Few women are as prominent in the local startup ecosystem and venture capital space as entrepreneur and ecosystem builder Grace Sai. The co-founder and CEO of Impact Hub Singapore (The Hub) is a key player in the city-states’ startup ecosystem through her role at The Hub.
Since inception, Impact Hub Singapore has grown to two co-working spaces. One is located at Cuppage Terrace in Orchard Road which opened last year, and the other in Prinsep Street.
Currently, its infrastructure encompasses co-working spaces, a venture fund, an events platform, a cafe and accelerator and aims to build “startup environments within corporates and governments” through various innovation models, as well as introducing entrepreneurial culture, talent and innovations into larger organisational ecosystems.
In an interaction with DEALSTREETASIA, Sai shares her views on venture capital, entrepreneurship, the role of Impact Hub Singapore in the city-state’s startup ecosystem and the growth of corporate venturing in the region.
You’ve founded and served in some non-profit organisations and social enterprises. How has this shaped your approach to entrepreneurship and the Impact Hub fund?
Our portfolio is much broader now and covers start-ups in general, with 75% of the Hub community being tech and digital. With my background in social enterprise, I always look for the clarity of purpose in founders- that the start-up’s mission is just as critical as their business plan.
The experience has been very useful in my work dealing with The Hub’s business fund, particularly regarding how to select people based on the clarity of their purpose, rather than their business model at an early stage. Our investment is a pre-seed round of up to S$500k.
The limited partners (LPs) in our current fund are a mixture of three family offices, and the rest are angel investors, both new and seasoned. We’re aiming to make angel investing more accessible and are heartened by the commitment, especially when LPs are members or alumni of The Hub, and we’re making it easy for them to seed the next generation of founders and teams.
Our venture fund is the first fund in any co-working setup; I’m not sure if we can claim it globally, but it’s definitely a first for Asia. We’re in a very beneficial position to work with all the main VC funds here in Southeast Asia.
We’ve got an investor-in-residence programme, and we’ve signed MOUs with two of the biggest VC funds here: NSI Ventures and Golden Gate Ventures. We are sharing deal flows and mentorship, and they’ve committed some hours to mentor our committee and founders.
Your Corporate Innovation Programme attempts to answer whether big companies can innovate like a startup. Whats your take on the capability of Southeast Asian and Australian enterprises to achieve this?
There is a reason why these large enterprises still exist today – they have been great at what they do, and have created systems and processes to protect that ‘greatness’. However, some of these ‘protection’ are also preventing them to change quickly and nimbly. Some leadership teams are more progressive in seeing the need to reset their culture and be more open and courageous. Some are not.
The questions out there are whether large enterprises can last through multiple economic cycles and adapt to changing market ecosystems. Of the 20+ companies that work with us, 75% are foreign-owned MNCs, which are used to working in the same manner in their corporate HQs.
The number of local companies is fewer – DBS being the prominent local champion – so they are setting a good example as a role model locally.
There is a growing trend of big business collaborating with startup ventures. What should each side of the relationship bear in mind, given the volatility and risk associated with startups?
There haven’t been many such success stories globally, as start-ups and corporates are unlikely allies.
There must be an awareness of the different mindsets that as they enter the conversation and the position they’re negotiating from. There’s a different pace in terms of the speed of decision making, and many other many small differences that can make or break trust. Both sides must come in with the best intentions of building trust.
Corporates often have processes to prevent change, whereas change is in the blood for start-ups. Each party has different roles coming together, and both should take the time to know each other in order to cultivate relationships.
Start-ups often go into a corporate relationship too naively. For example, if start-ups work with corporates, who will own the IP (intellectual property) at the end? Is it a service provider partnership, or a lock-in partnership? All these things need to be ironed out before the ‘marriage’. We’ve seen all these setbacks before.
The Hub is positioned as an innovation intermediary, but – more importantly – it’s a trusted intermediary. We speak both languages, as we work with both sides to build access to innovations, and global markets. Our focus is on how we develop something into a relationship that makes a start-up-corporate partnership work, focusing on the ‘how’, rather than simply doing what works.
Corporate venturing in the technology space has been booming, and this is slowly extending to consumer goods firms. Your take on the differences this will create in the corporate venturing approach?
Large FMCG firms are so huge that any kind of tech or innovation can be relevant to them. Their products touch 2 billion lives and they are among Googles’ largest customers on a global basis. They’re already investing in new media, so that I wouldn’t silo an FMCG company away from tech and technology translates to scale
We’ve worked with Unilever, Procter & Gamble (P&G) and ABInBEV – they’re very interested and are genuinely seeking to adopt tech into their organisation. As a competitive advantage, it helps to have a compelling and engaging organisational culture for a corporation. Especially for professional services firms, if they’re not attracting the best talent, then they are in trouble.
An Entrepreneur article from 2014 suggests that corporate venturing will cause significant disruption amongst traditional institutional VCs. Do you see this as a good thing enabling the venture capital ecosystem to evolve?
I don’t see them overlapping since what they offer is quite different. Corporate VCs provide access to global markets and distribution channels, as well as significant global branding and marketing capabilities.
It allows a company funded by a VC fund to scale much faster and more broadly. If I were a VC fund right now, I’d be forming partnerships with corporates to create a route to market for my portfolio firms. Mathematically, management fees render it difficult to aid portfolio firms extensively. VCs focus on sourcing and having a portfolio in the early stage of a start-up ecosystem’s maturity.
Now we see a couple of the main funds here with 20-40 companies and a vested interest in seeing them thrive and having their portfolio firms as potential acquisition targets. It’s the duty and role of general partners (GPs) to form relationships with potential partners or buyers. An example of corporate VCs in the Singapore ecosystem, is the Unilever Foundry, which focuses on small ticket sizes, and Unilever Ventures, which targets larger entities.
Firms such as Acronis – a portfolio company of Runa Capital – maintain a corporate development arm. Is it more efficient to assign corporate innovation tasks in-house, or is it better to employ the model of external venturing?
In general, in the absence of an unyielding internal champion who is an entrepreneur, it’s better to do it outside the corporate setting. If you have an internal champion who can negotiate the relationship and provide a safe and innovative space for innovation to happen, then it can happen.
Having said that, there are very few cases of innovation coming within. That’s why Barclays invests in co-work spaces like RISE. And now they are starting to explore the space in India. Some corporates have a system of maintaining a physical space outside of the corporate entity and operated by a co-working operator.
We also see that at The Hub with Paypal; Braintree is operating outside of Paypal’s office, and for a good reason; it’s literally out of the corporate building. If there is that champion -an influential leader that can protect the innovation arm from the board and bureaucracy – then it can happen. That person’s relationship with the CEO and board has to be robust. Innovation means making mistakes. Can the culture make the space for tolerating that?
We’ve been working with corporates for the last 18 months without having that profit-maximising purpose. We want to understand the relationships and have collected a fairly impressive portfolio of projects. One-time events (i.e. hackathons) could serve a function buts it’s a limited one. How can you influence the corporate leaders to adopt a corporate innovation mindset and spread that ideology within the organisation?
Corporates need to identify their need and to choose between either a mandated corporate innovation arm or a specific group identified to lead innovation initiatives.
At thee end of the day, it’s really about just encouraging changes and for private sector professionals to step out more and gain innovation from outside the corporate world. We want them to spend time with our communities, draw inspiration from them and conduct market research, as well as strategise.
What would improve the VC ecosystem in the region?
VCs who push the envelope to test new ways of growing, rather than those that copy a model that exists. There’s no proven model. Even VCs have to be entrepreneurially-minded. There’s no dominant system or model that works, and they need to try new ways of conducting selection, investment, and support for their companies.
We need to look at short-term and long-term solutions. These kind of visa programmes are a plugin that creates and drive an ecosystem. I was involved in MaGIC, and that was a recipe as part of building towards a critical mass.
Long-term solutions are more interesting to discuss, as introducing entrepreneurial mindsets is still nascent in Singapore. In Tiong Bahru (a Singapore neighbourhood) – I was a Tiong Bahru girl – I know a girl who was nine years old who set up a lemonade stand and was selling it for $2. I was one of her customers.
Within three days, more traditional neighbours complained to NEA and URA to shut her stand down, citing the hygiene threat. What kind of education do we want to give our next generation? That’s the saddest story I heard in recent times. You’re not only killing the shop but the desire to dream and test new ideas.
How do you balance a very efficient legal system vs. a paranoid one? If every kid in Singapore gets that treatment will we have a generation of entrepreneurs? We need to have a long-term view and be confident of or role in nation building. Children can be part of nation-building when the grow up, and we need to have a more long-term view of our actions today.
Freedom of speech and other such expressions are critical to this. But when you try to suppress the ability to voice out such expressions, you’re muting the capacity to think and create. It’s systemically linked, and all need to reflect upon a single question: How do we build a more self-confident view on things?