Home > Settings > Archives > March 2021 > ACE-GeoWorks Teh Tarik Series: “Understanding Venture Financing & Investment”
ACE-GeoWorks Teh Tarik Series: “Understanding Venture Financing & Investment”
What industries and technologies are Venture Capital (VC) firms investing in this year? What key factors do VCs look at when assessing the scalability of start-ups and what are the most common mistakes made by start-ups in their quest to scale their products and services to their customers? These are some of the questions partners from VC firms -- Carmen Yuen of Vertex Ventures and Michael Lints of Golden Gate Ventures, addressed at a recent webinar, “Understanding Venture Financing & Investment”, hosted by Action Community for Entrepreneurship in collaboration with GeoWorks.
Carmen Yuen of Vertex Ventures
According to Carmen, in 2021, VCs will continue to look at industries and technologies that align with their specific investment thesis. She said that in the case of her firm Vertex Ventures, this includes enterprise software, consumer internet, fintech and health tech services. “The usual suspects will continue to be digital commerce, fintech, edutech and healthtech. We’ve seen this play out in 2020 given social distancing and the whole issue of working from home.” Carmen believes that trends in “digital ordering” will continue, and suggests that home food delivery, home entertainment and e-commerce will remain growth areas.
Michael added that while there hasn’t been a significant shift in investment strategies at his firm Golden Gate Ventures, he has also noticed an increase in local innovation now that people are being confined to their homes and companies are having to adapt to their work force logging in from home rather than the office as a result of COVID-19 pandemic safety measures. He said that combined with a rapid growth in tech talent, he is seeing smarter solutions to problems being developed in Singapore and he is seeing local companies focusing on healthcare and even quantum computing.
Michael Lints of Golden Gate Ventures
When asked about factors that Venture Capital firms take into considerations when deciding to invest in a company, Carmen said, “We want to make sure that they have the potential to become the regional champion, if not the global champion.” This would require founders to have high ambitions, determination and both the “mental and physical capacity to continue the journey”.
Michael added that when investing in companies, especially if they are at the Series A or Series B stage, venture capital firms would want to ensure that these companies “utilise their capital specifically for growth”. He said that while fundraising is considered as a milestone and a cause of celebration for companies, he cautioned that the real challenge starts when companies receive capital. This is because they are expected to grow “2X or more” over the course of the following 12 months. This expectation, he says, will put pressure on organisations, co-founders, teams and even one’s private life. “So, what we’re trying to do is gauge whether the founding team has the ability to make sure that the company grows when there is new investment.” Venture funding, he says, is equity based, not interest based. “You’re giving up a part of your company for the cash you received in return.” Rather than taking a step back after receiving funds, he urges companies to “take 10 steps forward because it’s extremely important that the company scales from here on.”
Webinar moderator, Yan Lin Ang, from
Action Community for Entrepreneurship
Action Community for Entrepreneurship
One of the common mistakes made by founders when in the early stages of developing their business, is the issue of giving away too many stock options to their employees especially when they do not raise enough capital. It is thus important to be cautious with stock options, Carmen advised. “You should learn how to pace out your employee stock options. Don’t be too generous at the start,” she said. She also suggested that founders keep a close eye on their cash flow and have clarity on the specific market that they are interested in. “Are you going after the enterprise market or are you going after a certain domain within the consumer market? Be clear rather than going for multiple markets at the same time because it will lead nowhere.”