Q&A: Formation 8's Brian Koo

Q: When Formation 8 was set up, what was the Asia angle?

A: The overall thesis was about having the insider perspective of Asia and Silicon Valley under one platform. If we can truly bring them together, and have a lot of arguments around it, we will be able to go after the biggest ideas with the best talent. The first fund was more about investing in US technology and bringing it to Asia. We thought that if there is a very exciting US technology company it would be silly if they weren't thinking about expansion into Asia. At the same time, we didn't think Asia had enough big, bold ideas from entrepreneurs so we didn't focus on investing directly into the region, but recently that changed.

Q: What led to this change?

A: In Silicon Valley every entrepreneur wants to go after a billion-dollar idea. I used to meet a lot of smart entrepreneurs in Korea and they would present ideas for games studios. Not many of them were really thinking big - my family started LG Group and no one was saying, ‘I want to go after your family, I'm going to disrupt Samsung, I'm going to disrupt healthcare or financial services.' Then a couple of years ago we started to see some different companies. We invested in Memebox, which distributes Korean cosmetics, and when you talk to the CEO, Dino Ha, you don't feel like you are talking to an Asian entrepreneur. Asian entrepreneurs in Silicon Valley are usually shy, they want to do well by the VCs, but Dino is just so confident - he really wants to rebuild the beauty industry. My partner Gideon, who was previously CFO of YouTube and Facebook, is on the board of Yello Mobile. He tells me: ‘When I see Sanghyuk Lee [the founder] I see Jack Dorsey.' He is always thinking big ideas and bold action. We think now is the time to start building the brand in Asia and helping these entrepreneurs. That is why we are putting together an Asia fund.

Q: You are primarily focused on Korea and Southeast Asia. What about China?

A: We like China as a market - if you have a consumer technology there is a phenomenal growth opportunity - but it is very crowded and we are worried about the valuations we see there. Korea and Southeast Asia are relatively untapped. We believe we have a decent network and a strong insider view in these markets.

The entrepreneurs we like tell us they don't really want local investor money because those investors can't provide what they need - which is global talent

Q: So valuations in Korea and Southeast Asia are less of a concern?

A: The entrepreneurs we like tell us they don't really want local investor money because those investors can't provide what they need - which is global talent. They say: ‘We know how to build the business in our own country and we've brought in all the local talent. But to become a billion-dollar company we need a data scientist. If we could find a product engineer who knows how to scale our product, that would be amazing.' When we bring that to them they want to think about how we can get the right valuation.

Q: Do you require all investee companies to go global?

A: We don't require companies to think beyond their country, but if you are based in Singapore and only looking at the local market it is going to be small. Many of the companies we like are headquartered in Singapore and pushing into Indonesia, Thailand and the Philippines. The only country where you could build a big business entirely domestically is Indonesia. With Korea, it depends on the business model. For example, the country could support one massive e-commerce company, but I don't know how big that is yet.

Q: Yello Mobile has been aggressive in making acquisitions. What is the strategy?

A: It looks like a roll-up strategy, but it's really not. The CEO's perspective is that lifestyles in Asia are going mobile - he wants to look at shopping, travel, digital marketing, online to offline, and new media. The infrastructure is just getting started and it's a matter of time before there is a big wave of growth. His goal is to make sure his company is best positioned, with the best talent, before this growth comes, and the fastest way to do that is to acquire the best team in a certain vertical. In Korea, Yello Mobile is the dominant player in its five target sectors, and now acquisitions are slowing. The CEO sees the lifestyles of people in Southeast Asia as being similar to Korea - people want to do everything with their mobile phones - but the infrastructure is a couple of years behind Korea. There might be a company with all the shopping data in Indonesia but no algorithm, and consumers can't interact with the mobile service because the infrastructure isn't there. If Yello Mobile can acquire this company and build a local operation then it will be in a strong position when the growth happens.

Q: How do you support portfolio companies as they enter new markets?

A: Our team in Southeast Asia is helping a lot by becoming a Memebox team. They set everything up, make all the calls, order stuff. Then the key thing is networks. That is something people in the US don't necessarily appreciate enough. When CEOs from the US go to China they can set up a lot of meetings, but we can help save time by putting them in front of the right partners, and the right people within those organizations.

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