Given that there are so many methods to raise capital nowadays, what are the benefits or challenges of raising funds from a venture capitalist or corporate venture capitalist?
First, choose wisely
Sarah, the fierce and ambitious entrepreneur who has personally taken on the responsibility to aid in the success of female founders conveyed that choosing a mode of fundraising depends on which stage you are in and the number one thing you are looking for. Are you looking to scale or are you looking for capital? Or are you looking for a strategic partner that can help you open doors to markets not available to you? “Women are underfunded but they have been very resourceful in finding different modes. Bank loans, crowdsourcing and even newer models like revenue financing. It’s hard to say this is the one route for you without understanding where you are in your business and what your priorities are.” She challenges all entrepreneurs to think about what's necessary for them at this point to get to the next stage as this understanding would help them to identify the right method for them.
It is a long-term partnership with a venture capitalist; even longer than marriage
Sarah articulated that fundraising is an investment. “You really want to think very hard about who you want to invite into that sacred space that you are building.”
“At Endeavor we believe that fundraising is all about partnerships. If you are going to raise equity capital and essentially give away a part of your business, it should be worth it”, added Jackie, the brilliant mind at Endeavor helping pave the way for the success of entrepreneurs worldwide. “Cash is really a commodity at this point. You want a real partner, someone who will add value. You will get that in traditional venture capital, because when you choose crowdsourcing, you are losing the opportunity to find that real partner.”
Corporate venture capitalists are good partners for businesses at leader stages
Jackie declares that corporate venture capitalists generally employ strategic and financial objectives, so partnering up with them before figuring out your strategy might hinder the business. “They can engage with you and your business in a number of different ways. They can be a client, partner, investor or even a buyer. We like to encourage our founders to think of them as a client and partner first, eventually as an investor and ultimately as a buyer”, she added.
Corporate venture capitalists can be too demanding
One of Asia’s leading tech entrepreneurs and a visionary, Rosaline reveals that corporate venture capitalists may sometimes feel like they own the startups they invest in. “They are financially focused but they are also very focused on their own strategic needs. Some of them don't understand how to manage startups, but they can help you grow.” She has had both good and bad experiences with venture capitalists.
Sarah empathizes with the different views on corporate venture capitalists but states that it is important not to put a blanket role on all of them. “I was part of a corporate venture capitalist in Malaysia. I have seen how startups were bamboozled with questions but it is because we as a corporate are still tied to certain requirements, from a governing standpoint,” she demonstrated that as much as they are doing due diligence on entrepreneurs, it is critical for entrepreneurs to do their due diligence on them as well. She agrees that startups cannot afford to have investors slowing them down. “Do your homework and inquire from other startups they have invested in”, she said.
How can corporate venture capitalists change to work more efficiently with startups?
Brimming with suggestions, Sarah begins by expressing her respect for investors and a reminder to not discount their role in fundraising. She notes that many corporates are being disrupted due to the innovation in startups. It is a real threat to them. “There are numerous legacy systems and structures which have worked for years, along with massive respect for bureaucracy and hierarchy.” There are definitely situations where the corporate attempts to eliminate their competitors, but there are also situations where they want to figure out how to create value together. “It really is a culture shift - corporates trying to invest in startups, and change within the industry. I think it’s a huge leap”, she added.
When she was just a 26 year old negotiating with 60 year old CFOs, she understood the significance of listening to stakeholder needs. “Within the corporate venture capitalist, listen to all the stakeholders and come to a middle point. Listen to their fears so both sides can benefit from it. Putting the mission ahead of politics is really hard but never lose sight of that and your job”, Sarah hopes that corporates can learn from startups and change, innovate and move quickly with the times.
Thoughts on fundraising from accelerator programs?
It might be exactly what you need at that point
“If the accelerator is providing a lot of value & learning critical to the stage you are in, taking that capital might be worth it. Evaluate the partnership & evaluate what you are getting in return for the percentage of your company you are willing to give away”, Jackie focused on the importance of listening and being aware of any mistakes.
It’s not a bad thing but many believe it is an expensive form of capital
Regardless of the high cost, Sarah clarifies that the benefits depend on which stage you are at and what it will do for you. Despite this, her doubts linger. “I seeded a study and discovered that women still raise less than male founders after going through an accelerator program which is supposed to equalise the environment. So is it really all great? More to be seen.” So, she advises entrepreneurs to evaluate all available options before making a decision.
Since you see investments with a global lens, are there any nuances in raising from or amongst the APAC region that the founders should be aware of?
Sarah reflected on how it's a great time to be an APAC founder because there is so much growth happening in China that we can learn from. She advised entrepreneurs to avoid fixating on the West for ideas. “You need to think about the markets you are serving & be really mindful about how you build & what it can be. Don't limit yourself and think about scaling across countries. Venture capitalists are looking for a lot of great ideas now in SEA - so think about your own unique play.”
Echoing her thoughts, Jackie highlighted the importance of using the local context to your advantage. “APAC is a big market and you want to solve a problem by understanding the local context. Do not try to solve a U.S. problem in APAC as it might not be a problem in APAC.”
“What you can do to minimally localise, gives you the ability to go global”, Rosaline explained that building a platform that you can plug & play in different markets can smoothen the scaling journey.
Last words...
“Play it for the long term. Like Rosaline said, it's not all glitz and glamor. But if you are in it for the right reason and you want to solve a hard problem, stick with it. Because the world genuinely benefits from the power of entrepreneurs. Don’t neglect your mental health because if it's a marathon, you don't want to run yourself dry in the first sprint”, Sarah encouraged all entrepreneurs to keep going and keep hustling & assured that everyone believes in them.
“Entrepreneurship is hard, there is no denying that. But if you have an idea and you think you can build something, don't be afraid to try. It’s okay to fail in life as long as you learn how to get back up. I've learned so much from being an entrepreneur versus being a corporate climber. It's like compressing time & accelerating learning”, Rosaline described how she was a much better person for being an entrepreneur, despite all the pain.
“If you have an idea, try it. Don't be afraid to make mistakes. Make sure you listen along the way as it's easier to get tunnel vision and think you have all the answers. Remember that other people have been there before, made the same mistakes, so it's worth pausing and listening”, Jackie echoed similar sentiments. She also reminded everyone about the plenty of networks out there to support entrepreneurs and the funds looking to increase their investments and female-led companies.
The content of this article is summarised from the EndeavHER session organised by the APAC Endeavor offices: Endeavor Malaysia, Indonesia, Philippines, Vietnam & Japan. Endeavor is the world’s leading community of high-impact entrepreneurs. We dream big, scale up, and pay it forward. Follow us on our social media pages to get the latest news on upcoming events and key learnings.