Alumni of the Month: Conrad Tsang (BEng EEE)

Engineering education leading to different directions and opportunities

Conrad, the president of the Hong Kong Venture Capital and Private Equity Association with a wealth of over 20 years of experience, shares with us on how his Imperial Engineering education, albeit not directly relevant, has been instrumental throughout his career and advises our recent graduates on how to prepare for the next opportunities.

Can you briefly tell us about your academic journey?

I was born and raised in Hong Kong, went to boarding school in the UK, then Imperial College for undergrad studies in Electrical & Electronic Engineering in 1994.

After my 1st year at Imperial, I realised that I have interests broader than just pure engineering, so in the remaining years of the degree I signed up for many non-engineering modules such as politics, economics and accounting in order to understand how the engineering world interacts with the business world.

Graduating with a First Class Honours from Imperial, I went on to the University of Oxford for a 2-year Master’s degree in Management Studies, right before Oxford Saïd Business School was established.

How did the Imperial education help with your career?

After a stint in equity research at Merrill Lynch covering TMT around the internet bubble times (early 2000s), I had an opportunity to join a private equity firm. One of the partners was an MIT engineering graduate and valued my technology + engineering background, as it allowed me to understand the underlying technologies in the deals.

We looked at many technology deals around the world, particularly in chip design and communication hardware companies. When speaking with engineers and founders, we needed to be able to ask the right questions. My engineering background was then valuable in convincing these field experts as well as evaluating the investments.

By now I have been a private equity and venture capital professional for over 20 years. Up until today I still find the engineering training extremely helpful. It not only helps me understand the basis of latest technological advancements, but also helps me with logical thinking, enabling me to understand different businesses as a PE/VC investor. So looking back, my decision to complete the Electrical and Electronic Engineering degree at Imperial actually paid off.

What brings you from an engineering degree into the investment world?

Looking back at my career, I realised that very often when I got a job opportunity, it was somehow related to my engineering training that people appreciated.

I once had a summer internship with a fund management company, the first assignment was quantitative data analysis. I asked my mentor why I was assigned such a job. He replied saying it was because he wanted my “engineering head” to help with the analysis. After graduation, I first started out as a fixed income salesperson at an investment bank. Unfortunately the Asian debt market was wiped out after the Asian financial crisis in 1997 and the economy was really bad at the time. I had no choice but to look for another job, switching to equity research at Merrill Lynch Asia Pacific.

Sometimes you might be idealistic and want to stick with your current field, but circumstances may not always allow it.

During the internet bubble in the late 1990s, many companies would just add “.com” to their names and become internet darlings overnight, with stock prices rising 10 folds in a day. That was when the first wave of angel investors started investing in venture capital and private equity. Most people did not know what venture capital and private equity were; these were very new concepts in Asia.

Owing to the demand for finance professionals who understand technologies, I was given a chance to join a PE firm in Hong Kong.

So on one hand, it is the circumstances that led to opportunities, but on the other hand, it was my experience and background that drove me to the current direction.

Apart from switching fields, did you go through any other major career movements and why have you made that decision?

Another interesting change was my geographical focus. After the internet bubble burst, many people retreated from the US stock market. Around the same time, China was admitted to the WTO and we saw strong GDP growth in the region at 11-12% a year.

At that point there weren’t that many people doing investments in Chinese companies, some banks even lacked China focused coverage. For me, from 2002 I decided to focus on China investments owing to its market size, high growth, young demographics and the opportunities brought by China’s admission to the WTO. The market then was not competitive as there was not much capital in the market and companies were hungry for money.

Between 2003 and 2012, we invested in traditional companies like retail and restaurant chains, whose revenue would be growing at 40% every year. You were able to invest at 8-10x earnings (P/E ratio), added value by improving operations and corporate governance, eventually taking them public, we could often enjoy a 3-4x return. So overall, we had a very exciting journey in taking Chinese companies public, which has become a common phenomenon today.

Is there a landmark deal in your career?

I happened to come across a coal-mining company back when China was turning from a coal exporter to an importer for the first time in history. The company was at a very remote part of China; you could either take a 12-hour train, or a small domestic flight to get to that mountainous area.

The airport was at the top of a hill with a very short runway and the area was misty and raining all the time. Had the pilot not been careful, he could have overshot and crashed the small plane. Most people didn’t want to go there but I went. I’d even say I risked my life to arrive at that place, not to mention going down the mine with the engineers, when many mining accidents were happening at the time. I still remember going down a tunnel in the mining lift and the entrance getting dimmer and dimmer until there was total darkness.