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What makes VCs tick, what they look out for, and some great stories and insights into how these rockstars work

On January 6, the National University of Singapore (NUS) Entrepreneurship Society organised a panel as part of the Global Entrepreneurs’ Conference with prominent venture capitalists. Among the panelists were Willson Cuaca of East Ventures, Kuo-Yi Lim of Monk’s Hill Ventures, Tan Yinglan of Sequoia Capital, Arnaud Bonzom of 500 Startups, and Moderator Kelly Choo of Neeuro. Here are some highlights of the 90-minute panel.

What factors do VCs look out for?

Willson of East Ventures mentioned that his company likes NUS because of its alumni’s track record—Carousell, 99.co, and Shopback are some companies helmed by the university’s alumni. He also quipped that the venture capital business is not an investment business but a people business; VCs like aggressive, young founders who think big because long shots pay off for the fund. These big bets are the only ones worth their time, as most startups looking to disrupt traditional industries might only get anywhere from 25 to 35 per cent market share at their exits.

He added that the two most important things to him are the founders and the market. If the founder is good, typically the product will be good as well. He also mentioned that fresh founders are sometimes preferred, because experienced ones take too long to plan and are not naïve enough to execute on their plans. (If fresh founders knew how hard executing their plans really were, they might not do it either!)

Monk’s Hill Ventures’ Kuo-Yi, on the other hand, looks for passionate people with good analytical skills, guts, drive, and those that execute ideas well.

Yinglan of Sequoia Capital then referred to an article he read on Harvard Business Review. According to statistics he’d seen, an entrepreneur’s odds of success from the first failure to the second only go from 20 per cent to 21 per cent. In addition, their likelihood of success only surges when paired with a mentor (from a 30 to 80 per cent success rate), and this is where Sequoia comes in, by filling the gap in essential mentorship.

He also urged people to treat VCs less as investors and more as business partners. Typically, you’d want a VC who can roll up their sleeves to help you. When Tokopedia’s servers broke down, their VCs helped to fix the problem.

500 Startups’ Arnaud also provided some context on the VC process. According to him, VC funds last for 10 years, which means startups must yield returns after this period. VCs invest for the first two to three years and then spend the next three to eight years helping their partner companies mature. The exit and time horizons are important and are always kept in mind.

While 500 Startups focusses heavily on the market, Arnaud also appreciates good founders. He shared that what separates good founders from the pack is really their speed of execution. When Arnaud met the founders from Glints at an event at INSEAD, they asked for feedback, and, not only did they work on it by the next day, they surpassed his expectations.

When is a good time for founders to raise money?

In reply to a question from Neeuro’s Kelly on a good time for founders to raise money, Yinglan responded with the adage: “If you want money, ask for feedback, and if you want feedback, ask for money.”

Arnaud followed up that if you are a good founder, VCs will track you down. To this statement, Yinglan agreed. According to him, Sequoia actually tracked down WhatsApp’s founders in a coffee shop in Mountain View, California. He also recounted his efforts to meet with the founder of Tokopedia while the latter was on his way to Japan to propose to his girlfriend. Yinglan boarded the same flight as Tokopedia’s founder and built rapport. That week, he joked, there were three proposals: the founder to his girlfriend, Softbank to the founder, and Sequoia to the founder.

Also Read: Choose which battles to lose so you can win the war – Tokopedia CEO William Tanuwijaya

Willson also chimed in saying that he wants people to know their industry, value chain, the pain points they are fixing, their fundraising numbers, how to position themselves, and how to develop their niche. He also says that real mentors are the ones who give you money; they are the ones really invested in you.

How should founders show VCs that they are prepared?

Here, Yinglan and Wilson shared another story: the CEO of Shopback, Henry, recognized Yinglan at Block 71 and pitched to him while he was trying to grab an Uber (pun intended). Yinglan told the CEO that he didn’t have time, as he was on the way to a Lo Hei (also known as Yu Sheng, a traditional Chinese dish and event) and that Henry should follow him. There, Henry met Wilson and recognised him immediately. He impressed Wilson by saying that he knew East Ventures had interests in e-commerce. The CEO then began presenting the numbers that proved Shopback’s traction.

“Not that I need people to recognise me,” Wilson said,  “but it shows me that you’ve done your homework, and you know who is interested in what, and at what stage.” He went on to say that he was impressed when Henry openly showed him Shopback’s numbers. According to him, this was very vital in building trust.

What should founders be careful of when raising rounds?

Kuo-Yi noted that sometimes funding rounds become the milestone. But according to him, the best founders know that raising a round isn’t about just that because the real work begins after attaining that milestone. Arnaud follows with the idea that raising money is ultimately also a negotiation: Don’t raise when you’re almost dry.

Also Read: What do Venture Capitalists want? Getting under the skin of Asia’s most influential VCs

Yinglan also shared his thoughts. According to him, founders need to think about the market size they are operating in because certain markets don’t have the size required by a startup. He urges founders to consider what kind of business they are: venture-backed or bootstrapped. Founders must think about their situation and remember that once they take money, the clock starts ticking (even faster) towards potential IPOs or follow-up financing.

Ultimately, what I learned from the members of the panel were their thought processes, what made them tick, what they look out for, and the stories they shared that gave insight into how they approach their work. It’s clear that the panelists love what they do; their enthusiasm was apparent in all they shared. To the panel, thank you for sharing your time and wisdom with us students.

A bullet-pointed transcript of everything I caught during the panel can be found here.

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