2021 was a record year of fundraising for startups in Southeast Asia, and we’ve covered this in several pieces in the past few weeks in general, for specific markets, and also for specific verticals. Even on our podcast, we made sure to ask our founders, all of whom have raised at least one institutional round where we participated, about how they approached fundraising and their advice for fellow founders who are just about to raise for the first time.
2022 is expected to be an even greater year for startup investing in the region. With more emerging venture backable verticals, there will be more founders looking to raise venture capital, and so we compiled a list of all their fundraising advice: 18 in all.
From what they’ve shared we’ve also identified a few common themes:
- Fundraising is a two way street. It’s not just about getting capital or value-add from investors, but also investors looking how they can win with your company’s growth.
- Investors invest in people who do and the stories that come out of what they do.
- Do you know what you are selling? It’s important to know the ins and outs around the market, business metrics, as well as motivations of customers and employees.
- Find the right partners who understands your vision, aligns with what you want to build, and has the capability to support you throughout the ups and downs.
- It may be the first round, but there are long-term implications.
If you’d like us to join your next round of funding, let us know what you’re building on our website. We also have tools on our website to help founders and investors with funding:
(1) Fundraising doesn’t automatically solve problems; focus on people.
“Maybe my advice will be more relevant to startups that are smaller than Payfazz. So I’m speaking about the startup that maybe just started and is just starting to raise its first Series A capital. That it will always be hard.
In the early days, when I raised Payfazz’s first ticket from Insignia and the first ticket from YC, I thought that after I have money, problems will be solved, but actually, you will have another problem. Right after Series A, you have another problem.
After Series B you think your problems are solved, but actually, you will have another set of struggles and you will realize that actually, it’s normal, that you will always find these hardships.
And it will be impossible for you to solve it alone. So that’s why I keep mentioning people. You need to leverage people around you. You need to bring a good set of investors who can support you from the investment side, and also be a good board of directors. They can be good people to support you in your decision-making. A good C-level and good team members can be the people to help you execute [on your decisions].
Don’t try to do everything alone because that’s going to drive you crazy. And maybe a lot of founders try to do everything themselves and that will make them feel really stressed and depressed.
So that’s what I want to share with founders: focus on people. In this case, I’m not only talking about the people that you recruit, but also the people on your board and the people that are brought by your investors, because they can influence a lot in your company.”
(2) Watch dilution.
“The best advice for early-stage founders raising your first round is — please don’t get screwed, trying to give up too much of a company away that’s all.”
(3) Your first check determines the checks that come after.
“Well I think when racing your first round don’t just look for VC with money or the first check that comes in, but look for real partners who can work with you, work alongside you through many rounds to come. Your first check really determines the checks that come after.”
(4) Fundraising is a two-way street; know your potential investors too.
“Firstly I have to understand the investor landscape because investors come in many different shapes and forms. Research them before you reach out, or else you’ll waste your time and the investor’s time.
Second one is you need to differentiate [yourself] from the other startups and stand out in some ways because investors come across a hundred plus companies weekly. So you have to be different, right?
The third one is the investment thesis. Make sure that your company fits with their thesis of the investor. Also check their portfolio, know exactly what type of firm they invested in and last but not least is no is the norm.
Investors are always looking for a reason to say no, and some pass on Facebook, Airbnb, Google, YouTube, et cetera. So do not take it personally and always leave on good terms as you never know what the future holds.”
(5) First round is about having a great story and a great profile.
“For founders who are raising their first round, it’s very important to have a great story. A great story about why and how and what your startup is doing.
And then the second thing that’s very important is the founder’s profile. I mean, what you’ve done in the past, and how would it enable you to be successful in your own venture? So having these two answers really clearly, would help investors to have confidence in your startup and in your business idea.”
(6) Leverage first tranche publicity to round out your fundraise.
“A few, I would say first, make sure that your company’s investible. Know your metrics really cold. Reach out three to six months before you have to raise. Create the relationship first.
And then lastly, this one I just learned from the last round of fundraising. If you already have the first tranche and you haven’t closed your round, I would highly suggest you to actually announce it in the press, because then it will actually bring quite a number of other folks who potentially want to invest in you.”
(7) People invest in doers, not storytellers.
“Be passionate and confident. Also, you really have to be able to do. People only invest in real doers, not a storyteller. Show them your ability to get things done.”
(8) The right partner trumps valuation and rights.
“Pick the right partners because that will be very important, much more important than valuation or some rights, and the right partner can actually lead you a very long way.”
(9) Have a deep understanding of your market.
“Honestly, fundraising is hard. For anyone fundraising out there, you guys are not alone. It’s super hard. Especially in emerging markets where there’s not been a precedent of a market being proven here and it may be a big one, it may be off or something wrong, it could be either, but what I want to say is this: have a very good thing of the problem you’re trying to solve for, and have good market understanding.
For us early on when Insignia chose to back us, I think it was because we had a good understanding of the landscape, what the nuances of mental health care are in Asia, and a good roadmap and plan as to how we were going to tackle this in the next years to come.
So I think having a good, strong understanding of your market that you’re trying to tackle, be quite focused on what I’m trying to focus on. It’s a common trap that a lot of people try to make a global “Google” company from day one. It’s not going to happen. Just be clear of what you’re trying to tackle, know your market well, prove that you are a good operator, execute and it will help. I won’t say it’s easy, but it will help.”
(10) Keep a close eye on metrics and (11) find investors who align.
“While founder background and idea are important, especially to demonstrate founder-market fit, I personally think it’s quite important especially in the D2C space to keep a close eye on metrics from day one as it is the way to show that you’re not only prepared as a founder and have a great idea but also that you’re great at executing from the start.”
“Choosing the right investor is key. Look for investors who are aligned with your vision, able to support you, and bring to the table more than just financial support. You will always face challenges along the way, and so you need to find investors whom, when the going gets tough, you can trust to always be in your corner.”
(12) Balance vision and reality.
“I think it is important to really believe in your dream and be realistic at the same time. For the early stage, investors make decisions based on their impression on the founders more than the business itself.”
(13) Understand (and communicate) how your company is going to be big and why your customer needs your product desperately.
“This is actually one of the mistakes that we made for the first time, and then we learned [from] it. It’s to have a deep understanding of your customers and your market, because we realized in the end, investors just want to get a better and clearer understanding of how your company is going to be big, and why your customer needs your product desperately.”
(14) If you can sell to your employees, you should be able to sell to your investors.
“I think the most important thing, especially in the first round of funding, actually falls into two things. One is actually the founders. Number two is actually the dream or the vision.
So if you actually don’t have a very strong profile I suggest that you build your profile first like what I did. I wasn’t very popular in Indonesia. I mean, nobody knew me. So I actually joined a lot of competitions, to make sure that the concept was validated as well, and also learn a lot of ways to practice pitching.
Number two, about vision and dream — vision and dream are very important when you build a company even before funding, because that’s how you sell the dream to your employees so I think building that kind of dream is super important. and if you can sell the dream to your employees, I think there’s a good chance you could sell the dream to investors as well.”
(15) The best place to start raising money is your customers.
“I would definitely think hard about how much you need, why do you need the funds? And do you need to really raise it in the first place? I think there’s a bit of an overall narrative here around, “Hey, we need to start a company and we need to raise funds and so on,” but it is not true. Tons of people have created great companies without raising any external money, and the best place to start raising money is your customers. So if you can do that, start from that but like, obviously if you need any capital, then you find it from the right people.”
(16) Keep an eye on the long-term.
“Know the game that you want to play in the long run.”
(17) Find people you are comfortable with and with whom you are aligned.
“Something which I strongly believe in is to raise from investors that you can communicate with, that believes in you instead of just having the money. I think that’s the most important. The first round of capital, truth be told, founders go through big changes. We face challenges, so the support of the investor is the most important and the understanding. So that first round of capital I think should be people that you are comfortable with [and who] are aligned, that you trust.”
(18) Focus on product rather than finding investors.
“Maybe it is counterintuitive. I believe for the first round, you should focus on your product first, rather than focus on finding the investor. Because if you have a strong product, the investor will come, of course, if you are lucky.”