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The Startup Guy

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The legend goes that in his youth amateur wrestler Darcy Lalonde went one-on-one against Bret Hart. Others claim the vigorous Canadian almost did pro-hockey.

It is hard to tell these days how much the towering Lalonde’s past remains a part of him. Rather than pursue athletics, he got an MBA and plunged into Asia instead.

As a hardened veteran of global business, Lalonde has more than a few feathers on his cap.

In 2001 he co-founded NorthgateArinso, a pioneering human resource firm serving the then nascent business process outsourcing (BPO) sector. He also worked for top-ranked private equity giant KKR (Kohlberg Kravis Roberts) for a while before his current gig in DML Holdings and SHORE Solutions.

“I was too entrepreneurial in KKR,” he confesses. “I was called a cowboy. Now I’m called the corporate guy.”

Lalonde, who kick boxes to stay fit, willingly shares his experience as an entrepreneur and investor who built a career in the Philippines.

As guest speaker at a prestigious business forum and networking event, China Business caught up with the gregarious Lalonde, who was willing to talk at length about his work.

In the ensuing conversation, he talked about how to make it in Southeast Asia’s most bullish economy, the BPO gold rush, and why retirement gets old fast

What did you learn from your experience in private equity?
As an equity player, it’s all about models. [Lalonde shares a story about how KKR once wanted him to downsize a company.] I told them, “If you’ve got the money to pay for the private jet, then let’s talk about models here.”

In private equity, trend lines that go up are good. After the global financial crisis, private equity went “What do we do now?” Debt is hard to run these days. The stock market doesn’t really value a company in terms of its revenue.

Based on your experience, what allowed you to be successful here in the Philippines?
I guess my hero is Warren Buffet. What I like about him is he actually has a passion about business.

I was surprised by some of the e-mails warning me about the Philippines. I never paid anybody anything.

You need to get good local people who are trustworthy and experienced. My whole little network here is with people who’ve worked together. I think what’s important in business is for your ecosystem to span beyond the company.

Entrepreneurs don’t take orders very well. [Laughs]

Can you name the aspects of the Philippine business climate that make it exciting for international entrepreneurs?
The US is recovering. The EU is struggling. Southeast Asia is bullish. [Lalonde points to a graph on a presentation slide.] What we’re showing here is the inflow of cash in Asia. What we’re seeing is a nice trend going up.

Asia is where it’s at. With a million dollars in the Philippines I can start a business. A million in Canada and I can rent office space and hire sales staff.

The Philippines has had a great 2013 so far. The country is internationally getting a better reputation. Inflation has to be watched out for. It can blow economic growth right out the window. Why are funds investing here? The returns are good and the risk isn’t that big.

The Philippines is still easier with startups. Thailand is unpredictable. Indonesia can change their business laws dramatically. Singapore is expensive. In Canada, every dollar I made the government took half of it.

What other attractive features does the Philippines have?
It’s a western business model here.

I think the present administration has done a good job of putting international investors at ease. The World Bank says the Philippines is a top destination for foreign investment. There’s political stability, a low inflation rate, a large young work force, and the English skills and work ethic are great.

HSBC believes the Philippine economy is among the top 20 economies in the world. Why the Philippines? The fact that I live here is pretty important. I do business here.

What keeps you excited about the BPO sector?
I personally believe BPO and tourism is what the government should focus on. I can’t wait for those houses and condos along the Pasig river!

I think the BPO sector is doing well. Tourism still needs work. We should be able to outclass Thailand.

[BPO made] Php 13.4 billion in revenue last year. New cities are opening up. There’s been a 27.56% year-on-year rise from 2004 to 2012. By 2016, 1.3 million people will be employed with a commensurate rise in office space.

The average age of Filipinos is young. The most important thing is to give the education to bring them to the middle class. The per capita income here is US$3,681.

In your presentation you mentioned critical success factors. What are they?
It’s important to set up your legal entities properly and hire a strong local team. Don’t think you know it all. Surround yourself with people you can trust.

Sit down and draw your revenue and your baseline costs. Set up your company properly. In today’s world, cash is king. Banks won’t give you money despite low interest rates.

Ask yourself: How much money do I need to keep running? Small companies can grow faster. With just 30 people you can have 100% growth.

If you come here you need to make sure. If the deal is too good, be careful if someone offers shortcuts. I’ve never had a problem doing business in this country. There are some barriers to doing business—a foreign firm can’t buy land.

It’s important to be involved in the local ecosystem. Join the Information Technology and Business Process Association of the Philippines (IBPAP) and chambers of commerce. Go to local pubs.

Get your proper visas. If you don’t, some people can make life very difficult. Shortcuts can get you into trouble.

Sometimes you need to pay a Filipino as much as you pay a foreigner. I hope Jonathan [Smith, co-founder] and I can walk into the sunset while a Filipino CEO can run SHORE Solutions.

You’re actively involved in startups and lead an investment firm (DML Holdings). What exactly are you looking for?
The good news is there’s a lot of activity going on now. We want to find companies that are entrepreneurial and cash positive.

We’re not that hung up on IT. I like tourism because of the resorts and hotels I visit.

Our sources tell us you own a beach resort and plan to retire permanently. Why do you still work?
It got boring. [Laughs]

Print ed: 08/13


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