As funding slows, what's a start-up to do?

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Technology entrepreneurs hoping to snag funds must be prepared to tweak their business models or better still, find a unique advantage, warned top investment gurus at Singapore's EmTech Asia conference.

Start-up funding is on the wane following a boom year that drove valuations sharply higher. During the last three months of 2015, global funding to venture capital-backed firms dropped 30 percent on quarter to $27.3 billion, the lowest in nearly a year, according to data by KPMG and CB Insights.

"We won't see as many unions this year, it's definitely going to be a harder fundraising environment for entrepreneurs over the next few years," warned Jeff Clavier, founder and managing partner at seed-stage fund SoftTech VC.

Given the cautious backdrop, venture capitalists are becoming more selective.

Businesses with the flexibility of adapting to market needs will stand out, said Justin Kan, partner at Californian seed accelerator Y Combinator.

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"Our biggest companies are pivots of things, adjacent to their original ideas. For example, Airbnb started out as guys renting air mattresses, and now it's a vacation rental site. We mentor founders to help them adapt their business."

Clavier said that while selecting companies, he looks at how founders fit their markets, whether they have a unique advantage for their product, and if it works, whether they have a long-term plan.

"What is their path to bringing in $200 million in revenues? If you can get $200 million, you can go public."

Rob Coneybeer, managing director at Shasta Ventures, echoed those views.

"For us, the number one metric is serving an untapped market opportunity. Typically, that's because founders have identified a new technology that's available or if incumbents haven't innovated for a while."

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Even more attractive is a company solving problems within their immediate geography, according to Sequoia Capital.

In emerging Asia, there's a business model of innovation that takes lessons from abroad but stillnuances ideas to local standards as their respective economies industrialize, explained Yinglan Tan, venture partner at the prolific VC.

"Southeast Asia, for example, has three kinds of companies: clones, mutants and new species. Clones tend to be less resistant to changes in markets, mutants take themes from abroad and modify them but the most exciting for us are new species, who find local problems and solve them locally."

Ultimately, this new period of slower funding could prove beneficial in the long-run.

"I do think that there's going to be a down cycle, but we think that's fine. The best companies will continue to restart and down cycles enables companies to grow well so I think we'll be fine," said Kan.

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