Leadership Perspectives
- Published on
Growth and profitability must be met with good governance says Tan Yinglan
For any company, much less a startup, the ability to see the bigger picture can only come from having a board and management that are diverse in not just gender and skills, but also age and experience. Tan Yinglan, founder and managing partner of Insignia Ventures Partners, chats with CBD.
It doesn’t take long to discover that Tan Yinglan is a man in a hurry. It’s a trait evident not just in the fast-clip of his conversations, but also in the rapid growth of Insignia Ventures Partners, the early-stage Southeast Asia-focused VC fund the entrepreneur set up in 2017 and which raised, in late 2022, US$516 million in an oversubscribed first and final close for its third venture fund. All told, in six short years, Insignia has over a billion Singapore dollars under management from a swathe of blue-chip investors, among them university endowments, family offices, and sovereign wealth funds.
Yet, as successful as Insignia is, Tan remains remarkably grounded, modestly giving the lion’s share of the credit to not just his mentors, but also the lessons and old-fashioned values he’s learnt from the generations of leaders who have come before. “Keep your promises” is a coda that he repeats several times during his interview.
That, and cultivating the ability to see the bigger picture – a quality the Harvard and Stanford alumnus insists can only come from having a diverse board and management. To that end, he champions both young and older hires for the complementary perspectives they bring to the decision-making process.
This diverse approach, he insists, is crucial because the world has shifted from a paradigm of plentiful cheap capital and an almost buccaneering approach to investment to a much more challenging business environment. “There’s less capital and less consumer demand and yet companies have to turn a profit. So, some of the younger founders have to reverse their mindset and you have to complement them with some experienced people that have seen one cycle or two cycles.”
One of your guiding mantras is that you want to partner with the best-of-breed founders to build great companies in Southeast Asia. What are your expectations and requisites when investing in a company?
We look at many factors, and founder-product fit is a key consideration. Do you have the right background? Do you wake up every day wanting to solve problems? Do you have the tenacity to go solve all those problems to build this product and this company? In other words, it’s important to find the right people who are unstoppable, tenacious and resilient. So when they hit a wall, they climb on top of it, they dig a tunnel under it, they go around it, they make friends with it!
Not just the right people, but the right people at the right time.
Absolutely. We like to be the first institutional partners in an early-stage company. We find we can then shape and mould its DNA much better than if we were a late-stage pre-IPO investor. The early stage is where you really shape the first product and strategy. And the first few key hires really make a big difference. Otherwise, by the time the DNA of the company has been formed and senior management hired, we can only make an incremental input.
Picking up on your point about the first few key hires, what role does diversity play?
For starters, we tend to hire startups CFOs for our portfolio companies. Of course, there are always CFOs that have worked in very large enterprises and multinationals. But for startups, the combination of uncertainty and fast pace means you need a different skillset to go with the usual qualities of rigour and good corporate governance. That’s why we also incubated Insignia Academy, which is our education arm, to train startup CFOs. Education is not even our core business, so this is a sector diversity.
Another dimension is age. In the tech sector, things move very fast. I won’t be the first to know about the latest, fast-growing social media app or the latest Chat GPT applications. My kids are better plugged in. So you need younger people to look out for the innovation aspects of a business. But you need to balance that with grey-hair wisdom. I think the traditional ways of doing business – keeping your word, making sure you are frugal, the defensive functions – are usually ingrained in older people.
And you also need a diversity of sector expertise simply because a lot of sectors are going to be disrupted by AI, so you need to factor in vertical understanding of each of the vertical sectors.
How do these considerations influence your approach to board composition?
It depends on the vertical, but one of the things we look for is diversity in skillsets. So rather than chase brand-name board members, we look for functional expertise. To take a simple example, for a remuneration committee, we want someone who has experience in that field. If a company has a multiple geographic presence, we look for people who have experience in multiple countries. If it’s a FinTech company, we make sure we have one or two hires that have good banking and regulatory expertise. Layered over this is a blend of age and gender, and experience in sectors and geography. One other consideration that’s not often mentioned in this kind of conversation is temperament. You want people who are not just aggressive, but who are also thoughtful. If your start-up is run by five young guys all thinking the same way, running in the same direction and chasing growth at all costs, that’s a recipe for disaster.
Turning your earlier point about the importance of grey-hair wisdom on its head, how important is the younger generation's perspective to running a company today?
You need the inventiveness and thoughtfulness of young founders because they take risks. If you leave the important decisions to more senior management who have seen many cycles, their jaded responses may be, “Oh, this can’t be done, because of…” and they’ll list five reasons. If that mindset were to pervade across that company, then no one will take risks and they’ll just hold up the status quo. So you can’t have that. But conversely, I remember that when we started Insignia, a lot of young founders armed with cheap capital chased growth, and neglected basic business guidelines and fundamental issues like corporate governance. They ignored the more cautious advice of senior management who advocated keeping reserves, and having contingency budgets. I think you’ll find that the young founders who listened to this advice are, today, very glad they did.
How organisations can survive in an unpredictable world – even black swans