May 2016

Entrepreneurship in the development of

ASEAN Economic Community

Douglas Abrams

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About the facilitator

• Wharton MBA

• JP Morgan – Vice President IB Technology, GM Internet Marketing

• Parallax Capital Mgmt – Co-founder and MD Private Equity

• Extream Ventures – Co-founder and MD S$20 million seed fund

• Expara – Founder and MD IDM Ventures Incubator, advisory, training

• NUS – Adjunct Associate Professor, Business School, Entrepreneurship, Sasin – Visiting Professor, Venture Capital

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Creative destruction

• Innovative entrepreneurs drive long-term macroeconomic performance

• Long-run economic growth

• Economic fluctuations

• Structural adjustment

• Accounts for over 50% of productivity growth

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Development of a thriving entrepreneurial sector

• Not just an economic "nice-to-have"

• In the knowledge-and innovation-driven globalized economy of the 21st century

• It is a competitive necessity

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Impact of VC-funded companies on econony

• US companies receiving VC from 1970-2005 accounted for 10 million jobs and $2.1 trillion revenue in 2005

• 9% of total private sector workforce and 16.6% of total GDP

• Job growth rate of 4.1% vs 1.3% and sales 11.3% vs 8.5%

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Companies founded by MIT grads

• 25,800 active companies

• Employing 3.3 million people

• Generating annual revenues of $2 trillion

• Singapore: $307 billion; Thailand $373 billion; Vietnam $186 billion

• Equivalent to the 11th largest economy in the world

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Innovation and Entrepreneurship

• Why countries need innovative entrepreneurship

• Driving innovative entrepreneurship: enterprise ecosystems

• The key players

• Singapore enterprise ecosystem

• Outlook for Thailand’s enterprise ecosystem

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Innovation and ecosystems

• Coral reefs – 10% of earth’s surface; 25% of known species

• Cities 10x larger than neighbor are 17x more innovative

• Residents of city of 5MM are 3x more innovative than resident of town of 100K

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Factors that drive innovation require ecyosystem

• Liquid networks

• Slow hunches

• Serendipity

• Error

• Exaptation

• Platforms

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Participants in enterprise ecosystems

Enterprise ecosystem

RIs

IHLs

Entre

Govt

Accel Incub

Angels

VCs

Mentors

Industry

Capital markets

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Who are the players?

• Entrepreneurs – Lifestyle entrepreneurs – High-growth entrepreneurs

(scalable business)

• Venture investors – Venture capitalists (VCs) – Angel investors – Corporate VCs and investors – Banks – Government

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What roles do they play?

Identify opportunities

Provide funding

Oversee finances

Assist with growth

Generate returns for themselves or their investors

Venture investors

• Create opportunities

• Raise funding

• Manage finances

• Increase value

• Generate returns for investors

Entrepreneurs

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Small versus scalable business

• Small business: limited scope, complication and risk. Slow growth.

• Scalable business: significant scope, complication, and risk. Rapid growth.

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Why do companies raise investment?

• Lifestyle or scalable?

• Paycheck or payout?

• A big piece of a small pie?

• A small piece of a big pie?

Founder

Investors

Investors

Founder

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Stages and sources of funds

Founder’s Capital

Seed/Angel

Series A, B, C

Mezzanine Pre-IPO IPO

VC hurdle rates 60-100% 40-60% 20% Why are these rates so high?

OM F,F&F

Incubators corporations government

Customers, suppliers, strategic partners VCs, Banks for VC loans

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Why do investors invest in venture capital?

As of June 30, 2014. The Cambridge Associates LLC U.S. Venture Capital Index® is an end-to-end calculation based on data compiled from 1,508 U.S. venture capital funds (963 early stage, 165 late & expansion stage, 374 multi-stage and 6 venture debt funds), including fully liquidated partnerships, formed between 1981 and 2014. (1)Pooled end-to-end return, net of fees, expenses, and carried interest.(2) 2007-2015 Sources: Cambridge Associates LLC, Barclays, Dow Jones Indexes, Frank Russell Company, Standard & Poor's, Thomson Reuters Datastream, and Wilshire Associates, Inc

Case Shiller Real Estate Index 4.1 Expara IDM Ventures (2) 43.03

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Companies founded with venture capital

www.nvca.org

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Industries created by venture capital

www.nvca.org

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Milestones in Singapore enterprise ecosystem

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

No VCs NRF NUS TIF

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Strengths of Singapore’s enterprise ecosystem

• Public policies promoting entrepreneurship and venture capital

• Public policies supporting the venture capital industry

• A business friendly environment

• Strong IP protection regime and corporate governance

• Strategic location in Asia

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SEA deal flow pipeline is full

S$90MM invested in Singapore seed stage in 2013 alone

Deals Amt (USD MM) Population GDP (USD B) Total SG 264 71.8 5.312 274 Total US 908 361.4 314 15000 SG / US 29% 20% 1.7% 1.8%

[1] Crunchbase Jan 2014, Wall Street Journal Feb 2014

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SEA exit markets at an inflection point

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US and Singapore public sector VC

• The US federal government alone invests as much in small businesses as total VC investment through SBA/SBIR

• Federal contracts to small businesses dwarf total VC investment

• Start-ups are also funded at state and local levels

• Both US and Singapore invest about 1% of GDP into programs supporting start-ups and small businesses

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Contact us

• Douglas Abrams

• Expara – dka@expara.com – www.expara.com

• You can also contact me on: – Facebook, Linked-In, Line,

Whatsapp, WeChat

• Singapore mobile: 65-9780-5381

Singapore HQ Block 71 Ayer Rajah Crescent #$02-10/11 S139951 Regional offices: Bangkok, KL, HCM, Tokyo