Kenneth Li is the Managing Partner of MDI VC Singapore, and he is responsible for MDI Ventures Global Expansion and Fund Initiatives. He is one of the founding members of MDI ventures and has been with the firm since its inception. His experience also includes time at Deloitte and Systec VC, one of Indonesia’s earliest VC/venture builders. Subsequently, he also manages several private funds throughout his career. There are currently two funds that actively operate under his management.
His investment follows the belief in a mix between value investing and sustainable growth fueled by venture investment. Throughout his career with MDI, his investment choice has contributed four out of seven exits for MDI. The sector of choice includes fintech, logistics, SaaS, and consumer tech. His next focus is to bring MDI Ventures as a globally respectable venture firm. He believes the VC model’s combination with a corporate-backed ecosystem should be one of the vital determinants of success for MDI ventures.
In an exclusive interview with AsiaTechDaily, Kenneth says:
The fact that there are so many other successful investors worldwide gives you the motivation to achieve the same kind of success that is recognized globally. These challenges always give me the drive to do our best and achieve the best result you possibly can. MDI’s fund is considered very young (4 years) in the Indonesian VC world, let alone the global scene. However, in this period of time, we have been steadily working to have just a single fund to have 4 active funds.
- Always continue to learn
- Don’t compare yourself to others but try to better yourself each year
- Find the source of your happiness in life, not only wealth, fame, etc., unless money is your source of happiness 🙂
Read on to know more about Kenneth Li and his journey.
What background and domain expertise do you have?
Kenneth Li: I was mainly educated in Finance. My first career was in Deloitte, soon after I move to VC and has ever been in the industry since. The reason why I took Finance was that in any aspect of our life, it would have a touch on the financial world; therefore, I feel the needs and curiosity to dig deeper into the subject. With VC investing over the year, the specific sectors I focus on relate to Fintech, Enterprise solutions/SaaS, and e-commerce enablers.
When did you first think about starting a fund?
Kenneth Li: Since I was in university, although what I envision was a different type of fund (more in line with natural resources and mutual funds), it turns out that I did achieve the same goals of setting up a fund for investment.
What kind of startups/ sectors have you invested in till now?
Kenneth Li: Quite agnostic but mainly in Fintech, SaaS, and E-commerce enablers.
What types of companies do you look to invest in? And What’s your mental model for investing?
Kenneth Li: The one thing I also look out for is unit economics that makes sense. Often, in startups, they look too much to metrics that cannot prove a direct relation generating positive unit economics. Of course, it would be not very reasonable to expect positive net income from the very beginning, but I would like to see a model that shows that it can achieve it over time. The underlying reason is that despite tech startups are expected to grow quickly, and it is still a business at the end of the day. Therefore, my mantra here is not growth at all costs but growth with a sustainable business model in mind. Those are the type of companies that I look for despite the sectors.
What is your typical investment range, and how many startups you invest in per year in general? Additionally, can overseas headquartered startups get funding from you?
Kenneth Li: We invest anywhere between $1M-$5M, typically between Series A-B and generally about 10 investments per year. However, that activity has increased quite a bit since we launched additional funds. Our funds’ operation is region agnostic. We have made investments in Korea, Australia, the USA, and more. We also have offices in Singapore and the USA. However, we have a special interest in the SEA markets, especially Indonesia, as our HQ, where we can offer our portfolio companies the most support.
What would be the KPI that you usually check about the startups’ growth? It may be diverse in each industry like LTV, CAC, MoM, etc. but it will be helpful to understand more about your additional investment factors.
Kenneth Li: I am all about the “real numbers” I agree that startup growth indicators and KPI’s vary across business models and industries. Still, in any business, there is always “one metric that matters” that reflect the state of the business, and that is revenue. No matter how beautiful your other metrics if you can generate revenue, it will all be meaningless. All the startups Revenue and its Contribution Margins have to convince me that its trajectory can be positive. The one I especially pay attention to is when startups spend on marketing. The correlation between marketing to revenue should not be linear. If your spending on marketing is in a linear relation with your revenue, that means you won’t be able to reach that scale where you can dial down on marketing and keep growing. What I always try to find is not a company with a product that people would like to use, but a product that people would like to pay for.
How do you handle this COVID-19 outbreak situation for your fund’s survival in the future?
Kenneth Li: This really depends on where you are in your fund’s lifecycle. If you’re a fresh fund, then my recommendation would be to invest. Valuation multiples have eased, and startups are looking to raise a “rainy day round” like an insurance policy if the economy takes a turn for the worst. On the other hand, if you are a fund in the later stages of the life cycle, you may need to roll up your sleeves and make some hard, unpopular decisions.
Right after being an investor, like in the early days, there must be some tough times in building up the first fund along with building up a second fund or giving back the good returns to those LPs. If there is any similar tough time like this, please tell us more about it and how you (or your team) overcome the difficult times?
Kenneth Li: There were definitely some tough times in the early days of our first fund, especially for MDI Ventures as it was the first CVC for an Indonesian State-Owned Enterprise, and it was also the biggest fund in the country at the time. Many from all sides had expected us to fail, claiming it was a feat too ambitious. But we had a strong idea and belief that we were on the right track. Our thesis was to connect super high growth and innovative startups with a large corporate with an abundance of resources, network, and infrastructure; of course, who else is a better partner to have in the digital ecosystem than a telecommunications company.
Additionally, Do you have advice for anyone looking to start a fund?
Kenneth Li: Create a thesis that you strongly believe in and stick true to that thesis and your investment fundamentals—network like crazy. It would be best if you had supports from LPs. Build Trust.
What mistakes do you see founders make when raising money?
Kenneth Li: Don’t get caught up in the up of raising big rounds. It is always best to raise what you need (maybe a little bit extra) and not what you. I always ask a founder what they are going to do with the money we’ve invested and what we want to hear is a very solid plan and a dollar by dollar break down on fund usage. If you’re not sure how to use the funds, then why raise any at all. On top of that, as a founder, you don’t want to dilute yourself too much, and if you raise a big round but can’t justify the valuation, then one of two things can happen: 1) you raise the amount you want, at a lower valuation and you lose majority control of your company, or 2) you raise below your expected target, at the valuation you wanted to maintain dilution. Regardless, you look like a schmuck that doesn’t know what they are doing.
What’s your advice to entrepreneurs who have a chance to meet investors like you? What are the top 3 questions that you always ask the founders?
Kenneth Li: You don’t have to win over every investor. To close a round, all you is anywhere between 1-3 investors to believe in your business, and it’s better to secure funding from investors who believe in your business and can support your vision. My Top 3 questions are always:
- Who do you generate value for?
- How do you generate value?
- How do you monetize?
What’s your general thought about the term “Global,” and What are the important factors (criteria) for local startups to consider for international expansion?
Kenneth Li: Before thinking of any expansion, I believe that the company needs to acquire a product-market-business model fit, which means that you have a product that customers want to pay for.
What kind of startup or tech industry will impact the world in the future, like 2-3 years locally, in your view?
Kenneth Li: Fintech, Health, and Education will be exciting sectors for the SEA region as the middle-income sector continues to grow to demand better living standards. Fintech is a sector that can greatly help boost access to a better standard of living and can also provide financial support for a better quality of health and education. Besides that, we see that logistics is starting to take off, and a new retail wave has also been enveloping the market.
What are the top-three books or movies (TV series) that changed your life and why?
- The Intelligent Investor by Ben Graham
- The Warren Buffet Way by Kenneth Fisher, Peter Lynch, Robert.G. Hagstrom
It was the books that I read when I was in middle school and high school. It was the ones that interest me in financial matters and investments. Some of the insights that I got from these two books are very influential in selecting my investments.
- The Lean Startup by Eric Ries
This was the first book that I read when I got into the startup scene in 2011. Although there are many other good books, the lean startup applies not to tech companies but also corporate change/evolution. Implementing this book’s content and the value investing style that I’ve learned over the year seems in line with my current investing style.
How do you keep yourself motivated every day?
Kenneth Li: The fact that there are so many other successful investors worldwide gives you the motivation to achieve the same kind of success that is recognized globally. These challenges always give me the drive to do our best and achieve the best result you possibly can. MDI’s fund is considered very young (4 years) in the Indonesian VC world, let alone the global scene. However, in this period of time, we have been steadily working to have just a single fund to have 4 active funds.
What are the top- three life lessons that you want your (future) sons and daughters to know?
Kenneth Li:
- Always continue to learn
- Don’t compare yourself to others but try to better yourself each year
- Find the source of your happiness in life, not only wealth, fame, etc., unless money is your source of happiness 🙂
What would you like to be remembered for?
Kenneth Li: One of the most prominent investors in the world.
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