Jeff’s Posthaven

I have been asked many times about smaller startup ecosystems in Southeast Asia what they should do to generate large technology startups and thus attract more foreign direct investment in their countries. After yet another roundtable with a government entourage and local and regional ecosystem leaders, let me share a few thoughts. 

Start by using historical data and research to give you a place to start. We have over 10 years of startup and funding data to study in Southeast Asia of which I will not cover in depth, but for those who are keen to chat about using data driven strategies to run your fund please contact me.

Here are some high level data for you.

In SE Asia, most of the largest valued companies are:

• Global aspiration - 8% (most are B2B)
• Indonesia only aspiration - 40%
• SEA regional aspiration (usually with Indonesia as one of the aspired market) - 30% (1 in many)
• SEA ex-ID Squids - 17% (many in 1)
• SEA ex-ID only aspiration - 3% (hardly funded nor grow fast enough - 1 in 1)

With this as a backdrop, and the fact that the founders are aware that they are more than likely a copycat (99% are).

What should you do then?

1. Gather Knowledge

• Understand your environment in your beach head market or markets you are targeting and figure out your problem statement, consumer and business drivers and timing
• Figure if you and your team are the ones that are capable to address these market(s)
• Then focus on product and growth metrics while serving these markets and try to move from the bottom left to the top right corner of the chart above

We (founders and investors) have a fundamental lack of knowledge flow between capital providers from different stages. I would recommend more open conversations between accelerators and Series B to D capital providers to really understand what they are looking for. We also need to speak to other founders they are likely to copy around the world to learn what not to do in their businesses. Lastly, we need to learn from others in both developed and developing markets and understand what drivers are needed to help startups to be successful. Everyone needs to gather knowledge.

2. Market Mapping

If you are able to go global and compete with the best in class, likely aiming to be the top 4 in the world, go for it. However, from historical data, the probability of that happening is low but not impossible.

The higher probability of where you are now or will be are the 2 bolded options above.

First, if you are not addressing Indonesia from day one, you need to start planning your regional plan from day one as there will be other copycats in the region as well with a head start because they are either already based in Indonesia, or has raised more capital and/or launched in multiple markets earlier than you.

Second, be a Squid

This is where most startups get stuck, they are there but not quite. Look to be a squid with 2 tentacles and 8 arms in your home country, and plan to extend 2 tentacles to potentially 2 countries and 8 arms into potentially 8 different business lines. This way, your total combined addressable market will be larger than you originally sought out to do.

Hope this helps. 

Happy New Year!

99% of companies should not raise capital from venture capital firms.

But many founders who are in the 99% thinks they are the 1% who should. Sometimes investors think the same way and that may spell trouble many rounds or years later.

Work with your cofounders, advisors and investors to make sure where you stand.

If you are the 99% (and there is absolutely nothing wrong with this), and want to be the 1%, work hard and leverage on your team, capital and strategy (timing/speed), and execute to address larger markets (Y-axis) and increase the sophistication of your MOATs (X-axis). See http://reactionwheel.net/2019/09/a-taxonomy-of-moats.html.

Once you know who you are and what you will be in 7-10 years will you be able to honestly approach the right investors who fit you. 

In Vietnamese

99% các công ty không nên huy động vốn từ các công ty đầu tư mạo hiểm.

Nhưng nhiều nhà sáng lập nằm trong 99% này lại cho rằng họ là 1% còn lại nên muốn làm. Đôi khi các nhà đầu tư cũng nghĩ như vậy và điều đó gây rắc rối trong nhiều lần hoặc nhiều năm sau đó.

Làm việc với những người đồng sáng lập, cố vấn và nhà đầu tư của bạn để đảm bảo vị trí của bạn.

Nếu bạn là 99% (và hoàn toàn không có gì sai với điều này) và muốn trở thành người 1%, hãy làm việc chăm chỉ và tận dụng đội ngũ, vốn và chiến lược của bạn (thời gian / tốc độ) và thực hiện để giải quyết các thị trường lớn hơn (Y -axis) và tăng độ tinh vi của MOAT (trục X) của bạn. 

Xem http: //reactionwheel.net/2019/09/a-taxonomy-of-moats.html.

Một khi bạn biết bạn là ai và bạn sẽ là gì trong 7-10 năm nữa, bạn sẽ có thể tiếp cận thực tế những nhà đầu tư phù hợp với mình.

Accelerators should exist in every country where a startup ecosystem has been initiated whether they raised private capital to operate or are government supported, here are a few tips for operators of accelerators (especially in emerging markets):

1. Go sector focused if you can as they are more dependent on being able to localize and where the power of local networks are more important.

2. Work on both inbound and outbound recruiting of founders. Leverage on PR, both on and off line marketing activations to improve your funnel. After knowing the profile of founders you would like to fund and assist, you can use Linkedin to do an outreach campaign to have them apply direct or engage with your team in a call to find out more. Work on improving your funnel.

3. If you are an agnostic accelerator, be as close to market standard as possible with your investment amount and terms. Best teams will either raise money on their own or apply to YC or nothing, so you need to be able to stand toe to toe when compared.

4. Set up an advisory panel of honest and committed founders and investors to help you select your final cohort. Diversify this panel of advisors to get the most honest set of feedback as possible. This will improve your selection of founder types, and ideas. In emerging countries, almost all ideas are copy-cats, the more data you have in your hands the easier to select the final cohort that will result in success.

5. Run a rigorous feedback loop during the program, focusing on company building exercises, and making sure they are venture back-able. Work with more people in the investment sector from angel, seed to Series B/C to help select, critique and refine models as they move along the program. This will help increase the funding rate post graduation. Also cut founders that do not fit your own criteria as an accelerator early on, ideally within the first 2 weeks.

6. Work on a sustainable model financially so you can build a brand to carry the product forward. Sometimes you rely on the investment model (e.g. x% of investment will be paid as a program fee or a put option to sell your stake at Series A), others may resort to doing consulting gigs with corporates and/or raising private capital or sponsorships to self sustain. There are various models, make sure it suits you and your team. 

Hope this helps any new or existing programs.

In the next many months, this might be the new normal. Meeting founders for the first time over Zoom and making bigger efforts with personal reference checks. Perhaps, if investors have a wide network or have team members in various outpost offices (for e.g. for us in Singapore and Jakarta) and already know potential founders before hand, the time scale will stretch out less.

How do you read people over video within 15 mins?

Using voice, and verbal cues as signals to judge people.

How do you source and rely upon on your network’s references?

New skills need to be acquired to collect such data for decision making.

Finally, trends for your business will accelerate, which means the traditional way of managing venture capital funds will change quicker sooner. Whatever you think that will happen in 10 years will happening in the next few years. Be prepared.