These Airbnb and WeWork vets proved their biz concept by helping Carousell expand abroad
When Henek Lo was exploring the idea for venture builder Hype, he had just completed a successful run with WeWork, helping it set up its offices in Seoul, Hong Kong, and Shanghai.
Before that, Lo and co-founder Robert Hao were part of the team that expanded Airbnb in Asia. Third co-founder Patrick Lee spent eight years with Google in Korea and was also Airbnb’s general manager in the country.
Based on his experience, Lo thought there was a market need to help startups expand to new territories in Asia. But first, he had to prove his idea worked.
The opportunity came when a common acquaintance got him in touch with the founders of Carousell, Singapore’s classifieds success story. Lo offered to use his knowledge of the local market to help Carousell enter Hong Kong, and within three quarters, he had an office up and running for the startup.
Hype takes a different approach compared to most venture builders in the region. Instead of building startups from the ground up, it engages companies that are around their series A stage, already generating revenue, and looking to spread their wings abroad.
The Hype model
Hype works with companies in a couple of ways. One is a two- to four-week consulting service for which the company charges a fee. It is mainly aimed at startups from the US or Europe that are considering expansion and want to better understand Asian markets.
The other service requires much more time and involvement. Hype comes in and effectively manages the whole process of a startup’s expansion in a new market, from hiring to operations. Once the operation is all set, Hype assists in choosing a country manager and then the company can take it from there. “To use the engineer analogy, we tune up the car and we give it back to them when it’s race-ready,” Lo says.
We tune up the car and we give it back to them when it’s race-ready.
For this, Hype charges fees and takes an equity stake in the client startup. The stake depends on the size and valuation of the company Hype is working with. “We engage the startups directly to discuss those [terms] on a case-by-case basis,” Lo says.
Proving the concept with Carousell
Carousell already had users in Hong Kong when the team met with Lo. But he convinced the startup that he could help grow the business, establish an office, and put a team in place there at a fraction of the time it would have taken had they done it themselves.
There were differences between the markets that Lo saw right away, such as how buyers and sellers meet and transact. “People in Singapore meet largely at MRT stations and pay in cash,” he says. In Hong Kong, the Carousell app needed to communicate information such as areas that are not safe for meet-ups or ways to verify transactions.
After Lo met with Carousell’s founding team, he signed on for two quarters that eventually got stretched into three. On behalf of Carousell, he recruited an initial four-person team in Hong Kong and helped them create the strategy, manage the budget, and engage the community.
Lo also handled performance marketing, social media marketing, and product listings and localization. He even signed up a local celebrity to increase brand awareness for Carousell through TV and social media.
After doing that for most of 2017, the final step was to select and train a general manager that would take the Hong Kong office forward. Brian Sze, previously head of sales for Deliveroo in Hong Kong, came aboard at the end of the year.
“Running the office for three quarters, I knew exactly the kind of person [Carousell] needed at the time to help them scale,” Lo says. “I had heard good things about him, so pulling him in at that time, when they needed to scale the categories for cars and jobs services was the right time.”
From hype to practice
The project’s success showed Lo that his idea of helping startups expand to other markets was sound. “I always say, thank God that went well or I wouldn’t have a business,” he quips. As his work with Carousell wound down, Lo focused on building Hype, which he had set up with his co-founders in the meantime.
Hype started out in early 2018 and has already worked with 10 startups, four of which have benefited from its operating service. Almost right after Carousell, Hype took on a new project: Hong Kong-based tutor startup Snapask’s entry into South Korea. Hype put together a four-person team and then assisted Snapask in localizing its product, acquiring users and tutors, and leading marketing and awareness efforts.
Hype is also collaborating with US-based Surkus, an events marketing platform that learns from user behavior and recommends relevant activities like concerts, art shows, and more. “They probably didn’t think about Asia seriously, but ultimately chose to come to Hong Kong as their Asia hub,” Lo says. Hype will work with Surkus to establish a foothold in Hong Kong until the end of 2018.
Betting on companies through investment
Hype connects startups with its network of investors, making it easier for them to raise follow-on funding. But Hype also believes that its services allow it to gradually forge ties with clients, which naturally leads to a more involved relationship. “The services we’ve created are a bit of a funnel,” Lo explains.
So Hype is planning to set up its own investment fund in the future. The company is in talks with limited partners at the moment – some of which have already participated in Hype’s US$1 million seed round.
Lo thinks the value proposition for Hype as an investor makes sense, considering its deep involvement with client startups.
“Most VCs today get a pretty deck with a nice dataset, but how do you validate the company is doing well?” he asks. “By putting ourselves into these startups and operating them, we know a lot about them. So in the future, limited partners will feel more confident about their investment because we’ll be able to answer a lot of questions that a 50-page deck will not.”
Meanwhile, startups will benefit by getting investors that not only know their business model and potential but can also provide added value. It saves them the trouble of trying to pitch to 50 different VCs and having to tailor their spiel for each one.
Hype is planning to set up its own investment fund in the future.
A potential challenge down the road is Hype’s scalability, given that its business model is tied to its manpower. Lo sees the company working with 20 to 25 startups per year at the moment, but he acknowledges that scaling fast enough could prove difficult. “Building all these startups is a lot of work. So even learning how to balance that has become a bit of an art form,” he explains.
Even so, Lo doesn’t envision Hype so much as becoming a 1,000-people team, but more of a small outfit that can handle a lot of different verticals. “I always tell them we want to be super nimble and efficient, but also be able to build the team with a very broad range of backgrounds.”
Launching their fund should push Hype toward that direction. “I hear everyone talking about deep tech – there’s a reason we don’t do that,” Lo explains. “What we’re good at right now is launching businesses in new markets and making sure they grow. We do have a mission of being able to build anything one day,” he muses.
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