A few days ago, I had a lovely dinner with Swee Ting Pan, Head of China team at JAFCO Asia, along with our CEO and Head of South Asia. Swee Ting was the one that led our Series A deal into Shein in 2013. Now Shein is valued at 100 billion USD and considered as the third-most valuable startup in the world. I did not miss the chance to ask Swee Ting about her decision to invest in Shein and took away some valuable advice that I’d like to share below.
𝐅𝐮𝐧𝐝𝐢𝐧𝐠 𝐬𝐡𝐨𝐮𝐥𝐝 𝐚𝐥𝐰𝐚𝐲𝐬 𝐜𝐨𝐦𝐞 𝐢𝐧 𝐚𝐬 𝐭𝐡𝐞 𝐫𝐞𝐬𝐮𝐥𝐭 𝐨𝐟 𝐚 𝐠𝐨𝐨𝐝 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐦𝐨𝐝𝐞𝐥 𝐫𝐚𝐭𝐡𝐞𝐫 𝐭𝐡𝐚𝐧 𝐭𝐡𝐞 𝐬𝐭𝐚𝐫𝐭 𝐨𝐟 𝐚 𝐠𝐨𝐨𝐝 𝐨𝐧𝐞. Shein only raised a small amount of funding before receiving our Series A investment of 5 million USD. Whilst Shein founder argued that his vision is to have a full control of the supply chain, the limited funding did not allow him to do so. But even then, Shein founder was very good at building an efficient feedback loop that allowed the company to deliver what customers wanted and to quickly discard what they didn’t want. The company formed partnership with various small suppliers that manufactured what customers wished to buy and then shipped out their orders in time. Thanks to this, Shein managed to build decent traction in its early days and the management team successfully convinced Swee Ting of their execution abilities, even when they had very limited funding.
𝐅𝐨𝐜𝐮𝐬𝐢𝐧𝐠 𝐨𝐧 𝐥𝐨𝐜𝐚𝐥 𝐦𝐚𝐫𝐤𝐞𝐭 𝐢𝐬 𝐠𝐨𝐨𝐝, 𝐛𝐮𝐭 𝐟𝐨𝐜𝐮𝐬𝐢𝐧𝐠 𝐨𝐧 𝐟𝐨𝐫𝐞𝐢𝐠𝐧 𝐦𝐚𝐫𝐤𝐞𝐭𝐬 𝐬𝐨𝐦𝐞𝐭𝐢𝐦𝐞𝐬 𝐢𝐬 𝐛𝐞𝐭𝐭𝐞𝐫. Even though Shein comes from China, it serves mostly the US and Europe markets. The main reason is that China is full of fashion-focused ecommerce companies, and it will be very costly for Shein to compete with these players. Instead, Shein leverages its China origin by sourcing for low-priced products from local manufacturers and sell to customers overseas. Whilst many founders believe it’s most important to build a good traction in the local market before expanding abroad, Shein serves as an example of how the opposite strategy might play out better.
As for myself, I also learnt a few things from Swee Ting’s sharing.
𝐊𝐞𝐞𝐩 𝐚𝐧 𝐞𝐲𝐞 𝐨𝐮𝐭 𝐟𝐨𝐫 𝐭𝐡𝐞 𝐦𝐞𝐠𝐚𝐭𝐫𝐞𝐧𝐝𝐬 𝐛𝐮𝐭 𝐛𝐞 𝐰𝐚𝐫𝐲 𝐨𝐟 𝐟𝐨𝐥𝐥𝐨𝐰𝐢𝐧𝐠 𝐭𝐡𝐞𝐦 𝐛𝐥𝐢𝐧𝐝𝐥𝐲. JAFCO Asia was the only investor that made a bet in Shein in its Series A round in 2013. Other investors on the other hand were busy chasing ecommerce startups that focused on serving China market, given its large population and booming internet economy. Had Swee Ting followed other investors’ footsteps, we would have missed out on Shein. So this story is a reminder for me to keep myself posted on the major market movements but at the same time have a healthy dose of skepticism when following these trends.
𝐃𝐨𝐧’𝐭 𝐥𝐞𝐭 𝐟𝐚𝐢𝐥𝐮𝐫𝐞 𝐝𝐞𝐟𝐢𝐧𝐞 𝐲𝐨𝐮. Something not many people know is that Swee Ting got burnt pretty badly with another ecommerce investment before finding Shein. But that experience didn’t stop her from believing that ecommerce was still a large market to tap in. If anything, that failed investment even pushed Swee Ting to look harder for an ecommerce company with a unique business model that can scale. Shein was the answer to her long quest, and the rest is history.
𝐖𝐡𝐞𝐧 𝐢𝐧 𝐝𝐨𝐮𝐛𝐭, 𝐚𝐬𝐤 𝐲𝐨𝐮𝐫𝐬𝐞𝐥𝐟 𝐢𝐟 𝐲𝐨𝐮 𝐜𝐚𝐧 𝐨𝐧𝐥𝐲 𝐦𝐚𝐤𝐞 𝐨𝐧𝐞 𝐝𝐞𝐚𝐥, 𝐢𝐬 𝐭𝐡𝐢𝐬 𝐭𝐡𝐞 𝐨𝐧𝐞? Swee Ting only makes 1 to 2 deals at max per year and the above question is what she often asks herself when looking at certain investment opportunities. I used to set KPI for myself to close at least 1 new deal per quarter and this mindset constantly puts me under a lot of pressure to meet the target. Swee Ting’s advice has helped me reflect deeper on my approach of making investments as a VC.
We wrapped up our dinner with some random discussions on politics, history as well as all the good deals we missed, many of which have become unicorns. If there’s anything that hurts VC much more than a bad deal we invested, it’s a good deal we missed, since a single good deal could more than make up for the rest of the bad deals.
And how do we VC cope with this sense of loss? We move on cuz that’s just life.
Original post is first appeared here: Amy Phuong Do Facebook