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(#5)HAK podcast: Hugh Mason, JFDI co-founder & CEO - Lessons learned from running JFDI Accelerators and corporate startups (Part 2)
HAK Podcast

(#5)HAK podcast: Hugh Mason, JFDI co-founder & CEO - Lessons learned from running JFDI Accelerators and corporate startups (Part 2)

Andries De Vos, Narine Daneghyan
We continue our insightful conversation with Hugh Mason, the co-founder and CEO of JFDI, a Singapore-based accelerator that has built over 70 startups since 2012.

In this episode we will cover the problems of the VC market, current trends, methodologies of running an accelerator and much more. Stay tuned.

Website URL: http://www.jfdi.asia/

Hugh's LinkedIn: https://sg.linkedin.com/in/hughmason

Listen to the Podcast


Andries De Vos: If you sketched out the business plan for a venture studio, what would it look like? You have already mentioned that it would be more narrow-focused and it would give access to the first customers. What other things would be in your recipe book?

Hugh Mason: I'll give you an example. Here in Singapore, several years ago, I met a wonderful guy, who only invests in games development and all he does is casual games, these dinky little puzzly things, and the prime market for those in the West is housewives at home, who are bored. The kids haven't come home from school, they've done some washing or so, and they would play a game as a treat. They will do it through their set up box on their TV or through their mobile phone, and they end up paying to play that game.

That guy had totally understood that vertical. He knew the psychology of his customers, he knew when they played and how much they paid, he had distribution channels to get to those people. So when people came to him with potential casual game ideas, he was able to say: "I will do this if you make these changes, here's the terms of the deal, take it or leave it." And when people came in, he would act like a traditional publisher, really. I think in some ways a venture studio could be something like that, where you take ideas that have come from outside and you're a specialist with access to distribution and finance.

Another way is the way that many feature film studios work: they have independent film producers who develop a slate of scripts, raise a couple million dollars, spend it on development of 7-8 film scripts, connect these scripts with star talent through their contacts with agencies — directors and leading actors — and then go to the studio. They present this package and say:“ I've got a great script, with a great actor that's prepared to do it and a great director that's prepared to do it, will you take this on? We'll share the backend of the value that's created and in return, you put up the capital and you organize the distribution.”

Another model to do would be what film studios also do, which is to say because we know the market, because we have the metrics, the technical skills and resources in house to make things, then why don't we come up with projects internally? And then we will hire a director to direct the film, in this case it is a Chief Executive who will run the business. The interesting thing about that model is that to drive the business is the critical thing, you need to find someone who is motivated to drive the business but is not so entrepreneurial that they will get bored and go off to run another thing. So, you need to find people who are entrepreneurial and disciplined and prepared to work when they don't know the majority of the business in the early stage, potentially someone who could get it going from nothing to something and, of course, that's the Rocket Internet model.

Andries De Vos: What is it you think that is wrong with the VC market today that venture builders have understood?

Hugh Mason: Venture capital is widely recognized to have some serious challenges. There was a fascinating report by Kauffman Foundation a few years ago, called "We have met the enemy and it is us". It revealed, if you look at the statistics, the dirty secret of venture capital is that the vast majority of funds — I'm talking like 80% here — actually make a loss. If you put your money into a venture business, you get less back than you put into. There's a chunk of them, maybe 10-15% that will give you your money back with a little bit of extra, but not much more, and then there's a tiny number of VC firms which make outsize returns. Because they have that brand name and everyone wants to be associated with that brand name, of course they attract the best companies moving forward. It's a curious thing, if you actually look at psychology of all of this. There's been some great analysis done on portfolio construction in VC firms, if you do the equivalent of a tracker fund in public businesses, if you just randomly invest in a thousand startups, you can show that the results will be remarkably similar to what most VCs achieve.

This is the human need to believe that there is star talent out there that can pick winners. And then there's the whole story of adding value, nurturing, which some VCs do and the majority don't. All of this is stuff that has been well-documented and well-discussed elsewhere. What can venture studios bring to the mix?

I won't name the fund, but I will say it is an extremely large Singaporean fund that everybody's heard of. I was having discussions with a very large fund that makes tens of millions of dollars size investments and above, and they feel they are cut out of the stages of startup growth where value is created. They feel yes, they can write very large checks, but by the time they come to the party, they're not making that great of a return on their investments.

Just recently, when one of our very first investees was bought by Intuit, what I think is interesting is that in the early stages of development, when people put money into JFDI, the multiple we got on our initial investment was like 100x on that investment — a hundred times of what we put in. The folks from our investor pool, who then invested a couple rounds later, made a good return, but it was absolutely nothing like 100x, even though it was a multiple amount of what they put in. When you draw that kind of curve, a hockey stick curve evaluation growth in a startup, it is really true that the returns are fantastic if you can get in at the beginning and avoid getting screwed by later investors in terms of dilution, if you can get in early and with a reasonable deal with the founders who've got some integrity.

That means that for a later stage fund, like the one I was just thinking about, the problem they've got is by the time they  come to the party, the band's already onto his last song. That fund told me confidentially they were setting up a venture studio internally. And I wonder whether this is going to be the case, whether we'll see corporates do something similar. The pros and cons of that is another discussion.

The simple answer to your question is that venture studios allow people who have access to money to get into deals with discipline and structure earlier than they would've otherwise and therefore enjoy more evaluation growth. The real thing they've got to hide if they're going to do that is their own egos.

Being a VC does not mean you know everything about starting and growing businesses. It means you know a lot about raising money from LPs, term sheets and all that stuff. It's great, we need that skill set, but it's got nothing to do with building value and a company, unless you've been a founder yourself.

Perhaps the ideal structure would be something like a venture studio with people in it, who know how to create and grow value, closely coupled to a fund which has an arms-length relations with the folk who are doing the company building, because like everybody, if you're the one doing the company building, you're going to believe all your projects are brilliant. You need to have a robust discussion with investors. So, even if it's your own fund, my hunch is that probably even people making final investment decisions need to be separated from the actual building process.

Andries De Vos: I see more and more corporates, innovation teams reaching out to us as well to explore the possibility of creating a venture studio. These trends are indeed emerging and it's exciting, but, at the same time, I would argue that the risk culture of those teams as well as their background may not be compatible with being entrepreneurs. If you take that line of thinking to the next level and imagine that you see VC as a product with a roadmap -V:1, V:2, etc, what are the versions that we have now and that will come in the future? What are the trends that you see?

Hugh Mason: One of the things I hear a lot here in Asia from partners and family offices that want to invest in VCs is that it is a tough call for people to lock up their money for 10 years in a fund run by someone they haven't worked with before, who then invests it in businesses that have got nothing to do with the investor’ group of family businesses, where their children don't get to learn from experience. If you're brand-new in VC and you're setting up a Southeast Asian office, then maybe you'll get some LPs to invest. But it's a very tough call to keep asking people to invest in it. There is a matching function that VCs perform.

In the old days, it used to be performed by those angel groups. 10-15 years ago the only way for startups to meet business angels was to go to a monthly cabaret, where a bunch of guys would be sitting and having dinner and drinks, and the startups would kind of go on stage and lap dance for them and then, occasionally, they'd write a check.

I think VCs similarly act as a magnet, drawing together money and talent. The question is whether the fund is the only way to do that. On the angels' end of things, I think it's interesting that we've seen things like syndicates forming an angels' list, where you have an experienced investor that people believe in and trust, who says I found a great investment here, who wants to come in with me? And because they've got a bunch of followers on Angellist, those people will all come around and effectively set up a VC fund. But it's a VC fund for just one investment and the lead investor that runs that will have to carry everyone's money and all usual things that a VC would do. Everyone can see where the money is going, make a decision right now - there it is, go!

You think whether you actually need all this structure of a fund, is it actually necessary to act as a magnet? If it really is about talent, if that's what investors want to follow, then you can do that as an individual.

The other thing I think is really interesting is the way we're starting to see some private marketplaces emerging now. For instance, here in Singapore we have a business from Estonia, called Funderbeam, which is a private exchange that accredited investors can join. And they can invest directly into early stage businesses. The challenge with it at the moment is that there's not so much market volume, not so much trading, so the investment in all that is liquid, that means that the transparency of pricing that you get from a public market isn't there yet. But as an idea, I find it really interesting.

If I was launching JFDI all over again, I think now that we've got a brand name and everybody knows what an accelerator is, there is an argument that maybe we should just put up an exchange trading fund that's sort of linked to JFDI on something like Funderbeam, raise the money that way and then deploy it to support early-stage startups. Maybe that's what we should do. Then at least our LPs investing in the accelerator could have a way of getting in and out.

We'd have to put much more energy into the storytelling around the performance of the startups and there would have to be someone doing market making, but maybe that's all possible. Often, in finance particularly, as it's one of the conservative industries, there are different flavors of product people come up with, but it's rare that we get a brand-new paradigm.

VCs are what they are, they date from the 1950s. Would you create VC funds in the same way today if you were inventing them from scratch? Probably not, in the same way you wouldn’t invent retail and shopping malls in the same way now that we can do e-commerce. I'm watching this, and I am a spectator not a VC, I'm an individual investor who used to run an accelerator. I am fascinated to see in which direction this goes.

Andries De Vos: With all the know-how that you've acquired over the years, do you think there is an opportunity to almost codify those know-hows and the methodologies of running an accelerator? Or you consider this a very limited added value?

Hugh Mason: When JFDI Asia stopped running its own active acceleration process and we entered this harvest mood to focus on supporting our portfolio and moving it toward liquidity, that's what we've been doing since 2015, one of the things we looked at was if we could offer accelerator as a service. Funnily enough, a company actually pitched this to me the other day. I was looking at setting up an impact accelerator, working with a large corporate venture. I found that there is a business in Europe, a fantastic software platform that's got everything you want to run an accelerator they've coded into a system. There's two or three out there now, I think. The mechanics of running an accelerator are relatively well-understood.

The other thing that's happened since we started JFDI is that some fantastic academics have done a great job to start documenting accelerators, identifying success factors. There's a great book by Mike Wright & Israel Drori called “Accelerators”, and it presents an analysis of what it takes to make an accelerator work. There's a wonderful researcher in the U.S. called Susan Cohen who's done a great job on what goes in accelerators and why they succeed, and how we can measure their success.

The know-how is open source now, the spirit of the startup accelerator was always about making this stuff open source. I think if I were going to do it again, I would focus less on the mechanics of running the accelerator and more on achieving distribution for startups and achieving more liquidity for investors.

Andries De Vos: What are some of the most interesting models you've seen, specifically in the accelerator and venture building space right now?

Hugh Mason: It's fascinating to see different rifts on the same theme. You can see something like Entrepreneur First, it's been extremely successful in London, in particular. Matt and Alice had set it up and created an amazing climate where very smart people from top universities and technical people come together. It's basically a 3-month team forming operation, followed by an accelerator. I can't see anything magical about it other than the fantastic community that has grown around it.

I think that whole area of how you form teams is an interesting one. The second area I find very interesting, I joined On Deck, which is a virtual accelerator, and while I was in quarantine as I had COVID-19 and I was stuck in a hospital, I wondered what it would be like to be in an accelerator. I got lots of friends in Europe and I got businesses there and in Asia, but I never got a business in Silicon Valley myself. Because of COVID-19, I could join the accelerator that had gone virtual and doing it online would cost far less than getting a flight to America. It turned out to be absolutely fantastic. What On Deck did brilliantly was to curate people. Going back to the point I made earlier about the quality of people coming into the accelerator, the thing that On Deck did fantastically was to get amazing people together. The conversations I've had were great. To be honest, I'm very happy to have paid that and more just for the people I've met.

Now that we have a sort of framework around how you build startups and now that we've got some common mentor models and shared language, it seems to me that the physicality of an accelerator is still important for team formation, but it's less important when you're trying to help companies and support their growth.

I don't think you need to be face to face with a mentor. I'm mentoring a wonderful eye surgeon for the moment, for example, who's left eye surgery and is setting up a very exciting business and I really look forward to our conversations as a mentor, because it's so stimulating to talk with someone intelligent and passionate. It's great that we don't have to be together. We can share business models, I can share articles and stuff I've collected that is useful for our conversation, and she shares stuff with me about eye surgery which I find fascinating because my mum had cataracts in her eyes.

A huge function of the accelerator or venture builder is to create a community. I wrote my master's thesis on what an accelerator is, back in 2011-2012. It wasn't clear at that time what an accelerator is. The thesis is called “Guilds for Geeks”, and the conclusion I came up with is that an accelerator is like a medieval guild where you bring together masters and apprentices, and the craft of entrepreneurship is handed down from generation to generation, through on-the-job training. Until recently, that had to be done face-to-face, but I don't think it has to be done that way in the future. You can have a community of mind without having a community of place. That's fantastic because it means that really talented people, wherever they are, can reach out and connect with other people.

I'm working at the moment with a Swiss-based accelerator called Seedstars and also with GSMA (Global System for Mobile Communications). They run some fantastic programs across the very developing parts of Southeast Asia.

Recently, I've been mentoring teams in Papua New Guinea and Samoa. The most interesting discussions there have been with great people, as smart as anyone on this call, they just haven't had the chance to travel and to connect. There were two conversations that really inspired me. One was with a wonderful woman in Papua New Guinea, who had an idea for slaughter as a service. In her country, buying a live chicken at the market is the way that you buy your meat. You carry the chicken home, you chop its head off and then you cook it for your family — it's fantastic fresh meat. She came up with an idea of a service, when you can use your mobile phone to order chicken, and when it's delivered you can slaughter it in your backyard.

What I loved about that is that it's a business model we actually know how to do, but it was applied in a culturally relevant context. Later on in that same session of mentoring startups, a guy actually came up to me with a ring about the size of your head — a piece of string with shells threaded on it. He brought me the traditional shell money, and you can still buy things around the Pacific islands with shells like this. This dude was pitching me a blockchain business and it wasn't one of those bullshit blockchain businesses, where it's all crypto and faith in the future. It was a really solid idea. And it was amazing: here's this guy, whose parents were using shell money, and how he's pitching me a technology business. He was able, through the internet, to get access to all the same whitepapers and ideas. I thought that was so inspiring.

For me, the most exciting thing about the future of venture studios and accelerators is that wherever talent is, people will be able to connect, form teams, get together and get mentored.

I'm passionate about this because, especially in the mess that we're in because of COVID-19, entrepreneurship is a tool kit for creating possibilities in mess, in ambiguity.

Entrepreneurs come forward there is a total mess, when there are cracks in the society, and they fill the cracks and they fix things. That's exactly what we need right now, that's the “just fucking do it” spirit, which made us unite and set up an accelerator.

The reason I'm still passionate about entrepreneurship and teaching it, mentoring in it and doing it for the rest of my life is that I believe that entrepreneurship fundamentally creates the future.

The exciting thing about accelerators and venture studios for the future is that now we don't have to be in the same space and we don't require too much money to do it either. You can run an accelerator in Papua New Guinea and make a success!

Listen to Part 1

(#5)HAK podcast: Hugh Mason, JFDI co-founder & CEO - Lessons learned from running JFDI Accelerators & corporate startups (Part 1)
HAK Podcast

(#5)HAK podcast: Hugh Mason, JFDI co-founder & CEO - Lessons learned from running JFDI Accelerators & corporate startups (Part 1)

Andries De Vos, Narine Daneghyan

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