Vertex Holding’s CEO on the lost art of killing bad ideas

This article summarizes an episode of Keith Yap’s video series featuring Chua Kee Lock, CEO of Vertex Holdings.

Chua Kee Lock, the group president and CEO of Vertex Holdings / Photo credit: Vertex Holdings

Chua Kee Lock, the group president and CEO of Vertex Holdings, rebuilt his firm by turning a multi-million-dollar mistake made by his China team into a success in Southeast Asia. This event shaped his investment strategy, which relies on a network of local teams to separate real opportunities from market hype.

The illusion of ‘spray and pray’ investing

It’s easy to get the impression that venture capital is just a numbers game, where investors spread small investments across a wide variety of startups. According to Chua, this pressure to invest quickly becomes even more intense during market booms.

Investing in startups is not a simple game of odds
Chua says this idea is “the furthest from the truth.” He believes that while the business might seem easy on the surface, as if “you just spray enough company, hopefully you hit one,” the reality is much different.

Speed over caution
During the 2021 market boom, investors felt pressure to make deals incredibly quickly or risk missing out. Competitors were closing multiple deals a week, and even Chua’s own team would argue, “this is a different century. This is a different generation… today is about doing investing in the fastest pace and trying to make sure you don’t miss out any good idea.”

Avoiding bad ideas is the forgotten job
In response, Chua would bring them back to a core principle, reminding them that “in our business it’s important to invest in good ideas, but it’s equally important not to back bad ideas.” He notes that this second part is “always forgotten.”

An idea must first pass a reality check

Before looking at a founder or market, Vertex’s first step is to determine if the product can actually be built.

Huge potential doesn’t matter if the product is impossible
Chua explains, “You have to have the basic knowledge and basic science to understand whether this is doable or this is sensible.”

He notes that someone could pitch a portable time machine and the “number of potential customers is probably in the billions,” but a basic understanding of physics tells you “this is not possible.”

This reality check applies to all advanced fields
“Same thing applies to semiconductor software and so on so forth,” he states. “Having some basic knowledge of science is important.”

Global insights require local connections

To properly evaluate founders and ideas, you need people on the ground. This is the core principle behind Vertex’s decentralized structure.

Chua believes you “must be able to have the good, strong local team seeing the opportunity in the right sector, invest in the right company, and help the entrepreneur build the company.”

A fly-in, fly-out model is ineffective
He explains the need for local teams by asking, “I can’t really fly in, fly out to the US every day to invest in the US. I don’t have the right network… How do I be a good advisor to the entrepreneur if I’m only available once a month?”

How a missed opportunity in China led to a win in Southeast Asia