Ho Nam: There are some specific reasons why we like Korea. It’s an interesting overlooked opportunity. There are a lot of VC dollars taking on opportunities in places like China, India, and Israel. No one’s really focused on Korea. It’s only one of six countries in the entire world with a high per capita GDP in a population that’s more than 50 million people.
50 million is tiny compared to India and China, but it’s a pretty significant population, especially if you multiply with a high GDP and a population with a very high propensity to buy things online. They have the world’s most advanced broadband and mobile infrastructure. You could actually create pretty significant companies.
Korea has produced more Internet unicorns than any other country outside of US and China. We have some competitive advantage there because we have some Korean roots. Most of our activities outside of the US tends to be in Korea, but we are opportunistic.
Sramana Mitra: What are your greatest investment successes? I know there is one unicorn from Korea. Would you like to talk about that? Particularly, what I’m interested in is, what stage did you invest in them? What did you see in them when they first came to you that looked promising? What was the investment thesis and how did it pan out?
Ho Nam: It’s a good example of how every big winner that we’ve ever backed, the business that ends up creating the most shareholder value is not really the business we invested in. These businesses evolve. Some people call it pivot. Coupang is the company. When we invested, it was in 2011. They got started in 2010. It’s a Groupon clone. It was one of dozens and dozens of Groupon clones that started around the world. I’m sure there were many that started in India.
Around that time that Groupon was going public, they came to Korea and they looked at potentially acquiring us. They said, “We’re either going to acquire you or crush you.” They decided to actually crush us. They started a Groupon Korea division. They puts lots of money. A few years later, they shut it down. Coupang has evolved to become the Amazon plus UPS of Korea. The company is now worth more than Groupon on a global basis when not that long ago, they said they were either going to buy us or crush us.
It’s quite interesting. Another good example of a company that pivoted is a company we invested in 20 years ago. It’s called Vesta. They started in the prepaid calling card business. That wasn’t going well. They decided to take advantage of this fraud detection technology they had. When you were doing prepaid cards, there could be some frauds using stolen credit cards. They decided to use that fraud technology to become a financial transactions company and they indemnified their customers.
We indemnified them of all the fraud risks. They grew in a capital-efficient manner. They made Inc’s 500 Hall of Fame. To make the Hall of Fame, you had to be on the list five years in a row. The business is unrecognizable from where it had started. That’s a common pattern we see in a lot of big winners.
Sramana Mitra: Last question, are there areas that you’ve identified as promising areas where you can build fast-growth large companies?
Ho Nam: There are always some new areas that we try to learn about. We usually post them on our blog. The most recent blog post I did last year was on vertical market opportunities, which we believe is a trillion dollar opportunity. If you look at the vertical software category, it’s a $100 billion category.
$100 billion is a pretty interesting number because it’s much bigger than the operating systems and databases and other categories. If you look at these vertical markets, most of them are still operating on paper-based manual processes. They really have not adopted technology. We think the opportunity in these vertical markets is much bigger than the current $100 billion opportunity.
If you go after the paper-based systems, that’s an order of magnitude higher. The deal we signed in New Orleans is in the vertical market category.
Sramana Mitra: Great. Thank you for your time.