Ep770: Kevin Sutantyo – You Have to Back the Right Founders

Andrew Stotz 00:01
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning in our community. We know that to winning investing, you must take risks, but to win big, you've got to reduce it. Ladies and gentlemen, I'm on a mission to help 1 million people reduce risk in their lives. And I want to thank and welcome my listeners from Indonesia to today's podcast episode. Fellow risk takers this is your worst podcast hosts Andrew Stotz, from a Stotz Academy, and I'm here with featured guests, Kevin, suntan to Kevin, are you ready to join the mission?

Kevin Sutantyo 00:42
I am Andrew, thank you for having me.

Andrew Stotz 00:46
I'm excited to have you. And, you know, one of the funniest things, Kevin, when I first moved to Thailand, I was teaching finance. So 31 years ago, and I had my first class and I did what every teacher in America does is I say, I'm gonna call the roll. And so I had a list of 30 Thai students, and you know, how ties, ties people's names are super long. And I realized after about the third name, I was like, I'm never going to be able to pronounce these names. Now, I'm pretty good at Thai names. But what about Indonesian names? Are they long, like Thailand doesn't seem like they're as long? It

Kevin Sutantyo 01:22
can be long, I would say on average, not as much, you know. So you can see my last name, I think that's just above the average. And so I do know that title is Thai last names, Thai names in general, you know, can have, you know, quite a few syllables

Andrew Stotz 01:37
there. Yeah. It's, it's, it's an interesting difference. I mean, it's fantastic. I've had an opportunity to kind of travel around Asia a lot over my life and my career. And I've definitely enjoyed my times in Jakarta, which is the main place that I've been mainly going, you know, as an analyst, but so let me introduce you to the audience. Kevin is the partner for Southeast Asia investments for sovereigns capital, a venture capital fund, focused on early stage tech driven, scalable companies, Kevin was an active angel investor in both the US and Southeast Asia prior to his work at sovereigns capital. He was an operator investor for four years and an environmental biotechnology company focused on waste management. Kevin also has experience with the Indonesian public markets as a commissioner and at a local commissioner at a local Indonesian securities brokerage, maintaining a fit and proper standing with the Indonesian regulator, Kevin, take a minute and tell us about the unique value that you are bringing to this wonderful world.

Kevin Sutantyo 02:44
Well, one of the things I'd also like to add in there to my bio, is that I'm a mechanical engineer by training. And so I believe that engineering is a wonderful discipline, because it is a problem solving discipline. And so I believe that I take that into my work. And that, as you know, you know, in business, in companies, things don't always work out according to our plans. As an engineer, I believe that I bring a positive spin to that, and I was like, Yo, let's, let's get to the other side of this issue. And I do believe that there's always a way. I believe that, you know, you know, because of my investing experience, and the both public markets, as well as the early Angel stage, like being in the VC sort of still early, you know, gives me this interesting perspective of that, you know, what does an exit look like? You know, how is an IPO feasible? Because I've seen that, and, and, and, and in an early stage investment, as well, is that, you know, is this a scalable company? So I think that my previous experiences has really helped me for this role that I am in right now. It's

Andrew Stotz 03:55
interesting point because as a CFA charterholder, and being involved in CFA all my life, basically, there's a lot of engineers that want to enter the world of finance. And they really adapt well, because of the structured way that they've learned and, as you say, problem solving, but there's a logical framework, and I've seen that a lot. I also have an online course I do called valuation masterclass boot camp. And in that bootcamp, I have a lot of engineers that say, I want to learn finance and start working in finance. So that's an interesting and you can see the uniqueness of the engineer is the structured or logical thinking. And as you just said, that I hadn't thought about a problem solving framework.

Kevin Sutantyo 04:46
Interesting, interesting. And

Andrew Stotz 04:49
tell us just a little bit about what types of things you're invested in. I know, I just love the final part of what I read about the company and what you're doing is scalable company He's I mean, here we are in Thailand, I'm in Thailand, you're in Indonesia. And we got lots of little companies that are trying to solve local little problems. But man, is it really scalable? Well, maybe in Indonesia, maybe the population is large enough that it's scalable in Indonesia. In Thailand, I think that's a little bit more doubtful. Given that, you know, it's a much smaller population. But what does it mean? Like, what are you guys doing? What types of things are you looking at, and particularly this idea of scalable?

Kevin Sutantyo 05:29
Yeah, I'd also like to start off that with, you know, to all of your listeners, and I know that there's probably varying degrees of people who are familiar with venture. And one thing that I always like to tell everyone that I meet is that not every business is suited to be a venture backed business. And that does not mean it's not an excellent business. So for example, if you have a cafe to cafes, five cafes, 10 cafes, that is an excellent, excellent business, this business will put your kids through college, it will. Yeah, you know, like, you know, it'll, it'll support your family, perhaps for many generations. And so what I like is, is that I tell people that well, actually, a venture company is not necessarily this type of business, it is something that you that you can get these economies of scale, and that this company, you know, can grow to perhaps a billion dollar, what we will be calling the industry, a unicorn kind of company, in a short period of time, venture capital firms are usually anywhere between seven to 10 years in terms of their lifespan, and that we look to enter and exit within this time period. And some companies are not built to take in capital grow fast, and then look to buy out their shareholders or to IPO m&a, some, some companies are really meant to be generational and to be long lasting. And so that is something that I believe that it's something you know, like people see venture capital as early stage capital. And that's it. But we need to look at what's behind the mechanisms of venture capital for you to decide in your business. Are you a quote unquote, venture capital, scalable company?

Andrew Stotz 07:22
Yeah. And I think that's an interesting point, as you said, like a restaurant or something like that. It's just, it's, it's not an easy, scalable thing. And as I, a friend of mine has a food truck in, in, in, in America, and I was talking to him about it, I said, a food truck business is either zero or 10. You know, if he'd come to mean that you have one food truck, I'm sorry, it's just not, it's not a viable business. And unless you're just trying to earn a salary for yourself, right, you've got to think 10 food trucks in order to think about a business. Another calculation I do is I always tell people that from a business perspective, you got to rush to get to $7.5 million in revenue as fast as possible. Why 7.5 Because if we look at just average gross profit margins of about 30% of the average business, and we look at the average net profit margin of about 6% of the average, let's say large business in that case, and then you look at the management team that you need, and the infrastructure, you need to scale a business, you know, you need seven and a half million dollars to be able to afford the management structure that makes it not a one man show, or one woman show and you need that money for the infrastructure that you need. Just simply putting in a world class accounting system is costly. And so you know, thinking about scaling, and I think that when I think about venture, I think about accelerating success. And I have one startup that I started many years ago with my best friend Dale, which is a coffee business called Coffee works here in Thailand. And it was a factory and we roasted coffee, and we supplied hotels and coffee shops and restaurants and offices. And we still do, it's 30 years, maybe in venture investment for the first seven years or at maybe after our first couple of years, maybe it would have accelerated on progress. And then the venture could have exited. And we still could have a long term, you know, business. So I always, you know, think about that. And he and I debate and discuss that. Of course, in the end, we kept 80% control of that business, and we control the cash flow of that business. And we haven't had, you know, maybe it would have been amazing, or maybe it would have been a disruption by having that come in. I don't know.

Kevin Sutantyo 09:49
Yeah, I agree. And I think plenty of I've seen plenty of instances where venture capital has been a distraction for a solid business set. says, Yeah, you know, like the one that you just mentioned or no.

Andrew Stotz 10:03
And just one last little thing about what you guys are doing. If someone is listening to this, and they have a business, and they're looking for funding, and they're in, let's say, Southeast Asia, what is your ideal type of investment?

Kevin Sutantyo 10:19
Thank you for asking Andrew. And so for sovereigns capital, we're looking at early stage meaning usually at like the seed level, we are usually one of the first institutional investors to come into the round, maybe alongside angels a little bit after angels, and we're looking for businesses that are generally software related, that have an ability to scale. And one of the unique thesis of sovereigns capital is that anyone can go to our website and see that actually, we're a faith driven fund. And that means that we actually put values into our investments in a way that we believe that you have to, you have to do you have to contribute to human flourishing, we're not necessary, we're not looking for negative investments. I think, for example, that, you know, there could be a company that makes a lot of money, but then if it somehow leads to the detriment of people, that's not something that we're interested in doing. And so we believe that, you know, we're looking for big, excellent, scalable companies that actually have something in there that was either redemptive or, or a factor that leads to human flourishing. And I'd love to just give an example, that we were an early investor in grab, and that we're very proud of that investment. And that what we've seen is that not only is Anthony Tam, the founder of very, very openly faithful gentleman, but he has built a company, that's, you know, that's on, built on great values, that has helped many, many, four wheel to wheel drivers make a wage that's above the minimum wage in many regions, including my own, and help vendors increase their top line that which was a big lifeline during the pandemic, so that in this kind of business can be big, and is inherently, you know, leading to the benefit of people.

Andrew Stotz 12:26
Maybe you can, just briefly before we go into the main question of this podcast, what does it mean, you use the word faith, but you also talk about, you know, obviously bringing good to the world? What does it mean, when you say faith? Yes.

Kevin Sutantyo 12:40
And so I would say that the founders of sovereigns capital are very strong Christians. And what they have done, what they have seen is, is that their experience of being entrepreneurs and being investors that you need to provide, and live your faith principles out, you can't just, you can't just say one thing, and then do another, you can't just be one way, you can't, you can't just Yeah, you can't say something and just be another way it you have to live principally, and you and then we treat our companies principally. And so one of the things that we always like to say is that everyone can agree, right, that culture is a competitive advantage. And that what well, you know, like, when you look at the Christian values, when you, when you treat people, as in wow, you know, you're a real person, you're someone and made in the image of God, that really changes the way that you look at your team. And then your team will then look change the way that they treat your, that your customers. And so, we believe that, you know, you know, that providing these values, you know, from the top down, you know, is beneficial, makes for good business.

Andrew Stotz 14:01
That's great to hear. In fact, I've been working with some of my clients on their values, and re visiting values. And, you know, it's interesting, because where is the source of many of these values? Well, religion and Christianity also provides, like, you know, do unto others as I'd like, you know, them to do unto me, and, you know, the golden rule and all that stuff. And I was just looking at the values in quality works. And one of them is integrity, we cultivate a culture of honesty, transparency and reliability in every decision and interaction, building deep trust and respect and

Kevin Sutantyo 14:44
there's a spot on,

Andrew Stotz 14:46
there's a value. So I think that's a good thought. For everyone out there who's listening and, you know, ask the question, too, in fact, I have a community that I have and we had a meeting last night since I've been working on values. I asked people to tell me what your values. And so for listeners out there, what are the values that you live by. And I also like to say that values are in present tense. They're not a aspiration, like a vision, we want to be here there, look at how you live right now. And what principles do you live by, and then start to develop, you know, those are my values, I'm living my values. Of course, if you're living in a way that doesn't fit with your values, you need to, you know, think more deeply about your situation. But values are, you know, an ultimately, that's what employees buy into two, right? And customers. Because if you have the amount, the values that connect with those, the people that you want to be working with and investing with, it's beautiful.

Kevin Sutantyo 15:45
Yeah, so spot on. Well, that

Andrew Stotz 15:49
that's helpful for us to understand a little bit about what you guys are doing. And now it's time to share your worst investment ever. And since no one goes into their worst investment, thinking it will be, tell us a bit about the circumstances leading up to it, then tell us your story.

Kevin Sutantyo 16:02
Well, what I love to share is kind of an amalgamation of a few bad startups, I mean, startup investments, it wasn't a bad startup, it was a bad startup investor. And so the story is centered around and you know, like an amalgam of about two to three stories where I basically thought that I had more influence over the outcome of the company than I really did. And what I've learned as a startup investor is that you have to back the right founders, and it's their company, we as investors usually take a minority position in the company. But my worst investments ever happened, because I thought that for some reason or another, I knew a little bit better, I was a bit more experienced, and I and I sort of directed them, like you should do this, you should do this, instead of that, I would do this, instead of that, that product, well, I would do it this way. And it comes in, it comes to a point where it, you know, in one situation, I believe there became like an over dependency, you know, on my opinion, and as an investor, I'm not in the day to day. And so I sometimes I became not as reachable, and then the company has stuck without, you know, my without my decision, per se. And another one another one, it just led to sort of a friction between me and the founders, that like, Kevin, you haven't been on the ground. And what you're saying is, you know, perhaps may work, you know, in your, in your circle or world, but you're not seeing that this is what we see. And so you need to let us, you know, build the way that we believe is the right way. And so I've learned that we're here, we as investors are here to guide companies, but not be prescriptive. We need to help them when they ask, we need to, you know, maintain, you know, positions sometimes, you know, on, you know, on a high level and a board level didn't just tell them that like what I've seen is this, what I've seen is this, but the decision ultimately has to come from the founder, because it is still their company.

Andrew Stotz 18:43
That's interesting. I have some thoughts in my head. But before we get into that, how would you summarize the lessons that you've learned from this experience?

Kevin Sutantyo 18:54
Don't think that as an investor, like, you're always a kingmaker, like, think about, you know, just realize that your influence may have some limitations to trust in the founder. It's their company, it's their mission vision. And they are the ones executing three look to be in a helpful position instead of a combative position, even when you and the founder, you know, come to a difference of opinion.

Andrew Stotz 19:32
Yeah, those are great lessons. And what I've been thinking about a lot as you were talking was, you know, my coffee business that we started in Thailand coffee works my best friend Dale, and I've started it but he's the managing director. I'm not an employee of the company. I'm an equal shareholder, but I'm outside and, man, Kevin, I got lots of opinions. And those opinions, I have to acknowledge that I'm never Ever on the front lines. And I learned many, many years ago, two things that I learned first is that I provide ideas. And you know, let's say, outside views. That's the first thing. The second thing is that we have a value between us in our relationship and our friendship, which is principles before personalities. And the idea there is that what, what's the principle here, we've joined together to create a business that brings value to customers, and ultimately creates value for ourselves and our employees over a long period of time. So is it really worth it to squabble over some particular issue that I think should be this way, and he thinks should be that way, I would always basically let him make that final decision, my, my role is to suggest, to listen to feedback to provide, you know, support in every way, but ultimately, I like, what you're, what you're saying is that ultimately, it's got to be his decision. Because he's on the ground, you know, dealing with that, and I, we value our friendship, we even said that if we ever got to a point where this business was going to damage our friendship, we're going to shut it down. We're going to end it because we don't want to lose our friendship. And again, goes back to values, you know, what we value individually, and in our friendship, you know, is critical. So anything you would add to that?

Kevin Sutantyo 21:42
No, I think you said it very, very well. And I. And, you know, when you talk about the friendship part, it's, I do believe that, you know, like, sometimes I've invested in friends, and sometimes I've become good friends with people I've invested in. And regardless of the outcome, you're right, that the relationship really matters. And I believe that, that as mature investors and mature operators, we can get past it. It's at the end of the day, like, we can see that, you know, yeah, perhaps in this situation, things were heated. But I've had, you know, I've had really great experiences where, you know, working with a good friend, where yet we are at odds, we say a few things that we don't mean. But if we're mature enough, we can always go back to each other and just say, You know what, what I said was out of line, I apologize. And for me, like 100% of the time, that's worked. And we've and we move on.

Andrew Stotz 22:54
I'm in a 12 step program from my alcoholism and drug addiction, which I've been involved in, you know, and been in that 12 STEP program for 41, almost 42 years since I first got sober. And one of the things is that it's one of the steps is we continue to take personal inventory. And when we were wrong, promptly admitted it. And I think that one of the big lessons about being mature, as you said is that it's very simple. And I love to teach young people in my ethics class, and I have ethics for finance, but just to ethics class, which is when you're wrong, all you have to do is say, I am sorry, I was wrong. And it's amazing how many problems when you sincerely apologize. Dissolve. And so I think that's a great reminder of that. So let's, let's now look at others, other venture people out there. Let's look at Angel investors. Let's think about people that are doing the similar stuff that you're doing. And they listen to this and you know, they, they've got some thoughts from it. But I want you to think about based on what you've learned from this story and what you continue learn what's one action that you'd recommend that they take to avoid suffering the same fate?

Kevin Sutantyo 24:17
Yeah, I would say that you know, if you're, if you're going to be an investor and an angel investor, a venture investor then hear hear my stories about we know where we are, where sometimes we can be the ones to sort of self destruct, you know, like, or, you know, or be the burden for the company. And, and, and take that approach of that. I'm investing in someone's hopes dreams mission, and that I'm here to support it and if you don't believe in those hopes, dreams business mission And then actually, the better thing to do is to not invest, because likely there will be another company out there that will align with exactly what you are looking for.

Andrew Stotz 25:12
It's great, you don't have to take on everything that's in front of you. All right, last question, what's your number one goal for the next 12 months? Oh,

Kevin Sutantyo 25:21
well, the number one goal for us, I think, for the next 12 months is that it's, uh, you know, where we're very, very fortunate that, you know, we're in our fourth fund right now. And it's where it's, you know, we're still in fundraising mode, but we're very close to, you know, to where we want it to be in our targets. And so I continue to be on the fundraising trail. But at the same time, I, you know, I'm always looking for just wonderful new high growth, potential startups in the Southeast Asia region. So and then, of course, you know, a big part of our job. And actually, one of the biggest pleasures of my life is to work with our existing companies, and the founders that we've already backed, and that we not only, you know, help them in regards to their business strategy are a sounding board for them in regards to execution. We take the time to get to know founders, sometimes even their spouses, and just to be like, Hey, how are you doing? Right? Because I think we all know, right, that when the founder or the operator of a company is somehow shaken or not, not fully there, like you have to, you should address that to people can't execute, you know, 100% on business, where perhaps, you know, something is happening at home. And so we actually extend that by building that relationship with founders. You know, we've been able to just have that wonderful relationship, but we can ask, how are you doing?

Andrew Stotz 26:59
So valuable. And, you know, I was just talking to a good friend of mine, and that question, how you doing led to an hour long discussion about the pain and struggles that he's facing right now. And that led to you know, being able to talk about it. So I think that's a great question. Well, listeners, there you have it, another story of loss to keep you winning. Remember, I'm on a mission to help 1 million people reduce risk in their lives. As we conclude, Kevin, I want to thank you again, for joining our mission. And on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?

Kevin Sutantyo 27:37
No, I just say, be excited about the investment space, be excited about innovation. Get it? Get in there, keep building. You know, our region is exciting, and I do see a bright future ahead.

Andrew Stotz 27:55
Beautiful and that's a wrap on another great story to help us create, grow and protect our well fellow risk takers. Let's celebrate that today. We added one more person to our mission to help 1 million people reduce risk in their lives. This is your worst podcast hose Andrew Stotz saying. I'll see you on the upside.