Hugh Mason is the co-founder and CEO of JFDI, a Singapore-based accelerator that has built over 70 startups since 2012. Hugh has a colorful background as serial entrepreneur, in the broadcast industry, software and technology, as well as investor and university lecturer.
About this episode:
In this episode we will cover Hugh’s experience of running JFDI, one of the pioneers of the accelerator model in Asia, and what he would do differently today if he were to start over again.
Website URL: http://www.jfdi.asia/
Hugh's LinkedIn: https://sg.linkedin.com/in/hughmason
Listen to the Podcast
Andries De Vos: Getting started, what is the history behind JFDI and what was your founding vision?
Hugh Mason: The background to JFDI is actually a co-working space. When Meng and I got together, we realized: here in Singapore there was a fantastic intellectual capital, lots of smart people and as fantastic financial capital as well, lots of money (still is), but there was no social capital for entrepreneurship, no place where people could come together, hang out, exchange visions and so on. Both of us realized that it was a hugely important thing for a startup ecosystem.
So, the real vision for JFDI was about ecosystem building ten years ago. It seems extraordinary now, when Singapore and Southeast Asia have got so much more dynamic, but back then there was very little in the way of ecosystem.
Andries De Vos: Why did you set up the JFDI business model as an accelerator?
Hugh Mason: It was a really interesting, accidental thing. Again, very odd to think of it now, but ten years ago, we were some of the first guests of an early tech conference - it was about a hundred people in a borrowed room of a university. One of the speakers was a guy called David Cohen, who'd come from Techstars, this accelerator we had heard of in Colorado. He was really interesting, because he didn't come from the Silicon Valley. We thought to ourselves: “Well, here's a very small town with basically 120,000-odd people. It's got some wealthy retirees, it's got some nice mountains and a small liberal arts college, and somehow this guy managed to create a community which kind of spawned startups — a school for startups, like a piece of community theater that comes together several times a year.” And we thought it was amazing! If that could work in Boulder, Colorado, then surely it could work in Singapore too.
So, while our intention was community building initially and that's why we set up a coworking space, as for the accelerator, we didn't imagine we could set one up. Actually, it was David Cohen himself, who called me one day and said he had been asked to set it in Singapore and he didn't want to do it, so maybe we wanted to do it. We looked at each other and thought, well, that's a good idea. Don't know anyone who'd done it in Asia yet. So, I think, we incorporated it a few days later.
Andries De Vos: When you started JFDI, did you ever expect it would take 6 years of your life and you’d end up with 60+ startups?
Hugh Mason: Yes, we did. One of the things that was immensely helpful to get it going was the community that was building around Techstars. It got going, I think, in 2006-2007, shortly after Y Combinator, and very quickly lots of people around the world besieged Techstars, asking for information, saying: “This is great, can we do one in our city?” Techstars was setting up an international network and I remember us being member number four in that network, I think. The message we got strongly from the founders of Techstars — and that's something the other founder Brad Feld talked a lot about — is that if you're going to build an ecosystem, it's a 20-year project.
When we started, there were people like Professor Wong Poh Kam here in Singapore, who set up the business angel network five years before us, and there were many, many other people involved in seeding, so I think we came into the journey three or four years into it and it was the right time to do an accelerator. Basically, we were the right guys in the right place at the right time. It was one of those "accidental" things.
Andries De Vos: I once read that no one gets a Suzuki tattoo, only a Harley Davidson tattoo. Your brand matters. I always felt that JFDI had a strong brand. I started my startup journey in 2011 in Singapore so I probably became more aware of the startup ecosystem in 2012, which is more or less the time when JFDI started doing lots of activities. You built a strong brand. How did you create it?
Hugh Mason: Meng and I sat down and asked ourselves, what is the spirit of entrepreneurship? And we came to the conclusion that it was this phrase which many people in the west know, JFDI — “Just Fucking Do It” — because that's what entrepreneurs do. And we asked ourselves, we wondered if they would let us incorporate a business here in Singapore called JFDI Asia, because everyone in the West was going to laugh when they saw the name. We were in discussions with investors at that point, including a government-linked fund, and we told ourselves that the whole point of JFDI Asia was to help startups raise funds in a hundred days so if we couldn’t get interest from investors in a hundred days, we were totally bogus and it was not going to work.
On day 94, this government-linked fund started expressing a strong interest and we thought: “Wow, what are we going to tell them when they ask what JFDI stands for?” And we were driving through Geylang island here in Singapore which is, if you don't know, one of the red light districts on the island with fantastic food. It is also famous for a shop called Eminent Frog Porridge Shop, it sells Teochew Frog Porridge. I don't know why it just popped into my head, but I suggested just telling them it's a Joyful Frog Digital Innovation Company or something like that. We both fell about laughing hard. It sounds like a bad translation of a Chinese company name. You go, let’s say, to Hong Kong, and there are amazing companies like “The Golden Bridge Fortune, Happy Lucky Company Building”, so we thought it would sound like one of those. Then we got some friends, who were Chinese scholars, to actually translate "Joyful Frog Digital Incubator" into Chinese characters so it looked official. And everyone kind of marveled at the quality of the translation, so it was kind of a joke, basically.
The next part of the story is we were looking for logos and we found this stock art, and we bought around four hundred poses of this little frog for a hundred dollars, I think. Everybody loved it, and the great thing we found was that all around Asia other people had used the same stock art — you know, when you buy one of these libraries online. People would send us photos of a cafe in Cambodia and say this cafe in Cambodia has your logo, this is amazing, and we would say that it is really cool and ask if they would tweet it out for us. Then ,we found online some beanie babies, these cuddly little toy frogs that looked just like the logo. We bought loads of them and we gave them to senior executives from IT companies, investors, and people like that. We said: “When you're traveling around the world, please, will you take a picture of the frog in front of the Eiffel Tower, Golden Bridge, things like that?” And we would do this whole story about the frog.
Very quickly, it turned out to be a huge asset for us, because as you know, one of the biggest issues in Southeast Asia is that there are many different languages, but everyone likes frogs. Frogs are okay because nobody has bad stories or bad rap about frogs. Still to this day, if I go and speak at a conference in Vietnam or some other place and someone comes up to me, they always say: "Ah! Frog man, frog man!"
Andries De Vos: When you were running JFDI, what metrics were you keeping track of on a regular basis? What metric or metrics mattered most to you?
Hugh Mason: We realized very early on that an accelerator lives or dies on the quality of people that come into it and the quality of mentors that they have to support them growing. The key thing for us — and it's actually more important than the money and anything else that you put into startups — is that people often join the accelerator thinking how much money they're going to get out of it, but it's not about that at all. Once you've been through an accelerator, you realize it's dead easy to raise 25,000 or 50,000 or even 100,000 dollars if you know what you're doing. The key is to know what you're doing. That means you need to be surrounded by great people as your team members and you also need great mentors around you.
The key thing for us was to see if we could get mentors to come to us, create an ecosystem where mentors will come and share their wisdom for free. It was very clear to us that there was no way we could afford to pay people who were successful entrepreneurs at the market rate. We had to give them something else in return.
So, the very first thing we tested, our minimum viable prototype if you like, which we did after incorporating, was if we could create a mentoring program that will create a lot of interest from Silicon Valley in Southeast Asia. Can we get people to come from Silicon Valley, hang out in Southeast Asia and spend time with great entrepreneurs? We found that if we curated that experience and made it good for the mentors, they would come for free. We often asked to pay for the air fare, but these were usually executives and they didn't need it paid and they got their families coming with them anyway, so that was the first thing we tested — whether the mentors would come for free.
Second, the biggest metric after that was the number of people applying and the selection process. We had a rather interesting discussion on how you select people, teams for an accelerator, and I could spend all afternoon talking about that. One of the keys to it is that you need a reasonable volume of people that you're speaking with, and I think for most accelerators you probably need 15 or 20 times the number of startups that you are trying to recruit. If you haven't got that many applying, you're not going to get quality in the end. So, we ended up being more selective than Harvard or Yale, or Stanford: I think we ended up taking about 4-5% of the teams that applied, and that evolved over time. The fundamental metric for any accelerator that is recruiting startup teams from the wild is the quality of the teams that you're finding able to select.
Andries De Vos: These are fairly top-line metrics and lagging indicators. What were the signals you were looking for on a daily basis to say “right, we're on track here”?
Hugh Mason: There were several phases to it. When we were doing our very first batch of the startups here in Singapore, we didn't know whether the accelerator format was going to work in Asia. For example, a lot of Silicon Valley culture is very "rah-rah-rah", extraverts “crushing it" type of stuff, and that is not very Asian, to be perfectly honest. We weren't sure at all whether it was going to work, so our first leading indicator was if anyone cared about it, if people were engaged.
The very first thing we did was with the help of Singtel Innov8, who sponsored us to run a series of startup weekends around the region — at that time no one had run a startup weekend in Manila or Bangkok. With support from Singteland some local partners, we ran this first startup weekend in about six major cities around Southeast Asia. We were just astonished that people were so interested. In every venue, we only could take about 250 people and by the time we got 300-400 people trying to get to our startup weekends, we thought wow, the timing was right, the hunger was there for that. That was a huge leading indicator for us.
The next thing was that once we started evaluating teams that were applying, we realized we couldn't pick winners. Meng and I were involved in angel investing before and as anyone who's done that we know it's very, very hard to pick winners. You always believe that the companies you put cash into are going to succeed. In practice, the hit rates for pre-seed investment is one in ten, if you're lucky. It certainly has been like that for us. When you get it right, the returns are great, but when you get it wrong nine out of ten times, you have to think about what you are doing.
The selection process we used was a negative one. We put together a series of patterns for failure modes, things that we knew that startups get wrong, and we selected against negativity. We selected the least flawed teams and we looked for teams that were closely matched to us in the sense they had reasons to do their project in Southeast Asia, and we looked for reasons why that team is the best in the world to do this project. What is it about this team that gives them an insight?
In some situations when that didn't turn out right, it was quite funny. I remember these two guys, who were almost wearing suits, like they just walked out from the business school, and they pitched us this very MBA-style online shop of women's shoes. Meng sat there listening to them and nodding very wisely, and when the guys finished after about 10 minutes, he looked them right in the eye and asked: "When was the last time you actually bought women's shoes"? These guys had thought themselves into selling women's shoes online but they had no clue. By the way they were dressed you could tell they were like me, they would depend on a wife or a girlfriend to choose clothes for, let alone shoes. They clearly had no domain insight. Time and again, we found classic flaws like that.
One of the advantages of having hundreds of teams applying was that we got to see regular patterns, document those and then select against the negative patterns. That's how we did it.
Andries De Vos: Have you ever felt like you were pushing your business downhill as opposed to pushing your business uphill when every day's a struggle? Did you feel like you ever got to that stage where the business was just running by itself?
Hugh Mason: I think we never quite got that stage on all fronts. There were moments like in 2012, when we were completely overwhelmed by the interest. It was great, but it was extremely difficult to raise money for the accelerator, for startups. At that time, about 10 years ago, most of the wealthy families and high net-worth individuals in Southeast Asia were very familiar with bricks and mortar businesses, fast food and shopping malls, but the idea of investing in this software thing — what the hell is that?
If I invest in a shopping mall, I can get rent from the tenants every month. If I invest oil palm, I can milk the trees several times a year. But if I invest in a startup, I have to wait several years and then it might be worth a billion dollars or it might be worth nothing. Why would I do that? So, the whole idea of startups as an asset class was strange.
We actually had a very similar path in retrospect to a couple of other first-generation Asian accelerators — Pollenizer in Australia had a similar number of startups to us and then like us, found that willing investors, people who were willing to take a risk that early on, already gave what they were worth. Likewise, there were a couple of Indian accelerators that set up and did about 70-80 startups and then found it hard to sustain.
There were a few in the region: SparkLabs in Korea, again part of Techstars network that became a global accelerator network. They were able to keep raising money and are to this day successful in keeping the same model. But for us here in Singapore, we got to the situation like Pollenizer, when mainstream investors were saying to us: “Well, these guys gave you money 3 years ago, so where is the billion dollars?” It was like I gave you apple seeds last week, so where are my apples, buddy? I can understand that, because when you come from the background of investing in traditional ventures that start yielding very quickly, it's a very unfamiliar idea that you have to wait for revenue. So, we were right people in terms of the model in some ways. In some others, if we had deeper pockets, if we could go on a little longer, but I think we'd be able to double down on successful businesses and capture more value for what we created and that's just a function of timing in a marketplace, really.
Andries De Vos: At what time did the idea of doing a corporate startup come to you? At some point, you started pivoting toward that and doing programs for corporates.
Hugh Mason: By the time we got to the end of 2015, we had done about 7 batches of the accelerator, we deployed around 3 million dollars into 70 startups and we were quite exhausted. Also, there were loads and loads of copies of us appearing, which is a compliment. However, to be perfectly honest, we could see that many of them were set up by people who had zero startup experience — well-intentioned civil servants, academics at polytechnics. We just thought to ourselves that it was going to be so confusing for any startup founder. The valuations that startups are going to expect will go sky-high, and the whole accelerator scene in Singapore is going to get a bad rep because there will be loads of bad quality programs out there.
We thought we should quit while we were ahead, we had deployed the capital we raised. We had invested in around 70 companies. I think we would have liked ideally to have maybe 100-150, but we thought 70 was a reasonable enough sample size and we should have a couple of hits in there. That actually turned out to be the case.
Meanwhile, to answer your question, a completely unexpected thing that happened was that the corporates were banging on the door. For those of you listening who don't know Singapore, it's home to about 7,000 multinational corporations, and many of them face challenges in innovation, like corporations do everywhere. They came to us and said what we did was extraordinary, we were creating new businesses with revenue and doing it under quarter of a million dollars, why it took them 20 signatures at main board level and several million dollars to get a new business venture off the ground. They asked: “How can we work together?”
At the end of 2015, when we decided to stop the active acceleration process, Meng took part of the process that we developed internally and built a business called Legalese around a contract management system for startup documentation. I took interest in corporate innovation and for about 3-4 years tried to do corporate innovation here in Singapore.
Andries De Vos: You touched on the idea that it can be difficult for a corporate to build a venture or an accelerator. In particular you shared that ego is an aspect that can be challenging for corporate executives running a new venture function. Can you share some of the challenges you’ve faced with partnering with corporate venture builder?
Hugh Mason: In 2016, when I dived into the corporate space, we had 30-50 multinationals here in Singapore banging on the doors of JFDI and asking us to work with them. We had everybody from BOSCH to Whirlpool washing machines, insurance companies, all sorts of things. Very quickly, I came up with the same cultural clashes everybody meets when they try to bring startup thinking into a corporate environment. The major personal realization for me was why I hadn't become a management consultant 20-30 years earlier - it was a lifestyle choice.
The months went by and I was getting paid well for the work I did for corporations, but it wasn't enjoyable. It was like working through concrete. I started to reach out to people who were doing similar work worldwide. We realized together that everyone was meeting the same challenges. The best model I have come across to understand why those challenges occurred is called the three horizons of growth. There are many different representations of it, and the one I find most useful is that you imagine a graph. The bottom axis, from left to right, shows technology from yesterday's technology through today's technology through to future technology. It's kind of a time axis. On the vertical axis, you can imagine going from the bottom, there is stuff that we do today and markets we know up to the top being markets we've never even thought about exploring and business models we have never investigated. The vertical axis is about business model innovation, the horizontal axis is about technology.
Most people in most corporations are working with yesterday's technology and business models for customers they already know — that's how the company makes steady money. However, if you want to investigate the future, you need to push outside that bubble, you need to move into the adjacent areas of technology that's just coming on to market and you need to move into new business models and markets that you haven't explored.
You need to be mindful of horizon three, which is the weird stuff — disruptive future stuff.
Now, everything inside a corporation is designed to avoid making mistakes. One of the great experiences I had was working with BOSCH. We worked together for about 4 years and we used to have really honest discussions about the cultural differences between us. BOSCH and other corporates don't need a company like JFDI or any venture studios to do innovation in horizon 1. If you're doing stuff with your existing markets and business model and you're just applying for technology, it is innovation but it is the kind of stuff that cheap financial offices like doing — it's about reducing costs.
If you're doing innovation in horizon 2, it's the stuff that the Chief Executive likes to talk about: building on our strengths, adopting the latest technology that's already being used by somebody else, etc. What you don't want to be doing as a corporation is that weird stuff that people in R&D lab talk about. People like to wear t-shirts that say "I am a disruptive innovator", but you don't actually want to do that inside a corporation, because you're going to lose your job. It's a bit like rock stars and porn stars. We have porn stars to show us all the things we fantasize doing but don't actually dare to have a go at. The same way with rock stars, Jimi Hendrix had to die choking on his own vomit, but it was part of his destiny — I’m sorry, but if he had become old and boring, he wouldn't be Jimi Hendrix. The whole point of a rock star is that they do outrageous stuff. The whole point about disruptive innovator is that they are disruptive and they do new stuff with business model and technology that seems scary.
That's why someone like Elon Musk is sexy to the general public, that's why everybody sat in a cubicle wishes they were Elon Musk some days, and other days they look at their salary coming through the door every month and they think: “Do I really care that much”?
I've been very flippant with the way I describe that, but there is a huge cultural clash between that and what a corporation is set up to do. Steve Blank describes this very well: there are two phases of doing a business: the discovery phase when you're doing that horizon 3 stuff and trying to figure out the product's market fit, and once you've got that market fit, that's time to bring the MBAs in, bring the suits in and scale it up. For me, that's when the business becomes boring, but that's what businesses are very good and, and I'm glad that those businesses exist. I would rather have Boeing build the aircraft I'm flying than Elon Musk. Would you get in an aircraft that Musk designed? Probably not. You would if you were a person that decided to go into space, but the majority of people do not want to do that, to take that risk.
We have different kinds of people, structures, cultures. They're all good, it's not like one is better than the other. I do think it raises an interesting question, which is if you are a corporation and you need to avoid getting disruptive and you need to keep innovating for the future, how do you do innovation? What I think is that you need to create an innovation framework. It's no good sending all your staff on design thinking course and give them t-shirts saying "rah-rah-rah we're doing a hackathon", if they will come back to work on Monday and the boss goes: "Ooh, we've never done this before, sounds very risky, we can't do that." If there's no way to follow through on the idea, it's just going to die.
That is the problem. Corporations are fundamentally staffed with people — for very good reasons — who are trying to avoid making mistakes. I'm not saying startups set out to achieve mistakes, but if you're fearful of taking a risk, you won't ever get to the future. You'll just sit back and do what is comfortable. I'm very glad that there are companies there that focus on doing what we know and understand, and they do it very well. I don't want my bank taking massive risks with my money. I do want the fund manager, where I've put some of my money, I do want them to take risks, but I don't want the bank doing it.
Andries De Vos: Of course, there is a historical context, but with hindsight, were there things that could have made your life easier? Looking back now, what would you have done differently?
Hugh Mason: I've often asked myself if I was going to do this again, would I do it the same way, and the answer would be that the ecosystem is different now, very different. The mission of JFDI in 2010, when we were setting up, was first to create an ecosystem and second to get startups to investment readiness — to the point where they are investable. We had no specter focus, it was just B2C, B2B.
If I were doing that all over again, I probably would have a narrow focus on one sector where I have access to distribution, so I can promise the startups not just money but also their first customers.
I would build something much more like a venture studio, where we capture more of the value that was created because one of the things that was painful for anyone running an accelerator is that it's a bit like running a primary school: you recruit everybody that comes in with the best of hope, and startup founders are wonderful people. And sometimes you see them rushing towards an iceberg and you say guys, go left or go right, just don't go straight ahead, and they go right ahead.
Was there something that could have got us to a longer-term model? I think if we found a few more investors earlier, we could probably have kept going. Would we have gotten destroyed anyway by the fact that there were so many poor quality copies of what we created? Probably. I think what we did was the right thing at the right time. We created good returns for our investors and we were probably right to call an end to it when we did. If I was doing it over again, now it's a different environment and we know a lot more now about the process of running a venture studio and accelerator, so I think I would do it differently then.
End of Part 1