“Nothing galvanizes like success.” Paul Santos knows what he’s talking about. His firm Wavemaker Partners sold four companies in the past year, creating about USD 400 million in enterprise value. “We made some money,” he quips during the second interview in the “Venture Matters” series, broadcasted by KrASIA on Thursday night.
Santos created the Southeast Asian branch of the Californian VC in 2012 and since then invested in over 100 businesses from a wide spectrum including software, AI, cybersecurity, agritech, and additive manufacturing. In 2019, Wavemaker managed to sell Coins.ph for USD 72 million to Gojek, Red Dot Payment to Naspers-owned PayU, and Wavecell for USD 125 million to US cloud company 8×8. In April, point-of-sale startup Moka was acquired for USD 130 million, also by Gojek.
Gold mine of opportunities
“We generally believe there will be global champions coming out of Southeast Asia,” he told host Robyn Tan who asked him about the perspectives for the region. “It’s a gold mine of opportunities because there are so many problems to solve,” said Santos. His Indonesian portfolio company eFishery developed an auto-feeding method to optimize costs—80% of which are for food—improving fish growth and water quality. “It’s a fish farming engineer from Bandung. He had 2 million in revenues and was profitable when we invested,” he said, referring to a potential market of 30 million fish farms in the country. “I’m excited!”
Santos points out the importance of Singapore for investors. “Singapore is a great place to start because of the commitment of the government with the smart nation,” he said, adding that the country is still “neutral enough” to be able to conduct business everywhere. “We need to be a little more frugal, a little more focused, but it’s the willingness to collaborate, whether it’s the research institutes, universities, or government bodies, and also the multinationals that already set up innovation centers here.”
Silent Eight, another of his portfolio companies, benefited from the infrastructure of Standard Chartered’s venture lab which was finally landing them a big deal with the bank. Santos counts that the Polish founders came to Singapore in 2015 to look for use cases of their AI product and several bankers recommended to utilize it for anti-money laundering. Silent Eight was able to automate the screening process and reduce the false positives drastically—and Standard Chartered decided to invest.
Building an industry standard
“The contract values are north of a million dollars a year,” Santos said. “You know how much we put in that company before we scored that contract? 2 million dollars!” He explains that they couldn’t have built it in Silicon Valley: “This would be the salary of how many people?” The startup now has offices in New York, Europe, and Asia, and Santos believes he has a shot that the solution becomes an industry standard, which would mean that all the banking peers will be compelled to buy.
Wavemaker is listing Silent Eight as one of its “deep tech” ventures. Santos defines deep tech as “enough science in there that it is unique enough to create some sort of competitive advantage.” He says that technology makes it harder for people to copy you. That doesn’t mean that the company needs to have a patent. “I’m not obsessed with patents,” he said. For him, there are also other ways to have a competitive advantage: “You can have trade secrets, you can have your own network, you can have industry access.”
“Don’t delude yourself”
Like for Silent Eight, winning the first marquee customer is key for deep tech startups. “That’s the ‘zero to one’ moment and sort of transformative for them,” said Santos who also shared some advice for entrepreneurs who find themselves in a critical situation now, thinking if they should hold on or cut their losses. It’s the time for honest decision making, he said. “Try to find your way, don’t delude yourself, you will be able to do better and better decisions over time.”
The “Venture Matters” webinar series will return on July 9, 2020. For more information, please subscribe to our newsletter for the newest event updates.
