You’re a Series B startup in Asia. Which Venture Capital firms should you approach for funding?

Your Series A VC should syndicate to co-invest with other VCs for your Series B. Generally VCs keep funds reserved for funding the upcoming rounds of their portfolio startups.

Funding has become more difficult, equity investors are scarce and VCs like to syndicate and co-invest for later-stage companies. In Asia, i.e. ASEAN wich refers to 6 countries incl. Singapore, Malaysia, the Philippines, Thailand, Vietnam, and Indonesia, I suggest names like GIC, Insight Partners, Smash Ventures, Temasek, Pantera Capital, Tiger Global; Fenbushi Capital, General Atlantic, Openspace Ventures, Intel Capital Corp. Accel, Andreessen Horowitz, Animoca Brands, to name a few. It depends on the industry and vertical.

When seeking funding for your Series B startup in Asia, it's crucial to approach Venture Capital firms that align with your business goals and vision. Clearly articulate your funding requirements and be specific about how you plan to utilize the capital to drive growth and achieve key milestones. Consider reaching out to VC firms with a track record in your industry or those known for supporting companies at your stage. Building a strong relationship based on shared values and strategic alignment will enhance your chances of securing the right investment partner.

While the passage focuses on internal clarity, a keen understanding of the VC landscape is equally crucial. Analyzing historical data regarding investment preferences of specific VC firms in the relevant industry can reveal invaluable insights. For instance, a study by Crunchbase revealed that in 2022, VCs in the SaaS sector prioritized companies with strong recurring revenue models and clear paths to profitability, highlighting the importance of tailoring your value proposition accordingly. Data point: According to PitchBook, the average time to close a Series B round in 2022 was 4.3 months, underscoring the efficiency gained by targeting the right investors with a well-crafted pitch.

When gearing up for Series B fundraising, it’s crucial to approach VCs with a crystal-clear vision. This phase isn’t just about securing funds; it’s about strategic partnership and precise goal-setting. Are you aiming to break into new markets, innovate with groundbreaking features, or perhaps strategically acquire competitors? Beyond capital, consider the expertise and network you need – be it in talent acquisition, brand development, or navigating regulatory landscapes. Your preference for either an actively involved or more hands-off investment partner also plays a pivotal role. By introspecting on these aspects, you refine your investor search, ensuring your pitch resonates with their interests and expectations.

The most important dimension to increase the conversation rate of a potential deal is, the phase and the appetite of the fund. For example, the fund may currently be operating in a low-IRR zone hence may be open to riskier investments or the GPs may be enjoying the fat management fees as a lifestyle so they look for downside protected deals. This is usually not public information, the founders need to gather these insights from clues in the market or from other founders

While the passage emphasizes research on individual VC firms, exploring broader regional trends can offer valuable insights. For instance, a recent report by KPMG revealed that in 2022, healthcare and cleantech sectors in Asia witnessed significant VC interest, indicating potential opportunities for startups operating in these areas. Data point: According to McKinsey & Company, the average deal size for Series B rounds in Asia has increased by 30% in the past two years, suggesting that VCs are willing to invest larger sums in promising startups with strong research-backed plans. However, Focusing solely on VC preferences can stifle innovation and compromise the core vision.

Once you have an idea of the who are VCs looking at your industry, it lends to the cause to build relationships early - referrals from other founders are a great start, especially if the VC you're targeting is invested in them. Otherwise, they can also help share the experience of their own fundraising journey and maybe some tips on the different personalities you'll meet along the way.

One other thing you can do is speak to your current series A / B VC and they will be able to guide you on the ones to target (in both scenarios where either they are co-investing or exiting as part of your series C)

The vast majority of Series B-funded companies in Asia were part of the Chinese Internet and Mobile Wave that swept throughout the region as locally successful companies sought to expand into strategic markets or specific industries. Anchored by the rapidly developing local consumer market, these firms were able to create rapid growth and traction as they, like many other technology founders sought to grow into global companies. If you are targeting specific territories or categories, seek investors that have experience supporting companies in your region (China, Japan, Korea, Singapore) all have experience and portfolio companies that have gone on to successfully enter and target markets like the US and build a local team.

Suggest looking at DCM (no affiliation). They are a tried and true firm that helps companies commercialize in Asia and beyond.

Consider Gojek, the Indonesian ride-hailing and on-demand services giant. Their Series C funding round in 2017, led by Sequoia Capital, exemplifies the benefits of targeting top-tier VCs. Sequoia's investment not only provided crucial capital, but also opened doors to strategic partnerships with Google and JD.com. This network, coupled with Sequoia's regional expertise, enabled Gojek to expand rapidly into multiple Southeast Asian markets, ultimately achieving unicorn status. Data point: According to a 2022 report by Bain & Company, top-tier VC investments in Asia resulted in a 3x higher average return on investment compared to other VC investments, highlighting the potential for exponential growth through strategic partnerships.

At the Series B stage, startups enter an elite realm where they can attract Asia’s top-tier VCs like Sequoia Capital, Matrix Partners, and SoftBank Vision Fund. These investors offer more than capital – they’re gateways to vast global networks, key in navigating the complex Asian market. With their support, startups are not just funded but strategically positioned for growth, future rounds, and successful exits, leveraging the VCs’ resources, reputation, and reach. This is a transformative opportunity, turning promising startups into market leaders.

Consider the case of Beyond Meat, the plant-based meat alternative company. In their Series C funding round in 2017, they diversified their VC sources by including Kleiner Perkins (top-tier VC), Tyson Foods (corporate VC), and Temasek Holdings (regional VC). This strategic mix provided not only capital, but also crucial partnerships with Tyson Foods in distribution and product development, and access to the Asian market through Temasek. This diversified approach fueled their rapid growth and solidified their position as a leader in the sustainable food industry. According to a 2022 report by PitchBook, startups securing funding from diverse VC sources achieved a 25% higher valuation on average compared to those relying on top-tier VCs

By this stage, you'd need to have all your data in a well-organized manner. It is likely that you won't have all the answers (because that's how you quickly moved from stealth to your first paying customer) but you need to have a good sense of what goals you're after and the metrics you're tracking to tell you you're on track.

As you engage with target VCs, gear up for the intense due diligence process. This stage is where VCs deep-dive into your startup, evaluating everything from financials and market analysis to team dynamics and legal standings. Preparation is key: have all necessary documents and data at hand, and be ready for frank discussions about your business’s strengths and challenges. This transparency not only aids VCs in their decision-making but also sets the tone for a potential long-term partnership based on trust and clarity.

When preparing for due diligence as a Series B startup, it's crucial to provide comprehensive and transparent information to potential investors. Here's a checklist to guide you Financial Documentation Legal Documentation Operational Information Compliance and Regulatory Customer and Market Analysis Team and Human Resources Intellectual Property (IP) Protection Technology and Product Development Cybersecurity and Data Privacy Previous Funding Rounds Being organized and transparent during due diligence builds trust with potential investors. Ensure that your documentation is easily accessible and up-to-date. Additionally, be prepared to address any questions or concerns that may arise during the due diligence process.

Focus upon value in the deal more than the valuation. Your VC investor should bring in connections, buyers, suppliers and open up doors to the IPO.

While thorough documentation is critical, compelling storytelling can set you apart. Weave your data and information into a clear narrative that showcases your potential, market opportunity, and vision. Utilizing data visualization tools and interactive presentations can enhance your due diligence materials, increasing investor engagement and retention of key information. Due diligence has evolved from a secretive financial audit to a more in-depth and collaborative evaluation encompassing various aspects of a startup's potential. Understanding this shift allows founders to approach the process as a valuable opportunity to showcase their strengths and build bridges with potential investors.

Negotiating the best deal for your Series B funding involves a strategic approach and effective communication. Here are key tips Know Your Value Understand Investor Motivations Create Competitive Tension Focus on Terms That Matter Most Valuation Discussion Negotiate Board Representation Remember, successful negotiations are about finding a mutually beneficial agreement. Be firm on key aspects while remaining open to compromise on less critical points. Building a positive and collaborative relationship with your investors is essential for the long-term success of your startup.

Consider approaching venture capital firms that align with your industry and have a track record of investing in Series B startups. Some reputable VC firms for Series B funding include Sequoia Capital, Accel Partners, and Bessemer Venture Partners. Tailor your pitch to highlight your growth, market traction, and how the funding will propel your company to the next level. #StartupFunding #SeriesB #VentureCapital

Let me add the reality, shall we? First, while you're perfecting your concept and recruiting top VCs like Sequoia Capital or SoftBank concept Fund, remember that great entrepreneurship feeds on daring and creativity, not capital. Yes, research, network, and pitch well. In this dynamic arena, don't only chase top-tier VCs—underdogs can provide grit, unorthodox insights, and a desire that matches yours. Let's not forget due diligence and negotiation, where transparency is scrutinized. Embrace it—this is when you become a force. Be ambitious with top-tier VCs, but don't underestimate the potential of varied, unusual partners. I can say, the less-traveled path often leads to undiscovered but rewarding territory... Just do it!

The key is which region your core market and exit plan are, whether to stay in Asia or go to the US. If it is the East and Southeast Asian markets, then VCs, CVCs and sovereign funds from Taiwan, Japan, South Korea and Singapore are all good candidates. Their willingness to invest in new ventures in the growth stage or near maturity is clear, and they can provide market access and talent resources, which will also help with eventual public offerings in the Asian capital markets. On the other hand, if you have a plan or even have market success in the US, then it would be better to seek for VCs in the US that has an Asian branch or partner, and there is a better chance of exiting by being acquired by an American company.

Anti-Dilution Protection: Understand and negotiate anti-dilution provisions to protect existing shareholders in the event of future financing rounds. Evaluate the impact on ownership in different scenarios. Exit Clauses: Clearly outline conditions and mechanisms for potential exits, including IPOs or acquisitions. Ensure alignment on the timing and strategy for exits. Use of Funds: Provide a detailed breakdown of how the funds will be utilized. Align the use of funds with strategic growth objectives discussed during negotiations.