“Now is the best time to invest in early-stage venture capital sectors with solid long-term growth”: Q&A with Ng Chee-We, Founder of Oak Seed Ventures
Oak Seed Ventures recently completed the first funding round of its new Core Tech Fund. Seeding early-stage grassroots tech startups, the venture capital fund invests in companies developing AI, 5G, SaaS, Web3, cloud, as well as data and enterprise infrastructure.
The Shanghai-based venture capital firm was founded by Ng Chee-We, who has spearheaded investments in early-stage high-tech startups for more than a decade. With a focus on providing seed funding to cutting-edge tech entrepreneurs, Oak Seed Ventures has invested in companies such as data intelligence firm Kyligence, which has raised more than nine figures since its inception.
“Our company aims to seed the tech world with oak trees,” said Ng, who holds an MBA from Harvard and master’s and bachelor’s degrees from MIT. “Oaks support a huge ecosystem, and we are looking for the future oaks of the tech world.”
KASIA sat down with Ng to learn more about his investment philosophy and why he thinks now is the best time to invest in early-stage tech startups.
This interview has been edited for brevity and clarity.
KrASIA (Kr): Tell us about your career as a coder before becoming a venture capitalist.
Ng Chee-We (NC): I have always been interested in computers. When I was 13, I learned to write programs.
I first went to MIT for my undergraduate studies in electrical engineering and computer science. In 2000, I joined ST Engineering, where I led the team to build Asia’s first encrypted hard drive. Then I went to Harvard Business School. After that, I came to China with McKinsey, where I worked as a consultant for two years. I did it because I heard China was where the next big thing was. Eventually, I decided that venture capital was what I really wanted to do, because it allows me to get back to my roots of love of technology.
Kr: How did you get started in the VC world?
CN: I started my venture capital career at Cisco Systems, where I actively sought investments in enterprise technology startups to understand future innovation trends and for the company to diversify into other areas. than computer networks. It was around 2012, when the cloud and big data were becoming a reality. This was the era when technologies from big internet companies were seeping into the corporate world.
For me, it was a very exciting time. I also like being in venture capital for various reasons: it keeps me “young” and forces me to keep learning.
Kr: What areas are Oak Seed Ventures focusing on?
CN: One of the main areas we look at is enterprise technology. At the top of this computing stack are applications, such as software as a service (SaaS). As you go down, there are more general technologies – fundamental data-related building blocks – including big data and data analytics, and infrastructure, such as storage, computing, networking and DevOps.
Kr: Why does Oak Seed focus on enterprise technology?
CN: We are bullish on the enterprise technology market in China and the region. We are seeing a wave of companies in China and Asia transforming. These companies want to look like Internet companies and their transformation allows them to serve their customers digitally, in real time and in an intelligent way. They therefore require a lot of data and AI processes. We need startups to provide these types of technologies and services.
Kr: What does your startup portfolio look like?
NC: Ninety percent of our portfolio is in start-ups and areas such as SaaS, AI, data technologies and infrastructure. Maybe 10% — one or two investments — are in semiconductors.
Kr: High-tech startups often need massive funding. What is the capital intensity of your investments?
NC: One of the advantages of enterprise tech startups is that they don’t burn a lot of money. It’s not like in consumer technology, where you have to spend a lot on customer acquisition and provide subsidies, like handing out free coupons. For enterprise technology, you don’t have these issues.
That said, there are some capital-intensive business sectors, such as chips.
The other one that requires a lot of capital expenditure is AI. Some AI companies are very capital intensive. For example, when they have to acquire GPU farms or pay for them in the cloud, and require many engineers to train large neural networks with large datasets.
Kr: These are tough times for VC. We see the trend of increase in KPIs and decrease in investment cycles. How do you decide which startups to invest in?
NC: We are looking for truly world-class entrepreneurs who are building something unique and investing in them at an early stage. It’s our secret sauce. The key comes to them early. It requires keen judgment.
The business of venture capital is essentially about making a fair judgment about risk when others are unable to do so. Otherwise, you’re just doing the market rate for returns. If you want to do more, you have to exploit information asymmetry. You must have a better ability to choose the right companies that will succeed. This means having a better view of the risks than the rest of the market. And my job is to be on the right side of information asymmetry.
Kr: You recently said that the public equity market was turbulent due to soaring inflation and supply chain disruptions resulting from the Russian invasion of Ukraine and COVID-19, and now is the best time to invest in venture capital sectors in the start-up phase with robust long-term growth. Why do you think this is the best time to come?
NC: Many people worry about venture capital funding in tough times because consumers and businesses are spending less. But life goes on. Business customers are still having problems that need to be solved and startups are still being created. Sometimes, in difficult market conditions, companies feel the need to further improve their capabilities and the return on investment of acquiring the right enterprise technologies could be even more compelling.
Innovation does not stop because of market turbulence. The real entrepreneurs we are looking for are more likely to succeed because there is less competition for them during this time.
Also, there is less “noise” in the sense that in times of uncertainty there are fewer entrepreneurs and startups competing against each other. This makes it much easier for us to go through all of this and identify the real innovators.
At the same time, there is less “noise” in funding in terms of artificial valuations when markets are booming. Now we can step in early and invest in these startups when they have lower valuations. Hopefully in five to seven years we will be out, with good returns, assuming of course there is no major depression that lasts ten years.
Kr: How have the geopolitical tensions between the United States and China affected the ecosystem of Chinese startups?
NC: China wants to become more self-sufficient. The Chinese government encourages Chinese companies to buy local technologies. Some startups are responding and rising to the occasion. There are also returnees who come back to China from the United States and start businesses: they think that for every product in the United States, they can develop a Chinese version.
These Chinese entrepreneurs can bring these products to Southeast Asia, a market that the United States generally tends to ignore. Altogether, these factors have created many opportunities for Chinese startups.
Kr: What advice do you have for startups seeking funding under the “US-China decoupling”?
NC: It is a good time to create businesses that would be favored by the environment; for example, making a Chinese equivalent of a technology that exists in the United States.
That said, I encourage entrepreneurs to keep in mind that the products they create should be world-class and differentiated. There’s no point in being the tenth maker of anything. Whatever you create, you must have an edge over others.