Khailee Ng’s 5 tips to grow a sustainable business

• Only “complainers” say it is impossible to raise funds
• Do away with the ‘hustle till you drop’ founder mentality

The 12^th – 13^th May 2018 at The Launchpad, Cyberjaya marked the inauguration of the newest startup conference in town. Themed “Sustainable Entrepreneurship”, the Cyberjaya Startup Summit (CSS) 2018 brought prominent speakers from Malaysia’s startup ecosystem under one roof. The conference saw an impressive line-up of investors, founders and accelerators within the industry which included Khailee Ng (pix above), managing partner of 500 Startups, has a track record of success and contribution towards the Malaysian startup ecosystem that renders him a force to be reckoned with. With six unicorns in its stable now, that track record is poised to explode. One of the unicorn’s is Grab, a ride hailing company which recently made headlines for its acquisition of Uber Technologies’ Southeast Asian operations.

Unicorns aside, 500 Startups stands apart as being the most active seed stage investor in the world with 2000 invested startups spanning over 60 countries. This gives Khailee, both a macro view of global startup trends and, having launched his entrepreneurial career in Malaysia, a micro view of how things are developing in Malaysia.

As the keynote speaker at the weekend’s Cyberjaya Startup Summit (CSS) 2018, Khailee synthesised his thoughts and reflected on the startup ecosystem being at a turning point. “Going forward, we will see if Malaysian-based startups get ahead of the pack and become significant players in Southeast Asia (SEA) – or fall behind.”

The paradigm shift: What’s different then and now?

Comparing the startup landscape today to six years ago when he was looking to raise funds, Khailee sees a few key differences. A major change is the type and vast availability of funding out there today. He bluntly says, “Those that claim it is very difficult to raise funding are simple complainers.”

“When my cofounder and I were searching for funding back then, we only had one serious venture capitalist in the market,” Khailee recalls. Today, there are plenty of venture capitalists within the ecosystem, funding schemes such as the Axiata Digital Innovation fund (ADIF), crowdfunding platforms, angel investments from the likes of Malaysian Business Angels Network (MBAN) as well as international investors.

Another significant change he points out is the increase in talent. “Contrary to how startups today feel and keeping all things equal, there is actually more talent in the market today than five years ago.” To illustrate his point, he talks of how there was only one person in the market back then that code in Ruby on Rails, a type of web application programming.

In addition to talent that come from failed and successful startups of the past, Khailee also tells founders to consider foreign talent. Khailee himself hired a talented Syrian chief technology officer (CTO) at Says.com who then went on to become the head of engineering at iflix. “There are many sources of foreign talent including Syria, Ukraine and Iran. It’s just a matter of working hard and looking for the right people.”

While it’s all good that there is more talent and funding in the Malaysian scene, the competition within the industry has also gotten stiffer. “To the left and right of you, there are founders who are also competing for what could be a finite amount of funds.”

Five tips for startups to grow long-term

“If you’re ‘hustling’ hard to grow your company and you’re struggling in terms of sourcing talent and funding, there are five main aspects that you can look into,” Khailee shares.

Firstly, he advises startups to move away from simply hiring talent to cultivating a continuous source of talent. To build sustainable startups, it is important to retain quality talent at an affordable cost.

Khailee draws on his experience at Says.com, the company he founded which is now under the ownership of Media Prima. The company was in need of corporate salespersons but they all came with high salary demands. “And somehow, they lacked the drive required for a startup to grow,” Khailee shares.

To address this problem, he decided that the salespeople he hired needed to be creative. With that, Khailee moved outside the traditional bracket of salespeople. “I started hiring unhappy creatives from advertising agencies which are notorious for their long working hours and mediocre salary.”

His hiring strategy proved successful when Says.com secured (US$252,000) RM1 million in sales that year. Khailee shares “Some of the talent hired at the time are still working at Says.com to date.”

Secondly, he urges founders to apply a similar philosophy in securing customer acquisition channels. “Once you discover this and dominate this before your competitors do, you’re going to have large customer acquisition volumes.”

He gives the example of PetBacker, whose founder started off with a product similar to Kaodim and ServisHero. However, while pursuing the business, the founder noticed that his most profitable customers were looking for petboarders. With this information in mind, a pivot was put into motion and PetBacker came into play.

But Khailee is quick to forewarn, “I am not suggesting everyone pivot their business. But once you hold customers in a profitable niche, be sure to go in hard on that area.”

The third piece of advice is about raising capital too late in the startup journey. Many companies wait to experience a growth spike before raising funds. He calls this “the biggest death move”.

Khailee says there are many stages in trying to raise capital which includes reaching out to financiers, negotiating and finalising agreements. “Don’t wait till you have two months left to launch to raise funds. Give yourself about six to nine months to raise capital.”

He also urges startups to raise a little bit more than they need. “The landscape of fundraising changes quite rapidly. So it’s always good to have some extra funds in your pocket to help you move along.”

Khailee’s fourth tip may not seem very business-oriented but is only logical for founders to practice in order to grow their startups sustainably. He advises against the conventional startup culture of ‘hustle till you drop’.

“If you work hard continuously and neglect your health and social life, it is guaranteed that you will eventually drop and that is not how you build a sustainable business,” he warns.

To build results in the long haul, founders must build expectations of how they scale their psychology, fitness and family. He puts forth the example of Anthony Tan from Grab whose business success story did not occur at the cost of his fitness and health. Khailee shares “Anthony is a strong and fit guy. He goes to gym regularly and does yoga.”

His fifth and final tip for startups to growing a sustainable business is to focus on developing their core product thoroughly before expanding to other products. Khailee says so many companies struggle to raise Series A funding because the core product has not hit significant scale, yet startups are already spending money on a new product.

He explains that it gives the impression to investors that the company is working on a new product because the core product was not strong to begin with. “This leaves investors asking why they should invest in what is essentially still a seed company but at a Series A price.”

Nonetheless, Khailee tells founders that this should not impede them from innovating and trying new things. He introduces a 80:20 rough guideline, “80% of your founder mentality should be focussed on developing your core product and business.”

“Founders being founders always want to try new things. But be sure that the 20% of your resources are allocated towards something solid that can complement your business,” he advises.

“But if you’re lucky, your 20% innovation could go on to swallow your core revenue stream”. Khailee goes on to give the example of a Korean company which started off as a personal training chat app. As the business progressed, the company received more and more requests for healthy food options. With this, the company started selling protein powder and healthy food which has now become its main business.

Khailee concludes his talk with a ‘fun fact’, “Most unicorn companies take about seven to eight years to really mature. If you’re not ready for the struggle and hard work, maybe you’re better suited to a corporate job.”

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