Here’s what investors, VCs look for when investing in startups

Originally printed by CNBC

Pitching an idea to seasoned venture capitalists, and asking for their money, can be a nerve-wrecking experience in public speaking and deal-making for first-time entrepreneurs. Startups that play their cards right can hope however that it opens the doors to the billionaires’ club for the founders.

But standing out in a room full of other aspirants and grabbing an investor’s attention can be tricky. At the sidelines of the Innovfest Unbound conference in Singapore, CNBC spoke to a number of venture capitalists (VC), with existing portfolio investments in China, Japan, the United States, Southeast Asia, New Zealand, Israel and other places, and asked them about factors that influenced their investment decisions.

Xavier Arnau | Getty Images

Unsurprisingly, the viability of an entrepreneur’s idea was important, but most VCs said they placed a greater emphasis on the founder’s personality, and on his team.

Taizo Son, the brother of SoftBank CEO Masayoshi Son, is the founder of Mistletoe, a venture firm that also is partly an accelerator and incubator. As a seasoned investor into startups, including the successful southeast Asian company Garena, Son said he preferred backing founders over business ideas.

He told CNBC, “My criteria to invest are the founders. So I won’t check any business plans, any economic projections, spreadsheets; but (instead) I focus on the founder’s mindset (and) passion.”

To be sure, Son also favors unique ideas and technologies that can differentiate well from the competitors, but he emphasized that passion — one that founders will not give up on during trying times — influenced his bets.

Veteran Israeli entrepreneur Yossi Vardi, who has invested in 86 startups, of which 30 made exits, told CNBC in his experience a good idea with poor execution would not go anywhere. But an average idea with great execution could become successful.

“When I started, I thought ideas were overrated and now I think ideas are irrelevant. It’s about execution and the personality of the people, rather than about the idea,” Vardi said.

To be sure, having a great personality that can convince investors does not mean guaranteed success for startups. The norm is that for every Facebook, Snap or Alibaba, there are thousands of failed businesses — a common figure cited by many says startups have a 90 percent or more failure rate within five years.

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So what makes a business succeed? While having a technology or a product that can change the industry, or create a new one, is an advantage, investors say there are several reasons even the most promising startups can fail.

Lagging behind the market

One key reason why some startups lag is that they are too slow to bring their product to the market, or offer updates and adapt to competition, according to Tina Cheng, a partner at Cherubic Ventures – an early stage technology VC firm that has invested in over 100 companies in the U.S. and Greater China.

While five or 10 years ago, a company could get away with offering the same product or service for a few years, Cheng said today the pressure to innovate is tremendous. To be sure, that pressure is not unique to startups — for example, in the smartphone industry, players are expected to push out new flagship handsets, with improved features and services, annually.

“If a company is doing well, it will be in the press. And the next thing you know, there will be a lot of copycats. One skillset that successful startups have is how do they always stay ahead of their competition?” Cheng told CNBC.

Poor management and lack of communication

Delegation of tasks, hiring the right people for the job and managing the team is also important, according to VCs.

“We found that many of the founders do not know how to delegate … (and) … they do not know how to hire the right person for the right job,” said Isaac Ho, founder of VentureCraft Group. He added that integrity was also a common problem, where founders would hide the real situation of the company from stakeholders.

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VentureCraft is a regional venture capital company in Asia that bets on medical technology (MedTech) and the information and communications technology (ICT) sectors.

Ho told CNBC about one of his early investments that went south. VentureCraft backed a company in the clean-tech and water technology space. The firm did a financial due diligence but skipped out on looking into the background of the founders. The company folded within three weeks.

Digging further, Ho said the firm realized the management team fought among each other, the CTO was fundraising by himself and the company didn’t pay employees for the past four months. The founder also owed debt for several months.

“By the time he got the money, he had to fold” said Ho. He added that a good CEO would know how to delegate, when to release his power or consolidate as needed.

Today, as part of his due diligence, Ho said VentureCraft looks deep into founder’s’ background – into their classmates, their college reputation, their relationships with their vendors and other stakeholders. One quirky piece of addition Ho adds to the due diligence is assessing how long it takes a founder to respond to his texts on the messaging service WhatsApp.

“If you take days to respond to me, when you are seeking my finance, what will happen during the bad days? Do you take months to reply?”

Lacking expertise in the product or service area

Chintaka Ranatunga, managing partner at Global from Day One Fund 2, affiliated with Sparkbox Venture Group, however, thinks the CEO personality trope is a bit “overplayed” by investors.

The fund is an early-stage VC fund with offices in Auckland and Taipei and they invest in Series A level in business-to-business (B2B) software and hardware companies.

“I don’t actually think the CEO personality thing is that important. I think it’s a bit overplayed. I do think particularly in the B2B space, domain expertise is extremely important,” he told CNBC. He added that some of the portfolio companies he has invested in have founders with between five to 20 years of expertise in their areas of operation.

A common mistake Ranatunga sees among startups in Asia, particularly Singapore, is the blind copying of successful business models from the U.S. and China, without accounting for the relatively smaller local and regional market size.

New $36 million fund launches to “plug a major gap” in the burgeoning New Zealand startup ecosystem

New $36 million fund launches to “plug a major gap” in the burgeoning New Zealand startup ecosystem

A $36 million venture capital fund has been launched in New Zealand aiming to plug a gap in Series A funding in the fast-growing local startup sector.

The Global from Day One Fund II has announced a first close of $NZ38 million, $5 million more than was originally targeted.

The fund will contribute investments between $500,000 and $2.5 million in pre-Series A and Series A rounds in mostly New Zealand and Taiwanese startups.

Investors in the fund include the New Zealand Venture Investment Fund and its Taiwan counterpart, along with Sparkbox Investments and a range of private investors, including some from Australia.

GD1 Fund 2 Managing Partner Chintaka Ranatunga says the fund is now on the hunt for local startups with proven global traction..

“We’re looking to invest in fairly early-stage software, internet and lean hardware startups at a pre-Series A and Series A stage,” Ranatunga tells StartupSmart.

“Typically these sort of companies already have revenues of $1-2 million, customers in offshore markets and a clear global competitive advantage.”

The fund has also revealed its first investment from the new cash pool, in sales automation startup Qotient, which Ranatunga says typifies the sort of startup he wants to focus on.

“This is a classic example of a company originating in New Zealand but they’ve currently got an office in New Zealand, an office in Sydney and a CEO based in Silicon Valley,” he says.

“In many cases the companies already have an overseas presence or plans to have a presence, and we will help them with that.”

Ranatunga says the startup ecosystem in New Zealand is rapidly growing, and very early-stage angel funding and later-stage investors are becoming prominent, but there’s still a gap when it comes to Series A size rounds.

“We’re one of very few early-stage VC funds in the New Zealand market – we’re plugging a gap for pre-A and Series A capital,” he says.

“The New Zealand startup ecosystem has definitely developed a lot in the past four or five years and now there’s actually quite a lot of very early-stage capital at a seed and angel level.

“But early-stage VC capital to scale is a real crunch point. So that’s what we’re looking to do – we’re here to plug that gap in the middle.”

While not looking to invest in any Australian startups, the fund is looking to develop ties with neighbouring investors and to help New Zealand tech companies expand across the Tasman.

“We know some of the players in the Australian market, like Blackbird and Airtree,” Ranatunga says.

“We have a fair amount of friends in the Australian ecosystem and now we have the fund off the ground we’re looking forward to doing more stuff in Australia. We’re not looking to invest in Australian startups but many of our kiwi startups have staff, offices and most importantly customers in Australia.

“We’re helping them set up in Sydney or Melbourne and in the future we may have Australian co-investors.”

Global from Day One raises US$26M for its second fund; makes first investment in Qotient

GD1 Fund II is a cross-border technology fund targeting startups in New Zealand and Taiwan with a focus on the US and Asian markets

Global from Day One (GD1), a VC fund launched by Auckland-basedSparkbox Ventures and Taipei-based VC firm Pinehurst Advisors, has raised NZ$38 million (US$26 million) towards its second fund.

New Zealand Venture Investment Fund (NZVIF) and its Taiwan counterpart National Development Fund committed around NZ$11 million (US$7.5 million) each towards this. The remainder came from Sparkbox, the Fund’s management team and private investors in New Zealand, Taiwan, Australia, Singapore, Hong Kong, and the US, it said in a statement.

New Zealand investors include Stephen Tindall’s K1W1, Diligent Founder Brian Henry, and a range of private investors with technology and finance backgrounds.

GD1 Fund II is a cross-border technology-focused fund with the majority of capital to be invested in New Zealand and Taiwanese startups with a focus on the US and Asian markets.

“Investors are showing faith in our proposition, which is to target early-stage software companies needing investment of between US$500,000 and US$2.5 million at the pre-Series A and Series A stages. We are typically investing into companies which already have revenues of US$1-3 million, customers in offshore markets, and a clear global competitive advantage,” GD1’s Chintaka Ranatunga said.

The Fund has made its first investment in sales automation SaaS startup Qotient. Co-founded by Justin Wright and serial entrepreneur Miles Valentine (founder of Zeacom), Qotient has offices and customers in Auckland, Sydney and San Francisco.

NZVIF Investment Director Aaron Tregaskis said: “Venture capital investment is at healthy levels but we always need new funds coming into the market to continue and build on the momentum which has been achieved. GD1 is occupying a niche in between where the angel market invests and where other VC funds target slightly larger investments.”

GD1 Fund II is currently open for investment until final close later this year.

By Sainul Abudheen K – e27

NZVIF, Taiwan’s NDF to jointly anchor second VC fund

Note, this first appeared on Deal Street Asia at this link

January22,2016: NewZealandVentureInvestmentFund(NZVIF) (http://www.nzvif.co.nz/) and its Taiwanese counterpart National Development Fund (NDF), will each commit $7.5 million in a new fund across both these countries.

This new vehicle – The Global from Day One Fund II (GD1 Fund II) – has already raised over NZ$30 million and is targeting a final close of up to NZ$45 million.

This is the second venture capital fund established as a joint New Zealand-Taiwan arrangement. GD1 Fund II joins Movac (http://movac.co.nz/) and GRC Sinogreen as active VC funds in the New Zealand market.

This new vehicle will primarily invest in New Zealand-based startups with a focus on offshore markets, while some part of it will be set aside for startups aiming to use Taiwan as a springboard to achieve growth in Asia.

GD1 Fund II, which will be based in Auckland and Taipei, is a 10 year Silicon Valley-style micro VC fund that will invest in high growth technology companies.

The final amount that NZVIF and NDF will invest in this new fund will depend on the vehicle’s final size.

The fund’s managers have committed about 20 percent of the capital, with the rest being raised from private investors in New Zealand, Taiwan, Singapore, Hong Kong, and the USA.

GD1 Fund II will target startups developing software, internet, and smart devices or ‘lean hardware’, and will be looking at deals between $250,000 and $1.5 million in the Pre Series A and Series A stages, and invest in around 20 companies in New Zealand and Taiwan.

This new VC fund is being launched by investors from Sparkbox Ventures (http://sparkbox.vc/) – the Auckland-based early stage fund – and Pinehurst Advisors (http://pinehurstadvisors.com/) – a Taipei-based early investment fund. GD1 Fund II’s managers’ track record include investments in over 100 early stage companies, including successful New Zealand companies like Xero (https://www.xero.com/), Booktrack (https://www.booktrack.com/), MishGuru (http://www.mish.guru/)and GreenButton (http://www.greenbuttondata.org/).

The GD1 management team of Mark Hsu, Chintaka Ranatunga and Kevin Chen will be managers for the second fund too.

GD1 Fund II is the eleventh venture capital fund established with NZVIF as a cornerstone investor, and the latter’s commitment is to ensure that at least half the fund will be invested into New Zealand-originating technology companies.

“From a New Zealand Inc perspective, one of the chief benefits of the partnership that􏰅 NZVIF has with Taiwan’s National Development Fund is that it opens access to new􏰅 networks and markets for fund managers and the high growth companies they invest in,”􏰅 Franceska Banga, CEO of NZVIF, said in a statement.

 

NZVIF commits to new $30m VC fund

Note: This is originally a Press Release from NZVIF. 

The New Zealand Venture Investment Fund (NZVIF) will be a cornerstone investor in a new joint New Zealand­Taiwan venture capital fund – the Global from Day One (GD1) Fund II.

The cross­border technology­focused fund has raised over NZ$30 million and is targeting a final close of up to NZ$45 million with the majority of capital to be invested into New Zealand start­ups with a focus on offshore markets. A portion of the fund will be applied to startups aiming to use Taiwan as a springboard to achieve growth in Asia.

GD1 Fund II has been established by investors from Sparkbox Ventures – the experienced Auckland ­based early stage fund – and Pinehurst Advisors – a Taipei­ based early investment fund. GD1 Fund II’s managers have invested in well over 100 early stage companies, including successful New Zealand companies like Xero, Booktrack, MishGuru and GreenButton.

The new fund has cornerstone commitments from NZVIF and its Taiwan counterpart, the National Development Fund, of around NZ$11 million (US$7.5m) from each, with the final amount dependent on the fund’s final size. Around 20 percent of the capital has been committed by the fund’s managers, with the rest being raised from private investors in New Zealand, Taiwan, Singapore, Hong Kong, and the USA.

GD1’s Chintaka Ranatunga will manage the fund’s investments alongside Mark Hsu and Kevin Chen, targeting young companies developing software, internet, and smart devices or ‘lean hardware’. They will be looking at deals of between $250,000 and $1.5 million at the Pre Series A and Series A stages. The fund is expected to invest in around 20 companies in New Zealand and Taiwan.

NZVIF chief executive Franceska Banga said that with the fund’s first close, it will be the first new venture capital fund for a year and fills a gap in the New Zealand market for funding Series A stage opportunities.

“It is a welcome addition to the growth stage investment sector and it is the eleventh venture capital fund established with NZVIF as a cornerstone investor. The terms of NZVIF’s commitment means that at least half the fund will be invested into New Zealand­originating technology companies.

“GD1 Fund II joins Movac and GRC Sinogreen as active VC funds in the New Zealand market. We are confident that some of the other funds currently in development will be able to raise capital and join these funds in the market.

“From a New Zealand Inc perspective, one of the chief benefits of the partnership NZVIF has with Taiwan’s National Development Fund is that it opens access to new networks and markets for fund managers and the high growth companies they invest in. This is the second venture capital fund established as a joint New Zealand­Taiwan arrangement.

“The fund’s managers have broad experience in working with technology companies throughout Asia and North America. They have extensive contacts and investors from around the region, including Taipei, Singapore, Jakarta, San Francisco, Tokyo, Hong Kong, and Shanghai. This will be of considerable benefit to growth companies looking for rapid expansion into these major offshore markets.”

Background Information

GD1 Fund II

GD1 Fund II has as its cornerstone investors Sparkbox Ventures, NZVIF and NDF. The GD1 management team of Mark Hsu, Chintaka Ranatunga and Kevin Chen have considerable experience in early stage investing and growing technology companies. It will be based in Auckland and Taipei. It is a 10 year fund Silicon Valley­style micro VC fund investing in high growth technology companies.

NZ Venture Investment Fund

NZVIF has been investing with venture capital funds through its $250 million Venture Investment Fund since 2003. It has partnered with 10 venture capital funds which have invested into over 65 companies, including Orion Health, Xero, SLI Systems, Vend and PowerbyProxi. It formed a co­fund partnership with Taiwan’s National Development Fund in which both will invest with venture capital funds with interests in New Zealand and Taiwan.

National Development Fund of Taiwan

The National Development Fund of Taiwan (NDF) is a $10 billion fund established in 1973 to support industry innovation and research and development in Taiwan. It provides direct investment into firms, indirect investment via venture capital funds, and loan financing. It has invested into more than 50 venture capital funds globally.

 

Partners of Sparkbox, Pinehurst launch US$30M startup fund for NZ, Taiwan

Note: This article first appeared on e27 at this link.

Partners of Auckland-based early-stage VC fund Sparkbox Ventures and Taipei-based VC firm Pinehurst Advisors have launched a US$30 million cross-border technology fund.

Christened Global from Day One (GD1) Fund II, the firm will invest in New Zealand startups with a focus on offshore markets. A portion of the fund will also be applied to startups aiming to use Taiwan as a springboard to achieve growth in Asia.

GD1 will be looking to invest between US$250,000 and US$1.5 million in pre-Series A and Series A stage startups. The fund is expected to invest in around 20 companies in the areas of software, Internet and smart devices or ‘lean hardware’ in New Zealand and Taiwan.

The fund has already received commitments to the tune of US$19 million, as per an official statement.

New Zealand Venture Investment Fund (NZVIF) and Taiwan’s National Development Fund have committed around US$7.5 million each. Around 20 per cent of the capital has been committed by the fund’s managers, with the rest being raised from private investors in New Zealand, Taiwan, Singapore, Hong Kong, and the US.

GD1’s Chintaka Ranatunga will manage the fund’s investments alongside Mark Hsu and Kevin Chen.

“From a New Zealand Inc perspective, one of the chief benefits of the partnership NZVIF has with Taiwan’s National Development Fund is that it opens access to new networks and markets for fund managers and the high growth companies they invest in. This is the second venture capital fund established as a joint New Zealand-Taiwan arrangement,” said Franceska Banga, CEO of NZVIF.

GD1 Fund II’s managers have broad experience in working with technology companies throughout Asia and North America. They have invested in over 100 early-stage companies, including successful New Zealand companies like Xero, Booktrack, MishGuru and GreenButton.