Welcome to our blog.
Welcome to our blog.
The year 2020 impacted the entire global way of life like never before as every business trend that we knew has been turned on its head. One huge benefit that came from the pandemic in 2020 was the acceleration and rapid innovation of certain software technologies. Let’s take a look at some of the more significant software development trends that have shaped the industry in 2020 and will continue to influence it in a post covid 2021. These will impact the startup world and lead to opportunities in venture capital investment in future tech-enabled startups.
There are of course many other trends that will lead to powerful and innovative startups in 2021 and beyond such as advanced cybersecurity, biometrics, edge computing, and ongoing iterations in cloud infrastructure. All of these will affect the way startups evolve and you can count on Elementz Ventures to be on the lookout for these companies.
“An idiot with a plan can beat a genius without a plan.”
– Warren Buffett
1. MORE THAN A HOPE AND A PRAYER REQUIRED – At times, it can seem that the early stage investment process is simply a ‘shot in the dark‘: a partially-applicable list of mumbo-jumbo that inadequately defines unique situations, advised on by less-than senior ‘mentors‘ unsure of the next step or how to position for the subsequent step. As future builders, reaching the next stage in consistent fashion, it helps to have advisors that have (1) operationally been there and done from inside, making crucial business decisions and have (2) hands-on intimate details of the later phases in order to construct a plan to get there. Some experts believe pattern matching is crucial, but it goes against the central tenets that of innovation in entrepreneurship, that innovation arises from the novel rather than the contrived, suggesting success simply because you fit a certain mold. However, experience does lead to efficiency and insight beats hustle surrounding the innovative disruption itself. Just like it a imperative to have a soccer coach who’s operated at the highest levels and knows intimately the technical moves required to succeed when simply running fast is not enough, likewise ventures should be treat start-up with the same care and precision. For example, in one instance, we merged three smaller companies in order to combine a larger entity which could grow into a disruptive space. We didn’t create the innovation or the disruption, it was there already and imminent and going to happen, whether we were there are not. However, we recognized the pre-existing trend, and applied long term strategies, models, and metrics to focus on the salient dimensions to capitalize on that trend, leading to a public listing.
2. A FIELD OF LILYPADS OVER A SINGLE FILE – Whether small or large, the same fundamentals remain constant in business. Options and potential pivots are the lifeblood of growth amidst constantly changing backdrops. Imagine a frog crossing a pond with only a single trail of lily pads. In essence, the solo frog would be much more successful marking a defined route in a field of lily pads in order to choose the successful path. As life hands out unforeseen ‘lily pad flimsiness’, the frog with diverse, pivot-able field to cross the pond has a better chance of making it across to the end goal. This is an obvious truth for products in finding users. A seasoned professional wouldn’t have a single group even with catering explicitly and first to the that single group that cannot live without your product (the most ardent fans). Likewise, why would one strategically plan a singular path with the lifeblood start-up financing? We know the lily pad field and the benefits of staying the center with open options all around. If you’re not intimately aware of the options, how can you plan to stay in the center? For example, we had companies we worked with who originally wanted to proceed down a traditional IPO pathway. However, because they focused on the right metrics and dimensions, when the IPO market was closed or unfavored, they were able to pivot toward a SPAC, direct listing, or other option and stay actively growing instead of in suspended animation awaiting finance.
3. VIBRANT INVESTMENT PATHWAYS = VIBRANT ECOSYSTEMS, NOT A COLLECTIVE OF START-UP COMPONENTS – As one studies post-SPAC San Francisco and New York vs. other government-incentivized entrepreneurial ecosystems, one begins to surmise that simply having ecosystem components like a talent pool (university), service providers (lawyers, accountants, other professionals), or large Fortune 500 companies nearby, doesn’t necessarily guarantee a successful entrepreneurial ecosystem. We believe too much focus on checking off the list of ecosystem components is not really a difference maker or many ecosystems, as every contrived ecosystem would be successful, international or domestic. Rather winners have an available defined pathway and understanding of the endgame: where to go and how to get there. We believe within Orange County, Elementz has the premiere position in understanding those every changing pathways with our experience. We look at the example of the Bay Area community embracing direct listing and the SPAC structures to enable a viable outlet and options for public investor for the myriad and variety of portfolio companies, and as they have defined the pathways and built the chain, the companies continued to grow and succeed and the pipeline grew stronger. Similarly Boston/NYC early stage community has adapted in reverse but both have understanding of the endgame and that’s why they’ve grown.
4. CERTAINTY IN EARLY STEPS BUILDS CERTAINTY IN LATER STEPS – now if a collective company knows the next steps, it can plan more fully for those steps. Beyond the (A) metrics and planning, the company can consistently (B) know what future investors will judge you upon and allow you to (C) aiming big toward upcoming catalysts and developing markets. Like rock climbing, where a firm hold necessarily allows a climber to develop a firm hold for the next hold to launch upon, we believe that experiential certainty which helped you develop early stage confidence, that confidence will carry on the end goal. Using the soccer analogy again, the chain of properly placed passes (and options for dangerous passes) leads to the score and end goal. In the long run, returns are better and companies are stronger. While experience doesn’t guarantee success, it certainly gives you the best chance, with these understandings and diligent execution accordingly, we believe more companies have the ability to grow larger and resultantly, our fund produces better returns in the long run.
Irving Kau has joined Elementz Ventures as a Managing Partner offering his key strengths of fund management, investor relations, research, and leadership to the partnership. Irving brings his extensive experience in both global public investment and global private investment with access to North American and Asia-Pacific-based outlets. During his career, he has worked on the buy-side/investor, sell-side/advisor, and corporate side. Over his career, he has successfully completed over $100M in investments for 15+ companies and taken 8 companies public onto NASDAQ. He is a detail-oriented, global leader focusing himself on follow-through, execution, and task completion. He deeply values character and ‘doing the right thing’ in each and every circumstance despite any potential short-term effects. Irving is also a Managing Director of KW Capital Partners, a private equity group focusing on pre-IPO investment in N. America that brings innovative and technology companies to a public NASDAQ-listing. Based on its unique niche, expertise in growth industry sectors and capital markets, KW routinely returns an average ROI between 50-90%.
Previously Irving was head of Asia Office for GHS (now Seaport Global), a full service investment bank. He founded and developed the Asia team execution and strategies sourcing deals globally. He was CFO for Asia market Ag leader Origin Agritech Limited (NASDAQ:SEED). During his tenure of over seven years, while based in Beijing, Origin averaged a forward PE ratio over 35x and possessed an average daily volume of over 1.5M shares (over RMB6.6B market cap, top 25 international NASDAQ company in 2010) with a roster of many blue-chip investors including Fidelity, Wellington, Citadel, Baron, Heartland and MUFJ. With a background both in finance and science, while publishing several peer-reviewed academic papers, he has the ability to understand the technical aspects of financial, management, and advisory work within many natural science industries.
He holds an MBA from Rice University in Finance & Strategy and has studied for his Ph.D. at USC in Business Strategy. He also holds FINRA Series 7, 86 & 87 licenses. Irving lives in Irvine CA along with his wife, Linda is and three amazing teenage children.