“How to Attract a Venture Capital’s Attention?” – 500 Startups
People always ask “Where can we find Venture Capitals in Taiwan?” On the other hand, Venture Capitals also raise the question “Where can we find potential business?”
We have venture capitals in Taiwan, and according to our observation, there is no concern about funds or capitals in Taiwan too. However, looking at the current situation in the startup investment, the startup industry certainly experiences the shortage of its resources. “2015 Global and Taiwan’s Entrepreneurship Environment Communication Forum” invited four venture capitals representatives from Silicon Valley, Europe, Singapore and Taiwan to share their perspectives about each country’s startup environment.
“From this forum, we can learn experiences from their successful examples and to take useful policies to improve the entrepreneurship environment in Taiwan,” said by Lin Mei-Hsueh, Deputy Director general of Small and Medium Enterprise Administration.
Cjin Chen, Representative of 500 Startups located in Taiwan, is the first speaker in the forum. She has solid entrepreneurship experiences before joining 500 Startups last year including co-founding Gamelet and App Cubie. “500 Startups is a famous accelerator in Silicon Valley, which, unlike in Taiwan, invest every teams who join the accelerator. 500 Startups offers 125,000 USD in exchange of 5% of the shares in each startup. If the team performs well, they would put more investment into the company.”
500 Startups mainly invests teams including e-commerce, cloud services, mobiles, family and educational technologies, and recently in the IoT field. The accelerator also provides diverse resources, such as advisor services in product and marketing and AWS (Amazon Web Services) sponsorship.
“The Demo Day of Accelerator, similar to the Deadline for startups, enforces you to plan ahead and grow, which is helpful for funding. 500 Startups has invested over 1,200 enterprises from different 50 countries. Moreover, 500 Startups composed of more than over 2,000 investors and 200 to offer assistance or advice for the startups, which is also the most essential part for entrepreneurs,” Cjin said.
She pointed out the following directions for Taiwan’s startups:
- Your solution is not my problem
Think about who your client is before you start developing a particular technology. How many people will need your solution? How much money would people be willing to spend to solve this problem? In addition to the advice, Startups have to understand their customer.
- Telling a good story
Knowing how to tell an attractive story of your plan to investors, media and partners is what we need to learn in the Asian society.
- Investors’ background
There are different kinds of investors, such as Pre-seed, Seed, Post-seed, A/B and etc. Entrepreneurs needs to do homework themselves. They have to review each VC and evaluate their possibility to invest you and possible budget they are willing to offer.
- Party round v.s. Piggy round
“Party round” means that many investors together form a team, and “Piggy round” is the one which “piggy” out everything. For example, United States is more like a “party round” type investment. Each type of investment has their own pros and cons. Cjin prefers Party round investment that allows people with different backgrounds to form a complete team. Two kinds of risk existing in piggy round investment: “Signaling risk,” which indicates that if the only investor is not willing to fund the company, other potential investors would hesitate investing afterwards; “Relationship risk,” which means that no mediator between the team and investors if their relationship gets worse.
- Company structure
A startup should set up its structure of distribution of the company’s shares before seeking for investors, such as Convertible Notes, Convertible Securities, and regulations of closely held companies.
“Traction” of Company – Focusing on Active Users
In addition to above notices, whether startups are aware of what they are doing is especially important in VCs’ evaluation. “Besides the popular ‘16 indicators,’ investors also want to know where users come from? How much cost to get an additional user? You have to understand your own advantage in the market.”
Cjin also observed the popular term “traction” in this industry. Can traction be created by startups? Some companies would spend money on buying users; however, Cjin said, they became your users not because they “like” your product or service, and therefore, it is difficult to study their real needs.
She also emphasized that you do not have to do something “hot” or popular to get “traction.” Rather, you have to do what you are truly good at. “For example, Whatsapp has not gained profits yet, but they know they continue growing. They are just waiting for the opportunity to earn money by either charging fee or through advertisement.” Overall, in addition to profits, active users are another equal important factor to get “traction” in the company.封面圖片來源：PanX