What are VC investors expecting from early-stage startups in 2021 and how should such founders prepare themselves for future fundraising journeys?
e27 posed the above questions to Goh Seng Wee, Managing Director of Brain To Free Ventures (BTFV), a privately financed VC company based in Singapore.
Launched in 2019, BTFV is an early-stage investor that predominantly remains sector-agnostic. However, it prefers startups that target mid-ticket consumer-facing startups in Southeast Asia (SEA). Its two most successful investments are Moovaz and ErudiFi (both graduated to raise Series A).
In this interview, Wee shares BTFV’s investment criteria, priorities and plans, and his views on SEA’s early-stage VC investment landscape.
Excerpts from the interview below:
Do you think early-stage VC investing has changed since the onset of COVID-19?
We think that with COVID-19, real-world problems of connectivity, logistics, branding, discovery, experience, sustainability, etc. are all up for grabs.
Investors are returning to being more sensitive to value than to vision, so founders should not be discouraged by smaller valuations and smaller investment tickets.
The euphoria of capital market meeting tech startups is evolving towards more sensibility. Beyond knowing the numbers and vision, investors are digging deeper into the background.
Ultimately, investors need to have the confidence of getting their money’s worth. Such confidence can be built only by having a strong backend — sturdy teams, sustainable growth numbers, honest scalable products.
These combine to create value for the investors. In fact, if founders know how to use their resources well, a S$1 million (around US$75,000) today is worth as much as S$3 million (around US$2 million) pre-pandemic.
Unlike other investors, BTFV has a strong focus on making investment deals only in SEA.
How do you think the tech landscape will look for early-stage startups in a highly developed nation like Singapore?
The rate of unicorns/success stories from the region will probably accelerate at the greatest pace compared to any other market continents in the world. Many winners will be from this region.
Within SEA, Singapore will get a disproportionate share of successes due to the strong public policies and immense resources poured to transform the city-state into a tech powerhouse. Singapore is friends with the other tech powerhouses, such as the USA, China, Asia Pacific, and the EU.
The tech tide is rising faster here than anywhere else in the world, and the tide is rising the fastest in Singapore. Basing your startup from Singapore is probably a sound decision that will pay multiplier dividends over time.
The fact is that Southeast Asian startup companies overall have done quite well, and I’ve been telling people that people who launched their startups last year or this year have the potential to become the richest fellas around.
What are some of the key criteria that you use to evaluate early-stage deals?
Investing in early-stage startups requires us to sieve out key early data indicators that truly matters, and then exercise our acumen to make an investment decision. Most people invest based on “good or bad”, we invest also based on “cheap or expensive”.
There can be many good ideas that solve big problem statements with seemingly huge addressable markets, but early-stage investors need to know that few will become scalable and profitable products.
All startups’ valuations are always inflated, hence we need to be able to have a strong business image to make a bet on how people would like to live their lives and spend their money in the next two to four years. We invest in human dreams, acumen and the ability to execute.
Once we sign an investment deal, the rest is about not giving up and strong execution. We expect the highest level of monetary discipline and believe in using the least resources to create the most impact. These are ways startups can possibly overtake the incumbents.
As an early-stage investor, we need to balance hand-holding the founders while allowing them space to find their way. At the end of the day, our belief is that many companies that will be great and admired in five to eight years’ time are being built today — whilst BTFV won’t proclaim that our portfolio companies will all emerge segment winners. We are certain that the winners are already in the market today.
What kind of support does BTFV provide to its portfolio companies?
Our team has, collectively, in-depth business experience in multiple segments and markets for the past 18 years (in our pre-VC businesses). Startups in our portfolio like that we connect them to dynamic business networks. Nadar Ajlani (Managing Director) and I had gone through SARS in 2003, the financial crisis of 2008, and the oil crisis of 2014.
Aside from providing investments (up to US$50,000), we are able to lend our experience and guts to our portfolio companies as they manoeuver and make tough decisions.
Up and down market cycles are common — true that the past year has been a Black Swan, but basic fundamentals remain the same. Together with our founders, we keep our eyes on staying on the right trajectory.
We constantly look within our network to find synergy and believe in sharing learning points within the portfolio companies, so that a mistake and dollar wasted by a founder will be learning and dollar earned by another.
Our attempt is to learn from our competitors, listen to our customers, discuss issues deeply as a team, test out new methods and double down fast on early successes.
What tips would you like to give early-stage founders who are trying to raise money?
Charisma to gain trust, ability to re-learn new norms, and intellect to understand clients’ problems faster are timeless business skills still very much applicable in a post-pandemic world.
Founders must have a stronger start-state regional network. Regionalisation is becoming tougher; imagine you can’t even fly into the new market to meet your local team. Hence we see decentralised growth, with each city/market-led by strong early employees, and over time the market verticals will converge.
The next wave of startups would probably emerge that way. Litmus test must always be customer satisfaction — customers generally love cheap and honest products that save them time and money.
Do more through partnerships, build positive unit business economics early, grow your reputation as a trusted tech aggregator for your segment. These help you leap ahead of those that build in-house proprietary tech to solve the same problems.
Founders preferably should also focus on the users and changing norms rather than their investors’ returns. Every enterprise — from MNCs to startups — will make many mistakes in the next one to three years, and the fastest to learn and make the least mistakes will win. The J-curve and inflection point have been brought forward with COVID-19.
What’s on the cards for BTFV for the rest of 2021? Any investment plans?
We are happy with our portfolio of 11. We hold nearly 40 per cent in dry powder to selectively double down our existing portfolio companies’ success, but we also know it is hard to turn down brilliant and courageous founders who may come knocking on our door.
We like to hear from 5G, green solutions, creative use of crypto, and social e-commerce. Every new startup we undertake is not just about putting in dollars, it is also about value-adding to them in getting them, for instance, new market footholds and reference customers.
Image Credit: Goh Seng Wee
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