Venture Capital Q&A : Current Early stage VC fund MP, Ex - Top 3 Chinese VC fund analyst, Chinese VC investment advisor.
I have written a few post thus far for WSO on angel investing and beginner VC. But I'm sure there are a lot of other questions that you guys might want to ask. Give me all you got and i'll try to answer them.
Please try not to ask questions others have asked. Ask away!
Question is more relevant to your asia experience than VC specifically:
as a korean-american who's interested in going back home for a couple of years in the future, what kind of competitive advantages should I be looking to hone over the next couple of years? Will be working in M&A at an EB from an ivy and hope to work at a fundamentals driven hedge fund in the future. Native Korean fluency (but not business fluent, can't read a BS/IS in korean yet. Will be self-learning it by reading filings on my own to gain business fluency), but no connections back home.
@kidflash I don't know if what I'll say will be valid to your role at a korean M&A role but, the language shouldn't be problematic. When I started, I was fluent as well but not business fluent. I cleared that pretty quickly. I don't know if it's a specific technical skill that will give you the competitive advantage over your peers. For one, my technical skills definitely were not superior that of my peers, if anything they were better. But, I was praised for my intuition and unique ways I tried to solve problems.
It seemed to me a lot of my asian peers were very systematic in their way of thinking / evaluation. VC is risk seeking in nature so the analyst should already be the ones who are able to think outside the box. Still I felt sometimes what I came up with wasn't something they would think of. I think the same thing could apply to you.
thanks! sb'ed
Thanks for doing this! Several quick questions:
Would really appreciate any info you can provide!
@7xEBITDA We work primarily in the mobile/web space. This includes tech platform enabled services. Sector wise we are agnostic, we're looking to work with ambitious and capable younger generation entrepreneurs.
I wouldn't say i'm an entrepreneur in the traditional sense of starting a startup. I ran a small edtech startup a long time ago but it was not scalable. I am entrepreneur in every way in spirit. I started running consulting business that had 6 figures revenue since age 18 and other companies like that. But never was it a "startup" in the way people use it now.
Technical knowledge is not a must. Obviously you have to have at least a basic understanding of things you are going to invest in. Although, it's going to be hard to understand some sectors if you're not technical or unable to properly evaluate a opportunity. So i'd say it depends on what sector you're in and what strategy you're pursuing i.e passive maybe quant strategy, or active strategy.
I would say it would be great to have a free intern to help me manage social media haha. Right now we have just started and about to make first batch of investments. It's been mainly deal sourcing and screening for me and I haven't been able to maintain a proper presence online (something important for early stage firm). Otherwise, not really. 3-4 capable partners is more than enough.
Hope that helps. Feel free to follow up.
You're awesome. Thanks!
@HideAndSeek
Everyday I comb techcrunch, pandodaily and also angellist at times. I like reading all the major VC blogs like AVC, feldthoughts, mark suster, dixon and such pretty often. I also comb different places for updates on trends and financing news.
I don't focus on any specific sector of technology. We are a sector agnostic firm. It gives us the opportunity to look at more opportunities but also has the downside that there are investment opportunities I am not able to properly judge (Some investors won't admit that but I will). So i gotta ask a friend or colleague who will understand (diligence)
What job do you think would be the best to take for someone who wants to become an entrepreneur? Lets just say that being an entrepreneur at the moment is not feasible.
@packmate There's a young entrepreneur by the name of Ali Hamed who writes really good blog posts about this kind of question. I don't know what your situation is, bu the best path to becoming an entrepreneur is just doing it. Even if you don't have the tools, experience , guts, anything. Just do it.
Otherwise, learn to start something. IDC what it is, an app, a weekly blog. Take small steps in getting there. But i really don't suggest this because good entrepreneurs act hard, act fast. Don't get into the habit of taking small steps.
What do you look for when evaluating potential investments? Team, idea, both? Where do you see the early stage VC industry going? With the JOBS Act the lines are quickly blurring between early stage VC and angel investor syndicates.
For me personally, both are important, but team is much more important. Indeed the line is blurring but i believe the industry is evolving and there will be a place for both to co-exist. The good deals in the industry has always gone to the top dogs, and having syndicates won't change the game. A good thing to read is Paul Graham's essay on early stage VC outlook. it doesn't take into account JOBS act or syndicates but good read on VC outlook. There will be a lot more good companies coming out and more room to play with.
Thanks for the great response!
As a VC/Angel, what are the big mistakes that startups do when working with you guys?
@plaxico That question is way to vague. There are a million ways a startup could screw up. Including, but not limited to, everything. More specification appreciated.
I currently work for a start up (along with my FTjob). Ive been going back and forth with our ceo and our board member (hes a finance prof but with no industry experience) about the model ive built to value the company. They want multiple models claiming the VCs want a VERY simple look at cash flows.
My model goes into alot of depth including month by month projections the first 2 years and quarterly for the next 3 years along with a terminal year (again the CEOs and Board members idea).
My question to you is, how detailed of a model do VCs require to make a investment decision? Do you guys want a hugh level valuation, or wouth rather want a model that has the detail and I-Banker would make?
Note: The company has 0 revenue and is raising funds to make a market ready version of the device.
@ttghalust You're pre-revenue.. 99% of the projections you're going to make is going to be wrong. I would probably grill you on how you arrived at those numbers rather than those numbers itself. What assumptions did you make to arrive at those numbers. If a certain margin change, how will that affect your revenue outlook. Month over month growth, burn etc is pretty standard for 3 -5 years out. What do you mean terminal year? 5 year exit? That is not necessary. This will be attractive or not attractive depending on whether you're pitching to an angel looking for 5-10x realizable within 5 years, or a VC looking to hit homeruns.
I don't particularly care about the financial model. It has to make sense, show that you have a good sense of handling the financials, on top of having all the other qualities that will make me say Yes.
What's your intake on VCs in China compared to the U.S counterparts? (Valuations, exit strategies)
@Elllo Valutaions - Lower, Exit strategies - not mature compared to U.S. VC in China is more skewed towards certain industries, as innovation is not open to all spaces. Ex: Financial industry is one. I would consider Chinese VC market as an medium level mature market compared to the U.S (at least for consumer oriented stuff). If you want to dig more in depth, please ask a more detailed question. My intake comparing the two is too vague.
1 How do you source the deals? Through reference from your connections, or from the applications entrepreneurs send in? 2 How would you evaluate the founders and their team? Mainly from their track of record? 3 Now that IPO market is tough in China, what's your exit strategy?
Will appreciate your insights!
@RVP Best deals have been from connections. We do attend demo days at top accelerators as well.
Track record, sign of obsession, leadership, understanding how they think about problems, commitment. Pretty generic traits on paper but really stands out when you meet them. Really the only way I can say that is, if you meet enough people, you will be able to tell the smart and hustling ones. if you meet enough smart people, you can tell the truly exceptional ones.
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