In an e27 interview, Jeremy shares his insights on evaluating a startup’s potential through growth trajectory, angel investing myths, managing risks through addressing conflicts and product-market fit and investing approaches during a funding winter.
How do you typically approach investing during a funding winter?
Founder leadership takes centre stage during this time. It’s crucial to assess the resilience, adaptability, and strategic vision of founders in navigating these turbulent times.
This shows up as a decision to double down on the fundamentals and focus on unit economics that demonstrates product-market fit. Prioritising efficient resource allocation and sustainable growth helps founders weather the storm and build a strong foundation for long-term success.
What are your typical investment criteria, such as industry, stage, and geographic location?
I focus primarily on Southeast Asia because there are so many exciting opportunities in the region. Staying focused and aligning with my expertise enables me to make informed investment decisions and be helpful to founders after the investment.
Can you describe your investment process from initial contact to closing a deal?
After the initial contact, we will first do a video call to establish the connection and gauge mutual interest. If there is potential alignment, we proceed to follow up with deep dive meetings, explore the data room and answer questions for a thorough understanding of the opportunity. If all goes well, we proceed with closing the deal!
Also Read: Founders should act as custodians of investors’ capital: Jed Ng of Angel School
How do you evaluate a startup’s potential for growth and success?
I look at two key factors when evaluating a startup’s potential for growth and success.
First, I examine the startup’s prior growth trajectory and milestones achieved, as it serves as a strong indicator of its ability to scale. Second, I make it a point to engage in customer and industry calls to gain firsthand insights into the startup’s value proposition and market fit.
How important is the founder’s experience and background when making investment decisions?
The founder’s experience and expertise in the industry they operate in are crucial for demonstrating a strong founder-market fit. The speed at which they acquire knowledge and adapt to the space provides valuable insights into their potential for success. Careful consideration of the founder’s experience and ability to navigate the market help me decide if the investment has a higher likelihood of positive outcomes.
Can you share your successful investment and what made that investment successful?
One of my successful investments was Iterative Scopes, a pioneer in the application of AI-based precision medicine to gastroenterology.
Their success can be attributed to Jonathan Ng, the founder, and his exceptional entrepreneurial spirit combined with his domain expertise and doctor. Secondly, he started building the company years before the timely tailwind of increased market interest by both customers and investors for AI solutions in healthcare.
Jonathan and I discuss his experience on the BRAVE Southeast Asia Tech podcast.
What are some common mistakes that startups make when pitching to angel investors? What are some myths about angel investment?
One common mistake startup founders make is not clearly articulating the problem they are solving. It’s crucial to quantify the pain point being addressed and specify the scale of the problem, whether it’s a US$10 per month issue, US$100, US$1,000, US$10,000, or even US$100,000. This helps investors assess the market potential and the urgency of the problem.
One myth about angel investing is the belief that picking winners is easy. Underestimating the complexity of this task can eventually lead to a humbling experience. Some investors may feel it’s effortless, get overly excited, and invest quickly.
Also Read: Your investors are your number one fan: Tina Di Cicco of Manila Angel Investors Network
It’s important to strike a balance and allocate capital wisely throughout the investing journey. We discuss angel investing best practices over a podcast.
How important is the alignment of values between the investor and the startup founder?
The alignment of values between the investor and the startup founder is paramount. In one out of 40 scenarios of eventual success, we will be working together for 10 years through both ups and downs.
In the other scenarios, we will have to go through some of the toughest times together as we figure out how to land the plane. Shared values become the strong founder of a strong working partnership.
How do you manage risk when investing in startups? Are there any specific metrics or indicators you look for?
I pay close attention to two key areas, especially in the early stages. The first is the high likelihood of cofounder conflict in the early stages, which can significantly impact the success of a venture. The second area is product-market fit, which is crucial for revenue growth.
Addressing these risks head-on and ensuring cofounder alignment and PMF helps the startup team increase their likelihood of eventual success.
Can you share any advice for startups looking to raise funds from angel investors?
My advice is to approach it as a learning process for both parties involved. You have to treat each interaction as an opportunity to showcase your ability to learn and iterate based on feedback. Demonstrating a growth mindset and a willingness to adapt can greatly enhance your chances of securing investment.
Shiyan Koh, managing partner of Hustle Fund, and I discuss how fundraising is not just about the funds, but also about building long-term trust for a serious working partnership in the face of tough odds.
This article was originally featured on e27 at https://e27.co/my-advice-is-to-founders-approach-raising-funds-as-a-learning-process-jeremy-au-of-monks-hill-ventures-20230609/