully digital. Who you are online will be more important than who you are at home and in the physical world.

而 NFT 防偽造和紀錄永遠寫在鏈上的特性，也使得它的應用，可以延伸到真實世界中。例如，某場 NBA 比賽的主場球隊，透過球隊 App 直接販售 88 張 NFT 紀念球票，除了迅速銷售一空外，不難想像這些 NFT 擁有者，未來將有他們專屬的活動，而這些 NFT 除了是球票外，也可能成為 Backstage Pass 等。

更進一步想要探討的是 NFT 開啟的 Creator Economy。如何讓創作者能夠直接享受到流量帶來的收益算是老掉牙的議題了，訂閱或直播打賞都是 Internet 下的產物。但直到 NFT 的出現，才找到每個產業環節的平衡。

時間往回推 10 年，Internet 下放了獲取知識的成本，社群媒體打開了媒體與創作者面對大眾的管道，造就出人人都可以是網紅或 YouTuber。當人們每天在社群媒體發文，上傳照片、音樂甚至是影片，也將這些檔案複製到 Facebook、YouTube、TikTok 等平台，在複製貼上的同時，也等於把內容的擁有權轉給了平台，當社群平台運用這些內容變現，賺取巨大的財富後，這背後的反撲，便是你我熟知的個資、反壟斷等問題。

我們看過很多新創團隊試圖要解決這個問題，例如推出訂閱制，讓做出好內容的人，也可以享受到應得的經濟價值。然而，這存在著一個本質矛盾，想像一位歌手創作出一首歌，當然會希望越多人聽到甚至是喜歡才會是最大的滿足，但設一個付費或訂閱的門檻在前面，直接就限制了能接觸到這首歌的聽眾，經典好歌的定義應該為何？究竟是讓最多人翻唱、欣賞，還是創造更多訂閱、銷售？Internet 現行的數位內容機制，並無法解決這個本質矛盾。

另一個更本質的問題是，不管哪種商業模式，都仍然會被各種數位、社群平台掐著脖子。今天 Instagram 封鎖了你的帳戶，或 App Store 下架了你的 App，甚至 Facebook 降低觸及率，你都可以向平台反映，但最後決定權仍然在不在你的手裡。遊戲玩家在某個遊戲裡買了一個虛寶，這個物件表面上屬於遊戲玩家了，但他並不能讓遊戲玩家決定是否能在其他平台使用。原因就是，這些數位資產的擁有權，都不屬於創作者或購買者個人，而是由各種平台宰制。

NFT 的特性，讓這些問題有機會被突破。它在大眾都能觸及的情況下，清楚記載這個內容的原始創造者和之後的分潤機制。甚至未來每一次的轉手或再創作，原始創作者也都能持續受惠。當你我有辦法掌握所有權時，創作者與平台間的力量，才有機會平衡，而資產的價值，才能真有機會賦能更多創作者。

當人們擁有可靠的民主自治機制，財產所有權不需要靠單一政府保障，這才是人權真正的進步。

【歡迎所有 AI、Blockchain、NFT 與目標東南亞市場的創業者，加入專為你們服務的 AppWorks Accelerator】

Photo by Pensive glance from VisualHunt

David Wu, Associate (吳戴文 / 投資經理)

David is an Associate mainly focused on investments. He previously lived in the US, but was drawn to the Greater Southeast Asia region by the growth opportunities and the wonderful people here. He spent the first five years of his career as a consultant at IBM, where he became intimately familiar with the enterprise software and services needs of Fortune 500 companies. Later, he focused on building predictive models and solving optimization problems for large companies, and gained an appreciation for the role of data and algorithms in our lives. He joined AppWorks in 2020 after receiving his MBA from Columbia Business School, and also has a B.S. in Mathematics from the Ohio State University. In his free time, he tries to stay active and is always looking for opportunities to hike or trek, often seeking the trail less traveled.

Hiring is a tricky thing no matter who you are and what the role is. But it’s doubly hard when you’re a startup founder and you’re making a key hiring decision in a new market you’re expanding to — you can’t afford to make any personnel mistakes this early on, especially when runway is limited and potential investors are gauging your execution on a promising new source of growth. And with advances in technology and globalization, the opportunity to enter another market has never been available so early, magnifying the importance of getting things right as a growing startup.

However, there are a few pitfalls that we as leaders and organizations succumb to at times, which can disproportionately impact hiring decisions in new markets. It’s good for leaders to be aware of these early on, well before you are ready to make such a hire, as it could take a bit of marinating to gain self-awareness. Here’s how people often go down the path of making the wrong hire:

Humans hate uncertainty… You’re expanding into a new market — a market that you’ve perhaps visited many times, whose people you’ve worked with and partnered with in the past, and on which you have done plenty of research. But let’s face it, if we’re being honest, when it comes to truly understanding the market, we can’t hold a candle to a native. And that’s totally okay! We can assess the uncertainty of the market, think of all the ways we might be wrong, all the ways we might fail, and all the ways we could hire the wrong people, and come up with a course of action which maximizes our expected return. Right?

You’re expanding into a new market — a market that you’ve perhaps visited many times, whose people you’ve worked with and partnered with in the past, and on which you have done plenty of research. But let’s face it, if we’re being honest, when it comes to truly understanding the market, we can’t hold a candle to a native. And that’s totally okay! We can assess the uncertainty of the market, think of all the ways we might be wrong, all the ways we might fail, and all the ways we could hire the wrong people, and come up with a course of action which maximizes our expected return. Right?

Unfortunately, that’s just not the way we are wired. Humans hate uncertainty. A 2016 study found that our stress levels were directly correlated to the uncertainty of the outcome, rather than the outcome itself. Not knowing how we’ll do on an exam is more stressful than being certain we’re going to fail. Receiving a call from your boss out of the blue is more stressful than knowing that she’s calling to fire you. And not knowing whether or not your startup will live is always more stressful than knowing it’s the end of the road.

So as humans, our instinct is to minimize this stress by suppressing the uncertainty. Despite the fact that external information is always incomplete and there are many types of uncertainties we have to deal with around hiring for a new market, in our mind we make things easy. We need to make ourselves feel in control. The kicker is that the same study found that our performance level increases with uncertainty. Feeling uncertain actually brings the best out of us, which makes quashing the uncertainty even worse.

…So we often latch on to our own organizational ideologies. Everyone has their own ideology based on what we have experienced in life. And when we are faced with key decisions to make, our ideology is what determines our decision. In the uncertainty of hiring for a new market, we suppress the stressful unknowns and default to something—anything to reduce the stress and give us some sense of control. So we default to our organizational ideology — it’s clean, easy, and certain. We hire the smartest person. And the smartest person, as we all know, is the one who most agrees with you — the one who conforms to your ideology the most. 

Ideologies come to dominate organizations. And why wouldn’t you hire the person who fits the most into your ideology? Everyone successful at the company is like that. That is because of the systematic entrenchment of ideologies in organizations — through mentoring, feedback given to employees and through the interview process. People who don’t agree with the ideology don’t get in the door, and those who do get in the door are constantly pushed to conform even more. At some point you can’t even imagine working with someone who doesn’t share the same general views. Why wouldn’t you hire the person who agrees with your ideology? After all, the company has been successful and the ideology has worked so far. With everyone on the same page, it decreases the need for bureaucratic control and increases efficiency. There’s just one problem.

The organizational ideology doesn’t always transfer to the new market. We don’t actually understand the local market that well. We don’t fully understand how it’s different from our home market, and that our ideology might not be 100% the best fit for our new market. As you’re interviewing candidates for key hires in the new market, they may express views about which users to target, how to market the product, and how to build the organization on the ground. Chances are, if the person is a native and the market is different from your home market, you will have some disagreements. This is normal and a product of you being an outsider and living in your ideology, so you should think twice before dismissing such a candidate as you would if you were hiring for your home market.

Joel Leong, founder of ShopBack (AW#13), APAC’s leading cashback rewards platform, now in active nine countries across the region, has often spoken to us about not just hiring a local person to lead the new market, but fully empowering them and giving them the leeway and resources to execute the plan that they have developed, as if they were a founder themself. Joel often moves to the new country himself for several months at the beginning of each market entry to fully grasp what’s happening on the ground, but always passes on the reins to the country manager after setting up the local team.  

We reach for control over local creative units. What’s even more dangerous is that we tend to feel most strongly about creative units like marketing and local product design. Many founders and organizational leaders are well-traveled global citizens who may have even studied and worked abroad. We may overestimate how well we actually understand the customer and how they respond to the product or the marketing. When local managers are telling you something that seems totally unintuitive given what you know about something subjective or creative, our first reaction will be to resist. This is in contrast to non-creative units like finance, IT, or production — boring stuff where local requests are usually approved without a second thought. Of course, the success of entering a new market often hinges on the creative aspects, so leaders should be mindful when hiring or evaluating local resources here.

CK Cheng, founder of AsiaYo (AW#12), the Series B travel booking platform which has raised $10 million to-date, shared a few experiences with me on this topic. At the outset of market expansion, AsiaYo used a centralized decision-making structure. “I made the decisions whenever I had a strong opinion, and I would take responsibility for them,” he says. 

But later, as they expanded deeper into Japan and Korea and now Southeast Asia, they shifted to a decentralized structure covering their large geographical footprint. Why? “I realized my hit rate was so low [making the correct decisions]” he laughs. “Now, it doesn’t matter if I feel strongly about something or not – I’m not the person on the ground. So I spend more time making sure that the decisionmaker has a good decision-making framework, and is connected to the right stakeholders in the organization, so that they don’t need to consult me.”

CK describes his current hiring approach in new markets as “trust over capability” – placing more emphasis on trusting the candidate over his own subjective evaluation of their capability. To increase this trust, he stresses finding people recommended within his close personal network – both his Japan and Korea country managers were second-degree connections. By hiring based on trust and track record, he doesn’t need to worry about being on the exact same page in terms of strategy and approach.

So what can we do?

I think the first step is just awareness — being aware that all people have certain tendencies that are ingrained in our psychology. And that sometimes it works for us, but other times we need to take a step back and be very conscious of our blind spots, such as when we enter a new market, whether that’s geographic or otherwise. This is not as simple as it sounds when you are a manager or running a company; making a wrong decision in a new market is a scary thought and can lead to major consequences. It is easy to acknowledge that everyone has blind spots, but only when one understands the root of our own personal management psychology can we truly make an informed, unbiased decision.

When you’re making the hire, you might consider giving a long look to that candidate who firmly disagrees with you on the approach but has a proven track record of success in the new market. This way, you’re conscious of your own pitfalls and can actually use it to your advantage, by finding someone who disagrees with you in certain respects. And you can have confidence and trust in their execution given their prior record. Feel and embrace the discomfort that will surely come with this decision which stems from natural human tendencies. Let go, trust, and empower. This takes tremendous mental discipline but could be a practical way to make better hiring decisions.

【We welcome all AI, Blockchain, NFT, or Southeast Asia founders to join AppWorks Accelerator】

Photo by Dylan Gillis on Unsplash

Sophie Chiu, Associate (邱敬媛 / 投資經理)

Sophie is an Associate in the investment team. Before joining AppWorks in 2020, Sophie had 10 years of experience covering public equities. She was part of the portfolio management team at Neuberger Berman, focusing on emerging market opportunities. Prior to that she served as a research analyst at Credit Suisse, JPMorgan, and London-based Autonomous Research. Sophie holds a Master of Finance with distinction from Warwick Business School and BS Finance from National Taiwan University. Her passion and expertise, however, extend far beyond just researching companies and industries. She is also an author of two published poetry books and holds a keen interest in human psychology and human behavior.

Whilst founders and early investors often regard an initial public offering (IPO) as an end goal, public market investors rather see it as the company’s first debut, akin to the NBA draft. With that said, there are some key qualities that the capital market looks for in a public company. In fact, there is already a standard of what is regarded as a ‘good IPO.’ I believe by understanding this, mid-to-late stage founder-CEOs can design a more structured roadmap for going public, or even rethink whether an IPO is actually the best option for their company. This piece of article is more written for growth stage founder-CEOs. However, if you’re an early-stage founder, I believe this article can also shed some light on what is ultimately valued the most in the sometimes arcane process of filing for an IPO. 

Trust is what helps companies earn long-term loves in the public market. It’s a playing field with big guys that have already proved their sustainability, building layers upon layers of trust as each quarter passes. Trust is cultivated not only through data (a result of management and operation), but also through market reaction. This means, executing a good or even strong IPO is indeed very important because the trust is then solidified from day one.

Three qualities: Growth, Size, and Momentum

From my 10 years of experience in both brokers and asset management firms, I see growth, size, and momentum the three qualities that overwhelmingly dictate the success of an IPO. Usually a banker would prepare a scorecard, rating a handful of factors that advise the parameters of a public offering. But, these three in particular have an outsized impact on a company’s debut, and understanding their underlying mechanics can help founders become more informed before they enter the negotiating room and differentiate true advice from sweet words. I will also introduce a few unfortunate case studies to help illustrate the importance of these factors. 

Growth

Growth, like in any fundraising process, is the most important factor. In the public market, growth expectations are not as high as in private, early-stage startups where 100% month-over-month is the norm. However, a 3-year compound annual growth rate (CAGR) of 50-60% is still an ideal benchmark to strive towards, at least for a technology company. Consequently, timing of an IPO is a key consideration for startups; list while there are still strong growth prospects, otherwise poor market feedback is all but certain.

Candy Crush Saga, a staple among every grandma’s home screen, had gone through such pain. Its Irish parent company, King Digital Entertainment (delisted in 2016), first filed for an IPO in September 2013. Soon in December 2013, news about King’s consideration of delaying the IPO due to market concerns about the sustainable growth of the company had spread. Back then, Candy Crush Saga accounted for over 75% of King’s gross bookings and it has already reached 500 million downloads, topping the charts of the iTunes store. From the IPO filing, monthly unique players (MUPs) had already declined in the latest quarter by 6.5% , whilst gross bookings and revenues dropped 2-3%. This implied a negative signal for the growth expectations post IPO. The resulting impact on King’s stock price was evident, down 16% on the day of the IPO, with its valuation dropping US$ 2 billion (from US$ 7 billion) in the span of two months. Moreover, the follow-up financial reports confirmed the market’s concerns; King delivered a mere 20% in revenue growth in 2014, and subsequently declined 25% in 2015.

Size   

Size is a very important factor, but often overlooked by many startup founders; although, it may matter less if the growth rate is significant, say 80-100% year over year. Size encompasses both a company’s market cap and daily trading value and collectively determines the number of investors that can potentially participate. In Asia, the most ideal professional fund size is at least US$ 1-3 billion, which means an average position would be minimum US$ 20 million. This implies two things: (1) since most funds are not allowed to own more than 10% of the company, there’s an implied minimum market cap of US$ 200 million; and (2) even if a fund is willing to trade for 60 days (three months of working days) to buy enough shares, it means the daily trading value needs to be US$ 1.6 million at least (assuming a fund would not trade more than 20% of the amount to avoid affecting the price). However, the math here represents the bare minimum case. Most investors consider US$ 500-1,000 million as the bottom threshold for market cap, with anything below yielding very little appetite.

Many startups in Asia might face issues here. In Taiwan, it is a very common experience. For example, we have Kuo Brothers (8477 Taiwan), one of the main e-commerce players that was listed at a valuation of only US$ 30 million. This already implied a potential daily liquidity lower than US$ 1 million, greatly limiting the size of the potential investor pool. I was fortunate enough to chat with the chairman of Kuo Brothers Jerry Kuo and get his thoughts on this matter: “We certainly recognise the limit from our size, which actually leads to Kuo Brothers being greatly undervalued. However, coming to the public market still has its beauty, especially in talent recruiting and business expansion, at least for Kuo Brothers at the current stage. I believe in time the market will recognise our value as we grab more shares from this highly potential market in Taiwan.” 

Despite many Southeast Asian stock markets sharing similar features as Taiwan’s, founders in this region have long recognized the necessity to expand and reach a certain scale before even thinking about filing for a public offering. Sea Group’s 2017 IPO on the NYSE paved the way for Southeast Asian startups. It was the first unicorn from the region that went public at a valuation of over US$ 4 billion. Many other unicorn startups in excess of that size including Grab, Traveloka, and Gojek are now on deck.

Momentum

Momentum is the last but no less critical factor for a successful IPO. When I say momentum, I mean the market reaction in the first couple of days or months preceding a company’s first day of trading. Some may regard momentum as a function of trading or expectation management. I would define it as a reflection of a founder’s ability to deliver on their promise to the market. Momentum is generated only if a company achieves, if not exceeds  its forward-looking guidance. It is about execution. If there are any technical matters to take into consideration, at most I would suggest avoiding setting your listing window during major political or economic events such as elections or Fed meetings.

I would categorize momentum into three stages. These stages all matter, but it’s better if a company builds a strong momentum throughout, or at least exhibits a gradually recovering trend.

Stage 1: The IPO day – I would recommend that a company must never underestimate IPO day. It very often sets the tone of the market reaction. It is a direct reflection of the market’s appetite or view of the IPO pricing, and future growth potential. When deciding the IPO valuation, higher doesn’t necessarily always mean better; a valuation on the high end could lead to inflated expectations and therefore a higher probability of price correction on IPO day.

Stage 2: Before the first reporting – Investors tend to build some buffer in their model. They tend to apply some, if not a major discount to the guidance outlined in a company’s IPO prospectus. That is why expectations are rather mixed and vulnerable before the first reporting. Do not do anything that leads to further doubt. Again, it is about execution. A company should deliver what it has promised, signalling that the business is on track and in good hands. Any mistake (or misfortune) at this stage could instantly break investor trust, requiring an extensive amount of time and effort to rebuild it.

Stage 3: First reporting day – A company should deliver a good set of results that are in line with the guidance provided during the IPO process. The market reaction on the first reporting day will anchor a basic view on the company. If the reaction is strong, the company would have secured a solid level of trust among investors. On the other hand, a bad reaction would take extra effort and time to rebuild the company’s positioning in investors’ minds.

Snap’s IPO in 2017 is a great example here. Although Snap’s share price surged 44% on the first day of trading, the stock price soon lost momentum. Major reasons were related to the uncertainty of the IPO valuation, which was at 62x P/S ratio vs. Twitter’s 4x and Facebook’s 13x back then. Stock price fell 50% from the peak before the first reporting in the second quarter of 2017. However, the results made the situation worse. New installs of Snap dropped 21% year over year, comparatively worse than Instagram’s 8% year-over-year increase in the same period. Revenues and user growth also undershot, eliciting deep disappointment among investors and sending the price of its stock even lower. After this, Snap hovered at a low-price range for two years until they managed a comeback in 2019.   

Focus on your flywheel

Given the qualities discussed, I hope you now have a better idea of what exactly it means to be IPO-ready. My final piece of advice echoes popular sentiment among the most common early-stage pitfalls to avoid—premature scaling. Do not prematurely go into an IPO for the sole purpose of competing against the big guys.  We all agree that going IPO has its merits: It offers an exit for your early investors, and lets veteran employees realise the value of their ESOP and efforts. In the meantime,  the public market is indeed an effective and open place for (friendly) funding. However one should not ignore the fact that public market investors are not like the VCs and angels who spend years watching your company grow. Every inch of your ambition, vision, and execution are now under the eye of public scrutiny, where investor reactions tend to be immediate and widely irrational. So irrational, in fact, that an entirely new field of study has emerged called behavioral finance, where a handful of psychologists and economists have already been awarded Nobel Prizes. When expectations go sour, both valuation and liquidity (trading value) drain even faster. This vicious cycle can significantly impede the value and momentum of your business, taking years to build up again.

Therefore, I would highly recommend growth stage founders put a proper plan in place when considering an IPO. Make sure you have good growth, good size, and good execution and hence can deliver good initial momentum. Only then will you be in a position to reap the full benefits of the public market.

【We welcome all AI, Blockchain, NFT, or Southeast Asia founders to join AppWorks Accelerator】

Photo by Ahmad Ardity on Pixabay