Six of Southeast Asia’s more well-known early-stage VCs sat down at Echelon Thailand to offer advice
Your business idea may be spectacular, but without funding it is just as likely to get stuck on the runway than take off. At some point, all startups are going to try to get investment.
“You read e27, you read TechCrunch, everyone is raising money! It looks super easy. But then you look at startups and it is a total pain in the neck. It takes three-five months and you have to get on the plane to meet people. So, how the hell do you get funding?”
At Echelon Thailand, six notable investors in Southeast Asia — Adrian Stewart (Partner, Galaxy Ventures), Jeffrey Paine (Founding Partner, Golden Gate Ventures), Eddie Thai (Venture Partner, 500 Startups), Kay-Mok Ku (Partner, Gobi Partners), Apichai Sakulsureeyadej (Co-founder, IYARA VC) — took the stage for a free-wheeling discussion about the venture capitalism industry.
Here are our takeaways.
1. If you don’t want to lose hope, don’t pay attention to the odds
Silicon Valley often cites the ‘1-in-100′ rule for companies to get funded. According to our panel, the numbers in Asia are only slightly better.
“In my experience in Vietnam, we have looked at about 100 companies closely but pulled the trigger on three of those… And part of 500’s strategy is to invest early and often,” said Eddie Thai.
Kay-Mok Ku said that, for the average year, Gobi Partners looks at about 10,000 companies and the investment ratio is about 10 per cent.
But one theme did arise out of later questions — VC funding is home-run driven.
If a company is not getting funding, it does not mean it is a bad business, but one that consistently hits singles. Of course, companies want to hit home runs but singles translate into sustainability.
Moral of the story, VC funding is not the end-all be-all.
2. A good team was the most important factor, but there are other winning attributes
Let’s get it out of the way. Every panellist highlighted the importance of the team. But what else did they look for?
Apichai Sakulsureeyadej highlighted two key factors for IYARA VC. First is the value the startup will provide. The second is more of a test: “Is the user base willing to give up something for what you have to offer? Whether it is money or another service?”
Adrian Stewart also added the metaphor of the day.
“If there is a horse race. Do you bet on the horse or the jockey? I bet on the jockey because if the horse dies, [the jockey] can ride another horse”
3. Would you ever invest in a team of one? And would you ever invest in a team without a technical co-founder?
Being the solo Founder is not a deal breaker. Jeffrey Paine said his portfolio has about 10 per cent solo founders. He said generally two to three founders is ideal, but being a solo founder is not the end of the world.
The panel also agreed that being technical is not at all important. Sure, it’s nice to have someone who can fix technical problems when they arise, but many successful startups did not have a technical founder. The reason? Business-oriented founders attract Type-A personalities.
While a stereotypical developer is still standing in front of a problem asking if it is worth the dive, the businessmen have already jumped.
4. If you are a young founder in Southeast Asia, what is better? A single country or regional plan?
Ku explained it quite succinctly.
“The only country that demands a single-country focus is Indonesia. Singapore and Malaysia tend to be very regional markets because they are small markets. But Thailand is in a tough spot. The market is big, but not big enough. Which is why the startups we invest in Thailand tend be regionally focussed. [That could mean] going into China or, for example, trying to do an M&A in Malaysia,” he said.
5. Do investors look into some of the less-developed countries in Southeast Asia?
The average e27 reader will know how Eddie Thai of 500 Startups answered.
“We are quite bullish on Vietnam because Internet penetration, smartphone penetration has reached a point where [companies] can solve life problems with easy tech. We are not taking wild bets on brand new technology because we don’t need to [in Vietnam],” he said.
Ku explained that, in his view, the Mekong region can be utilised as a proxy to China.
“The Mekong region looks a lot like Mexico. There is a homogenous economic region to the north (US or China). And a diverse economic situation to the south (Latin America or Southeast Asia). That makes the Mekong a proxy play to China. The Chinese are taking a page from the Americans’ playbook; trying to internationalise the RMB and exporting infrastructure.”
6. What do startups say that you really do not want to hear because you know it is complete bull?
In the end, honesty was the key takeaway. Whether it was a story of a company playing two VCs against each other (who are, of course, close contacts) or pretending there is no competition, honesty is a much better way to raise money than overconfidence.
“It’s good to be confident in your company but [I don’t like] being so overconfident it stretches into the realm of arrogance. We are not stupid, we have been through some stuff. So some [startups] lie through their teeth. Honesty gets you deals better than lying,” said Stewart.
7. Shifting to a macro question, Vanzyl asked the group: Is the tech scene in a bubble?
Let’s just hear from them.
Sakulsureeyadej: Personally, I don’t think so. I think Thailand is about to start taking off. I think it is now the younger generation has realised [they] can come with their ideas and solve problems in the market. For us, the bubble is fairly far away.
Thai: I think tech is a long-term positive trend. Especially versus 10 or 15 years ago. Tech is cutting across every industry and will take a part of every [market]. Are US$100-million valuations correct? I don’t know. But in Vietnam, valuations are still very fair especially compared to China, India and Silicon Valley.
Stewart: The last bubble was US-influenced. If we fast forward 15 years ahead to today, the US does not control the global economy any more. Even if the US has a downturn, there are other economies.
Paine: We are not in a bubble, we are in a haze. We don’t have many exits, hence we don’t know what the valuations are at the exit level. Which means Series A and Series B [investments] are all over the place. We can’t see anything. Some countries are a little inflated because the exit numbers are not clear.
Disclaimer: Ardent Capital is an investor in Optimatic Pte Ltd, the parent company of e27.
Attend Echelon Thailand 2015, taking place on November 26 and 27, from 8.30 AM to 5.30 PM with an exclusive after-party that runs till late. Tickets are available for purchase online, use promo code e27Subscriber to enjoy awesome savings.
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