Angel investor with an 'extreme' philosophy

Angel investor Darius Cheung has been a serial entrepreneur since his secondary school days.

Back then, he imported VCDs that were not available in Singapore from Hong Kong and sold them to appreciative classmates.

"I wasn't making a whole lot of money. I had an inventory and once I finished selling that, I couldn't continue. But then came the CD recorder," Mr Cheung, 35, recalled.

He spent $400, his entire year's earnings, on the device. With that, he was able to make more copies of his CDs to sell.

The experience also taught him the concept of inventory risk when the school's discipline master found out about his CD business and confiscated his goods.

"Just like that, all my earnings were gone," said Mr Cheung.

"But that was the first time I experienced the power of technology - the same content replicated countless times with marginal additional cost when you have the right equipment," he added.

He has since moved on to bigger and more legitimate businesses, and one of his former classmates is now one of his investors.

In 2010, he sold the tech company he co-founded, tenCube, to global security giant McAfee for an undisclosed sum. A report at the time suggested the deal was worth over US$5 million (S$6.8 million then).

Mr Cheung is now chief executive of 99.co, a property search portal he co-founded. It raised $2 million in Series A funding from investors including Facebook co-founder Eduardo Saverin last year.

Q Moneywise, what were your growing-up years like?

A I came from a middle-class family so my growing-up years were pretty normal, but during my secondary school to university years, I was left on my own financially. My parents paid my school fees but I had to make my own money to buy the things I wanted.

So those were the years when I learnt to be creative and make money by creating value, like with my CD-import business.

Q How did you get interested in investing?

A Property had always been a big topic growing up, and my parents and others were always talking about property prices and how property helped some families create so much wealth.

Over the years, it became clear to me that property is the most reliable long-term wealth creation measure.

In terms of investing in start-ups, it started with my fascination with Silicon Valley that created companies like Google, and the role capital played in impacting the world, starting from when Don Valentine wrote his first cheque to Apple Computer.

I'm interested in the role of investment in directing the creative destruction of the systems of the world - moving capital from a less to a more efficient place, that drives humanity forward.

Q Describe your investing strategy.

A My investment philosophy is about having two extremes - one extremely secure, the other extremely risky. I invest in either property or start-ups.

I'm a big believer in property investments because the value rises in the long term, compared with stocks where you can have positive returns in the short run but then lose all your money in a black swan event.

I've also been an angel investor since 2011 and have invested in around 15 companies, some here and some in the United States.

The companies in the US generally do better than those in Asia because they have more mature ecosystems there, but it's here in Asia that you see really big, high-growth and untapped opportunities.

For start-ups, I follow research done by the Kauffman Foundation, which says you have to invest across a portfolio of at least a dozen companies and you have to follow up with capital.

I usually put in $25,000 per start-up so that I have the means to follow up and invest across more companies.

For example, I first invested in Carousell in 2014 and followed up later. I've also followed up on AirHelp in the US.

I do follow-ups because start-ups tend to have different rounds of fund raising - seed round, series A, B and C. A lot of times, the upside is made when you have the means to follow up with capital when the real venture capitalists come in and take the company to the next level.

By the time most people know a company is worth investing in, they probably can't go in any more. But if you're an early investor, you have the right to continue investing in the company.

I would advise people who are looking into start-up investments to invest first in a start-up investment fund and learn how they pick start-ups to invest in.

My very first investment was in a fund called Neoteny, and it was a very successful fund.

Its portfolio includes one of the best exits of Singapore, video streaming website Viki.

I don't think there's a fixed amount of capital someone should have on hand before going into start-up investments but it's worth noting that you should be prepared to lose whatever you plan to put in, so that should usually be about 5 per cent to 10 per cent of a normal person's net worth.

If you want to be an angel investor, you should be very clear on what your motivations are. It shouldn't be about getting rich quick. You should be prepared to lose money most of the time and there will be a lot of heartache.

It should be about knowing the company well, understanding the value it provides and being passionate about that.

I wouldn't advise most people to go into start-up investments - actually, I don't think it's suitable for most people.

Q What's in your portfolio?

A I currently own three properties. I have a 3,000 sq ft house in Houston, Texas, which I bought for $150,000 in 2013. It's currently being sold at a 25 per cent profit.

I also own a three-bedroom condominium here in the west coast. I bought it in 2012 for around $1.3 million. The annual rental yield is about 4 per cent.

I co-own an apartment in Hong Kong with my mother as well, and bought it in 2012.

The property part of my portfolio is worth around $2 million and, apart from that, the remaining 20 per cent of my portfolio consists of high-risk start-up investments.

Financial advisers usually recommend putting in just 5 per cent for high-risk capital, but I'm familiar and passionate about start-ups so I've put in more.

So far, I've had two exits. One of them was Astrid, a popular mobile note-taking app that was sold to Yahoo. I made $75,000, three times of what I put in. That's considered decent in the start-up world because for every company that's successful, there are more that are dead. For Astrid, I invested in 2011 and exited in 2013.

The other exit was Retargeter, an advertising company specialising in audience targeting. I made around $37,500, 11/2 times of what I put in. I invested in 2013 and exited last year.

Carousell has also done very well but I won't know the returns until I make an exit. For start-up investments, they can take five to seven years, or even longer.

Currently, I'm no longer investing in start-ups because my core focus has been my own 99.co, since we started it in 2014.

I have been putting all my eggs in this one basket.

Q What does money mean to you?

A Personally, money means freedom and the ability to pursue what you're passionate about. It gives you leeway to fail, especially if you have dependants. My daughter was born two weeks ago and, now, I'm a dad.

Q What's the most extravagant thing you've done?

A It's probably investing a large part of my portfolio in 99.co, the company I co-founded. I put in $500,000 over the last two years even though we could attract more outside capital if we wanted to.

Q How are you planning for retirement?

A I've never planned for retirement because I don't plan to retire. I think the most important thing is that I continue to learn and be equipped with the right skills so I can be productive and keep creating value.

I also plan on getting passive income from my property.

Q Home is/I drive...

A A three-bedroom apartment in the city centre, in International Plaza. It was built in the 1960s so it's very old, but I love it there.

We're currently renting it and we moved here because it's much closer to my wife's office which we felt would help her adjust to being

a new mum.

I have never bought a car. A car is a liability, but now that I have a baby, it's an unfortunate necessity.

sheryll@sph.com.sg

This article was first published on March 13, 2016.
Get a copy of The Straits Times or go to straitstimes.com for more stories.