Toward Imaginative Investments

Hi, I’m Anne and I’m a Senior Investment Associate at Kakao Ventures.

Our team works closely with early-stage startups and we’re always keeping an eye on market trends. As we do so, questions and discussions naturally arise both within and without our team.

I think anyone with an interest in the market would be in a similar boat (if not the same) as we are. Since ideas and conversations are more valuable the more diverse and deeper they are, I wanted to share with you some of our insights we’ve gained along the way. I hope this series can be of help to you entrepreneurs, investors, or even those of you who are simply interested in the market.

My Embarrassing 2023

Looking back on the past year, it was a time when I was intensely focused on enhancing the value of the existing portfolio and creating a one-team culture at KV.
(is how I describe the year of relatively less aggressive investment)

Just to be clear, there has never been a directive within KV to not make investments. But I guess it just didn’t feel right for me. As I witnessed first-hand how startups struggled to keep their heads above water over the past year of a frozen investment market, I’ve come to grow an eye for the many reasons why new entrepreneurs wouldn't succeed.

It's like dating in your 30s, where just even getting started is difficult enough when in your blissfully ignorant 20s, the world indeed was your oyster and the sea did indeed have a lot of fish. (Turns out that with more knowledge doesn’t come more power but more stress and fear.) I feel like at the age of 23, I had a checklist of 100 reasons why something wouldn't work, such as “Isn’t the market too small?” and “Isn’t the product team not ready yet?” and so on.

But they say humans are forgetful creatures. Recently, I've re-entered the mode of falling in love (with the entrepreneur) again, despite everything. I'd like to extend my gratitude to those who have awakened me.

Why Imagination Matters

I believe positive imagination is directly related to the core identity of an early-stage investor.

Early-stage startups tend to be immature in terms of business, which means that you can easily find more than enough reasons of why it won't work. If you don't exercise your imagination, there are few grounds for investment in the early stage.

I remember receiving stinging criticism not long after joining the investment division. One team came with a bold idea of turning wholesale fashion retailers of the DDM area into B2C retailers.

Naturally, I said, "This is a business model that doesn’t work in Korea," and listed all the reasons it won’t work. Just then, another member sternly asked, "Couldn't we try cross-border e-commerce for overseas sellers without restricting the model to Korea? What do you think it could look like then?" The question struck me dumb. It wasn’t an impossible idea even after I ran it through my “impossible checklist.” It was just a lack of imagination on my part. This served as a great moment of reflection and recalibration for me.

Lost Imagination

Recently, however, I realized that what I consider “good investment” was formulating risk profiles based on previous experience and evaluating based on these profiles. I still believe that considering those risks (such as an attractive market that matches the expectations of late-stage investors, profiles of fast-growing teams, etc) is very important. There's a big difference between investing without knowing the risks and investing knowing them.

However, there's something missing there.

Imagination. When you unfold your imagination, meetings suddenly become interesting. Imagination turns destructive questions like "Isn't the market too small?" into constructive ones like "What hurdles need to be cleared for the market to expand?" In these meetings, both entrepreneurs and VCs get excited, and the desire to invest grows. (And my sincerest apologies to those of you who have unfortunately had unimaginative meetings with me…T_T)

Let's Become Circuit Sluggers (for the baseball fans out there)

I believe Brian (Director Jang Dong-wook at Kakao Ventures) plays the most significant role in igniting imagination among our colleagues.

During team discussions, for example, Brian responds to the giving-up-too-easy questions like "Isn't the market too small?" with, "Couldn’t it be a market that could really grow a lot with good team performance?" (Other KV investment team members are also helping to expand our collective imagination in the Investment Committee, to whom I express my greatest affection.)

What's impressive about Brian is that despite going through many investment trials and errors, he has consistently made bold decisions whenever there's a glimpse of possibility, as if the “errors” part evades him entirely.

Lately, I’ve been saying, "This is why it's a tough battle," a lot, which is something I didn’t even realize until Brian, during a team dinner at a restaurant (might have been a bar, who knows) said with great conviction,

"You’re a circuit slugger, Anne. So why are you trying to hit safe!"

It was a big wake-up call.

Even other team members joined in on the surround sound chatter of calling me a home run hitter.

Brian’s words stuck so much that I kept thinking about it the next day. If only two out of ten investments succeed, shouldn't we make them home runs? Of course, I don’t suggest just recklessly swinging. This is no piñata. It's just that I realized I might have missed opportunities to hit hard by being trapped in my experience-based biases. Imagination could have made me place my bets differently. In fact, my strength has always been imagination.

Written by Hyewon Ann, a Senior Associate in the Investment Team at Kakao Ventures