Are SMEs Becoming the Next Frontier for Startup Talent? An Honest Conversation with Eric Koh

While the startup world often grabs headlines with its rapid growth and innovation, a quieter but equally exciting opportunity exists in traditional small-to-medium enterprises (SMEs). For Eric Koh, Co-founder and CEO of GenCap, a search fund focused on acquiring and managing SMEs, this lesser-explored space represents an untapped frontier. In this conversation with Elena Chow, Eric shares his journey from being a C-suite startup leader to building a search fund, the criteria for finding the right businesses, and how startup professionals can create value in the SME world.

Elena: What led you to transition from being a startup C-suite leader to founding a search fund focused on SMEs?

while startups in Southeast Asia struggled with product-market fit and burned through millions in funding, traditional MSMEs (micro, small, and medium enterprises) quietly thrived. These businesses make up 97% of the region's private sector and contribute 45% of its GDP.

Eric: My journey to co-founding GenCap was sparked by over a decade as a COO in startups across B2B SaaS, advertising, and payment infrastructure. During that time, I observed a recurring trend: while startups in Southeast Asia struggled with product-market fit and burned through millions in funding, traditional MSMEs (micro, small, and medium enterprises) quietly thrived. These businesses make up 97% of the region's private sector and contribute 45% of its GDP.

When I discovered the concept of Entrepreneurship through Acquisition (EtA), everything clicked. Rather than spending years chasing product-market fit, EtA allows entrepreneurs to acquire existing businesses with proven customers, stable cash flows, and established operations. It’s a de-risked entry point into entrepreneurship.

In Southeast Asia, succession challenges add another dimension. Many SME owners are nearing retirement, but their children are pursuing careers outside the family business. This creates a golden opportunity to bridge the gap, combining modern operational expertise with traditional business foundations. The search model allows me to acquire businesses at reasonable valuations, bring in the best operators, and scale them further. It’s entrepreneurship, but with immediate cash flows and a foundation to build on.

Elena: What criteria do you use to identify traditional businesses with strong growth potential?

Eric: We focus on businesses in Singapore with revenues around S$10–20 million, healthy margins, and solid cash flows. These are not unicorns—they’re businesses that have quietly created immense value by consistently serving their customers well.

We look for companies with recurring revenue, long-term customer relationships, and profitability of over 10% EBITDA margins. A solid track record of at least a decade is a strong signal of resilience and reliability.

While we’re sector-agnostic, we see great potential in areas like business services, specialized industrial services, education, and healthcare. Our sweet spot is businesses too small for private equity but rich in know-how. Light on assets but heavy on expertise. Often, these businesses have significant opportunities for improvement, whether through better technology adoption or streamlined operations.

Elena: How has your experience as a startup leader influenced your approach to running traditional businesses?

SMEs require a different pace. Startups often operate at breakneck speed, while SMEs benefit from incremental, sustainable changes. It’s not about overhauling everything overnight but working within the existing framework and improving it gradually.

Eric: At first glance, startups and SMEs might seem worlds apart, but there are surprising similarities. Ultimately, success in both boils down to one thing: people management.

In startups, you’re often leading teams through uncertainty and change, and the same applies to traditional businesses. The key is being a clear communicator, an empathetic listener, and a decisive problem-solver. If your team trusts you and understands the vision, they’ll move the business forward.

That said, SMEs require a different pace. Startups often operate at breakneck speed, while SMEs benefit from incremental, sustainable changes. It’s not about overhauling everything overnight but working within the existing framework and improving it gradually.

Elena: What roles are best suited for startup professionals looking to transition into the SME space?

Eric: Startup professionals bring immense value to SMEs, especially in areas like digital transformation, process optimization, and marketing. However, the transition can be daunting, so I recommend starting with a “fractional” approach.

This involves part-time roles where startup talent can help SMEs modernize specific functions. For instance, a startup CTO might work a few days a week digitizing an SME’s operations, or a growth marketer could lead targeted campaigns. It’s a great way to dip your toes into the SME world while allowing these businesses to access expertise they might not otherwise afford.

At GenCap, we aim to bridge this gap by placing startup talent in the businesses we acquire. By documenting these success stories, we hope to inspire broader adoption of fractional roles in the SME space.

The key to success is humility. While startup professionals excel at scaling and innovation, they must respect the established processes and culture of SMEs. Take time to understand the business deeply before introducing change.

Elena: What are the key differences between startups and SMEs that professionals should be aware of?

Eric: One of the biggest differences is the timeline. Startups operate with an urgency to achieve rapid growth, while SMEs often prioritize stability and long-term relationships. This shift requires patience and a mindset focused on steady improvement rather than overnight success.

Another difference lies in workforce composition. SMEs often have diverse teams, including blue-collar workers, which requires a more tailored management approach. While startups might rely on highly skilled, tech-savvy employees, SMEs often depend on a broader range of roles, each with unique needs and expectations.

Compensation structures also differ. While startups often offer equity and performance-based rewards, SMEs are more traditional. However, with the search fund model, there’s potential for equity alignment once value is proven.

Ultimately, the focus in SMEs is on operational efficiency and incremental growth rather than groundbreaking innovation.

Elena: Why do you think SMEs are a compelling opportunity for startup professionals?

SMEs offer startup professionals the perfect opportunity to combine entrepreneurial energy with proven business models.

Eric: SMEs represent a chance to make a tangible, lasting impact. They’re often the backbone of the economy, but many operate below their full potential due to outdated processes or lack of access to expertise.

SMEs offer startup professionals the perfect opportunity to combine entrepreneurial energy with proven business models. Unlike startups, where success often hinges on finding product-market fit, SMEs already have loyal customers and cash flow. The challenge lies in scaling efficiently, modernizing operations, and unlocking untapped potential.

Elena: Any advice for startup leaders considering this path?

Eric: Start by exploring the landscape. Get to know SME owners and understand their challenges. If you’re unsure, start with fractional roles to test the waters.

Be patient and adaptable. SMEs operate differently from startups, so success often requires working within their framework rather than trying to impose new ones.

Finally, remember that SMEs thrive on relationships. Building trust with employees, customers, and owners is just as important as implementing operational improvements.

Eric Koh’s journey highlights how the skills honed in startups can unlock new possibilities in the SME space. For those seeking meaningful impact beyond the startup ecosystem, SMEs present a fertile ground for growth, transformation, and lasting change. Keep in touch with GenCap’s progress here: https://www.linkedin.com/company/gencap-partner or reach out to Eric should you be interested to find out more about running an SME: https://www.linkedin.com/in/koheric/