EHK talks to Angel Investor/Bigcolors CEO James Giancotti
EHK talks to Bigcolors CEO James Giancotti about his transition from banking to angel investing, and lessons learnt along this incredible journey.
This interview with James Giancotti was conducted and condensed by EntrepreneurHK (EHK).
“In Silicon Valley, there is a badge of honour for raising money, but the question is: what are you raising money for?”
What got you into angel investing?
To summarise my story in one sentence: I was displaced. After getting my law degree in Australia, I went into consulting with Deloitte (where I met Bigcolors co-founder Jackie Lam), moved to HK as an investment banker with JP Morgan and then Goldman Sachs. I always remember that in my first job someone once said to me: “They never read your resume when you die”. Since then I constantly remind myself that i need to do something different, and invest in something other than a corporate. I started off my journey initially by investing in a small company called Makible – a HK based 3D printer maker. After investing in a few other companies I left Goldman Sachs for good to become an angel investor full time.
What is your view on the current start-up ecosystem in HK?
The startup scene in HK now reminds me of New York back in 2007, when Kickstarter, Meetup, and Union Square popped up. HK is slightly different and we need to play to our strength – hardware and finance. Startups that appeal to the city’s strengths and capture where the money is headed are doing exceptionally well and getting funded. Co-working space also helps build the ecosystem because everyone is close-by – you can see Sheung Wan becoming the hub. People elsewhere are also taking notice. I visited Silicon Valley last week and thought I had to sell myself, but everyone I met did their research and knew who I am and what I do. People want to know more. Outside of HK, we are seen as a place to watch. This is an exciting place to be right now.
Where do you think HK stands against other countries?
In places like Singapore a lot of control over where money heads is handed over to the government. This takes the focus away from building great products and good businesses, instead start-ups concentrate on how to spend the funding they received. We do not get that in HK and it’s great. As an entrepreneur here, you need to fight, hustle, and make your business work. This is what HK does well. HK is also a great starting point for start-ups who want to enter China and Asia. You see a steady stream of incredible homegrown and foreign talents. People actually want to come and live in HK – the appeal in the city itself also puts us ahead of others in the global arena.
What was the background of Bigcolors and what is the vision?
We initially launched Bigcolors as an equity crowdfunding platform. We found was that Asian investors have yet to take on the idea of crowdfunding – they have the money to invest but they don’t want to be actively involved in the management of businesses, so we structured and pivoted our business model into us investing in companies and incubating. We apply the same criteria as traditional investment funds: for a company that is worth $500K, we buy in at $100K and take 20% of the company. Instead of the traditional incubator approach i.e. 3 months plus a demo day, we incubate for a longer process. We dedicate resources and help our start-ups build their business. We find revenue-generating companies and help them become successful. The last exit of Bigcolors was Taxiwise – an advanced booking system that connect taxi drivers and non-Cantonese speaking expats and travellers.
Our vision is to get 30 companies in the next 3 years. We have invested in and will continue to bring foreign companies into HK. This is a deliberate strategy as we want to make HK a central hub – we have talents joining us from Turkey, U.S., and Australia in the next 5 months and these foreign expertise will be put to great use.
So bringing foreign ideas into HK and growing them here is the future direction?
Yes – it is actually very easy and works well with the local ecosystem. Take Roger Blasso as an example – he founded Oddup, an analytics based start-up that tracks the success rate of start-up through gamification. The app itself is a simple tool but the analytics is powerful. Roger was based in Istanbul, a great emerging market but he sees the future in Asia and U.S., and HK is great starting place. There is a lot of pull to HK at the moment – the next 3 or 4 years will be exceptionally busy.
What are the warning signs that a business is heading to failure?
An initial and obvious one is when companies cannot justify its costs. When you are spending more than you can reasonably explain, an investor sees it as a red flag that it’s time to get out and move on. Another one is founder divorce. As investors we look for “scar tissues” – we are only confident investing in co-founders who have either done it before, been friends for a long time, or had bad experiences together.
That leads us onto the next question – sole founder or co-founders?
Do you want to be the Nik Kershaw or the Beatles? A lot of successful businesses are built by one person but the chemistry between co-founders can lead to something amazing. Do you want to be a founder that can do it yourself and hire people that help? Or are there a group of you who want to change the world together?
Advice to start-ups seeking for fundings out there?
Do not see raising money as your ultimate goal. In Silicon Valley, there is a badge of honour for raising money, and this applies to HK too. The question is: what are you raising money for? To survive or to expand? Raise money for the right reason. Take strategic steps – get fundings only when you are established and want to make the business better, to hire key people, or to expand.
How do you distinguish between a good product and a fundable product?
A simple test – Imagine a product featuring on the front page of a magazine, would I get interested and flip to the featured article? If yes, there are potentials. A good idea in itself is not enough – execution is key. Combine a great idea with immaculate execution and you have a winning formula.
Longevity is crucial. To stay on top of the game you have to be innovating before everyone else does. Don’t be a “me too” – People will jump on the bandwagon, but if you the one actively looking for problems and hence potential solutions, you are then constantly ahead of others.
Does your corporate background influence on the way you work now?
Definitely. When I worked at Goldman Sachs I was surrounded by exceptionally smart people and thought I was the dumbest person there. That helps me enormously and it shaped me particularly from a recruitment perspective. We want to surround ourselves and our businesses with the best talents – attract the right people even if it takes longer or costs more. When I am hiring people I look for “Goldman quality”. It is important that angel investors maintain some corporate expertise in the start-up world – otherwise it’s the blind leading the blind.
Corporate life also helps me apply what works well in corporates into start-ups. There is a difference between building a business and building a company. To build business you want traction, sales, marketing. To build company you focus on HR policy, legal, accounting. I think start-ups should start learning about the latter too.
For those out there who are hoping to “take the plunge”, quit their full time job and join the start-up world, what are your advice to them?
Ask yourself – what is your life worth? If you answer is stable income from a job, sense of security, need to support a family etc., then your worth is what you are comfortable with. If you are going to jump ships, jump for the right reason. Only do it for true passion, to chase your dreams. Planning is key – make sure you are prepared (financially and mentally) and can afford to dedicate 6 months of your life to build something successful. There is nothing wrong with failing – if you don’t try, you will never know.
We see a lot of people under 30s wanting to get into the start-up world. Question is: what are you doing this for? When you are an entrepreneur, you create your own destiny. This is what keeps me happy through the highs and lows. A company we invested in recently released outstanding news – they found a non-toxin east vs west medicine cure for cancer. I have no doubt that the money will come but the sense of reward is on a completely different level. We are investing in businesses that are saving lives, and making a positive impact in the world. Every single life that I can help save means something far greater than all my corporate achievements put together. This is a legacy we can be proud of.