The Grey Space: Where Unicorns Dwell

The following are my presentation notes for my workshop on the 28^th October 2021, at Social Collider Toastmasters. 

Conventionally, a grey market is an unofficial market for financial securities.  Grey market trading occurs when a stock that has been suspended from trades off the market, or when new securities are bought and sold before official trading begins.  The gray market enables the issuer and underwriters to gauge demand for a new offering because it is a “when issued” market.  The gray market is an unofficial one but is not illegal.  The term “grey market” also refers to the import and sale of goods by unauthorised dealers; in this instance as well, such activity is unofficial but not illegal. 

The question now is, what is the grey space?  The grey space is the area of opportunity where an investor identifies a need before it becomes apparent, or where a founder creates a market where there was none, to address that need.  Instead of looking for that grey space, create it.  This is where unicorns dwell.  This is a relatively new definition, in entrepreneurship circles. 

Identifying and exploiting this grey space is where opportunities are found.  This allows us to seize market leadership without the initial constraints of competition.  Consider these companies below. 

Airbnb, Inc. is an American company.  It operates an online marketplace for lodging, primarily homestays for vacation rentals, and tourism activities.  The platform is accessible via website and mobile app.  Airbnb does not own any of the listed properties; instead, it profits by receiving commission from each booking.  The company was founded in 2008.  Airbnb is a shortened version of its original name, AirBedandBreakfast.com.  Airbnb, Inc. is not a property company.  It owns no property.  Instead, it leverages on other people’s ownership, which means it has no cost on its balance sheet to maintain all that property.  It is a technology company, fulfilling a need most people took for granted – people wanted a place to stay, and not go to a hotel or somewhere commercial.  Their current equity is close to US$3 billion.  Revenue for 2020 was US$3.4 billion. 

Grab Holdings Inc., commonly known as Grab, is a Singaporean multinational company headquartered in Singapore.  In addition to transportation, the company offers food delivery and digital payments services via a mobile app.  It has since expanded into other services, following the “super app” model.  It is Southeast Asia’s first decacorn, a startup with a valuation of over US$10 billion.  As of May 2021, its valuation was just under US$40 billion.  Grab does not own most of the vehicles we ride it.  It does not own any of the stalls or restaurants we order our food from.  It addressed a need we never knew we had – getting a ride, and having food delivered to us. 

Amazon.com, Inc. is an American multinational technology company which focuses on e-commerce, cloud computing, digital streaming, and artificial intelligence.  It started as an online marketplace for books but expanded to sell electronics, software, video games, apparel, furniture, food, toys, and jewellery.  Amazon is known for its disruption of well-established industries through technological innovation and mass scale.  It is the world's largest online marketplace, AI assistant provider, live-streaming platform and cloud computing platform as measured by revenue and market capitalisation.  Amazon is the largest Internet company by revenue in the world.  As of 2020, Amazon has the highest global brand valuation.  Amazon is the creator of online retail, and it changed consumer behaviour.  Amazon’s current market valuation is almost US$100 billion. 

Microsoft Corporation is an American multinational technology corporation which produces computer software, consumer electronics, personal computers, and related services.  Microsoft ranked No. 21 in the 2020 Fortune 500 rankings of the largest United States corporations by total revenue; it was the world's largest software maker by revenue as of 2016.  Microsoft, the portmanteau of “microcomputer software”, was founded 1975.  As of 2020, Microsoft has the third-highest global brand valuation.  This company is changed the way we work and live.  Most importantly, Microsoft makes its money on the back of its cloud services.  Do you know which companies depend on those services?  Companies such as Apple, Amazon, Netflix and IBM.  Whatever revenue they generate, Microsoft has a share. 

Finally, we have WeWork.  We know now that it is a failure, but the failure of the organisation lay in its founder, not the idea itself.  WeWork is essentially a commercial property version of Airbnb, Inc. 

The entrepreneurship mindset is about the blue ocean of opportunity.  Blue Ocean Strategy is a book published in 2004.  It was  written by W. Chan Kim and Renée Mauborgne, professors at INSEAD.  It is the name of the marketing theory detailed on the book.  They assert that specific strategic moves create a leap in value for the company while unlocking new demand and making the competition irrelevant – finding that grey space.  They call it the “blue ocean strategy”.  Unlike the “red ocean strategy”, the conventional approach to business of beating competition derived from conventional notions of market leadership, the “blue ocean strategy” tries to align innovation with utility and cost positions. 

In the red ocean, where your competition lies, there are sharks feeding and the waters are red.  What you need to look for is that blue ocean, where there is little to no competition.  Sometimes, it means seeing things that are not there yet, that grey space, and creating that market.  You cannot grow a business doing what other people did.  You cannot build another Amazon, or Microsoft, or Grab.  What you can do, is build something new. 

An example of what I mean, in the local context, is the Red Sycamore Experience.  Red Sycamore Pte. Ltd. is a company built on an idea that we can succeed with just the power of words.  We have absolutely nothing.  We have no technology, we have no major funds in our pockets, we have not credentials in the field itself.  Our credibility lies in two areas: finance, and the ability to put things together in structures that benefit all parties.  In business, there is no worth in appealing to altruism, or charity.  We appeal to self-interest.  And everyone has a self-interest in succeeding. 

Our principal is an American corporation.  They are a group of MIT professors with over a thousand patents, and brilliant ideas for changing the world.  They specialise in carbon negative technologies.  For example, Tesla claims to be ESG compliant.  That is far from the truth.  The production of their batteries itself produces such a large carbon footprint that it rivals oil companies.  All that lithium has to come from somewhere.  They developed a graphene battery.  What Tesla is talking about: a million mile battery, a thousand kilometres on a single charge, superior production – These people can already do. 

However, their board are all engineers.  They have no financial architects.  That is where we came in.  We brought to their attention that going head to head with Tesla in the US would end in failure.  But if they moved their production and fundraising to East Asia, we could conquer the market here, and then bring that back to the US. 

We saw that grey space in creating demand here, in our backyard, because we understand the policy changes governments in this world are taking, and we want to be ahead of that curve.  We articulated that position to the board of Quantum Age, and we secured sole rights for this half of the planet – the half that makes money. 

We positioned the vehicles as part of Indonesia’s national car programme, and we are in the final stages of negotiations.  All those cars need materials, and that is where the Quantum Trees, specially engineered paulownia trees have a role.  They replenish nitrogen in the soil, making them a useful pivot for palm oil plantations in Java, who have lost the European market.  More importantly, they generate carbon credits.  Before a single tree has been planted, we have already lined up buyers for those carbon credits. 

Climate change and the global pandemic is a time of trial.  It is also a time of opportunity.  If there are not problems, there is no opportunity to provide solutions.  Climate change means that specific needs must be addressed.  There is money to be made in helping people.  That money does not come from consumers, but from businesses, governments, and the people who have the most to lose, the wealthy elite.  There are a lot of floating funds in the market, with no place to go. 

Where do you think are the opportunities now?  Which industries?  They are in the most basic of things, in food, and water, and living space. 

When we started this project, our team considered where this would play out in the next decade or so.  We understood the market, we understood investor sentiment, and we were willing to break conventions.  The old ways of doing business, the old ways of investing, they are over. 

We must always consider where we want to go, and we did not want a unicorn.  We wanted a dragon.  We wanted to raise over US$1 billion, and have most of those commitments on hand.  What we offered was a chance to be a first mover in market no one thought existed.  SPACs are merely negotiating tools.  Most of them do not have the funds to expand the business.  Listings take too long.  The smartest play for us is to create structures and sell them for a consideration.  When you have hundreds of millions in tax exposure, like many do in Southeast Asia, the market is ripe to create vehicles for them, while leveraging on their funding. 

Where is your blue ocean?  Where is that grey space you can see?  Can it be scaled up?  Is it replicable?  Can you create a strategic bottleneck that you control?  When you can find that, you have the opportunity to create your own unicorn.