One night the police A typical nighttime neighborhood is doing its walk. The sun has set, and he is on the alert for any danger as he walks slowly down the road. Before long, he saw a professionally dressed man pacing furiously under the streetlights, occasionally falling to his knees between the cracks of the sidewalk.
A passerby is offering a hefty $100 to help find his misplaced keys. Relieved to see law enforcement, he asked the police for help and stated that he needed to get home to his family immediately. Together they come up empty, searching every inch of sidewalk, canal, and path under the lights. Anyone you ask for help will leave after finding nothing under the streetlight.
Frustrated and desperate, the policeman finally asked, “Okay, sir, are you sure I’ve lost them here? Is there anywhere else they could be? “
The man replied, “Well, no, I lost them in the park across the street, but the light is better here.”
This myth encapsulates a concept commonly referred to as the streetlight effect. Its origins can be traced back to the thirteenth century with a Turkish example, but the concept has been repeated in everything throughout history, from jokes about people who lose their keys to scientific explanations where the audience sees only what they expect to see. The point is, you can spend a lot of time looking for something, but if you’re looking in the wrong place, you’ll never find it.
Unfortunately, in my early venture capital days, no one told me this story, so I immediately started looking for deals where the flow was easiest: in Hong Kong. I had a strong personal network and brand in the Hong Kong region, and I had no trouble finding local entrepreneurs who wanted to fund Fresco Capital. I spent my days at my favorite coffee shop in Hong Kong meeting new companies willing to come to Hollywood Road, even though they weren’t the businesses I was most excited about or thought would be the most successful. Before long, I found myself with a very busy schedule, but not much excitement about any future investments.
Every weekend I sit down and wonder where the time went. I was self conscious as I had nothing to show for my packed schedule.
You can spend a lot of time looking for something, but if you’re looking in the wrong places, you’ll never find it.
Invest time in areas that have a high focus on what you want
I spent my time networking with local entrepreneurs, a strategy that didn’t pay off. Apparently there was a light in front of me in Hong Kong, but I felt like my keys were on the other side of the road in a park somewhere. I knew I had to stop taking it easy and look beyond Hong Kong for bargains. Along with my business partner, I started spending my time researching major entrepreneurial and tech startups with a group of top entrepreneurs looking for funding. It was also a hunt for those that had achieved great results in the past decade (unlike Hong Kong, which is still in its infancy and does not have many examples of successful venture-backed businesses). Then I hit the road.
My partner and I have spent time in cities like San Francisco, Austin, and New York, as well as London, Beijing, and Singapore. I spent the better part of my first five years in venture capital flying (mostly in economy class seats). On each trip, I was energized by the entrepreneurial activity in the areas we visited and overwhelmed by the number of promising companies we found everywhere. My days were just as, if not more, packed than my time at home. However, unlike my experience in Hong Kong, each day of the meeting yielded interesting investment opportunities that I was eager to dig into. Time passed, and I was finally getting results. I had a real deal flow! I just have to go to catch a plane.
As a newbie, we were on a tight, shoestring budget, so I crashed on friends’ couches or stayed on inexpensive Airbuses while traveling. I couldn’t help but feel like an outsider, especially when it came to exploring the San Francisco Bay Area. Who knows, Google’s headquarters in Mountain View is at least an hour from downtown San Francisco, and that distance adds up to several hours during rush hour, which starts at 3 or 4 instead of 5 p.m., as one might expect in California. Afternoon? One trip, hoping to cut down on travel time, I chose the halfway point between my meetings and checked into a budget motel in Daly City. I arrived with my luggage, and the hotel was across the street from a junk yard filled with old school desks, the city of Dali, affectionately called “Delhi Shiti” by the locals.
It wasn’t exactly what I had in mind when I was on the other side of the investment desk, but it was fun and energetic to hunt for opportunities, try to find the diamond in the rough or the next big thing. At the same time, we were in the process of raising our funds, so we were investing very little. We have been investing a lot of time in developing new sources of deal flow.