Peng T Ong on Why Monk's Hill Ventures Tells Entrepreneurs to Chase Big Markets

The right business model intertwined with right execution is what determines if a start-up is going big or sailing back home. It is pivotal to grow a company, earn revenues, raise funds, expand into geographies, run operations - and most countries are already moving in this direction. In Southeast Asia, where more than half of the region's GDP is driven by services verticals, there still exists a gap where technology can play a significant role to increase its efficiencies.

To elaborate on such prospects, our conversation with Peng Tsin Ong, Co-founder & Managing Partner, Monk's Hill Ventures, was influenced by what he likes to call "technification of services protocols'. Ong is a serial entrepreneur who has formerly co-founded companies such as SaaS-driven content management firm, Interwoven that went public on NASDAQ. Along with co-founder Kuo Yi Lim, Ong launched Monk's Hill Ventures in 2014. The Singapore-based VC firm has invested in more than 20 tech-driven start-ups spanning across Southeast Asia. Here are edited excerpts from our interaction.

Where are investments happening in Southeast Asia?

With a GDP of US$3 trillion, about US$1.5 trillion of Southeast Asia's economy is driven by the services sectors. Tech entrepreneurs are well aware that countries are now moving towards services, and they are technifying retail, e-commerce, transportation, logistics, supply chain, recruitment, insurance, lending and financial services. Almost all of these service verticals are inefficient because most of them in developed markets have never gone through the process of technification.

If you're a VC in China, life is going to get harder in the next 5-10 years because all these easy blue ocean verticals with respect to tech is gone. Every services vertical is being taken over by tech companies. Even before you consider optimising your old business, tech companies will come in and redo the entire business model. What traditional PE does is that they take the company and optimise it from a balance sheet point of view, but the problem is those models are getting disruptive by the VCs. Having spent a lot of time with big companies, what I've realized is they would rather fall off the cliff than change.

"Helping to figure out the right strategy to grow the company is where the value addition comes from." - Peng Tsin Ong, co-founder & managing partner, Monk's Hill Ventures

What are the opportunities for SMEs to go digital?

SMEs generate a lot of employment opportunities. There will be a few companies that will help digitise the micro SMEs. For instance, sales channels can be digitised which in turn would help digitise the inventory, resourcing, and so forth—vertical by vertical. So smart entrepreneurs who are technifying the services vertical will figure out a way to leverage everybody, but they will accumulate the value, else they won't be entrepreneurs.

Which sectors is Monk's Hill keen on investing?

We prefer asset light companies and the B2B2C drivers because we believe that consumption drives everything. An entrepreneur should be chasing big markets. We don't just expect entrepreneurs to copy the China or the US model. We expect them to think from every angle like how do I proceed from here or what steps I need to take when the retentions are high and the cap is low. The more we talk with entrepreneurs, the more we understand about how their business is going to grow.

We don't have a favourite vertical but a larger percentage of our investments lie in fintech companies. To answer a common query on our lack of investment in e-commerce, I'd say that the ROIC on e-commerce is not the same as other sectors. But beyond asset light, we look for the ability to ensure quality of the product.

Do you think exits are hard to come by?

If you build a company that is big enough, exits are not a problem. You can take the company public and you can sell it. Every time I look at a company, I ask—can this entrepreneur build a company big enough that I don't have to worry about exits?

How do you work with the founder?

When you look at the best funds in the US or in China, they have very good partners. They work closely with founders—that's it! If an entrepreneur is not able to figure out HR and marketing, he/she is going to face problems. Helping to figure out the right strategy to grow the company is where the value addition comes from. That's what we do. We are like psychiatrists, connectors and brainstorming partners to our founders. The reason we can do that is because we have built businesses before and have seen the ups and downs of building companies. (chuckles)

(The article first appeared in the August-September 2019 issue of The Entrepreneur magazine.)