Shaun Hon on Corporate Venture Building, Compounding Relationships and Skin In The Game - E29

Shaun Hon is currently a Director at Rainmaking, a corporate innovation venture studio that has built, invested and accelerated over 900 ventures globally and has a combined portfolio value of more than USD2 billion. The team has worked with over 100 Fortune 500 leading organisations such as Allianz, Barclays, HSBC, IKEA, Intel, Jaguar Land Rover, Maersk, Visa to deliver technological innovation. The firm has a presence across Asia, Europe, the Middle East and the U.S. Prior to joining Rainmaking, Shaun was a Principal at TRIVE, a seed stage Venture Capital Firm based in Singapore.

Shaun began his career as an engineer, helping companies such as Rolls-Royce and Royal Dutch Shell develop engineering solutions in industry. He worked in the automotive industry where he led performance design in electric vehicles for clients in multinational organisations such as Amazon, BMW, and Ford Motor Company.

Shaun received his Masters in Mechanical Engineering with First Class Honours from Imperial College London on a full scholarship, where he was also appointed Team Principal to lead the design and development of electric race vehicles for Imperial Racing Green. He enjoys playing Trine 4 and Solitaire in his free time. You can connect with him at https://www.linkedin.com/in/shaunhon/

You can find our community discussions on the podcast episode at https://club.jeremyau.com/c/podcasts/29-shaun-hon-on-corporate-venture-building-compounding-relationships-and-skin-in-the-game

This episode is produced by Adriel Yong.

Jeremy Au: [00:02:19] Hey, Shaun, welcome aboard the show.

Shaun Hon: [00:02:22] Hey, Jeremy, thank you for having me. It's a pleasure to be here.

Jeremy Au: [00:02:25] It's been great to hear about your leadership in accelerating venture building and it's been fun to hear your personal journey as well. I'm excited to have you share your experience with everybody.

Shaun Hon: [00:02:37] Absolutely man. I'll start chronologically. I've always been innovating in the transport space as an engineer. Whilst I was still in Imperial College, which was a long time ago, I was team principal, leading the Formula Student racing team to build electric vehicles. As a whole, we had more than 50 engineers dedicated to building that outfit. I then went on to start my career in the UK building predictive optimization models with an electric vehicle company for larger corporates like Amazon, BMW for many years. As an engineer, I felt very pigeonholed to solve one part of the supply chain in transport. I wanted a more macro view of the industry.

I subsequently moved to Singapore to join the venture capital space where I led investments into AI deep tech companies, as that was my domain expertise. The venture space has allowed me to get a front row seat to the industry and see multiple products and multiple businesses being developed at the same time, which I found super fascinating the last few years. As I moved from an engineering to non-engineering role, I still take a very product building mindset in the work I do. So, at Rainmaking today, I still think about what sort of features are relevant to make offerings more competitive, just like I would for an engineering product.

I currently lead investments in new venture build activities with our corporate partners in Rainmaking and my specific focus is within the transport space, driving AI and digital adoption in the industry. Solving some of the most pressing issues we believe the industry is facing, all the way from de-carbonization to supply chain resilience.

Jeremy Au: [00:04:09] How did you personally get started in technology? You were an engineer and you've done the geography shift, the role shift and even an industry shift. So, tell us more.

Shaun Hon: [00:04:21] For sure. For me, it all started around the time I went to Imperial College. Imperial is a very engineering heavy school, and I went there for my undergrad where I read my master's in engineering. And for a bit more context here, in the engineering world, engineers are always made to work in teams, and this is because it's extremely difficult to build one product by yourself. Most products are built in modular forms by different engineers and integrated together after. I find this is also quite analogous to the business world, really, because we don't see anyone building businesses on their own.

I had a lot of opportunity to work in teams. I think one of the things that we did really well was align on process outcome priorities because otherwise the chances of us getting to the end point on budget and on time was pretty slim. This is true, whether you're in a team working with X number of people, or you're a manager trying to integrate different components together.

At Imperial, I remember we were consistently thrown in teams of at least four to six people that we couldn't pick, to build products. So, I've built miniature hovercrafts. I've built an electric scooter. I've built a racing grade electric motor test rig. I've built an electric motorbike. I find that to successfully build anything, as a team, as a whole, we need to understand who and where people's strengths lies, where their weaknesses are and what their preferences, and aligning all of it together. In simple terms, what it is, it's just setting out and defining roles and responsibilities, who's delivering what. Is someone doing the finite element analysis, is someone doing the computational fluid dynamics?

I think this is a fairly standard process most teams operate in, but I think slightly less straightforward in the business world to navigate in. This is because for non-technical skills, there's usually an outside of your control component to it. I'll elaborate a little bit here. In an engineering world, the measure of which you can design a jet engine or not is pretty simple. It's largely binary. You probably can do it, or you probably cannot do it. There's little external influence. In a business world, the measure of whether or not you can sell a product to a client is more complex. So even if you could do it, the client has to be willing to pay, which you have little control over. You could be pretty good at that skill, but the outcome might not come across that way, it might just not show that.

Moving to the non-technical roles, I've really learned to view systems more holistically and better understand root cause before passing an opinion, and to avoid implementing fixes that only cure symptoms. I circle this back to what I've learned. I've had a lot of fun building really cool products in my life and I think I'm really grateful that I never had to do it alone. I've always had amazing talents, friends, colleagues, peers, delivering pieces where I couldn't, or didn't know how to. What's clear to me here is that there's a lot of mutual trust and belief, and without which, as a team, we would have never gotten to our objectives.

Jeremy Au: [00:07:17] That's such an interesting transition. I'm curious, what other transitions does an engineer I need to have in order to transition from an engineer mindset to the roles that you just described?

Shaun Hon: [00:07:29] I think when I first started out, what was most uncomfortable and also unexpected was the amount of people I needed to speak to. So, I work with teams of four to six in an engineering company and most of the time I stare at my screen 12 hours a day, coding. When I moved to the venture world, I was doing the exact opposite, which is to talk to founders eight hours a day. I'm just out all the time trying to understand people's businesses and trying to understand it from a different perspective. I think that part completely caught me off guard and I think that's one of the things that I think most engineers would not be super aware of, moving into the venture space.

Jeremy Au: [00:08:10] How did you accommodate that shift over time? Such a mentality accompanies the job shift, how did you come about and improve yourself to come to terms with that change?

Shaun Hon: [00:08:23] To be honest, Jeremy, I had really good role models here, I'm not going to lie. The few people that I can think of, the first person would probably be Yi Ming from Tribe Accelerator. He is an amazing individual because he's super congruent as a person, where his thoughts and his actions are so aligned, and he understands what he needs to do. And he's shown me time and time again, how much stamina he brings to building his own business. The other person that has taught me a lot is Gavin Teo from Altara Ventures, the previous partner B Capital. Every time I speak to Gavin, he has this amazing ability to make me feel like I'm a million dollars. I try to take that with me as a reference point when I speak to other founders as well. In short, I've had really good people around me that have shown me how it can be done and how it should be done.

Jeremy Au: [00:09:15] You shared a few of the challenges that you had in changing your mindset and transitions you've had to overcome. Are there any particular stories or experiences about adversity that you overcame?

Shaun Hon: [00:09:26] Yeah Jeremy, I think one of the values I'm always trying to remind myself of is to be vulnerable and to be authentic. One of the adversities or hurdles that I personally used to face was my desire for external validation. In essence, I felt the need to be significant, to be important and to be seen. And I would compensate by doing things that were ambitious, challenging, or were perceived to be the right thing to do because I wanted that validation, whether from my parents, my family, my friends. And I'm talking a little bit about this because I don't think I'm the only one that goes through it, especially coming from an Asian upbringing. I think we live in a society where our identities and our values are not found easily because our attention is caught up elsewhere.

We're so excited about all the accolades that we receive and the news of people's success in the media. Not knowing who we are makes it more difficult for us to be grounded as individuals. I'm really fortunate that I've had many coaches and more recently engaged a personal coach earlier this year to help me work on the issues that I face. It's largely a process to show me where my blind spots were and where they were dissonant in my thoughts and my actions, and slowly integrating that together to be more congruent as a person.

These days I take a step back in decisions and especially big ones that I make and the things that I do, and really question why I'm in this particular job or project or work and try to be as honest as I can with myself, if I'm doing it for external validation. Which I would like to start doing less and less of or like to stop doing more off. My litmus test today is questioning the intent of my action, am I doing it to appear to be smart? Am I doing it because I'm after a truth or a personal mission? I find that the more I align my personal growth with the work I'd like to learn and do, the less I worry about external noises. And so, this is my work in progress to being more authentic as a person.

Jeremy Au: [00:11:36] That external validation is very much a big feature in the technology world, right? Founders are in the press, VCs are in the press for their insights, just fed by social media and the press and what we tell each other. In the conversations that we have it's like, "Oh, did you know A person raised? Did you know B person raised?" How do you think about advice you can give to people who are trying to come to terms with external validation as the metric that we all seem to hear, versus the internal traction and progress that needs to be made on the actual business and the work itself?

Shaun Hon: [00:12:14] I think it's a misconception to decouple the system, and you almost have to view it in totality, right? What appears in the news and the work being done behind the scene has to be considered together. The misconception people bring, or view the space that we're in, whether startup raising money or being in the VC space, is that it's super prestigious. Because from the outside, like you said, there's so many great news about people raising bigger funds, people raising bigger series A rounds, B rounds, and these are fantastic news.

But I think what people are not cognizant about is the fact that those are signals of the beginning of work. So, if a VC has raised a new fund, there's a lot of pressure on deploying it into the right company and returning capital to LPs. If a VC has invested money into a company, they're now in a contractual relationship with this company for the long run, whether up or down, a sickness of death, 24/7, COVID, nor COVID, it's basically a marriage. So, I think what it is, it's easy to look at the landscape we're in and think it's amazing. But if we think about the work that needs to be done and view it as a totality, that's a more moderated view and more objective reality of the landscape.

Jeremy Au: [00:13:32] What support or resources would you recommend for people who are considering a journey similar to yours?

Shaun Hon: [00:13:39] Jeremy, this is my favorite question, man. First of all, I should obviously subscribe to the Brave Dynamic podcast. Secondly, this is something I think about a lot. I like reading, I read a lot of books and one I recommend alot is Hard Thing About Hard Things by Ben Horowitz. It's a detailed and humanizing encounter of Ben's time building companies. And we go back to people talk about the pros of starting a business quite often, but Ben talks about the difficulty that confront leaders every day when they're in that position.

The other one I really enjoy is the Tim Ferriss show. It's a podcast by Tim Ferriss, where he interviews world-class leaders and experts on their mindset and tools that they used to get to where they are. Probably not all episodes are relevant because he interviews a wide range of audience, so we'll have to pick themes that we enjoy and start from there. The other personal thought to resources and what people can do to get on this is, be super clear about the kind of people you want to surround yourself with, because these people shape a lot of who you are. The best way I found to do it is to define what values are important to me in my life. Some of mine are giving something a hundred percent. Don't do things halfway. Keep learning and growing, continuous development and be outcome independent, meaning don't control what I cannot control.

Knowing what I'm looking for helps me find those people easier, keep them in my life. This is so valuable for me because I'm looking to build more compounding relationships over time. Because the more compounded a relationship is, the more trust there is within. And that's important to me because I recognize that there are commodities of mine that are diminishing as I age. My work stamina, the attention I can allocate for a project, my time. And I find that my life gets exponentially easier when I can trust that someone's got my back and it's easier to build with people, I share the same values with.

Jeremy Au: [00:15:37] That's amazing. You've been helping pioneer venture building in the region and it's a new term for many people in the industry and even globally. How would you define venture building?

Shaun Hon: [00:15:50] In my view, venture building is a step to make innovation more predictable. Which is also the journey I'm on, is to find more consistent ways to add value into ventures. I'll take you through my thought process. If you think about venture capital being the 1.0 model and their value add is effectively capital, they can deploy a huge amount of capital very quickly into companies. The question I have is once a venture capitalist has invested into a company, are these companies growing because the VCs are continuously having more and more input to them, or are these companies going to grow regardless of the input of the VCs? I think venture building is that 2.0 model where they bring capabilities to build a new venture. It brings in the product development expertise for ventures to leverage off and this is a slightly better, predictable driver of innovation.

The next step at which most companies are stuck after they've built the product, it's the product market fit. A lot of time is spent trying to find that fit and unless that fit is found, it's difficult for a startup to take off. What I mean is, you can build really quickly, but take a long time, say six months, to realize what you've built is not a fit. Then you've lost many, many, many months’ worth of cash runway, and those are outcomes that kill a business. I'm interested in short-circuiting that process as much as possible.

This is where I think the 3.0 model comes in using corporates as an unfair advantage. Corporates have a large amount of assets that allow startups to quickly test against, to iterate and find that product market fit. For example, if I wanted to run an IoT hardware play on ships, through partnering a corporate that manages more than half the world's fleet, I can test if there's a fit quickly through their access. If there's a fit, I can distribute it quickly. If there isn't, I can also go back to the drawing board to start again. What this buys is it buys me time. This is largely my journey to find a more consistent way to drive value into startups using the 3.0 model venture capital, venture building and corporate assets.

Jeremy Au: [00:18:03] Venture building, obviously it requires a certain amount of intentionality around what is to be built and what the future holds. Are there any particular problems or trends that your team at Rainmaking is particularly interested in?

Shaun Hon: [00:18:18] That's absolutely right. I think in the transport space, fortunately or not very fortunately, it's a pretty legacy-heavy industry. What that means is that there are other industries that has innovated before the transport space, so the roadmap of which we can go is pretty clear, or at least there's a direction to the roadmap we're going to go. For example, in land transport, now I'll use a Singapore example, it's so easy to order food, to get taxis. We can do it via our phone. In the shipping industry, there is no signal on ships. It's so crazy to think about. Imagine if you received your parcel today and that was recorded on pen and paper, that's still being done in the transport space. There's very little form of digitalization. So, getting to that step is a crucial piece for the maritime sector.

This ties in a lot also to the resilience of supply chain. We've seen COVID affected that quite drastically where, for example, an autonomous robot company that's looking to buy battery has to order it from China and that the supply chain is broken. For the last many, many years, we've been so fixated on efficiency of the chain, such that we've built a chain that's very cost effective, but it's not very robust to external shocks. What I think a lot of us are changing towards to, or where the world will go to, is a domestication of production.

I think with that said, so 3D printing, the ability to produce the things that you need locally becomes so important. And decentralizing that chain a little bit, such that if one source fail, you could still get it from multiple different sources. This without a doubt will make cost of goods go up a little bit, but at the long run, it weathers shocks so much better. So that's a little bit what we're seeing in the space now and what we're building towards as well.

Jeremy Au: [00:20:22] There seems to be a war between the incumbents and the disruptors, right? Those that have the whole legacy infrastructure, the operations, the expertise, the Goliaths And then we have the Davids right, we see the VC's funding small startups that are starting from scratch and recreating last mile delivery, recreating their own networks. How do you think this story plays out?

Shaun Hon: [00:20:46] With corporate venture building, a large part of our thesis is what if there's no battle between the incumbents and the innovators? That's the whole point of combining innovation, which is startups and corporate assets. We've seen a huge amount of support and willingness to work together from the corporate partners that we work with and some of them are Wilhelmsen, Mitsubishi, Cargill, some of these global players.

At first, I think the concerns were, will players come together to work on a problem because it's competitive? And the more we went through the workshop, the more we went through the process, what we realized is that people wanted to come together to tackle a common problem. One of them is decarbonization, the other is supply chain resilience and we're seeing so many corporates, incumbents in this case, willing to work with startups to find better ways of doing things. So, in our thesis, there is no battle. In our thesis there's a real surreal co-creation going on and there's real collaboration going on.

Jeremy Au: [00:21:54] Who do you think is going to win? David or Goliaths? Are that David and Goliaths are always going to be buddy-buddy, happy-happy?

Shaun Hon: [00:22:03] The thesis here is that we are venture building companies that can be potential revenue generating business units for the corporates. So ultimately whatever business units these corporates have cannot weather the storm indefinitely. So, 10 years down the road, 15 years down the road, their revenue will continue to decline so they need new innovative business units to come in. By working together from the get-go, these new startups over time can potentially be acquired and integrated into corporate themselves. 

Jeremy Au: [00:22:41] So David and Goliath teaming up to beat up another Goliath, right?

Shaun Hon: [00:22:45] Climate change, exactly.

Jeremy Au: [00:22:46] I think a big frustration for so many startups is that they reach out to corporates and corporates have those conversations. We say, " Oh, we have this thesis. We would like to do that," and then it drags on, right? It becomes conversation after conversation, of politics to manage through. A lot of startups are basically saying, "Forget about partnering up with big guys upfront, let's go smaller or let's build it ourselves using VC money to replicate our stack because the alternative is waiting on corporate champions that don't show up." What do you think about that?

Shaun Hon: [00:23:20] I think from a building perspective, it's a tradeoff that should be considered. I think one has high-risk, which is to build it yourself and then it comes back into if you can find product market fit really quickly, that's great. The other one has lower risk, but you deal with a lot of, like you said, policies internally and some red tapes. What we try to do is to minimize that as much as possible. And that is by putting decision-makers on the table with this and people that have already aligned in objective that we want to do it. If that isn't clear upfront, then every subsequent step we take becomes very tricky. We really try to do that by making the startups work with decision-makers from the get-go.

Jeremy Au: [00:24:05] I think that's really underappreciated, which is the fact that you're getting lined up with decision makers. They've already made a commitment via your team on the problem and making the specifications about how they would define success. I think that's underappreciated, by founders, because they had to either do it themselves and hopefully they have enough domain expertise and industry connections to do it, or in your case, you serving it up on a platter for a team to go forward. It sounds like a good deal for corporates. They work with you to structure problems and say, "Hey, give me 5% savings on this, or 20% revenue upside on that." What's in it for talent and to join your team to go for this?

Shaun Hon: [00:24:51] That's a really insightful question, man. the talents that we're targeting is a very specific segment. More concretely, the talents that we're targeting are previous C-suite executives in the transport space themselves, where they also have the network, but more importantly, also understand how to navigate that sort of landscape really well. So conversely, if you brought someone in their 20s that would be very suitable for a different incubator accelerator, they might not thrive as well in the corporate venture building space because that requires a certain amount of corporate experience behind it, so we're really targeting very specific user profiles.

What's in it for them is that they still get to take on their C-suite position and a new venture, but they get so much more upside this time for making it successful. And that sort of de-risk model and set up is appealing to the users that we work with, or the talents and intrapreneurs and entrepreneurs that we work with.

Jeremy Au: [00:25:56] People who are looking to explore venture building as their next gig, what advice would you give for them to be successful in that realm?

Shaun Hon: [00:26:04] I think what's really important is to have a skin in the game mentality in the approach to the work that you do. I think it's really hard to enter the space if you didn't have a lot of operational background, if you didn't know how to build a product or a company. I think the kind of mindset to not adopt is to say, "Hey, I want to come in here to learn how to do it." I think you're almost better off, coming back to skin in the game, it's being accountable to yourself, learning all the different things that make a startup work. And then bringing a specific expertise to the table to help drive value.

I speak for myself. My specific background is building products really quickly, building it really well and building it in a scalable manner. I think it would be a very awkward conversation if I came to the table and say, "Hey, I'd like to join the space I don't know how to do it and I want to learn," I think that's a fine approach. I think that just isn't a very strong position to put yourself in.

Jeremy Au: [00:27:11] Wrapping things up. If you could go back 10 years in time, what advice would you give yourself?

Shaun Hon: [00:27:18] I think 10 years ago I was very timid and very conservative, and I was really afraid of being rejected or getting punched in the face. So, the advice I would give myself really is go back, be okay, be brave, try it, fail, fail again, fail faster. And the faster I fail, the more I learned from it and that is completely okay. It's completely okay to not like the process, but it's not a good reason to not do it. That's the advice I'd give myself, go back and get punched in the face more.

Jeremy Au: [00:27:50] Awesome. Thank you so much for sharing your experience and about how you got punched in the face and how you're kicking ass now.

Shaun Hon: [00:27:58] Thank you very much, Jeremy. It's super nice to be here.