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Peter Lynch, who has an extraordinary appearance that exudes the aura of a genius and has become more familiar as a meme or GIF, is a fund manager who represents the boom period of the US stock market in the 1980s. While managing the largest public offering fund of the time, he expanded the horizon of the indirect investment market with overwhelming performance (annual average +30%) and contributed to putting Fidelity, which he was a part of, on the throne. (Contrary to popular opinion, he thinks he is second and Anthony Bolton of Fidelity Europe is first. If you enjoyed Peter Lynch's book, I recommend reading Bolton's book as well.)
His achievements are great, but the reason he is constantly recalled across time is probably because of the books he left behind. All of his books are classics, even bibles, that explain various investment principles and theories in a fun and intuitive way based on his own experiences. (By the way, he was the first to use the expression 10 beggar, which seems to be used more in unlisted VCs, especially in the early market.)
The reason I've brought Peter Lynch here out of the blue is to introduce you to a place that surprisingly fits his definition of a "perfect" (and not just good) investment company.
Korea Spatial Data is a company that mainly provides building management (Facility Management; FM) services, including cleaning services (more simply, building cleaning) under the brand name Cleaner.
First, Lynch's criteria for the 'perfect investment' are summarized as follows:
1.
The company name is boring and ridiculous
2.
A boring business
3.
Abominable business
4.
Spin-off
5.
Non-institutional ownership & non-coverage
6.
Conspiracy theories (related to toxic waste or the mafia)
7.
Gloomy business
8.
Stagnant growth industry
9.
Secure a niche
10.
Repeat purchase
11.
Technology based
12.
Insider stock purchases
13.
Buy back own shares
When you peel back the layers, or when you look closely, there is a market with a huge business opportunity, and someone is quietly moving ahead, but this good opportunity is ignored due to bias or ignorance engraved in human DNA. That is the perfect investment opportunity.
Except for items 12 and 13 (which are difficult to apply to unlisted, early-stage startups with a short history), I think that Korea Spatial Data satisfies all of these criteria or even has a better foundation.
Let's take a quick look at each one.
1.
There aren't many legacy companies that start with the country name of Korea, and even if you add something to the end, it's old. Even a combination of the three nouns Korea/space/data... there's no room for disagreement.
2.
Basically, it is not a business that will hit the jackpot if you wake up overnight. It is a very operation-heavy business. Even if you do it, it is only to a certain extent. In the ChatGPT era, cleaning a building is the same.
3.
An example of a lynching was a waste management company. Korea Spatial Data also processes several tons of waste per day.
4.
Lynch cites Nokia as an example. It started out as a lumber company that spun off a wireless terminal manufacturing organization as a subsidiary, but since it wasn’t its main business, no one was interested, but it steadily pursued the business within an independent organization and hit the jackpot. Korea Spatial Data also has a subsidiary that experiments with two different BMs (while simultaneously strengthening its current BM).
5.
It can be interpreted as not being hot in the investment scene. When I introduced this team to other VCs, there was zero response like, "Oh, it's so good?" I even saw responses like, "I'll never see you again."
6.
In the early days of the business, even proptech startups that were in the same industry were very skeptical about the service. It may not be a conspiracy in some ways, since they clean up trash and toilets.
7.
It is a business that has existed since the moment the building was built, but there is no company that comes to mind. It is close to the realm of self-employment from the beginning and it is difficult to create a scale.
8.
Almost the only case that created scale was the case where a large corporation's affiliate handled the group's workload, but without exception, growth stopped and now it is illegal to hoard work.
9.
There is a fairly large niche market because of situation 8, and it can grow quite large because of reason 7. New businesses such as shared offices/kitchens are a bonus. Existing companies still focus only on common areas.
10.
From large corporations to top-ranking companies in each category, our customers are using our services without fail.
11.
With our self-developed software, building owners can check the condition of their buildings and manage workers' to-dos more efficiently.
From a top-down perspective, the market situation is much better than expected. The FM (Facility Management) market, which is the primary target, is a 220,000-unit nationwide (+3% y/y) building with 6 or more floors that must have a manager, and if the monthly management fee for the building is 20 million won, the scale is 4.4 trillion won. The number of buildings nationwide is 7.2 million, and the target scale is tens of trillions of won. The proportion of small cleaning companies is very large, but the market leader is growing rapidly (annual sales of 1.3 trillion won, 10 times growth compared to 2008), and is properly showing the possibility of corporatization.
The point of differentiation is also clear in terms of business. It is to competitively provide all the solutions that customers want and manage them based on software, thereby maximizing LTV and achieving an overwhelming customer experience.
We have overcome the practice of separately managing common areas (stairs, elevators, etc.) and private areas (each company), and the practice of separately managing cleaning and supplies, and have advanced the ability to provide all services on a turnkey basis, and even cover services other than cleaning (repairs, moving, etc.), and cover all of the processes from inquiries to confirmation through the app. There is still a long way to go, but it is growing by more than 20% every month and is even taking on the appearance of a mid-sized company.
Markets and business opportunities are important, but ultimately, people are important, and this is especially true when it comes to running an excellent business while comprehensively persuading stakeholders across a variety of offline sites.
How about a combination of a smart CEO (CEO Hyunwoo Kim graduated from Princeton and is currently working at global IB and PE such as Barclays and KKR) + a great assistant (a childhood friend and co-founder who covers operations based on his experience in related startups) + a reason to succeed (I can’t give up a good career and hear people say that I failed by starting a cleaning business that even my parents opposed)? I’ll bet on the possibility that the result will be success.
Going back to the beginning again, Peter Lynch is also perfect.
Until the day when Korean spatial data dominates all buildings, BASS is with you!
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