Last week, Venture Hype shared a conversation with entrepreneur-turned VC Nicholas Chan. In light of his tremendous success in investing in his short 30 years, Venture Hype was also interested in how Chan goes about selecting his investments. It turns out, he has a very detailed guideline for sizing up an opportunity to determine if it is the right fit for Azione Capital. The elements presented here are in order of priority.
Chan has a knack for spotting opportunities in spite of hot aired salesmen, he is quick to look beyond the thick business plans and filter out smooth talkers with fake western accents. He is immune to those using Silicon Valley buzzwords every two seconds or academic-types who can only cite references and theory.
Snaky individuals also emerge with a track record of being “serial entrepreneurs” that have successfully raised funds for half-baked ideas, failed and “bounced back” over and over. Chan highlights that the masses generally mistakenly herald these individuals as fighters. Others still have a world view that is built and guided only by what they read on blogs or see in startup-themed events.
Azione Capital instead will consider an entrepreneur that is able to demonstrate his ability to be meticulous and accurate, while also being able to accept feedback. This individual must be flexible to improvements and adjustments, participating as a silent undercurrent of strength and stability.
He must have the desire and ability to form teams; leading where needed and following when required. His ability to continually criticize and improve himself while praising the team onwards will win him favor. In addition, a clearly pragmatic approach towards financial management and a clearly observed frugal mentality of the management team are essential.
“In summary I look for someone who knows that when he approaches Azione Capital, he is coming with the mindset of seeking assistance and entering a partnership,” said Chan. He needs to be someone, “who knows the value of money and the responsibility in managing what they are given and is not someone who makes it clear that the VC-entrepreneur relationship is a “give me cash” mercenary transactional-type relationship.”
Far too many entrepreneurs are caught up in their own world, which skews their approach to market opportunity. Most either do not know enough about the market or lack the depth to conduct relevant research to unearth a sufficiently robust set of appropriate data.
Chan looks for those entrepreneurs who clearly demonstrate “Why not?” and in the creation of a market which is either overlooked by the majority of buzzwords and trench-chasing entrepreneurs. He looks to those individuals who address and lock themselves in by the superior and intimate understanding of a strong niche.
Chan said, “In summary I look for a team (preferably) that has some form of experience in the sector they are entering, and even better if their product/service has been requested or is demonstrated to have a clear instant demand from their existing contacts/clients within that sector.”
More often than not, those teams that approach Azione Capital either lack business development or technological capabilities. The team worthy of investment should demonstrate the ability to source for the missing elements or be willing to accept the recommendations from Azione Capital in the assembly of their team. The founding members should demonstrate good team player behavior. The key here is in knowledge retention and project management for all matters IP (intellectual property).
“Very often, the single greatest blockage of expertise is in an inexperienced (both in working and in starting up) management team that is terrified of opening up their team to others and in admitting their inabilities, fearing either loss of power or loss of face,” said Chan. “This can very often lead to the death of an otherwise great startup by the slow and sure stranglehold of stupidity.”
An idea is completely worthless unless it is actually being worked on and not just talked about and discussed endlessly. Many entrepreneurs fear that if they tell people about their idea, it can be stolen. Chan highlights that if it really is that easy, the idea wasn’t worth anything anyway.
“Far too often, entrepreneurs are too caught up with the fact that the idea is the single-most important part of their startup, and many even refuse to put up their idea for review (even to venture capitalists) and improvements,” said Chan.
“Until the day that these immature entrepreneurs can get a grip that a startup is 90% perspiration and 10% inspiration (to quote Einstein), they will be relegated to the great masses that will go nowhere. The barriers to entry should lay squarely on the abovementioned three factors, of which the idea is merely a succinct description of the synthesis of the three as a whole.”
Aside from the guidelines mentioned above, Azione Capital also focuses on the community involvement of each proposal. Chan’s personal conviction is that he wants to help startups that want to create value, be of service to others and make a profit. He has a strict dislike for those “wannabe entrepreneurs” or even “serial entrepreneurs” that ramble on about IPO, trade and sale right at the onset.
Chan believes that this demonstrates a lack of commitment to the long term business and of building a legacy. He is not as interested in those ideas presented by startups simply seeking to make a quick buck.
When asked about the start-up investment scene in Singapore, Chan was quick to note that it is dominated by trend-chasers and buzzword followers who are mostly trying to recreate the image of Silicon Valley. Most of the entrepreneurial events in Singapore are not a true reflection of Asian entrepreneurs at large. Most entrepreneurs are focused on their work rather than noisemaking.
The most commonly seen deals in Singapore include the “me too” type deals where wannabe student entrepreneurs from universities demand millions for their startups without putting a cent down, without having a strong team, and without a compelling product; and “perpetual grant” entrepreneurs who open a business for a grant, close it when the money is exhausted and repeats the process.
These exact crowds are the same that tend to dominate the “entrepreneur scene” in the events and blogs of Singapore, of which the term “entrepreneur” is twisted to suit the vocal minority whose only claim to entrepreneurship is the noise they make, not in the works they do.
According to Chan, “From my own experience, many private investors in Singapore are not too keen to put their money down due to lack of confidence from the abovementioned reasons, and those that do tend to put it with incubators like Azione Capital of which the mandate of spotting authentic entrepreneurs is put onto the management team, all of whom remain active entrepreneurs to this day.
Additionally, as better returns can be obtained with lesser risk via property play and stock market movements in the recent months within Asia, thus private investment amounts are being attracted to those areas rather than on high risk startup venture type investments.”
* For series, references are published in the last installment of the series.
Venture Hype respects your privacy. We'll never sell or share your email, and you may unsubscribe anytime.
I have found the Venture Hype team one of the most professional teams I have dealt with. Well oiled process, good questions, excellent editing and marketing etc.
