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Start-ups

Investors are excited about Southeast Asia. Here's their advice for start-ups

Silicon Valley has long been the epicenter of global start-up innovation, spawning some of the world's biggest and best-loved companies.

But where the Valley was once the considered the gateway to success, the market has now expanded to other global hubs. Increased funding and improved expertise has made it easier than ever before for entrepreneurial hopefuls to make a go of it in any of those regions.

One of those growing start-up regions is Southeast Asia, investors highlighted at a recent innovation festival in Singapore.

Exhibiting favorable macro-economic trends — such as a young, fast-growing population, increased internet adoption and rising wealth, the market is rife with money-making potential, said award-winning venture capitalist Jenny Lee.

"If I was an entrepreneur in Southeast Asia today I'd be very happy," said Lee, whose company GGV Capital is one of a number of venture capital firms to have recently expanded to the region.

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And she's not alone in her view. Management consultancy Bain & Co has predicted that by 2024 the region will be home to 10 more billion-dollar start-ups, marking a doubling of the region's current blessing of unicorns such as Grab, Go-Jek and Traveloka.

Meanwhile, venture capital investment into Southeast Asia has more than tripled in recent years. Sui Ling Cheah, operating partner at Wavemaker Partners, said the region now exhibits the "holy trinity" for investors: Capital, talent and customers.

Of course, investors do not have a crystal ball. Indeed, said Abheek Anand, managing director of Sequoia Capital, "often the most interesting industries are those that are hard to predict." But they do have a fair idea of what makes a business stand out from the rest.

Here's their advice for would-be entrepreneurs:

Speak to investors early

Whatever stage your business idea is at, the experts agree it's never too early to start talking to investors.

Very occasionally, said Anand, venture capital firms like his own may be willing to invest in an idea alone.

But even in the more common instances where investors want to see an additional, physical proof-of-concept before parting with their cash, they may be willing to share their advice to help you on your way.

"Many investors invest in lines not dots," said Pieter Kemps, principal at Sequoia Capital, noting that investors often want to build ongoing relationships with their investment prospects.

Those early conversations will also help you decide the kind of investor you're looking for, noted Andrea Hajdu-Howe, general head of capital at international start-up generator Antler.

That could vary from an angel investor to a venture capital firm or an incubator program — not necessarily one that's based in your region, she said.

"People tend to forget to look outside their geography for investment and for help," said Hajdu-Howe.

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When to go from employee to entrepreneur

Think long-term

Apart from forward planning for investment, it's also important to plan for the future of the business and be deliberate about where you want it to go in the long-term.

That doesn't necessarily mean knowing exactly how much money you plan to make. But, rather, what the factors are behind those revenues, said Raditya Pramana, partner at Indonesian venture capital firm Venturra.

"Financial projections will never be accurate, but it's all about the projections and the growth drivers," he said.

Lee of GGV Capital agreed. "I don't want to see financials; I want to see a forward-looking organization chart showing where the business is going," she said.

Listen to your customers

One of your greatest ways to assess the value of your ideas is to listen to feedback you get from the people you're trying to serve.

For Wavemaker Partners' Cheah, the value of those insights cannot be understated and will help ensure your business has a true market.

"Learn enough from your customer to know exactly the problem you're trying to solve," she said.

Know your competition

Lastly, investors agreed, you need to get to know your competition. And even if you think no one else is doing exactly what you are, think again because that may not last, said Yash Sankrityayan, principal at Jungle Ventures.

"A lot of the big apps are trying to get into everything and anything so they could be your competition soon," he said, referring to the likes of ride-hailing apps, such as Uber and Grab, which have now expanded into food delivery and even financial services.

Indeed, Lee said one of the best methods she uses when deciding whether or not to invest in a company is by evaluating it against its competition. Or, more specifically, assessing its staff against their peers.

"The best way to assess a company is not (by looking at) the top guy, but how the number 10 guy compares with the competitor's number 10 guy," the investor said.

"If your number 10 guy is better than their number one guy then you're in good shape. Otherwise, you've got a long way to go," Lee noted.

Anthony Tan, co-founder and chief executive officer of Grab, poses for a photograph in Singapore, on Monday, July 9, 2018.
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Understanding the wider market can also act as a good source of inspiration, said Barak Sharabi, founder of Infinity Technologies.

"You're in a very good space. You can see everything that's happening in the U.S. and in Europe and you can take what fits, " he said, noting that has been a common approach for other e-commerce and ride-hailing platforms.

GGV's Jenny Lee agreed. However, she said figuring out how to mold those concepts to a new market will be the key differentiator.

"Learnings from the U.S. and Europe will be relevant, but the navigation will be different," she said.

Don't miss: Top founders share these skills, says investor who backed Alibaba, Grab and Xiaomi

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