What to look for when investing in Asian startups
As an investor for Venturra Capital, I learned that when looking at Asian startups you first take a look at the business model itself. Then see whether it is in an area you think is good and whether you can build a sustainable business there. Then you look at how far they have come so far and what traction they have built. Finally, you look at the founder.
Understanding your customer
We have invested in a lot of e-commerce companies and as these companies start to scale, sometimes it is easy to lose sight of the individual customer, so we try to bring it back to that. Therefore we try to understand all the economics at the customer level and the unit level and understand how they change over time. We feel that orienting a business around customers and really understanding how to read purchases are happening and how they decay over time. This allows you to course correct and take the right actions in the early stage to ensure that you are actually building a sustainable business.
The Asian startup ecosystem
The Asian market is very large, but the ecosystem is really in its early stages. You’ve really only had one wave of tech companies coming up so far and what this means is that you don’t have a deep talent pool to rely on. Especially when it comes to technical hires and things like that. At least two or three of the Indonesian unicorns have actually shifted their development completely overseas because of how little local technical talent there is. That will change over time as these companies develop and as they train up people and the talent pool deepens. But this is a 5-10 year problem and it is not something that is going to get solved overnight.
Run fundraising as a sales process
From the fundraising I’ve seen that have been conducted the most efficiently. I think what they had in common is that they ran it like a sales process. It shouldn’t be this sort of process you go into without thinking through timelines and trying to stick to certain deadlines. If you don’t go in with a plan and you start speaking to investors at different times, you are going to get term sheets at different times and then you are in a very poor negotiating position when you have one term sheet expiring and one more coming in next week and another coming in three weeks from now. So from an entrepreneurs perspective, it is always beneficial to have multiple competing term sheets. If you have built a good business it is fair to want to create some competition with potential investors.
Avoid cold emails
A strong introduction from someone that has credibility goes a long way in finding an investor that will invest in your company. When that person makes an introduction, basically they are putting their neck and saying I think this is good why don’t you take a look. We get so many cold pitches all the time and for most investors, the default is always no and there has to be something that flips it to a maybe. When cold emails or cold pitches come in, it makes it that much harder to get attention to even be properly considered.
There are so many things to do when you are starting your company. Along the way you are going to make thousands of different compromises all the time because you can’t get everything perfect from the beginning. You will have to compromise on hiring, you will have to compromise on product decisions, compromise on the technical decisions you make. At the beginning as long as you are solving a core problem then the other puzzle pieces will fall into place.