The Startup Investment Process [Jie Lun-Head of the Ventures team for Plug and Play APAC]
What is the process of obtaining venture financing? What can startups and investors do to maintain good working relations? In this blogpost, we have Jie Lun to share with us more about the startup investment process as well as his perspectives on startups’ funding from an investors’ perspective.
Jie Lun heads the ventures team for Plug and Play, Asia Pacific, mostly within the SEA region, as well as matchmaking startups with corporate partners along with identifying potential startups for investment.
1) Jie Lun, can you share more about yourself, your passion and your previous work experience?
Previously, I was in this technology federation called SITF, Singapore Infocomm Technology Federation, now called SG Tech. I was tasked to manage the startup programme where we partnered with MDA’s iJAM grant (now called SGFounders Grant), which was a grant for startups, and matched these startups with investor mentors within our network, and facilitated the entire pre-seed funding process. This was what got me connected with the startup and VC ecosystem, and for Plug and Play, I applied for the job when they were searching for a program manager for the SPH Plug and Play accelerator, that’s more or less how I got in.
The initial few years in Plug and Play was under the SPH Plug and Play accelerator, not so much investments per se but more program management. After it ceased I transitioned into a more operational role, and then after that, I transitioned into a more ventures related role. Right now I oversee a team across SEA, we have a presence in Manila, Jakarta and Bangkok. I oversee the team’s efforts in sourcing for startups and connecting with corporate partners, as well as investments.
2) What do you, as an investor, look out for in startups?
Different VCs have different criteria, but for us, we call it the three T’s.
Team, Tech, and Traction.
Team: the people running the company, the co-founders. Who are the core team members? Are they qualified and experienced enough, and have the right networks or domain expertise within the industry they’re running the company in? Are they passionate and driven enough to run the company with the persistence and drive to see it through?
Second, Tech: looking at the product itself, whether there’s a significant technological barrier, whether the tech helps in terms of defensibility of the solution, is it easily copied or does it have differentiation from the competitors out there?
Third, Traction: something good to have, a risk-mitigating factor for the product. With traction, people are spending money to buy your product, which means it is validated in that sense. If you see traction and there’s growth in the traction, that tells you that the startup/business is significantly less risky.
3) You mentioned ‘traction’. Let’s zoom in on that. Startups often start with low to no capital. To attract investors, they often have to gain some traction, hence chicken and egg. However, the problem is: You need a prototype to get people interested. How would you design a go-to market strategy? What would you recommend startups to focus on?
The Chicken and Egg problem is something very common, I would say for the initial stage where no one knows anything abt the product, the main idea is to get an MVP out, test it with a few people you identify as early adopters, the most hardcore fans, as these people feel the pain the most. You have the exact solution to solve their problems. Having an early MVP out, testing the product with a bunch of users, getting their feedback and refining the product as it goes along- that helps you in developing something people want before you launch it to the general public. That kind of gives you some data on whether the product is viable or not before you release it to the public. If you can test it with a subset of early adopters and manage to convert them into paying customers in the initial phase, that kinda solves the chicken and egg problem. Since you’ll have a small set of hardcore users paying for the product, you can go to other customers and say that ‘hey this has been tested with other people, it’s been validated that it solves their problems’- that convinces them to come in, and that builds traction with the product. This is for a B2C product.
For B2B, it’s another process, you have an initial product where you go to a corporate or business to engage in a pilot, and usually for those pilots, you offer some kind of discount so that you can get people to test your solution and product. After a few pilots, you get the traction and credibility to launch it to sell to other companies.
4) What’s the process of assessment for investors that make them want to continue being with a startup in the long term?
In terms of process, we don’t have a fixed formula.Fundraising is a relationship-based game For startups, you have to identify your investors (partners), research each of them, identify who would be more interested in your product, before casting your net and seeing who replies. And from there, build a relationship from scratch.
From the investor side, it’s also about relationship management. The best deals are referrals from other entrepreneurs or VCs too, without a good relationship with the other ecosystem members, it’s very hard to identify good deals and end up investing in them. We don’t really have a process but it’s more of developing a “CRM” and keeping in contact with the deal flow you have. It’s important to be really upfront with a startup, not wasting their time. But of course, the process is about how you develop the relationship with the company and get to the point where both sides are comfortable with each other and will be able to work together for the long term. It’s about building the relationship, then the investment.
5) How often do you think startups and investors should meet after funding?
Entrepreneurs and investors are all very busy ppl, so both sides shouldn’t be very pushy. It depends on the investor - they have to gauge whether he is somebody that needs constant updates, or someone who is satisfied with a monthly update. For startups, they need to develop a relationship management process, to identify hot, warm, and cold leads.
For instance, hot leads should have more touchpoints, weekly/monthly check-ins, updating them on progress and have regular meetings and/or calls. For warm ones, drop them an email from time to time, and keep your startup in their minds. As for the cold leads, less frequent touchpoint would be fine.
6) What do you see in NUS angel ventures that inspired you to be a part of NAV?
I would say in the initial phase - it was the passion of the founding team of NAV. I was invited to a one-off mentorship event. We kept in touch afterwards. Subsequently, when NAV started, they contacted me again and asked me if I would like to join.
My first thought was ‘yes sure’! Since I’m an NUS alumni and am within the startup and VC ecosystem, I definitely feel that one factor is being able to give back to my alma mater, and it’s always nice to share my learnings and experience with the younger generation. Another factor is that part of my work is finding and investing in startups, so it’s synergistic with what I do and I get exposed to deal flow as well, hence this is a win-win situation.
Thank you Jie Lun for taking time off to have this interview with us!
We are grateful to have you as an advisor of NUS Angel Ventures.
If you have any other follow up questions, do email your questions to email@example.com
Watch the full video interview here: https://lnkd.in/gejFXBx
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