Students from various academic programs and student organizations, including the PEVC & Fintech club, participated in the first CDO signature Entrepreneurship trek to Silicon Valley in January 2019. For me and my fellow PEVC & Fintech club members, the biggest highlight of the trek was the opportunity to spend time with the outstanding team at AMINO Capital. We were welcomed by Risk Management Partner Dr. Charles Cheng, a Johns Hopkins alumnus, and Managing Partner Dr. Sue Xu. Throughout the information session, we listened intently as the partners set out AMINO’s investment philosophy, three bubbles in the current startup environment, and suggestions for us about career development in Silicon Valley.
As an early stage and angel investing firm, AMINO Capital has based its success around data-driven decisions, or as they call it, 3D. The belief is based on the advantages of technology in the decision-making process. That is, that data accumulation possesses intrinsic advantages that can produce huge value. Dr. Xu also explicated that there are five values good investors should be able to provide to entrepreneurs – cash, contacts, connections, content, and capability – or the 5C as she refers to it. Cash is the most basic thing investors can provide to startups. Next, investors should have contacts and connections to support the startup with post-investment services. At last, investors should be equipped with insights about the industry and related capabilities to help the startup grow fast.
The aforementioned rubric has proven prescient for AMINO as it has had a slew of successes. Typical exits include Mobike (acquired by Meituan) and Orbeus (acquired by Amazon) while their investment in Grail, the recent Illumina (ticker:ILMN) spinoff, has gone on to raise over $1B in the private market. Nevertheless, AMINO remains vigilant in circumventing frothy sectors and fully formed bubbles.
Particularly, Dr. Xu sees three bubbles in the current environment: artificial intelligence, blockchain, and migrating Chinese capital to Silicon Valley. The former two, she explained, are not at a level where they can increase efficiency, yet they’ve attracted extraordinary sums of cash. The latter is based on the amount of capital that comes from China with the stringent requirement that the startup has positive revenue and that it goes public quickly in order to turn over capital. Fortunately, that money gradually decreased from the end of 2018 and the beginning of 2019.
Last but not least, Dr. Xu suggested that business students exhibit caution before moving to Silicon Valley in hopes of working at the next unicorn. She explained that during the incubation period and early stage of a startup there is little MBAs can do but watch as programmers and product managers work overtime. Therefore, it is imperative that students focus on the maturity of the company in order to find the right fit. She suggests focusing on the later stages of the company, where management serves a crucial role in expanding the workforce and breaking into new markets. Also, it is during this period when mergers and acquisition become a critical part of the corporate strategy as well as visiting the possibility of a public offering.
After the trek, Dr. Cheng attended the alumni reception held by Carey Business School in Silicon Valley. During the meeting, he shared his thoughts and experiences on the culture of investing in Silicon Valley, and the timing of investment in the technology industry.