(#3) VB Map podcast: The Unbundling and Rebundling of VCs: A conversation with Chia Jeng Yang, Principal at Saison Capital

Website URL: https://saisoncapital.com/

Chia’s LinkedIn: https://sg.linkedin.com/in/chia-jeng-yang

Andries De Vos: Chia, from what I’ve seen in the industry today, I have the impression the VC platform on one hand is being unbundled and on the other hand is being rebundled. You’re more on the VC side, how do you see the market evolve both for VCs and for venture builders?

Chia Jeng Yang: The unbundling piece is a feature of competition increasing. We’ve already seen this a lot in the US: you see people coming in and providing lots of very specific types of support. And then, the ability to drive brand awareness and go to market for portfolio companies is really unparalleled, and there is something unique about funds going upstream, and micro funds and angel operators coming into the scene – we’re going to see a lot more  of that as competition heats up at a very early stage.

That’s the unbundling part.

The rebundling part – I think that’s fairly interesting.

We’re starting to see larger funds, especially the tier 1 funds, really going to start to dominate. As they get bigger and bigger, and ironically, the pressure to build very deep networks within some of these funds increases on both sides.

Specific to rebundling, large funds are finding themselves increasingly out of the loop, with micro-VCs and super-angels getting early allocation. A mixture of strategic LP investments as well as incubation and venture building models have quickly emerged as a rebundling strategy.

Andries De Vos: What are your thoughts on the best way to start a venture builder?

Chia Jeng Yang: VC used to be a finance job. It still is for a lot of people, but when capital became cheaper and cheaper and the cost of building things became cheaper and cheaper, it started narrowing down to the value that you can provide. The word “value” means a lot of different things. I think operating help is one kind of value. It became more and more bearish about operating health and became more bearish than other types – technical obviously is a good one, etc.

Venture building can be seen as being in line with the macro trend of capital becoming a commodity, so I can see why there would be opportunities there.

I’ll be very careful about what type of value you provide is. A lot of people are very optimistic about the type of value they can provide on the part-time basis. In some ways, I’m also unfairly hyping myself up if I mention all these discussions I’m having with founders of venture building, right? Because I’m just being a sounding board. And that’s it. I spend X amount of hours a week with these folks. That’s nothing, that’s just being friendly. That could be one way of doing it, but I’m also aware that this is the value I think I can provide. I’m not going to help them build a ship product. I’m not going to help them open a warehouse, I can’t do that right now.

Be super careful with what value means, especially in the context of a market that you’re operating in. I think that’s what some of the big venture builders have failed to see as overtime.

Once you, as a VC or venture builder, are very clear on your value proposition at the early stage, be it a unique ability to hire engineers, or navigate regulatory constraints – increasingly now very niche fields, you have a strong value proposition as a venture builder.

Andries De Vos: This takes us to the next question, how do you scale a venture builder in your mind?

Chia Jeng Yang: I am actually very bullish on the macro trend for corporate VCs, because 1) it looks like a lot of VCs are starting to hire smarter fund managers, and 2) they are learning how to interact with startups. But they also have all this strategic value add that they’ve learned to interact with startups better and better over time.

There are areas that I can think of where there might be an opportunity. Because of what we do in FinTech, I’ve come across a number of funds, which have been very good at helping FinTechs grow, and that’s something that you need to scale for sure. These people are super well-connected. It’s really specific value adds I can think of in specific fields, where the founder can be a good founder but still can have difficulty navigating those waters, and someone can bring in that support.

As such, you scale a venture builder by scaling your value proposition – being able to plug into an increasing number of consumer and enterprise distribution channels, as an example, is one of them. We’ve already seen the relevance of such corporate development teams already even in traditional VC funds.

Andries De Vos: You and I spoke a lot about how as a venture builder or a VC, it’s important to build your own ecosystem. But operation can be challenging to have a distributed network of experts and contributors. There are all sorts of issues around trust and confidentiality. How do you think you can go about making people more incentivized, committed and potentially even exclusive to your VC ecosystem?

Chia Jeng Yang: The fundamental difference between both of them is that I want to create something where if you interact with it, you can get X amount of value. That’s what a distributed platform is and that’s what I’m trying to create, but when you talk about ecosystems and community, it’s more of that – we want you to feel like you have skin in the game when you’re part of this. The more you give, the more you’re able to receive as part of that. Trust, dedication, loyalty is part of that offering, so it’s much less transactional. And that’s very, very difficult. It’s definitely harder to replicate and recreate the experience that you’re trying to build there.

As you know, I am a big proponent that the lines between VC and Venture Building have become increasingly blurred – the rise of platform/community functions within VCs is a part of that. That loyalty and community is mostly a brand play – being a trusted authority that people don’t want to get on the wrong side of. I have a lot of theories about how VC platforms evolve, but without giving too much away, I think the future of this is really around democratizing access to the upside of startup investing – both in a financial and non-financial way.