An Investor Who Sees The Future

Before the start of classes, I was thinking of coming to Hong Kong to meet Hyunjoo and Ellie once. However, the regional manager of Golden Gate Asia wanted to meet us. He doesn’t know much about us, but he knows that OTK Company is a client of Hyunjoo’s (since she has processed everything through her from opening accounts to subsequent matters).

So, he hinted at wanting to meet through Hyunjoo, and I gladly agreed because I also wanted to meet him. The old man welcomed us warmly.

“Nice to meet you. I am Chase Southwell.”

We also greeted politely, “Nice to meet you. I am Kang Jinhoo,” “Hello. I am Oh Taekgyu.”

We took our seats at a table where dozens could sit, and a male staff member who appeared to be a secretary brought us coffee and tea.

“Thank you for accepting the invitation. Did you have any trouble coming here?”

“Thanks to you, sir, we came comfortably.”

The old man said cheerfully, “It’s better to call me by my name rather than my title.”

Hyunjoo and Ellie sitting opposite us seemed tense. It seems uncomfortable to be with a CEO whether it’s a Korean or a foreign company.

No matter how much she is Hyunjoo, how often does she meet separately with a CEO?

Thinking like that, I also feel unnecessarily tense.

“Wow! The view here is fantastic. You can see all of Hong Kong at a glance. You work in a great place, Sister Hyunjoo.”

“…”

It’s not like he’s a baby who came to visit his mom at work.

When Hyunjoo frowned at him to be quiet, Taekgyu quickly shut up.

Seeing their reactions, Chase chuckled. “Since this is not a formal meeting, you can relax.”

Taekgyu spoke kindly in English, “Is that so? My older sister is too feisty.” Hyunjoo, with a more impressive demeanor than before, remained silent in front of the director. Confident Taekgyu made a joke and Chase chuckled along.

“Do you know I always get scolded by that sister of mine?”

“Haha, I also get scolded by my wife when I get home.”

In this moment, they appeared as amiable as foreign grandfathers. However, appearances can be deceiving.

Golden Gate has five heads including the major shareholder and CEO, James C. Goldman. One of them is Chase Southwell, responsible for the Asia branch. He is a legendary figure in the Asian finance industry.

Though not widely known to the public, anyone with a slight interest in current affairs would be familiar with his name. Chase arrived in Hong Kong in the late 1980s during Asia’s growth. Despite suffering losses during the Asian financial crisis, he argued for increased investment in Asia.

CEO James empathized with Chase’s viewpoint and fully supported him. This allowed Chase to purchase distressed bonds and stocks, leading to substantial profits as Asian countries overcame the crisis.

Golden Gate’s success in the Asian market can be credited largely to him. His influence in Korea is significant, handling all of Golden Gate’s investments there.

Though his personal wealth may be less than ours, his impact on the global economy is unmatched. With a single word, he can move billions of dollars.

If he were to reduce investments in Korea or make negative remarks about the country, the Korean stock market would be greatly affected. So, why would such a prominent figure want to meet us?

The reason is simple.

It’s because we have also become somewhat of giants.

***

If a year is short, it’s short, and if it’s long, it’s long.

We have traveled to various cities around the world, seeing and learning many things.

I have constantly been learning about the world and finance. My English has also improved so much that now even Ellie compliments me on my good pronunciation and expression.

Fortunately, Taekgyu has also managed to speak English decently. Koreans receive education in English from elementary school to high school for 12 years. Thanks to that, essential words and basic vocabulary are already stored in our minds.

We just don’t know how to retrieve and use them. Thanks to this, after setting a goal for about a year, I have reached a level where I can have conversations quite comfortably.

As we have been traveling and studying, the global economy has been changing rapidly.

The term “Fourth Industrial Revolution,” which was once used by a few, is now known by everyone. Most experts predict that the changes that will occur in the next 10 years will be greater than those of the past 100 years.

Governments and businesses have set out to find future opportunities to survive in the ever-changing industrial environment.

And…

The startups we invested in have grown explosively.

Startups thrive on dreams. They don’t need to make profits right away. They just need to show that they have the potential to succeed in the future.

But it’s difficult to demonstrate that.

Among the companies we invested in, not a single one is currently making a profit. Instead, they are incurring huge losses every year.

However, the atmosphere towards them has changed drastically.

Until then, investors who didn’t even bother to look at companies pleading for investments suddenly started coming to ask for investments themselves.

For companies to continue growing, continuous investments are necessary. And to do that, they need to generate revenue, take out loans, or raise capital from external sources.

Initial investments in startups usually involve founders selling their stakes. However, subsequent investments involve a slightly more complex process.

Previously, it was a matter between the founder and the investor, but after that, it becomes a matter among the founder, initial investor, and new investor. Additional investments are typically made through issuing new shares.

Company issuing a certain percentage of stocks (shares) and investing money by having new investors purchase them. Naturally, the ownership percentage of existing investors is diluted accordingly. If this process is repeated several times, it is possible for the ownership stake of 50% to be reduced to 10% or less.

To prevent such a situation, we entered clauses in our investment contracts that do not interfere with management at the time of agreement but include restrictions on new share issuance and holding preemptive rights. Issuing new shares at a low value was to prevent dilution of ownership stake.

If you were to pick the fastest-growing startup among dozens, surprisingly (or perhaps unsurprisingly), it would be Facit.

Facit used the investment funds we provided to build servers and establish partnerships with production companies. The number of users exploded, leading to more refined recommendation algorithms as data accumulated.

To find the porn you want without scouring the internet, all you have to do is enter your favorite actors and preferences on Facit.

In just one year, Facit quickly penetrated the global porn market. When searching for porn on search engines like Google, Facit’s site is prominently displayed.

A well-known American content company, noticing Facit’s explosive growth, proposed an acquisition with an offer of a whopping $400 million.

Facit declined the offer. Instead, a few months later, they raised funds by issuing 10% of new shares and secured a $95 million investment from a private equity fund. The fund valued Facit at $950 million, leading to the transaction.

Our ownership stake decreased from 48% to 43.2%, but the value of that stake grew. Similar situations played out in dozens of other startups, some seeking investment while others sought acquisition.

Investors might have been bewildered. When considering investing in promising startups, it turned out that substantial portions of ownership were already secured by unknown entities.

Thanks to this, the name of OTK Company became widely recognized, surpassing investment banks, hedge funds, private equity firms, sovereign wealth funds, and large corporations.

The combined value of the companies we invested in is roughly evaluated at around $10 billion.

600 billion becoming a whopping 11 trillion won. Of course, since valuing private companies is not straightforward, these are all estimations.

***

Chase looked at us and said, “I was surprised to hear that the two giants driving OTK Company were Jessica’s younger brother and his friend.” I smiled modestly. “You flatter me.”

He continued, “A couple of years ago, when I made $600 million from options trading in the Korean market, it was surprising, but I didn’t pay much attention. It was a highly risky investment strategy, and I considered it a stroke of luck for anyone. However, seeing the progress of OTK Company since then made me rethink.”

He preferred a long position investment strategy of buying low and holding long term over a short position. He seemed to highly appreciate our quick purchase of undervalued startup stakes.

Typically, investing in startups is considered a jackpot if one or two out of ten succeed. However, we succeeded with nine out of ten. The one remaining had yet to show promise, not a failure.

“I really wanted to meet these individuals with such outstanding insights at least once.”

Just because Warren Buffett has been consistently profitable for 50 years and George Soros had legendary wins in the forex market, no one considers them to have superpowers. They are just thought to have a superior perspective on the market.

Thus, Chase was purely amazed by my talent. With all the praise, I started feeling a bit guilty.

“I feel the same way. If I said I’ve met Golden Gate’s Chase Southwell in person, everyone would be envious.”

Opportunities to meet legendary investors in Asia are not common. Senior Sangyeop pleaded to bring him along before I came here, but unfortunately, I was too busy with work.

“The head of the department at the university I attend is a passionate fan. Both the undergraduates and the club members are.”

Chase was pleased with my words.

“Really? Then we should hold a signing event at Jinhoo’s school.”

I nodded earnestly, “I will organize it once.”

“Thanks to you, I have an excuse to take a vacation and visit Korea.”

We talked for two hours. As time passed, our conversation drifted away from finance topics to just casual chitchat.

Taekgyu talked about which recent movies were funny and which games were trending, while Chase bragged about how cute and lovely his son’s family who work as professors and his twin granddaughters were.

Unlike us who were relaxed, Chase had a busy schedule.

Chase stood up with a disappointed look on his face.

“I am very optimistic about the future prospects. Golden Gate hopes to continue working with OTK Company.”

“We feel the same way.”

“We are fortunate to have Jessica connecting Golden Gate and OTK Company. She is a valuable asset to both sides.”

Upon the chairman’s praise, Hyunjoo awkwardly cleared her throat, and Taekgyu, saying, “She is indeed a precious sister. Anyway…” received a cold stare.

It seems they don’t expect a follow-up meeting after this one.

“Perhaps there will be good news for each other by the end of this year.”

“What kind of news?”

With my question, he chuckled generously and said, “It’s not confirmed yet, but you can expect good news.”