US$200M Viki acquisition by Rakuten makes me beam

Well well, I guess someone forgot to draw the string on the proverbial bag and let the cat out earlier than it was supposed to. Kara of AllthingsD got the scoop; lucky her!

By now, Viki’s purported US$200M acquisition by Rakuten is all over Singapore’s online tech news, Facebook and Twitter. I’ve also been inundated by well wishes and congratulatory back slapping, both online and off. A friend (or two) was also respectfully curious about how much dough I made personally from this transaction. Another friend thought I became a millionaire overnight, which is a nice thought, but probably untrue.

What’s certainly true is Terence Lee’s comment in his follow-up op-ed piece on SGE:

As such, Viki’s exit is considered good news for the region’s angels and pre-Series A investors of the NRF-TIS vein. Silicon Straits’ (formerly Neoteny Labs) James Chan must be beaming. It pushes boundaries of what’s possible here and signals that Southeast Asia may soon see even larger exits.

I am indeed beaming, not because investors made money alongside Razmig and his team, not because Viki is going to blossom even more as part of the larger Rakuten family, but because this acquisition/exit debunks a couple of widely held myths and pegs Singapore’s tech ecosystem critics and boo boys back a good several notches.

  1. It is not possible to build a world-class internet company from scratch for the world, out of tiny Singapore. You do need to start with a strong team, idea and that little bit of luck to get yourself an awesome investor list, continue executing and get over the finish line. Peng Ong would be proud.
    line break easter egg
  2. Software startups need less more money than the government thinks it needs to succeed, especially in an off-balanced risk capital industry backstopping a nascent startup ecosystem. Some of us were recently told by certain segments of the Singapore Government as part of their policy review and realignment that “software startups need less money to go-to-market” when compared to hardware and biomedical startups. They’re only partially correct; software startups typically require less capital than most biomedical startups to get out of the door, but are now on par with hardware startups. This is because platforms such as Kickstarter are providing bootstrapping hardware entrepreneurs with a non-dilutive source of working capital, driving their capital efficiency to be almost equivalent to software ideas. I still think software startups are slightly more capital efficient than hardware startups, which have to deal with inventory, returns and in general more ‘physicality’. Also, let us not forget that Singapore isn’t exactly the cheapest place to hire top-tier software engineering talent willing to give their best at high-risk startups; ask Viki’s founders, they would know. I fondly recall running around helping Razmig to get set up and hire Singapore’s l33t RoR hackers for Viki’s early engineering team when they first set up shop in Singapore in mid-2010. Prior to Viki’s Series A, it had raised well less than S$589,000 and didn’t have anyone on full-time employment. It went on to raise US$4.3M for its first institutional round in Q3 2010, with majority of its Series A coming from Charles River Ventures, Greylock Partners and Neoteny Labs, with my partner Joi Ito joining the Viki board. It then raised a US$20M Series B in Q4 2011 before eventually selling in Q3 2013 for a supposed US$200M. Viki would not have gotten enough working capital to attract the necessary talent and scale quickly if it had chosen the usual Singapore entrepreneur’s path, i.e. take S$50K from iJam to start with, followed by S$250K for SPRING TECS POC, maybe S$500K from SPRING TECS POV, then S$589K from incubators under the NRF TIS, and then S$1M to 2M from funds under the NRF ESVF. Help of any form is always appreciated by entrepreneurs, but some form of help, while well-intentioned, can inadvertently crimp entrepreneur ambitions or attract the wrong sorts of entrepreneurs; a lot more can be done to structurally reform the Singapore Government’s startup equity program.
    line break easter egg
  3. Venture capital can be unattractive as an alternative asset class to fund managers. I’ve tried and failed to interest fund managers in Southeast Asia who found the 7-to-10-year lock-in by venture funds to be unappealing when compared to their usual diet of hedge and macro funds that provide annual or more periodic capital returns. I think our US$5M fund still has a few winners in the making so the final verdict on this point is still out, but being in a position to return capital (and more) to our investors 3+ years after the fund got raised, with such a lean operating budget, is an extremely strong position for any fund to be in, venture or otherwise.

Entrepreneurs that dare to dream on a wide enough canvas and are afforded sufficient capital to do so can make a difference to our world. The tens of millions of users that have benefitted from the language practice through fansubbing, the cross pollination and cultural spread that fan-subbed content facilitate on Viki, and the cash payout that Viki’s founders and employees get will continue to generate not just employment in Singapore, but more importantly the groundswell of virtuous pay-it-forward cycles that will hopefully spark off that next few big exits.

In the meantime, the Viki team deserves some time off to celebrate. Razmig et. al., you guys bloody deserve it. Joi, great job.

All of you were truly awesome ;-).

p.s.: check out Razmig’s CNBC interview about the exit.

About James Chan

James Chan is an entrepreneur, investor, geek, photographer and husband/father based out of Singapore. Apart from frequent travels to Vietnam, Myanmar and Indonesia for work, James can also be found online via his trusty 15" Retina MacBook Pro or iPhone 6+.