How to Become an Investable Founder in Asia Pacific
When founders launch a startup in Asia Pacific, their first inclination is often to fundraise, even if they and their company may not be ready. Their startup, in other words, is not yet investable. Any serious venture capitalist will be able to see through the slick visuals and bold predictions on their pitch deck and come to a simple conclusion: The startup is in not in the position to put an investment to productive use.
Assuming you already have an exciting service or product that has market-fit, how can you as a founder prepare to become investable? Though the challenges will vary from startup to startup, there are three fundamentals that founders must get right in order for investors to seriously consider investing in your company.
Itemize What You Are Building Your Runway For
One of the most common clichés on an investor pitch deck is the disruptive prediction: If we capture X percent of Y market, our company will be worth Z dollars in A years. Considerably less attention is given to the other side of the equation: How will your startup actually use the investment? You must have a clear idea of how much money you need and what you need it for. This advice may seem like common sense, but far too many founders draw a blank when pressed by investors during due diligence.
One key metric that founders should prepare is their burn rate: How much will they spend per month if they will pursue their plans? Again, this may seem like basic advice, but too many startups have not done any cash flow management at all. They don’t know how much they are spending, even if it is coming out of their own pockets. Founders need to realize that managing runway is not an administrative task, but central to their business strategy and their investability as a company.
Know Your Customer Acquisition Cost
Since the day-to-day life of an early stage startup can be chaotic, many founders throw everything at the wall to see what sticks. The challenge is that some marketing efforts may be stickier than others— in short, some channels may produce more leads than the rest. Unfortunately, amid the chaos, many founders are unable to track their customer acquisition cost (CAC).
Entrepreneurs must keep constant track of their overall CAC as well as their most efficient lead-producing channels, so they can minimize or even close expensive channels and double down on those that are especially fruitful. Knowing your CAC will mean that you can more quickly and predictably expand if you were to get cash infusion from an investor. Having a growth plan based on your current funnel will make you infinitely more attractive to an investor, or in other words, investable.
Strive for a Balanced Skillset Among Founders
Founding teams will almost always have a concentration of talent in a single area of expertise, as it’s unlikely for co-founders with diverse skill sets to decide to start a business together. The most common case is that a developer-founder will recruit developer friends and colleagues to join him, resulting in a founding team that is composed of all engineers. This team composition is not a problem on its own—the issue is that many co-founders let this lack of balance carry on for far too long. In the case of a developer-driven co-founding team, for example, they may end up having a fantastic product, but no expertise to market it to users or sell it to clients.
Founders should instead scope out their founding team and early employees based on the key needs of an early-stage startup. For tech startups, you need to understand your market well enough to promote your product at a price point that is competitive (marketing), know how to present it as a solution to client problems (sales), and manage expenses to get these and other key functions going (finance). That’s why a minimum viable product is such a buzzword these days—it really is practical to build a minimum viable product (MVP) first and it is equally important to know how you can test it out in the market and you can only achieve this with a well-balanced team.
Following these three simple steps will put your company in the best position to fundraise from the region’s top investors, as they will have greater confidence in your ability to scale your startup to the next level. The heart of investable, after all, is able.