Subramaniam Iyer, chairman of Appleseed, a Singapore-based venture accelerator, as well as the licensee of the Keiretsu Forum, a global angel investor network with its origins in Silicon Valley, follows the ‘passion first’ logic. When investing or working with startup ventures, the first thing he looks at is the founder’s passion, along with their ideas and the ability to change,pivot and execute.
A forensic accountant by training, Iyer wears many hats. He’s currently building chapters of the Keiretsu Forum in Singapore and Chennai, linking angel investors in both places with a global community of angel investors seeking to enter various markets. Through Singapore-based Appleseed, he helps local startups enter new markets abroad.
When he surveys the startup potential in the region, Iyer is bullish on Indonesia and says it can be compared to India with its growth stage, potential political trajectory, socioeconomic developments and transition of power. While these impediments can pose challenges to business-people and entrepreneurs, the way out is to build the skills to navigate the market and find the right partners when entering it, he adds.
In an interaction with DEALSTREETASIA, he speaks about his role in Appleseed and his contribution to the cause of entrepreneurship as the executive director of SmartKapital, a venture and advisory services firm based in Chennai.
At SmartKapital, he guides and assists the CEOs of small and medium enterprises (SMEs) in South India, Southeast Asia and the US through their critical growth stages. SmartKapital works on understanding and addressing the severe shortage of resources in the small business sector. These range from financial capital, to dealing with issues of social capital and infrastructure. Most of the deals are focused on firms engaged in the scaling stage, with the occasional startup venture deal being negotiated.
Edited excerpts from the interaction:
What led to Appleseed being established?
Kumaran Pillai, the CEO of Appleseed, approached me and asked whether I was interested in enlisting with him. I had moved to India from Singapore to find some way to help entrepreneurs. It would have been great to start a fund, but this was in late 2008 and the world changed. We couldn’t raise a fund, so we did something else and went into corporate finance.
SmartKapital still does some investing, but its really a matter of “feast and famine”, so I stay away from it. What we really wanted to do was to mentor companies and help them grow, but it wasn’t a great proposition. We were sort of plodding along and Kumaran knew I was doing this. I had an opportunity to get some funding for Apple Seed, so I got involved.
What’s the difference between a venture accelerator like Apple Seed, compared to normal seed accelerators?
We don’t have a 100-day restriction, like Y-Combinator or JFDI. We take companies with a proof-of-concept and help them with scaling. Most IT companies won’t survive in Singapore and need larger markets to survive, so we help them enter new markets.
I suppose we’re the next stage for a startup, just beyond a seed accelerator. We do have a 100 day program, which gives them (startups) a set of tools, with us on their board to guide them. We function as corporate governance, in the sense of executing a plan and providing strategic advice, as we have a stake in the business. However our equity is not as large as seed accelerators.
What about the Global Accelerator Program?
Either by ourselves or through our EIRs (entrepreneurs-in-residence), we help companies in our portfolio to scale overseas. Many startups do their books once a year, with no idea where the numbers are coming or going, so we fix that. We’re focused on the IT space, so we deal with techies. Techies can deal with the technical development but not sales. You can build the best mousetrap but be unable to sell it, so GAP is intended to address this as much as possible
What do you look for in entrepreneurs and ventures that apply to your program?
We are focused on IT and software companies, so the best prospects and clientele are techies who have technical prowess but no commercialisation expertise. We fill the gaps in finance, marketing & sales, since they don’t understand about budgets, finance or sales in general.
You need someone in the team with those skills – either through hiring or partnering.Since they can’t afford to hire, so we have people working with them to sell. We also assess their readiness to expand overseas.
Whats the most important thing entrepreneurs need to remember when venturing beyond their home markets?
It’s different every time. What works in your home country might not work in other markets. Take me as an example – I’m a Singaporean living in India. Now, India is very competitive, especially in the IT space. You need to understand the market, especially before attempting to enter one that has a lot of talent and entrepreneurial drive. You have to consider your options when making the decision to go abroad (ie partner or go alone).
What are the challenges that most entrepreneurs face when shifting from startup to becoming an SME?
When they’re a startup, the founder does most things. When they become an SME, they become bigger and they have to learn to delegate tasks. A big challenge lies in understanding their scope of responsibilities and letting someone else do it, even if it may not be as efficient as doing it themselves – because their staff are more effective and experienced.
Especially important is managing human resources and financial resources. As you grow, you need more funds. Otherwise, you could be a company that literally grows into bankruptcy, and that often happens. The two keys are human resource and financial resources.
When you’re a startup you can do it without much structure. But when you’re an SME, you need more structure and hierarchy in order to survive. Someone who’s a great founder may not be a great manager. There’s a lot more processes and protocols involved as a manager, and some founders can make the jump, while some cannot.
You need to educate founders early. Some end up realising this simple fact early on, as they grow their companys operations.
Do you think the digital divide existing in the Asia-Pacific is a problem for businesspeople and entepreneurs, or an untapped market that most entrepreneurs haven’t perceived yet?
If they claim it’s a problem, then they haven’t got the innovation to work through it. In India right now, mobile penetration is higher than Internet penetration. I can go to a village and my mobile still works. Nearly every farmer has a mobile phone. Its a country where there are more mobile phones than toilets.
What do you look for in the founders and management team of the ventures you work with?
Passion first, since passion drives everything else. We also looking at their ideas and ask “Does this make sense in the context of the world?” Their ability to pivot and change (i.e. their adaptability) is also critical. Ultimately, they just need to be sensible people, not stuck with “my way or the highway”, but to be able to adjust their business model in response to market conditions.
What’s the critical component of successful innovation in a startup ecosystem like Singapore?
I’m a forensic accountant, ever since I was with PWC. I’m still a forensic accountant. I take on work that involves interacting with very senior managers and outsourced tasks. The business model is tweaked, but ultimately I’m doing the same thing – there’s nothing innovative about forensic accounting
Innovation is about changing the way something is done. Innovation of business models, of differentiating from your competitor is critical. Product innovation is the greatest innovation, but how often does that happen? I’m not saying it’s impossible, but more business model differentiation needs to happen in Singapore.
It would be great if something like product innovation happened as well. So much research goes on in Singapore, but the commercialisation of this research hasn’t happened, so someone should pay attention to that.
Which countries have more potential in Southeast Asia?
Indonesia. It’s got a large population with a growing middle class. You need to find a need that is under served and bridge it. To me, the emerging nature of Indonesia’s economy, plus the issues that a high population always face, results in them increasingly needing services in different spheres
Indonesia lends itself well to comparison with India. Its growth stage, potential political trajectory, socioeconomic developments and transition of power will pose challenges to business-people and entrepreneurs, so you’ve got to build the skills to navigate the market and find the right partners when entering it.
In an interview with Wharton, Ravi Venkatasen, the former General Manager of Microsoft India, stated “India may be one of the hardest markets across the world, but if you succeed here, then you are like an Olympic athlete. The capabilities that you develop here will help you win all over the world.” What applies to India can apply to Indonesia, especially in regards to the concept of jugaad, which involves developing innovative ways to surmount the challenges of a deficit in resources.
I believe that the same applies to Indonesia, as well as other markets in Southeast Asia, which can have problems comparable to those faced in the Indian market. However, they are not of the same magnitude as the challenges posed by the Indian market.