Keiretsu Forum, a structured approach to angel investing: Subra Iyer

Visual of Keiretsu Forum Barcelona Chapter meeting. Credit: Keiretsu Forum

Keiretsu Forum, a global angel investor network, offers its members a better chance of finding deals that interest them, as the opportunities are not geographically constrained, said Subra Iyer, who oversees the community’s Singapore Chapter. While angel investing remains a risky business, Iyer is of the opinion that a sufficiently large portfolio would be required to make positive returns. “To make a large portfolio, you need to see a large pool of quality companies from which, you can build your portfolio, which the Keiretsu Forum facilitates,” he said, in an interaction, ahead of the inaugural meeting of the network’s Singapore chapter.  Edited Excerpts.

Are there any particular investment thesis or themes that the Keiretsu Forum will maintain, with reference to deals in Singapore and the ASEAN?

The themes for ASEAN will emerge but there are three segments the Keiretsu Forum (KF) operates in: technology, life sciences and real estate. But as a whole, we are agnostic. It’s not that we won’t touch a manufacturing venture, but manufacturing is often a debt play.

You are buying a lot of assets, so you generally want to secure those assets. It’s not that investors won’t touch them. Rather, investor find that the technology, life sciences and real estates can get ten times the returns on the investment.

And angel investing is about multiplying your investment by a factor of 10 or more. As an investor, you need a sufficiently diverse portfolio to generate good returns and ‘get a Google’. For some Google investors, the returns they got on their investment was a thousandfold, like Jeff Bezos and Ram Shriram.

What’s your opinion on the current investment policies in place and current trends by VC’s in Singapore?

To the extent that my investors invest in Singapore-based firms, current investment policies are good. There’s a lot of angel investments in London as the tax breaks angel investors are granted is excellent – it’s a very high marginal tax rate.

In Singapore’s investment environment, I don’t know how such a policy will work out. It’s a great advantage, but KF (Keiretsu Forum) deal flow isn’t confined to just Singaporean companies.Singapore investors are often restricted to investing in Singapore firms. Our deal flow is international. Angel investors registered as members of KF gain exposure to curated global deals from across world, with exposure to multiple markets.

Does Keiretsu possess any competitive advantage relative to other networks like TIE, Singapore Angel Network and Mumbai Angels?

At the end of the day, its not just the tax breaks that drive investing, but a good, curated deal flow. The Keiretsu Forum currently has 37 chapters around the world and at least four companies are presenting deals to Keiretsu members at every meeting. We have 100 curated deals available to our members, at the minimum.

If you look at The Indus Entrepreneurs (TIE), it does angel investing in one or two locations – Silicon Valley and the Northwest USA. Other than that, TIE doesn’t do angel investing. It’s very limited in that respect and it’s basically about mentorship. The Mumbai Angels, Chennai Angels and Hyderabad Angels are all geographically focused.

Keiretsu is a global brand and sources deals worldwide. Therefore, we’re not geographically constrained and investors have better chances of finding deals that interest them. Angel investing is a risky business, but with small investments in a sufficiently large portoflio, you’re more likely to make a positive return. To make a large portfolio, you need to see a large pool of quality companies from which, you can build your portfolio, which the Keiretsu Forum facilitates.

We are structured and have monthly meetings. Most angel investing groups in Singapore are very ad-hoc in their approach compared to us.If you like a structured alternative compared to the ad hoc nature of what is available locally, then KF is the platform you’re looking for.

Entrepreneurs can leverage upon mentorship, with more than 1400 members worldwide and a large group of experts in particular products and industries. And also, with 37 chapters, entrepreneurs can leverage expertise in other geographies to grow their business.

What does the formation of a Singapore chapter of the Keiretsu Global signify for the local and ASEAN startup ecosystem?

I think its essential as there is no structured angel investing in Singapore. Even the activity of BANSEA is rather irregular. Here, we’re bringing something structured, with monthly meetings for members to review deal flow that has emerged that month. The other thing that happens with Keiretsu Forum is that we run Keiretsu Academy for members to be educated.

Members may be first time angel investors and we answer questions like how to conduct due diligence in areas like intellectual property (IP), legal arrangements, management matters, operational affairs and understanding things like term sheets, so that they can become better at evaluating deals. If you do proper due diligence, your chances for success as an investors are higher than investing based on your gut feeling.

A lot of angel investing is done on gut because you like the deal of the company, not because of due diligence. Sometimes, angels invest in ventures in field beyond their expertise. Investors can leverage on the expertise to enhance and augment the quality of deals they invest in.

Keiretsu Capital (KC) – which is only active in the US right now – is also another benefit member investors can tap, as it helps conduct a top-up fund for deals that KF members have invested in. It’s a top-up fund for a specific niche.

For instance, if Appleseed showed some success in its portfolio and we have a sufficiently large membership base, we could establish a KC here for Asia, operating out of Singapore. To do it successfully requires that we worry about compliance. But before we get there, I’d like to build a credible track record and some successes.

What are the origins of the Keiretsu Forum, given that there is a lack of chapters in Japan despite its Japanese name?

Randy Williams, the founder of the Keiretsu Forum, is a real estate professional who did a lot of work in Japan. So it was the concept of a ‘forum of membership’ for angel investors that led to it being founded as the Keiretsu brand.

The strength of KF is its diverse membership and the competencies they bring to the table. The driver of the forum is that it’s community-based, for the benefit of a community of angel investors. You can leverage on their expertise and experience when making deals, as well as advising and evaluating deals for fellow members.

Also Read: Is Singapore’s government adapting Israeli innovation policy?

Are there any plans for a Singapore edition of the Keiretsu Squared accelerator, given the recent proliferation of foreign accelerators establishing themselves in the city-state?

KS2 is relatively new and I’m unsure they’re fully fuctional yet. They’re testing their model. For Singapore, there’s already Appleseed. Since I’m a major shareholder of Appleseed, I’d rather leverage on KF and build synergies with Appleseed than replicate the KS2 model in Singapore.

Appleseed can easily leverage on the KF forum in any case, and I predict the synergy will be phenomenal, given the combination of both angel investor networks and the venture acceleration model of Appleseed,

What are some of the success stories of the Keiretsu Forum in the Asia Pacific?

We started the first chapter in Chennai in February 2015 and already have 20 members, with 20 companies already presenting, with two deals about to close. One is an investment in a US firm that came through the KF network and the other is an Indian company in contract and captive farming.

The next chapter is in Singapore and Bangalore is also about to launch. The membership director of our KF Chennai has gone on to establish the Bangalore Chapter. There are negotiations with others to launch the Bombay chapter, as well as negotiations underway to launch a Jakarta chapter.

What’s your take on the recent entry of hedge funds into the venture capital (VC) space, particularly in large markets like India and the US? Is this a positive development for the investment ecosystem?

This space is huge. I don’t think entrepreneurs anywhere are granted as much funding as they need. As an investor, you need to spend a lot of time understanding the company, being confident in the business model and liking the venture. Otherwise, you’ll have no clue whether you can get the money back. There’s horror stories of angels investing large amount in a single company, which goes bust and never invest again.

VC’s want to see a lot of validation. You do need early stage investors, which is why that space is never going to be filled by institutional investors, whether by hedge funds and Vcs. Hedge funds tend to play to liquid markets, so this shift into the illiquid assets like startup ventures may not play out well for them, as they may lack the experience in that sector.

Intrapreneurship vs Entrepreneurship – what do you reckon is a better long term investment? Is it a better cultural fit for Asian entrepreneurs?

From a corporate perspective, they are clearly focusing on intrapreneurship as they want their managers to have their entrepreneurial skills, in order to drive a better business. The skill set is pretty similar. Someone who is good in intrapreneurship will be good at entrepreneurship.

I started a new business unit when I was in PWC, which is intrapreneurship. And I clearly learnt how to build a new business through that process. Eventually, I went out to become an entrepreneur. It’s a good training ground as you take less risk and probably risking your time and career rather than your money.With entrepreneurship, you risk your money, time and energy, which is the clear difference.

Whether intrapreneurs dare to leave the comfort of corporate life and regular income to take a shot an entrepreneurship is a question of personality and circumstances. I can’t comment on whether cultural fit is a factor, as its for each his own. For me, being an intrapreneur before being an entrepreneur worked. For others, being an entrepreneur from day one may work out better.

In places like India, they become entrepreneurs earlier, as there isn’t the comfort of a steady income all the time. Some people can’t get jobs, so they build a business. Its a tough environment. And most times, these are the environments that create entrepreneurs.

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.