Joan Yao: Impact Investing to Kickstart VC, Philippines Startup Perception vs. Reality (Brain Drain, Families & Acceleration) and Lose Nothing By Asking

Jeremy Au and Joan Yao discussed several key insights on the topic of impact investing in the Philippines. Yao shared her personal journey from accidental investor to impact investor, and the challenges she faced along the way. They also discussed the perception of the Philippine startup ecosystem versus the reality, including the role of the diaspora in building the ecosystem, the potential for innovation in the space of families and conglomerates, and the impact of the pandemic on the acceleration of the ecosystem.

Another key insight from the conversation was the importance of self-talk and how it can affect one's relationships with others and their chances of success. Yao discussed the inner critic that many Asian kids grow up with and how it can be both helpful and counterproductive. She emphasized the importance of learning to talk to oneself with love and kindness, which can lead to better relationships and a willingness to take chances. Finally, the phrase "lose nothing by asking" was highlighted as a key takeaway from the conversation, encouraging individuals to ask for what they want and not let feelings of self-worthiness hold them back. Overall, the conversation provided valuable insights into impact investing in the Philippines and the importance of positive self-talk and taking chances.

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Jeremy Au: (00:39)

Hey, Joan, really excited to have you on the show. We crossed paths so many years ago in the impact investing and social enterprise space, and now here we are in venture capital. Please introduce yourself real quick.

Joan Yao: (00:52)

Thanks for having me, Jeremy. So hello, my name is Joan. I'm the Vice President for Investments at Kickstart Ventures. Kickstart is a corporate venture capital firm based in the Philippines, affiliated with Globe Telecom and AI Corporation. Kickstart manages roughly 250 million across three funds, and we invest globally, but we intend to bring innovation into the Philippines using the platform of Globe Telecom and AI Corporation and also springing Philippine startups and growth by investing in the local market.

Jeremy Au: (01:35)

So how did you first get interested in the investing space?

Joan Yao: (01:42)

Pretty much by accident, I started also accidentally in finance. I thought I would be in marketing, but I completely bombed my Procter and Gamble interview, that is another story, and landed in investment banking. I did a couple of internships with Credit Suisse by UBS here in the Philippines and pretty much thought I was going to have a career in investment banking until the global financial crisis hit just as I was graduating from college and that led to a detour. I had always been interested in social impact and pretty much thought, after making all my money in investment banking, I would go forth and start giving it away to people, but fate intervened and I took a detour to search in the microfinance space and as I was having conversations with people in microfinance, that is when I got in touch with a group called LGT Venture Philanthropy, which is how we first met. LGT VP was focused on supporting early-stage social enterprises and pretty much by accident, I found my way to this group and was introduced to this world of supporting early-stage companies, providing them with the financial capital that they needed to grow, but also advice, access and networks and that was how my investing journey began.

Jeremy Au: (03:12)

Amazing. I have to ask then, how did you bomb your P&G interview?

Joan Yao: (03:18)

They like to ask these questions, name a time when you blank, showed leadership, solved a difficult problem, things like this, and there's a certain format of questions and to be honest, I was not used to interviewing this way. My style back then, and even until now, has always been a bit more organic and conversational and I didn't have a nice story in a box prepared for such a line of questioning and I just couldn't completely express myself and so that was the story of bombing my P&G interview. I just didn't have it in a box, Jeremy.

Jeremy Au: (04:01)

Well, in the same vein of openness, I also bombed an interview. I remember in undergrad because I wrote, and I was pretty decent at that point of time in terms of like written Chinese, so obviously I wrote, I don't know, I can't remember. I didn't write it in advance. I wrote in Mandarin, and then of course I was applying for a role in China for some internship and so we did half interviews doing great, and then they were like please explain the Chinese economy in Chinese and I flunked it. It was just arduous. I knew exactly what I needed to say, but I think it was a good reminder for me to realize that I was conversational in conversational Mandarin, but business Mandarin, talking about the economy, interest rates, and inflation were all terms that I was unfamiliar with at that time.

Joan Yao: (04:50)

That is a whole other language.

Jeremy Au: (04:52)

It was a whole different language. So I went home, and I deleted the phrase intermediate Mandarin. I just deleted it. I was just like, for all intents and purposes, no. I didn't even put a conversation on.

Joan Yao: (05:02)

No Mandarin.

Jeremy Au: (05:03)

I can order food and hang out and talk at the bar, but anyway.

Joan Yao: (05:08)

Don't ask you about the Chinese economy.

Jeremy Au: (05:10)

So there you are, now you're doing impact investing and what's interesting is that you made a transition from impact investing into startup investing.

Joan Yao: (05:21)

That is true.

Jeremy Au: (05:22)

We have both laughed about this as well. So before we talk about it, what were the key points that you learned from the transition?

Joan Yao: (05:28)

Early-stage companies are early-stage companies. When I spoke to the president of Kickstart, Minette, she was asking me to join Kickstart back in 2016. I had just come out of the government at that point and I was saying to Minette, I've spent six years investing in early-stage social enterprises, but I'm not as familiar with tech and I'm not as familiar with venture fundraising jargon. I did not know what a seed or series A or all these letters were about ESOP, none of that, right? But Minette said, “I have faith that you'll learn it and the principles are kind of the same”, and you know what? She was right. I think when you look at early-stage companies, regardless of whether they operate in social impact or in startup land, they have the same issues. They have a vision or a goal that they want to get to.

For social enterprises, maybe it's many lives touched. For VC-backed or startup companies, maybe it's a certain revenue or number of users metrics. But they start with a dream and it's like, how do we get there? A lot of the things that I did to help those social enterprises turned out to be quite useful still in venture land, whether it was helping them come up with their financial models and plans or thinking about who they needed to hire to grow the company, trying to figure out what business model they were going to follow, whether it was going to be B2B or B2C, or what the right pricing would be. So the fundamentals of building a business, regardless of what sector you're in, remain the same and those skills and experiences, I found to be quite transferrable. There's just new jargon that you lay over those same things.

Jeremy Au: (07:31)

As you transition into that, what would you say are some myths or misconceptions that people have about venture capital investing?

Joan Yao: (07:40)

Misconceptions about venture capital. This doesn't quite answer your point, but I think the closest thing I have in my memory bank about VC versus social impact is, having seen both sides, venture capital, venture philanthropy, or impact investing, very often, I think people get confused about the kind of capital they want to fund their business and I make the distinction between whether you call it a social enterprise, a small and beautiful business, a lifestyle business, there are many names for it, but there are companies that don't need to scale that much or don't want to scale that much. They have other vectors that they're optimizing for and the challenge is when they take venture funding to hit those goals, then of course, the venture will push you in a direction to grow, to scale, to expand and then those founders are put in this tough position where they’re like, I didn't want to grow that much. So I think just being clear about how far you want to take a company and then finding the right partners to get you on your way there is probably one of my key insights from both sides.

Jeremy Au: (09:24)

What's interesting is that during that transition, you also moved from a regional role to the Philippines as a market. So obviously, you're Filipino, you're working in the Philippines. What were some transitions or learnings that you had? Because I think it's one thing to grow up, for example, myself in Singapore versus, Singapore as a market, right? So what do you think about that?

Joan Yao: (09:46)

Yeah, so LGT, I was based in the Philippines, but I covered Southeast Asia. I had a bus route. I would travel two or three times a year: Manila, Jakarta, Hanoi, Singapore, go around Thailand and it's interesting. I saw these countries all rising around the same time, from 2009 to 2014 when I was at LGT, you could see the growth that was bubbling for each of these countries. I think if anything, that regional role showed me in some ways the similarities that these markets had in terms of generally like, demographics and the emerging middle class. So for me, there were a lot of similarities, between these emerging countries.

Differences, for some, the form of government was a bit different, but I guess I'm rambling, but overall, the LGT stint kind of made me see more than Southeast Asia, as a region was on the cusp of breaking out and it was great to see, moving to Kickstart. It's a role that focuses more on the Filipino market. As you said, I'm Filipino and as much as I super enjoyed the role at LGT and making friends all across Southeast Asia, there was also something meaningful to me about getting to focus more on this market in the Philippines and trying to help the local startup ecosystem get off the ground. If you allow me to regress a bit, my role just before joining Kickstart was actually with the Philippine government and maybe that planted the seeds for the Philippine government. I reported to the Minister of Trade and I talked to the minister about the potential that I saw in tech and startups, I could see what was happening in Singapore.

All the startup incentive plans that were being developed in Malaysia, early unicorns starting to form right or be developed in Indonesia and I said, I think the Philippines has a role to play in all of this, right? We are a viable market for tech and this kind of disruption and one of the things that I worked on when I was in the Department of Trade was a white paper to describe to the Philippine government how they might create policies and programs to support tech startup development in the country and because it was an election year in 2016, my white paper was put in a cabinet somewhere and I think was forgotten for the next five years.

Jeremy Au: (13:04)

Wait, was it ever published?

Joan Yao: (13:05)

It got turned into a law. I'm sure there were many steps, but some of the early suggestions I made around sorting visas around incentive plans, things like this. I shared them right with the minister, some senators, and lawmakers at the time, and those suggestions made their way into a startup act, Philippine Startup Act which was turned into a law in 2021, I think, but it took six years. I did not have this kind of patience and I guess bouncing off from that, Kickstart gave me a platform or was the way that I could then continue that work right from the government to try to support the local ecosystem.

Jeremy Au: (14:00)

So speaking about the Philippines as an ecosystem, we've both commiserated that the Philippines does feel like number four or number five out of the top six countries. I met a US family office and he landed, he's like, I understand Singapore. Don't talk to me about it. Tell me about Indonesia and Vietnam the rest of the dinner, so we never covered the Philippines or Thailand or Malaysia. So how do you feel about that?

Joan Yao: (14:40)

Indonesia, you can't talk about Southeast Asia without talking about Indonesia, just from the size. The sheer size of the market, as well as all the unicorns that they've spawned. Vietnam has a super fast-growing economy and a highly-educated population. There’s also quite a lot that's developing there. I think the Philippines was off to a slow start. From 2016, when I joined Kickstart, to 2018, 2019, there wasn't so much going on, to be honest.

You had, of course, the big guys, you had Lazada, Shopee, GCash investing in the market, but apart from the big players, you didn't see so many homegrown companies getting to scale, and I think that perception has plagued the market, but I guess what has changed over the past three years in our country is in 2020, when COVID hit the Philippines, we had one of the hardest lockdowns in the region, and whether or not you wanted to go online, suddenly there was no choice. That was everything from your groceries to how you attended school. Everything had to make a very hard transition to online.

The statistics that I like to use to demonstrate how drastic the transition has been at the end of 2019 is GCash, which is the mobile wallet that is under Globe. GC had about 20 million users, as of February 2023. If you check online now, GC has about 76 million users. So that is almost 4x growth in the number of Filipinos who are online and transacting. We have a population of about 110 million. We're number two in Southeast Asia and over the past three years, basically, 70% of the population has found their way online, to pay, to transact, and that's why since 2021, we've increased the number of investments that we've made in the local market that are B2C opportunities. We've seen more homegrown companies whether it's in direct B2C or even B2B, working with what we call sari-sari stores or warungs. There's just been a lot more activity and opportunity, and I think we've also seen more international investors, take note of that, the likes of General Atlantic or KKR but we have so many more kinds of investors making investments for the first time.

We've seen more local funds get set up and I think that kind of increase in sources of capital, like domestic and international, is also encouraging more startups to get off the ground. So I guess when I speak with investors who actually come to the Philippines and fly down here, they're excited by the consumer opportunity in particular and, I believe the Philippines is more reasonably valued compared to, perhaps, markets where there's a lot of demand already, like Indonesia.

Jeremy Au: (18:48)

In an earlier episode of BRAVE, we had Mark from Gentree as well as Shiyan from Hustle Fund. We discussed the bull factors for the Philippine market, as well as the bear factors. One aspect that there was a general perception that we felt was external was about brain drain, right? So it's relative as well because it feels like a lot of countries in Southeast Asia are benefiting from an inflow of sea turtles of talent returning from the US or China, returning to Singapore, to Indonesia, to Vietnam and boosting that local entrepreneur pool. Conversely, it feels like there's been a longstanding perception, I think, of a brain drain for the Philippines. What are your thoughts on this dynamic?

Joan Yao: (19:33)

Yeah, I think, first of all, you can't deny it. We have to acknowledge that there is a large percentage of the Filipino population that lives and works abroad. I think the last statistic was maybe 10% of our population. But I think you also kind of have to look at the industries where the brain drain is happening. I think the most visible for us on the ground, it's in the medical field: nurses, doctors, caregivers, therapists. That's one area. We also have a lot of seafarers, like maritime workers. It is another big area where we export, human capital. Service and caregiving in general, I think are also big areas, but I would say for white-collar jobs, software programming is generally like business management.

The attrition is not as dramatic as people would make it out to be or would assume it to be, and at the same time, if Filipinos do leave especially for the white collar jobs, when they leave, usually, it's more of regional roles. So in any case, it doesn't feel like we're losing them all that much. So they're based in Singapore, maybe looking at either Southeast Asia or even still covering the Philippines just from the regional hub. I think for the startup industry, we don't feel that brain drain as much, and to your point, we do have startup founders, people who join as managers at startups who either work or were educated abroad and then are coming home and looking at ways to be part of the consumer opportunity that we just talked about. Yeah, there is brain drain, there is attrition, but we should look into the kind of which particular verticals and receptors those are happening in.

Jeremy Au: (21:55)

One thing that's always struck me about the Filipino diaspora is actually how strong the sense of home is. I think a lot of folks are very positive and want to go home to the Philippines. It’s just that they feel like the career opportunities don't really match up their skillset, right? So whether it's a product manager or data scientists that are, like engineering leaders, a lot of folks don't feel like there's a role fit for them. How do you feel about that?

Joan Yao: (22:23)

I think it's one of these chicken and egg problems, of course, but as more startups get built, the case becomes stronger for people to come home. We invested recently in a company called Pickup Coffee, for example, and they're basically trying to be the Kopi Kenangan of the Philippines and I've met now two or three Filipinos who studied abroad, Ivy League backgrounds, but are in a way intrigued by the opportunity to build the next whatever iconic brand in the Philippines and are coming back. So to your point, I think people want to come home. They're just looking for a good reason to do so and hopefully, as more companies are started and scaled up, that provides that reason in that pull for folks to come home.

Jeremy Au: (23:29)

Yeah. What's interesting, for example, is I know Camille Ang from Hive Health, an amazing Harvard, MBA and Harvard Kennedy School double grad building Hive Health, which is about making health plans more accessible for small, and medium enterprises and employers, and therefore cascading better health coverage for Filipinos and families. It's really interesting to see, I think these green shoots come out and hopefully, that's a great opportunity for lots of folks. One interesting thing is that there are a lot of myths and misconceptions about the Philippines as well. Do you want to clarify any of them? What bugs you the most when someone gets it wrong about the Philippines?

Joan Yao: (24:16)

I think a perception that folks have is that the Philippines is very much controlled by families and conglomerates and that it's very difficult for new ventures to start to grow and scale. Perhaps a controversial view that I have is, sometimes, that preconceived notion itself is what stops people from trying. Maybe I can speak for myself as a Filipino growing up in the Philippines. I like to say that I grew up in a place where all the bookstores were one brand. There was pretty much just one brand of bookstore I could go to. All the drugstores mainly were one brand. Malls have three brands. So, you grew up as a Filipino and you kind of associate certain categories so strongly with a particular brand or a particular family that it somehow, like on the back of your mind, there's this programming that's like, oh, they seem too big to topple over, too big to fight against. I think we've seen founders enter the Philippine market, and truthfully, perhaps many of them are not from the Philippines and they come and they say like, how come no one's ever tried to make this thing just a little bit better?

One example that has come to mind, it's not one of our investments, but it's an investment of a PA fund here called Navegar, and it's a discount grocery chain called Dali. With Dali they're re-imagining the grocery format. It's a bit smaller. They are re-imagining the value chain. So there, some of their items are disruptively low price points, not too dissimilar from Pickup Coffee's value proposition, and it took the challenger mindset that I feel like if I create something, if I start something, people will want to try that, and I think as more and more of these challenger brands come to the public eye and maybe achieve some scale, it won't feel as much like, oh, there's no room for new players and there's no room for innovation because I think the Filipino consumer is hungry for new experiences and there are rooms for folks to come and try to build something that improves on what is currently here.

Jeremy Au: (27:17)

And on that note, personally, when have you been brave?

Joan Yao: (27:23)

Most recently, an example comes to mind when there was a founder and I really wanted to work with them and invest in their company, but they told me hey, we're not raising and we don't need your money, et cetera and I invited them for coffee and said, “Listen, I've been getting inbound offers to invest in similar companies, but actually, I'd rather invest in you, so is there a way? I know you said you weren't raising, but is there a way for us to make something happen?” I've done that at different junctures of my life. Many of the jobs that I've taken were, they were not looking for someone to join but I had to create the opportunities. Minette, our president, likes to say that you lose nothing by asking. So if you can imagine something, if there's something that you want, at the very least, try to have a conversation and see if you can make it happen. And if it doesn't, that's okay. You're right back to where you started.

Jeremy Au: (28:36)

Wow, that's a really good story, and what does it mean to lose nothing by asking, from your perspective?

Joan Yao: (28:44)

If you started in a position where you didn't have this investment or you didn't have this job, the worst thing that could happen is if you go have a conversation with a founder, you go have a conversation with a potential employer or someone you want to work for and say like hey, can I invest in your company? Hey, can I work for you? The worst thing they can say is, not right now, we're not looking for someone but you would be no worse off, but the potential upside from asking is, theoretically, infinite. At the very least, you can give it a shot.

Jeremy Au: (29:20)

Personally, I find it easy to ask on behalf of someone else than to ask on behalf of myself. I find it harder. Why do you think people find it hard to ask for themselves?

Joan Yao: (29:31)

I guess there's maybe this feeling that you're not worthy. Why would they hire me? I guess a lot of people make judgements or decisions about themselves, and then those end up limiting what they do before they even try. So that's certainly a lesson that I still kind of have to learn. I don't always succeed in practising what I preach. I always wanted to apply to B School, for example, but I was so afraid that they were going to say no, so I never did. So, that's the flip side of what I just said. That's a time when I wasn't brave. I let my fear of not getting something get in the way of even trying out for it and I didn't give, whoever it was, Harvard, et cetera, the chance to even look at my profile and decide whether they wanted me or not, because I decided that it wasn't good enough.

Jeremy Au: (30:48)

Yeah. Thanks for sharing that. I think the fear is real, right? There's no easy way to say it. I like what you said about not feeling worthy. What has worked for you in terms ofimproving the sense of worthiness? Or is the solution like, feeling unworthy, but making it less friction to ask?

Joan Yao: (31:28)

I love this line of questioning. I don't know to what extent our Asian backgrounds play in all of this, right? It's like, whereas you come home with a 95, where's the other five? I think at least for me, again, speaking for myself. It's like you grew up with kind of this inner critic, and there is this inner voice that says hey, you're not good enough or you don't measure up and, for many Asian kids, again, certainly myself, you end up cheating that voice inside your head, like your friend. It helps, right? It isn't completely negative because it's what drives you. I think many of us are driven by wanting to do better and maybe then, we'll be loved, but at some point it becomes counterproductive because, you could have achieved so much already in your life and by all accounts should be a lot happier. That voice inside your head is always pushing you to do more and I think for me, there came a point when it was affecting how I was towards other people.

I was too hard on my partner or my sister, my sibling, because then, you have to like to get on my level. I hold you to this standard, et cetera, but not respecting that people are on their own journey, right? You have to meet them where they are and support them where they are. So going back, I think for me, what works is realizing that I talk to myself the way I would talk to my best friend. If your best friend is having a bad day, your best friend failed at something, you're trying to be encouraging like hey, it's all right, try again, et cetera. But you screw up and the voice inside your head is just like, you idiot. Why did you? Too many expletives, I cannot say, but we're very hard on ourselves and that internal monologue ends up hurting us and hurting other people and for me, what I've been practising more is learning to talk to myself with love and kindness and you see that then, pay dividends in the relationship with other people and hopefully also in the chances you allow yourself to take because you're not so afraid of failing.

Jeremy Au: (33:24)

Thank you so much for sharing. That was a wonderful personal note to wrap things up. I'd love to summarize the three big takeaways I got from this conversation. The first is, of course, thank you so much for sharing your journey from investing accidentally as a career to impact investing where you are doing the regional bus routes across other various economies to Kickstart VC where you're helping build the Filipino startup ecosystem. I thought it was very interesting to hear also a bit of a stint at the government, as well as what you learned about the various markets and how you felt happy to be back home building the local ecosystem.

I also enjoyed the second point about the Philippine startup perception versus reality. I think you covered a lot of that. You discussed, and we debated a little bit about the perception of brain drain, but also like a little bit more about reality by industry, and I think the return of the diaspora to help build out the ecosystem. We also talk about whether there's sufficient space to innovate in the space of families and conglomerates. So I think it was interesting to hear that from your perspective, it's straightforward and doable to continue building whether you are a local founder or international founder and of course, it was interesting to hear your statistics around acceleration due to the pandemic and some of the key dynamics that are happening in the ecosystem.

Lastly, thanks so much for sharing about the phrase "lose nothing by asking." I thought it was a wonderful reflection, even for myself, about the voice that we have for ourselves versus the voice that we have for our colleagues and friends and I think, I pined down on being able to do the ask versus your feeling of self-worthiness, relative to another person. So I thought that was something that I probably have to remind myself an hour later, after this. So thank you so much for sharing, Joan.

Joan Yao: (35:56)

Thank you very much. Thanks for having me, Jeremy. Enjoyed the conversation.