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Send us a textThe funding environment is tough, but there is precedence. This episode’s guest, John D. Evans, CFA founder and general manager of SEIML Ventures, spent over 24 years as an investment banker, 12 years as a professor of practice, and 7 years in corporate finance. He's seen the highs and lows, booms and busts, of various economic cycles, making him a wealth of knowledge. With his unique insights, we explore the tough competitive nature of markets and the struggle startups face to ...
Show Notes
The funding environment is tough, but there is precedence. This episode’s guest, John D. Evans, CFA founder and general manager of SEIML Ventures, spent over 24 years as an investment banker, 12 years as a professor of practice, and 7 years in corporate finance. He's seen the highs and lows, booms and busts, of various economic cycles, making him a wealth of knowledge. With his unique insights, we explore the tough competitive nature of markets and the struggle startups face to generate revenue. Ever wondered how similar government-backed currency and private cryptocurrency markets are? We navigate that too!
Expanding our fiscal exploration, we peer into the darker side of finance, examining the history of financial fraud and its prevalence in boom and bust markets. You might be surprised by the similarities between Bernie Madoff and Bankman-Fried, and the distinct risks linked to neo banks and single-purpose fintechs. We also discuss the often-overlooked hurdle startups face: being able to commercialise. It's not all about the idea, it's about distribution and market demand.
If you're considering launching a fintech in Asia, you'll definitely want to hear about the FinTech ASEAN program, an all inclusive startup training program. Get ready to uncover the fascinating, complex, and often tumultuous world of finance and entrepreneurship.
Subscribe to our YouTube channel for more interviews, investor insights, and pitch deck tips.
Visit our website to learn more about our work with Asia's leading tech startups.
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What is Unsensible - The Asian Startup Podcast?
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Speaker 1: Even if there is a
demand, it's not a guarantee
that you'll make money, because
it's a competitive market out
there.
You need to know how to grow
the business.
You've got to have a good team.
Founders typically come from
the technical side, so they're
maybe not good in marketing,
sales and branding and, of
course, generating revenue.
Generating sales is the first
serious test that you face and
that probably accounts for a
good portion of that 90% who
fail before three years because
they can't commercialize, they
can't generate revenue, they
can't market.
Speaker 2: Welcome back to the
Uncensible Podcast.
Today I've got a special guest,
someone whose name will come up
over the coming weeks and
months.
We've started working very
closely with a gentleman sitting
next to me, john Evans, founder
and general manager of SEIML
Ventures.
John, we've been talking for a
while now, but why don't you
tell everyone else a little bit
about yourself and your very
long work history?
Speaker 1: Thank you, john.
Yeah, I mean.
I started life in the financial
markets in 1980 and spent 24
years as an investment banker in
debt, capital markets, equity
capital markets and investment
advisory, and this was always
dealing with very large publicly
listed companies and government
issuers on the debt side.
Then I went into academia for
12 years, professor of practice
in the UK and China, running
master's programs and investment
management, but in 2016, I
returned to industry, but in a
slightly different way, working
in corporate finance like I
started off, but with new early
stage companies, and so I've
been doing that for about seven
years now, started off in China,
now expanding into Asia, but
I've always done teaching part
time, and so I was very
intrigued when I learned about
the Founder Institute and the
Accelerator Program, which is
really like a training program,
and I thought it was a great way
to get involved with the
industry to help early stage
companies increase their chances
for success because there's a
high failure rate with startup
companies but also help the
investors make better
investments in what is a very
risky part of the investment
strategy.
So it's one line of our business
we provide consulting services
to startups, medium size
enterprises, we assist investors
, but this brings a whole
pipeline of early stage
companies that we can help
either to grow or find funding,
so it was a natural extension to
our business.
Speaker 2: Well, I'm not saying
you're old, but I do see your
gray hairs.
You've probably seen a few
economic cycles, right?
Speaker 1: Yes, I remember
shortly after I started in 1980,
which was a period of high
inflation and Volker, who was
then chair of the Federal
Reserve, raised overnight
interest rates in America to 21%
, which created a huge economic
recession around the world, and
the monstrous bubble of the
lending to LDC-developed
countries like Mexico, brazil
and Argentina created a very
substantial recession that took
about a decade to recover.
So that was my first experience,
really the 10 years after that.
One of the consequences of the
fallouts of that was that the
banking industry was seriously
hurt in the 1982 banking crash,
and so the development of
securities markets filled the
gap for the less ability for
banks to finance the world's
economy.
And so I got in at the very
early stages, working with UBS
at the time of the whole
explosion of the Euro bond
market and later the Euro equity
market.
So it was a fascinating time.
And then there's been many
other cycles at the end of the
90s, the Asian crisis, the
currency and things like that
followed shortly after in March
2000 with the dot-com crash,
with the 2008 financial markets
crash, and you could say we're
perhaps entering a bit of a
crash as they take away the QE
bubble.
So there's been no shortage of
excitement along the way.
Speaker 2: Yeah, I mean, are you
seeing we've had some very
colorful characters in the
markets of late, sam
Bankman-Fried CZ from Binance.
These characters, humans being
humans, have must have.
You've seen versions of them
before, surely?
Speaker 1: Yeah, I mean people
are very focused now on
Bankman-Fried crypto problems
and court cases and indictments
going on, but I think one
important thing to realize is
that when you're talking about
the financial industry, whether
you're talking about a
government backed currency or
whether you're talking about a
cryptocurrency which is a
privately backed, the whole
system of financial management
is really the same.
You're just talking about a
different underlying asset, and
so all of the problems that have
come up more recently, which
relate to issues about safe
custody, settling, security,
reconciliation, separation of
client funds from company funds
that have been a really big part
of the Bankman-Fried court
cases they're really just the
same thing that happened before
within financial institutions,
so there's a lot of similarities
.
It's just the location changes
over time.
Speaker 2: And with
Bankman-Fried I mean before him.
There was made-off right.
Speaker 1: There's been a whole
line, or you can go back to the
fellow who is running the fund
for bearings asset management in
the late 90s.
So it seems like every decade,
perhaps coincidental with the
cycle, you find some really big
fraud.
It was Bankman-Fried.
Now it was Bernie made-off in
2008.
It was the guy at bearings in
sort of 97, 98.
They come and go, probably with
the collapse of or the downturn
in the economy.
That's like the old economist
John Kenneth Galbraith talked
about in the term the bezel.
All of these serious problems
are not found out in boom times,
when markets are going up and
everyone's happy and no one
needs to get their money back.
But when the market turns south
, like it did when they started
jacking up interest rates and
ending QE and people then need
to get their money back, then
they find a lot of times they
can't get their money back and
all of these frauds come to the
surface and that's usually when
they're found out when markets
turn south.
Speaker 2: I feel like made-off
was a bit of a was a much more
calculating and smoother
criminal.
Perhaps he wasn't as flamboyant
as Bankman-Fried.
He actually kept two sets of
books, whereas I think in the
investigation so far
Bayman-Fried really didn't keep
books there.
She didn't know where the money
was.
Speaker 1: Yeah, I mean,
whenever you compare something,
you can find similarities and
you can find differences.
Certainly, madoff attempted to
keep a low public profile,
whereas Bankman-Fried tended to
be quite extravagant he was on
the cover of Forbes magazine.
So you know, if you're doing
something seriously long wrong
on a large scale, probably
drawing a lot of public
attention to yourself might not
be the best long-term strategy.
So that's one big difference
between the two.
Speaker 2: So now we're seeing a
proliferation of fintechs.
This is the current buzzword.
We've got lots of startups
setting up in this space One in
the spectrum, you know, startups
that want to become banks
neo-banks, as they call them.
And then you've got, you know,
single-purpose startups, maybe
focused on a very small part of
the payment system.
With all of these, this range,
do you think we're getting
saturated?
Is there?
Are there too many startups now
?
Speaker 1: I think you see every
decade in the financial
industry a common trend where
there's a lot of expansion and
then there's consolidation.
Over the last 10 years, or sort
of post-2009, where we've had
the quantitative easing bubble,
there was so much cash, it was
easy to start companies in any
industry not just in the
financial industry and a lot
exploded because private capital
, venture capital, was so easy
to come by.
Those days are over, and so I
think we're going to see
consolidation.
I think that's also always the
case in the financial industry,
because it really is a market
that's dominated by large
one-stop financial institutions,
and so it's very hard to
survive as a single provider of
some financial service.
Usually, sooner or later they
get bought up by a full-service
bank.
So the single-purpose providers,
I think, are here for a long
time because there's a lot of
legacy systems, there's a lot of
inefficiencies that can be
intermediated or disrupted by
new fintech.
So I think there's a lot of
opportunity.
But I think the longer-term
prospects for these
single-purpose fintechs is to be
acquired by some much bigger
financial institutions.
I think the NEO banks are a
slightly different story,
because it's really very
difficult to start a new bank.
I mean, it's not just the issue
that there's so many
established banks and thus a lot
of competition out there.
But banking is an industry that
operates on high leverage, and
so if you enter the industry,
even as a small entrant, you
have to work on that leverage,
otherwise you can never be
profitable.
But you only ever keep a small
percentage of your deposits on
hand, so if there's ever a loss
of confidence in the market or
your institution, then you can
fail very, very quickly.
Speaker 2: You saw that with
Silicon Valley Bank right.
Speaker 1: Yeah, which wasn't
exactly a startup, but it
emphasizes the point that if
there's a loss of confidence,
banks can fail very, very
quickly.
So I'm a little less bullish on
the NEO banks, as I are on the
single providers, because I
think they're in a very risky
position.
If they can develop some sort
of really different and
effective internet bank, they
might be acquired by a big bank
that has been unable to develop
it, but I think that's a very
risky area, whereas I think the
single payment or the single
service providers have a good
future, because there's still
lots of opportunity to improve
the efficiency and effectiveness
of the capital markets, even if
you're gonna be bought out
longer term.
Speaker 2: It's interesting
because we spoke earlier and if
you take a view of a single
market, if you look at, if
you're just in Singapore, you
might say that well, the banks
are so innovative, the payment
systems all linked.
What is there left to improve?
Speaker 1: Yeah, and I think the
public only sees the surface of
the financial industry, I mean
in the courses we run in
financial markets operations,
how the sort of internal
plumbing of the financial system
works.
To the outside user it may seem
very up to date, but maybe in
terms of the settlements, the
custody, the processing, they're
using legacy systems that are
maybe very slow.
Probably there's still not
efficient and effective
connection between institutions.
So I think when you get behind
the surface of financial it's a
lot less modern than it may
appear on the surface.
Speaker 2: Especially if you
start getting into the national
banks, the reserve banks.
Speaker 1: Yeah, I mean by
nature.
The bigger you are, the longer
you've been around, the bigger
and more legacy systems you will
have, and the larger it is to
change.
I mean a classic example it's
not a private bank, it's the
Federal Reserve Bank and the US
Treasury management of the US
Treasuries, which is the largest
debt market in the whole world.
I mean, for decades they stuck
with fractional pricing 130
seconds, 164, 128th and the rest
of the world had all gone to
decimal.
And they thought why is the
world's biggest capital market
not going to decimal?
Because the costs of the system
, because the system was so big
and so interlinked with
everything, was just too great.
And so that, to me, is a good
example of how, if you're too
big to change, then the latest
developments can be very late
coming, and so vested interests,
legacy systems, can often be a
big barrier to change.
Speaker 2: And then we can't
talk about opportunities without
talking about the risks.
Certainly, there are
opportunities everywhere, but
there's also risks, and for
founders and for investors.
We can see situations where
innovation outpaces legislation.
So if you look at Coinbase,
unlike their peers that have
possibly been a little bit gray,
they've tried to actively
engage with regulators, but
they're still very recently
being dinged.
What do you think about this as
a risk?
Legislative risk always follows
and always follows the
innovation, not the other way
around.
Speaker 1: Yeah, I mean I think
there's a public policy question
because, by definition,
governments are not centers of
innovation.
With very rare exceptions, it
tends to come from private
sector competitive markets.
And so, firstly, you have, as a
government, a public policy
choice.
Do you want to encourage
innovation, which means you get
the good parts of it and you get
the risks with it?
You know every distribution has
a right tail and a left tail.
We all want the right tail, but
if you want a right tail you've
got to take some of the left
tail with it.
If you're not prepared to
follow or to be exposed to those
risks, then you are limiting
innovation.
And as we teach in investment
management, if you want a higher
expected return you have to
take a higher level of risk.
The other thing is, in many
markets there's not a good
connect between government
regulators and private sectors
for a variety of different
reasons.
Sometimes they feel there'll be
conflicts of interest if
there's movements quickly back
and forth between the two
sectors.
But if you don't have some sort
of really effective mechanism
for integration and knowledge
interchange, then that delay in
proper regulation will be even
greater to the innovation.
Speaker 2: So there's a lot of
questions there at the high
level, government level, I mean,
during the crypto bubble, a lot
of retail investors got very
excited and lost their shirts.
Then you had some investors who
were probably a little bit more
cautious and said well, I want
to be part of the crypto boom,
I'll put my money into Coinbase,
because they seem to be.
They're listed, they follow
their reports, they're engaging
with regulators.
They're still probably going to
lose their shirts.
There is a lot of upside to
investing in these fintechs,
whereas downside, aside from the
risk to founders, how do
investors protect themselves?
Speaker 1: I think to take one
step back.
One of the big failings we have
almost everywhere not just in
any one jurisdiction is not
providing good basic education
for people to invest.
I mean, whether you're
investing in crypto or whether
you're investing in a listed
stock on the New York Stock
Exchange, the approach that you
take is fundamentally the same.
You're just looking at
something different, a different
company or a different product,
but you think of all the people
you went through high school
with, or maybe even university.
Unless they took a specialized
financial course, they probably
don't know how to do due
diligence.
They make an informed
investment decision.
They tend to just follow trends
.
Education in the market is a
really big issue.
Speaker 2: In the Founder
Institute program I guess the
standard program you're adding
additional modules, right yeah,
Can you tell us a bit more about
the modules you're gonna be
adding to that program?
Speaker 1: You know, I have a
separate course and of
entrepreneurship, and on the
first day we have one section
called Every company is two
companies, and what that means
is that you have an industry or
a specialization.
You're in healthcare, you're in
fintech, you're in blockchain,
whatever.
That's your industry, that's
your subject matter,
specialization.
But every company also has to
have a business administration,
manage the commercialization,
managing the marketing, generate
revenue.
So there's those two aspects to
every company.
So the core program of the
Founders Institute basically
helps the companies manage the
business side, the business
growth, how to market, how to
make pitches to prospective
customers.
It focuses really on the
business administration side,
but it doesn't provide
specialist knowledge, and so, as
I have a background, I thought
we would supplement it by four
additional modules that dealt
with financial markets,
financial products and financial
markets operations, to give
some of that specialist subject
matter knowledge to the founders
, many of whom probably come
from a technology background and
have never worked in financial
markets, and so to understand
how they really need to put this
together, to speak
knowledgeably to big financial
institutions they may want to
partner with, they need to have
that specialist knowledge.
And also the investors that
come along that may look at
these company.
They need to have those as well
.
So we're trying to supplement a
core program which focuses on
the business development with
subject matter expertise in
financial markets and financial
markets operations.
Speaker 2: Let's go back to the
startup side of things and most
of these startups will fail
within three years, like 90%,
huge failure rate.
Speaker 1: There's a lot of
people who have ideas that are
actually viable ideas, but they
don't know how to commercialize
them.
They're lacking the training,
and that's really what the
benefit or the intention of the
founders Institute program is is
to find those people with a
good idea but who need help to
convert it into a successful
business.
So they become the 40% of the
graduates, not the 60% of the
ones that fail out.
So just a lot of lack of
ability to convert a good idea
into a commercialized area.
That's a big part of the
problem.
A lot of people who come from a
research background maybe
because they're taking a PhD in
biomedicine at a university they
become fascinated on their area
of research and they know it
better than maybe anyone else on
the planet and they say, okay,
I'm the expert, I'm gonna
commercialize this, but there's
no market for it.
I remember the first case study
I took in my MBA was it was
called Building the World's Best
Mousetrap and it was all about
these people who were determined
to build the best mousetrap,
put time and effort into it and
they had the product.
They spent money but nobody
wanted it.
So it's a combination of so
many people have really good
ideas but they don't test out
whether there's a market demand
for it, because you have to if
you want to stay in the private
sector, which is what we're
talking about in startup
companies make this company
financially viable.
There's got to be a demand.
Even if there is a demand, it's
not a guarantee that you'll
make money, because it's a
competitive market out there.
You need to know how to grow
the business.
You got to have a good team.
Founders typically come from
the technical side, so they're
maybe not good in marketing,
sales and branding and, of
course, generating revenue.
Generating sales is the first
serious test that you face and
that's probably accounts for a
good portion of that 90% who
fail before three years because
they can't commercialize, they
can't generate revenue, they
can't market.
So there's a lot of variables.
Speaker 2: Yeah, my favorite
quote from an exited founder,
justin Khan, who was the founder
of Twitch.
He says first-time founders
worry about product, second-time
founders worry about
distribution.
Yeah, yeah, there's no true
words were spoken.
So we've been a wild ride, john
.
We've had made-off, we've had
SPF investment risk
opportunities.
Let's bring it all back
together for founders and
investors.
We were running the FinTech
ASEAN program.
Tell us a little bit more about
that.
Speaker 1: Okay, firstly, just
the details.
Registration will be open until
the 20th of August for any
founder that is interested in
joining the program, and it's
not just for companies that are
located in Asia.
Any company that would be
interested in perhaps entering
the Asian market is welcome to
join.
There's no geographic
restrictions on who might who
can join, and the program kicks
off on the 4th of September,
runs for 14 consecutive Tuesdays
.
The four supplementary sessions
about financial markets and
financial markets operations
will be on 4th Thursdays over
that 14 week period and it will
all wrap up before the end of
December.
And we it's part of our
ecosystem.
I mean we provide consulting
and advice to five mid-tech,
fintech, medium-sized
enterprises that are all
entering the ASEAN market for
the first time.
They're interested in finding
good startups to work with
because it may supplement their
product line.
So they've developed very
successful strategies of working
with startups in America and
Europe and we hope to replicate
that, and so that might be an
added benefit to a founder that
takes the program.
Maybe there is someone there
that will be their, their first
partner or their first customer,
and that's the connect there.
We also are working with a
number of angel investors in one
large venture capital fund from
Palo Alto who's looking at Asia
for the first time.
So we want to assist the
investors by not only helping
companies to be more successful,
but getting to know them and to
allow for a more effective due
diligence process.
Everyone benefits when, when
you know the companies and you
know the investors well.
So we we think that the startup
which will go through the
accelerator is a great way for
us to get to know those
companies, to help them build
their relationships with the
FinTech enterprises or the
FinTech investors, and sort of
everyone wins in that triangle.
Speaker 2: That's great, so I
will put the link to sign up in
the description below.
If you're listening on audio
only, we shall put the link up
on our website and I'll put that
in the show notes.
But, john, thanks so much for
your time today.
Speaker 1: Thank you very much,
Jonathan.
It's it's a new venture.
It's a very important thing
because I've always been
involved with training, so this
will be my first time focusing
on ASEAN, which I think is an
area with just a huge amount of
opportunity, so I'm I'm really
excited in moving it forward.
Speaker 2: See you next time.