This is not a year-end letter. We have not been operating long enough to write one of those. This is a founding memo, written in September 1997, as we watch the Asian financial system reorder itself in real time outside our window. We are committing our principles to record now — before the temptation arises to revise them in light of outcomes — so that future partners can hold us to what we believed at the start.
On Why Singapore, and Why Now
Singapore was not the obvious choice. Hong Kong has more capital flowing through it; Tokyo has more depth; New York has more of everything. Several friends advised us, in the months before we incorporated, that the right city for a serious Asia-focused fund was anywhere but here. We listened to them carefully and chose otherwise.
We are in Singapore because we believe the most consequential companies of the next thirty years will be built across Asia, and Singapore is the place from which it is possible to operate inside Asia without being captured by any single jurisdiction. The independence runs in two directions: we are not subject to Beijing's regulatory reach, and we are not subject to New York's quarterly ones. Neither freedom is unlimited. Both are larger here than they would be anywhere else we considered.
We also start now, in the worst Asian capital markets in a generation, on purpose. The companies we want to back will be founded by people for whom this crisis is formative — people who learned, before they raised their first dollar, that capital is not infinite and that markets do not owe anyone an exit. Founders shaped by an easy market underwrite their own infallibility. Founders shaped by a hard market underwrite the possibility that they are wrong. The second kind is the kind we want to fund. There will be more of them than usual in the cohort that emerges from this autumn.
On the Family Structure (No Outside LPs)
We have not raised an LP fund and do not intend to. The capital we deploy is our own and, we hope, our children's. This decision costs us scale; we are aware. It also costs us the marketing momentum that comes from announcing closes and fundraises, and the social capital that comes from belonging to the community of fund managers who measure each other by AUM. We have weighed these costs.
What it gives us in return is something we believe is worth more — a holding period that is bound only by conviction. A ten-year fund must, mathematically, exit positions in year nine regardless of whether they have compounded into what they were supposed to become. The structural pressure to liquidate well before maturity is, in our reading of fifty years of venture history, the single largest source of underperformance among otherwise capable investors. We will not be writing that letter to our future LPs. There are no future LPs.
The discipline this absence imposes on us is real. Without an external timetable we must impose our own; without LP scrutiny we must apply our own; without the social pressure of an annual meeting we must invent the equivalent. This memo is the first attempt at that invention, and we expect future ones — the year-end letters — to do the rest.
On What We Will and Will Not Underwrite
We will underwrite companies that are technologically differentiated, founder-led, and operating in markets where compounding is possible. By technologically differentiated we mean that the product reflects engineering or scientific work that took meaningful time to produce and would take meaningful time to replicate. By founder-led we mean that the people running the company are the people who envisioned it, and whose personal capital and reputation are at risk in its outcome. By compounding we mean that customers, once acquired, become more rather than less valuable over time.
We will not underwrite roll-ups, financial-engineering plays, or businesses whose primary moat is regulatory. We are willing to be wrong about which companies meet this bar. We are not willing to relax the bar in order to deploy capital faster, even — perhaps especially — in seasons where peers are deploying enthusiastically.
On the Time Horizon We Intend to Honor
Our minimum holding period is seven years. Our typical holding period, we expect, will be longer. In categories where the underlying technology takes a decade to mature, we expect to be measured in our patience rather than in our turnover. The most important companies of any decade are visible to almost no one in the year they are founded; visibility usually requires a patience that public markets cannot afford.
We can. That is the asymmetry we are buying. We will know, in 2007 or so, whether we have purchased it well.
A Closing Word to Future Partners
If you are reading this years from now and the firm has lost its way, the failure will not be because of the markets. The markets have always done this and will always do this. The failure will be because we relaxed one of the principles in this memo when we thought no one was looking. Hold us to all of them. The most important sentence in this memo is the previous one.
The Founding Partners
Winzheng Family Investment Fund · Singapore · September 1997