This past week, I stayed in Hong Kong and attended the RISE Conference, one of the biggest tech summits in town. Hundreds of startups in different phases - from alpha to beta - set up booths to pitch investors passing by while tech gurus impart invaluable wisdom in seminars and workshops.
Here's what I learned in the past few days attending seminars and talking to people:
- Cash is King - Do NOT run out of cash. Watch your burn rate. Fund raising will be very challenging this year and even if it's possible, the terms will be quite unfavorable to founders. My take is that the looming financial crisis in China and tech is scaring investors, and venture capital is drying up as we speak. We should go back to the basics and stop daydreaming about ballooning valuations and "potential value of Big Data". Get as many paying customers as you can. Be frugal and creative. Prepare for winter.
- Model Behavior - Make sure you advertise, pamper, and grow your "model employees" whose values, work ethic, and skill sets match what you desire for the firm. Set examples for all to follow.
- Client Relationships - In the B2B world, maintain strong relationships with clients that don't choose you in a bidding war. If something goes wrong with their first choice, you might just be able to rebound.
- Greater Fools - Keep in mind the "Greater Fool Theory" which states that investors sometimes speculate on the stock price, hoping to sell to the next fool. For instance, Jack may buy shares of Company X in the market at $24/share regardless of the underlying basis for such a valuation because he believes that someone might buy them from him for $48/share. This is exactly like the game, Musical Chairs. At some point, the music stops and the share prices come crashing down. This happens in unicorns such as Palantir and Thoranos as well as in the Chinese stock market. Don't be a fool.
- Community Building - If you want to build a community, which I presume every startup and platform are vying to do, you need to first be part of the community. If you don't play games, it's very hard to build a gaming community. The founders of Razor were avid gamers and they built products that they would have liked, and they would have been happy to ship the product even if they're the only ones buying them. You also have to always do right by the community. Stand by your values. They pay off in unexpected ways.
- KonMari - Recently there's been a crazy fad about tidying up started by Marie Kondo, who wrote the book, "The Life Changing Magic of Tidying Up." The KonMari method promises transformational changes to your life by offering effective tips on how to tidy up. Now, anyone who knows me knows that I don't tidy up. Never. I hate it. But the core tenet of the KonMari method - When deciding whether to keep something, hold it in your hands and see if it "sparks joy" in you. If the memories and emotions behind the item are not joyful, then you shouldn't keep it - is quite interesting and thought-provoking.
The Looming Financial Crisis and What to Do
On another note, I've also spoken to bankers and investors alike who have expressed their concerns over China's economy in the next few years. China currently has 1 trillion USD in non-performing loans and we're starting to see cracks; One of my strategic partners just filed for bankruptcy. Apparently a significant adjustment is expected, and the question is not if but when. Current government efforts to pump credit into the market further exacerbates the problem, masking the crisis in the form of temporary housing gains. The impending crisis will spillover to Hong Kong, where retailers are already struggling to survive their greatest downturn since SARS. Anxious and paranoid, I've been talking to people to understand the severity of the situation and possible strategies to weather to storm. How should a Christian respond to a situation like this? After much thought, I've come to the following conclusion:
- "But store up for yourselves treasures in heaven, where moths and vermin do not destroy, and where thieves do not break in and steal." Matthew 6:20 NIV. This verse popped up in my mind again and again. I think God is trying to tell me that my financial priorities should always be heaven-oriented. Now, given the investment story of Matthew 25, we are to make good use of the blessings given us, including our spiritual and material gifts. And this goes back to the "why" again. Our goal is to make good returns responsibly for the kingdom of heaven. This mindset will enable us to seek wisdom in finding the right investment opportunities while avoid being too stressed out or depressed when losses are incurred. Such investment opportunities, in my opinion, should be conservative in nature, healthy in its cash flows, and beneficial to the overall economic system in mission. Now these don't sound like stock picks but I think it's a good framework to worth with.
- Hong Kong has a stronger financial system, robust regulatory framework, and enormous foreign reserves to weather the storm. Strong demand provides support to the housing market despite recent slumps in pricing. If we allocate capital in Hong Kong (with HKD denominated investments) and in premium, safe assets in developed countries, we'll be relatively safe. India is now being heralded as the next rising star so I've heard investors are looking for growth opportunities there as well. I suggest storing up capital and waiting for opportunities to pick up prime assets on the cheap. But whatever you do, leave RMB.
- This is a golden opportunity to showcase how Christians manage finances in a God-glorifying way. In times of trouble, people will pay attention to our testimonies and when it seems like there's no hope in the secular world, we Christians have hope in Jesus.
Anyways, it's been a rewarding week. I've learned a lot. Thanks for reading.