What does it take to build a great business? Investment group XA Network believes that investment capital is only part of the answer; what entrepreneurs also need, it suggests, is practical expertise and advice from those who have been there and done it – and this part of the secret sauce is much harder to find.
“Right now, the world is awash with liquidity; there are billions of dollars sitting on the sidelines,” says John Wood, the former Microsoft executive who XA Network is today unveiling as the latest member of its advisory board. “Entrepreneurs with good ideas can find capital, but what they are looking for is someone they can trust to give them good advice along the way.”
Enter XA Network, which consists of around 100 members with experience of executive positions at most of the world’s leading technology businesses. It can count on the alumni of companies including Alibaba, Google, Amazon, Netflix, YouTube, Gojek and Grab. “These are people who have cut their teeth working at unicorn tech businesses,” Wood adds. “It’s a one-stop-shop for entrepreneurs.”
To underscore the point, Wood points out that alongside him, XA Network is also announcing a string of other high-profile advisory board appointments today. His fellow joiners are Steve Chen, co-founder of YouTube, Maya Hari of Twitter, and David Thevenon of Balderton Capital and Google.
The larger advisory board will support XA Network as it continues to invest in technology firms across Southeast Asia. With competition for stakes in such businesses hotting up, Wood and his colleagues believe that their network offers a key point of differentiation over traditional venture capital and private equity investors.
“Capital has become a commodity so the only way we are going to get in is by being founder-first,” he says. “We want to be able to work with founders for as long as they want us at the table.”
Founded two years ago, XA Network – the X describes any technology firm with a $1bn valuation and the A refers to alumni – has so far invested in around 30 businesses across sub-sectors including mobility, healthtech, foodtech, edtech, adtech, fintech, social commerce and proptech.
Today’s board appointments come just days after the network announced its first exit, through the sale of Singaporean video-sharing service Lomotif for $125m. But Wood is keen to stress the group’s long-term time horizons. “We want to be stable investors; we’re not looking for quick flips,” he insists. XA Network is, in any case, in build-up stage: it is currently investing at a rate of stakes in 15 to 20 companies a year, but sees increasing that to around 50 as a realistic prospect.
Southeast Asia has huge potential, the group believes, with a total population of 580 million and positive trends such as high rates of connectivity – 70% of people in the region online – continuing urbanisation, and favourable demographics. The digital economy added $100bn to the economy of the region last year alone and that contribution is expected to increase to more than $300bn by 2025.
Moreover, this is a market that is much shorter of the huge incumbent businesses that dominate in regions such as the European Union and North America. Dynamic businesses with strong management can grow very rapidly, Wood argues, pointing to the example of the technology business Sea, which hit a market capitalisation of $100bn earlier this year, less than four years after its IPO in October 2017. “There are plenty more businesses with the potential to become billon-dollar or tens of billon-dollar organisations,” he says.
Along the way, XA Network believes it can invest with purpose, backing Southeast Asian businesses with solutions that will help the region to compete on the world stage. “We are all very committed to the power of smart capital, intense mentoring and fuelling inclusive innovation,” Wood adds.