Month: May 2024

Breaking the Silence: Embracing the Emotion of Speaking Up

The month of May is Asian Heritage Month, honouring the lives and contributions of people of Asian origin.

This year, I would like to talk about one common issue among Asians—speaking up, or the lack thereof.

How often do you stop yourself from saying what needs to be said?

One of the biggest cultural differences that could hold Asians back is our tendency not to speak up. Since I was a kid, my parents and grandparents conditioned us to keep our heads down. Focus on your work, and as long as you do good work, your work will speak for itself.

This is all fine, except that in Western culture, certain behaviours are perceived as the norm. Leaders are expected to be vocal and own the stage.

I have seen firsthand very capable Asian people not getting promoted because they don’t say much. I have seen investors criticizing Asian founders for not having a take-over-the-world demeanour. In one specific example, a founder was having trouble raising capital despite the company doing really well. An existing investor (also Asian) told me privately that the main reason was that this founder didn’t act like a typical American founder.

Ouch! I instantly knew what he meant.

Speaking from my own experience, it took me decades to overcome this issue. I can’t speak for other Asian cultures, but in Hong Kong, during the era when I was growing up, parents would put masking tape on a kid’s mouth if they spoke too much. My parents never did this to me because I rarely said anything. 🙂 Even today, I have to constantly push myself to speak up. On some occasions, I still err on the side of not speaking up enough because it is still very unnatural for me. Your culture stays with you for life.

I can’t tell you exactly how to overcome this issue. To a degree, it has to come from within. You have to find your own way. For me, I kept telling myself I needed to err on the side of speaking up too much. Trust me, even with that, the end result is that on many occasions I still find myself thinking I could have spoken up more, even today. So, imagine if I didn’t give myself a little nudge. It took years of practice to overcome my own emotions. Eventually, I got used to it. Well, most of the time.

However, I don’t mean to say that it is all on Asians’ shoulders to overcome this. Asian or not, great leaders have the responsibility to create a safe environment for everyone to speak up in the first place.

Humility and kindness are great traits in Asian culture. Keep them. It is also okay to push yourself to be more vocal. The barrier is totally breakable, especially one step at a time. You just have to keep pushing. After all, speaking up is not mutually exclusive with your heritage!

P.S. This blog is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.

The depressing numbers of the venture-capital slump don’t tell the full story

Thank you to The Globe for publishing my second op-ed in as many weeks: The depressing numbers of the venture-capital slump don’t tell the full story.

The piece is now available in full here:

Bright spots in the current venture capital landscape exist. You just need to know where to look.

Recent reports are right. Amid high interest rates, venture capitalists have a shrinking pool of cash to dole out to hopeful startups, making it more challenging for those companies to raise funding. In the United States, for example, startup investors handed out US$ 170.6 billion in 2023, a decrease of nearly 30 percent from the year before.

But the headline numbers don’t tell the whole story.

There’s a night-and-day difference between the experience of raising funds for game-changing, deep-technology startups that specialize in artificial intelligence and related fields, such as semiconductors, and those who try to innovate with what’s referred to as shallow tech.

Remember the late 2000s? Apple’s App Store wasn’t groundbreaking in terms of technical innovation, but it nonetheless deserves praise because it revolutionized the smartphone. Then, the App Store’s charts were dominated by simplistic applications from infamous fart apps to iBeer, the app that let you pretend you were drinking from your iPhone.

That’s the difference – those building game-changing tools and those whose products are simply trying to ride the wave.

Tons of startups are pitching themselves as AI or deep-tech companies, but few actually are. This is why many are having trouble raising funds in the current climate.

It’s also why the era of shallow tech is over, and why deep-tech innovations will reshape our world from here on out.

Toronto-based Ideogram, a deep-tech startup, was the first in the industry to integrate text and typography into AI-generated images. (Disclosure: This is a company that is part of my Two Small Fish Ventures portfolio. But I’m not mentioning it just because I have a stake in it. The company’s track record speaks for itself.)

Barely one year old, the startup has fostered a community of more than seven million creators who have generated more than 600 million images. It went on to close a substantial US$80-million Series A funding round.

As a comparison, Wattpad, the company I founded, which later sold for US$660-million, had raised roughly US$120-million in total. Wattpad’s Series A in 2011, five years since inception, was US$3.5-million.

The speed at which Ideogram achieved so much in such a short period of time is eye-popping.

The “platform shifts” over recent decades have largely played out in the same way. From the personal-computer revolution in the late 20th century to the widespread adoption of the internet and cloud computing in the 2000s, and then the mobile era in the 2010s, there’s a clear pattern.

Each shift unleashed a wave of innovation to create new opportunities and fundamentally reshape user behaviour, democratize access and unlock tremendous value. These shifts benefited the billions of internet users and related businesses, but they also paved the way for “shallow tech.”

The late 2000s marked the beginning of a trend where ease of creation and user experience overshadowed the depth of innovation.

When Instagram launched, it was a straightforward photo-sharing app with just a few attractive filters. Over time, driven by the massive amounts of data it collected, it evolved into one of the leading social media platforms.

This time is different. The AI platform shift makes it harder for simplistic, shallow-tech startups to succeed. Gone are the days of building a minimally viable product, accumulating vast data and then establishing a defensible market position.

We’re entering the golden age of deep-tech innovation, and in order to be successful, startups have to embrace the latest platform shift – AI. And this doesn’t happen by tacking on “AI” to a startup’s name the way many companies did with the “mobile-first” rebrand of the 2010s.

In this new era, technological depth is not just a competitive advantage but also a fundamental pillar for building successful companies that have the potential to redefine our world.

For example, OpenAI and Canada’s very own Cohere are truly game-changing AI companies that have far more technical depth than startups from the previous generation. They’ve received massive funding partly because the development of these kinds of products is very capital-intensive but also because their game-changing approach will revolutionize how we live, work and play.

Companies like these are the bright spots in an otherwise gloomy venture-capital landscape.

P.S. This blog is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.

Canada risks losing out on the GREATEST prize: ownership of industry-disrupting companies and technologies

Thank you to The Globe for publishing my op-ed about the recent capital gains tax increase last week. The piece is now available here.

Once again, to summarize, as the world shifts to intangible assets, the consequences go far beyond brain drain and job loss. We risk losing out on the GREATEST prize: ownership of industry-disrupting, IP-based companies and technologies. This aspect, often overlooked, is illustrated with real-world numbers.

Not having significant ownership of these assets in the information age is equivalent to not having electricity and oil in the industrial age. This would have a devastating and long-term impact on our economy and reputation on the world stage. Canada would be left behind with digital breadcrumbs, selling our next generation short.

The policy change clearly didn’t take this into consideration. Saying that it impacts only 0.13% of the population is so wrong on many fronts. It is abundantly clear that it will impact EVERYONE.

Don’t forget to tell them.

Here is the full copy of my op-ed:

The Liberal government is increasing taxes on investment. Anyone experienced in entrepreneurship and investment knows this will stifle growth. We are at tremendous risk of losing our brightest entrepreneurs – along with the high-skilled jobs they create – to other countries.

This is evidenced by a new survey conducted after the capital-gains tax changes: Just 5.3 per cent of Canadian founders believe Canada is the best place to grow a company.

As the world shifts to intangible assets, the consequences go beyond brain drain and job loss. We will lose out on the greatest prize of the innovation economy: ownership of industry-disrupting companies and technologies. This would have a devastating and long-term impact on our economy and reputation on the world stage.

I will admit that this latest change to taxation has an immaterial impact on me personally. Wattpad, the company I co-founded, was acquired by Korean internet giant Naver for $840-million in 2021 so I’ve already paid my dues as stipulated under the budget at the time. But my experience illustrates how this tax change is detrimental to Canada and future generations.

Because I raised most of the capital from outside of Canada, only half of the company was owned by Canadians, including founders, employees and investors. In other words, when Wattpad was acquired, $420-million of the economic value left our country.

Before the tax hike, it was reported that when our tech startups become scaleups, about 75 cents out of every invested dollar comes from outside of Canada. This means many of these fast-growing companies are already majority-owned by foreigners.

As a venture capitalist, I see this trend play out all the time. The firm I co-founded, Two Small Fish Ventures, has a portfolio of 50 early-stage tech companies. We are the only Canadian investor in many of our recent investments. Foreign investors, especially U.S. investors, are aggressively writing cheques to own a significant portion of these early promising Canadian startups when they are relatively inexpensive.

The tax increase will only exacerbate this problem.

When a company’s assets are purely intangible, and its biggest investors and markets exist outside Canada, it’s natural and far easier for the company to move outside Canada or be acquired by foreigners, such as Wattpad. Needless to say, the economic value creation postacquisition is also captured outside of Canada.

One might argue that these companies create many jobs in Canada, so we still captured some value, right? Well, again, when a company’s assets are mostly intangible, the majority of the economic value created is captured by its IP, not the jobs created. As an example, Wattpad’s payroll was about $30-million per year, not small, but it is a minuscule number compared to the nearly billion dollars that the company was valued at.

There’s also a tectonic shift under way across the innovation economy. The rise of AI and related fields such as semiconductors in particular is an order of magnitude more capital-intensive than previous generations of tech companies. Canada has produced some of the best AI researchers in the world, but when 40 of Forbes’ 2024 AI 50 List are in the U.S. (and more than 30 of them in Silicon Valley) while only two are in Canada, we could have and should have owned a much bigger piece of the pie.

The best example is OpenAI, which was co-founded by Ilya Sutskever, a Canadian. The company is based in San Francisco. The majority of its employees are not in Canada. All the major investors are U.S.-based. Canada only has the bragging rights.

And, do I have to remind everyone that Elon Musk is also Canadian?

In the post-pandemic world, capital and talent are more mobile than ever. The pull to move to other countries is also stronger than ever. Canada is already becoming the best training ground for other countries to capture the value created by these companies outside of Canada.

I want Canada to win. I really do. What motivates me now as an investor is to help create more homegrown Canadian tech giants – and to keep them in Canada. My job just got much harder.

Higher taxes mean less capital, reduced investment, diminished ownership and fewer economic benefits. Period.

At a time when we need more capital to own a meaningful piece of the IP-based economy, our country is going backward. As the economy increasingly shifts toward intangible assets, we will be left behind with digital bread crumbs, selling our next generation short.

P.S. This blog is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.

Software Once Ate the World Alone; Now, Software and Hardware Consume the Universe Together

Over a decade ago, in his blog post titled “Why Software is Eating the World,” Marc Andreessen explained why software was transforming industries across the globe. Software would no longer be confined to the tech sector but permeated every aspect of our lives, disrupting traditional businesses and creating new opportunities, driving innovation and reshaping the competitive landscape. Overall, the post underscores the profound impact of software on the economy and society at large.

While the prediction in his blog post was mostly accurate, today, the world is still only partially eaten up by software. Although there are many opportunities for software alone to completely transform user behaviour, upend workflow, or cause other disruptions, the low-hanging fruits are mostly picked. That’s why I said the days of shallow tech are behind us now.

Moving forward, increasingly, there will be more and more opportunities that require hardware and software to be designed and developed together from the get-go to ensure that they can work harmoniously and make an impact that otherwise would not be possible. The best example that people can relate to today is Tesla. For those who have driven a Tesla, I trust many would testify that their software and hardware work really well together. Yes, their self-driving software might be buggy. Yes, the build quality of its hardware might not be the best. However, with many features on their cars – from charging to navigation to even warming up the car remotely – you can just tell that they are not shoehorning their software and their app into their hardware or vice versa.

On the other hand, on many cars from other manufacturers, you can tell their software and hardware teams are separated by the Grand Canyon and perhaps only seriously talk to each other weeks before the car is launched 🙂

We also witness the same thing down to the silicon level. From building the next AI chip to the industrial AI revolution to space tech, software and hardware convergence is happening everywhere. For instance, the high energy required by LLMs is partially because the software “works around” the hardware, which was not designed with AI in mind in the first place. Changes are already underway, ensuring that software and hardware dance together. There is a reason why large tech players like OpenAI and Google are planning to make their own chips.

We are in the midst of a once-in-a-decade “platform shift” because of generative AI. In the last platform shift more than a decade ago, when the confluence of mobile and cloud computing created a massive disruption, there was one “iPhone moment,” and then things progressed continuously. This time, new foundation models are launching at a break-neck pace, which is further exacerbated by open-source. So fast that we are now experiencing one iPhone moment every few weeks.

All of this happens when AI-native startups are an order of magnitude more capital-intensive than in the past cycle. At the same time, investors are also willing to write big cheques to these companies, but perhaps it is appropriate, given all the massive opportunities ahead of us.

Investing in this environment is both exciting and challenging as assessing these new opportunities is drastically different from the previous-generation software-only, shallow-tech startup. 

The next few years are going to be wild.

P.S. This blog is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, redistribute, remix, transform, and build upon the material for any purpose, even commercially, as long as appropriate credit is given.