Consultant, executive producer, psychiatrist... Dr Johnny Hon goes by many titles, but is perhaps best known as the founder and chairman of Hong Kong based VC Global Group. Much like Hon himself, the group’s interests are wide ranging. Its three main areas of focus are biotech, fintech and entertainment, working with everything from the genetic treatment of cancer to the Broadway musical Sunset Boulevard.
‘When I first started Global Group in 1997, it was mainly helping westerners invest in China,’ Hon says. 'Now it's changed. The money is coming the other way and we help Chinese investors in the west.’
MT sat down with Hon to get his views on the world of business and what he looks for when investing in new ideas.
When you approach incubators and accelerators, what do you look for?
The entrepreneurs are more important than the business plan. With the business plan, you can have a great idea but you can keep changing it so it doesn’t matter too much. Of course, you want to see the plan to make sure that they have done some thinking, but it's mainly the person behind the scenes, that it is someone who has a good personality and that if we give them money, eventually they will work it out.
We have learned over our 20 years never to give an entrepreneur too much money to start with. That will actually ruin the person. It’s like walking up to a plant and flooding it with water. If they have too much money they tend to have a lot of offers, a lot of staff and they believe in their product too much and not the market. They never get to change the product to make them suitable to the market, so you do have to drip feed them, a bit like a life cycle investor that gives them money as they go along.
Fintech in particular has is a very busy sector. How do you distinguish the good ideas from the bad?
There is a lot of hype in the bitcoin situation right now. I do think that blockchain itself will change how we work, but its like the internet boom: a lot of the new companies will not exist, so it's about finding the best ones. You really look at the entrepreneur, their ambitions and their personality to see that they know what they are talking about or if they just want to jump onto this bandwagon.
The entertainment industry is also changing rapidly. What changes do you expect to see?
I believe that fashion retail will drive a lot of entertainment content in the future. We're developing a technology right now where you can watch a movie in a normal mode or in shopping mode where everything you see with a bright yellow dot you can click on and purchase. If you like a Bond girl’s dress for example, why not buy it while you're watching the movie? In e-commerce, fashion, retail and content will become one platform.
Philanthropy plays a big part of what you do. How does this fit into your business approach?
When I finished my PhD, I decided to get into business instead of being a doctor. My philosophy was that by getting into business, I can make more money and help more people, so philanthropy is an important part. We've donated to over a 160 charities worldwide and half of the money we've made goes towards helping charities and third world countries. Recently we worked with an Indian charity to help with water purification plants.
Being able to give back and work with all the charities is rewarding. But at the same time, you meet a lot of business people as well. So you help people, meet other like minded guys who have other things to show and build relationships where work and charity intersect.
What are some of the biggest lessons you’ve learned from 20 years in business?
For a lot of people starting a new business, they underestimate how difficult things are and what they're getting themselves into. Of 100 new businesses, only 20 survive. For the 20% that survive, it takes two and a half years of putting money in to to make it work. It takes five years on average for the ones that work to become profitable so it is a long struggle, and people underestimate that.
They get into business, run out of money, mortgage their house and don't see the project through. If you really want to be an entrepreneur, you have to be prepared to go through hard times. Even if you are are good guy starting a business, you can still be in that 80% category and you need to be able to rebuild yourself.
Most of the top entrepreneurs that I've met, including people like Philip Green, all nearly went bankrupt, they all had trouble. But it's the self belief that sees them through. Eventually they'll get into a venture that works but they will have to fail a few times.
If you compare the UK to the US in terms of the capital market, the UK is a harder place to operate. There are more start-ups here and the capital market is much more harsh to people who have failed. If you listen to a company in the UK, they prefer to work with a business virgin. In America, they favour people who have done it a few times and have learned along the way and that produces better entrepreneurs. So when you see better quality companies that come through from the next stage, they are from America. That needs to change for the UK to stay as an international market.
How do you keep your finger on the pulse?
I have never stopped learning since I left university, and have just completed a fintech course at MIT. Doing charity work that’s linked to universities and getting involved with young people enables me to stay in touch with what is happening and the latests trends. This is all important in the VC world.
What advice would you give to start-ups looking to secure that all important funding round?
Be sensible about how much money you collect from investors. In the early stages it's very tempting if you have some good ideas to raise as much money as you can initially, but by raising too money you will disrupt your judgement.
Let's say you only have funding for four or five months. For each person you recruit, you need to be so careful not to waste your money and for any product you launch, you want to listen to the consumer to get it right.
On the other hand, if you have four years of funding sitting in your bank account, you'll get a big office in the West End, you'll recruit, have parties and before you know it, the party will stop and investors won't give you another chance. Whereas initially we say that although we're willing to invest a million or two million, I only want to collect £250,000 from you: let’s put that into the bank and see if it works. You can always go back to them for that money but actually having too much money, being too comfortable with a start-up is the biggest mistake.
What would you say to start-ups that are in the early stages of recruitment?
If you want to recruit some non-executive directors, it's best to get the grey hairs and the people who have done it before, so that on a board level they can give you some advice and monitor your corporate governance. I think for the people that you work with, it’s best to recruit grads or people with three to four years of experience.
If you try to employ someone who has worked in the market for 25 years and are still looking for a start-up job, then it's likely that there's some intrinsic problem with that person. You do want more experience to open doors for you and to give advice, but in terms of people you work with, it’s best to work with people your own age that you understand. Never be afraid to employ people younger than you and fresh out of university. A lot of time, we get the best people that way.
Dr Hon has stepped down from his position as company chairman for Gate Ventures, the firm that produced Sunset Boulevard.
For MT's take on age diversity, see this feature from earlier this year.
Image credit: The Global Group