Emakase was thrilled to have had the opportunity to learn from Mr. Bui Hai An, Deputy CEO of Timo Vietnam. The conversation covered topics from fundraising strategies to negotiating term sheets after the handshake, read on to learn more.
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We have a saying in the startup world that an investor is like your life partner, you have to be compatible and get along well for the relationship to last. As we all know, there are many kinds of investors, from angel investors to venture capitals or private equity. Each investor has different risk preferences, different cheque sizes and expectations. It’s important to understand at which stage your startup is and look for investors accordingly. For early-stagers, you will want to connect with angel investors, or join incubators and accelerators programs where you can meet with VCs.
Similar to how you look for a life partner, you must know deeply their hobbies, their personalities, which means you will have to “date” your investors for a while. More than just understanding their investment theses, you must establish whether they support the goals you are heading towards. There have been many stories of startups who get in bed with an investor just for their money, and they generally never end well for either party. Stepping into a relationship with an investor means giving them influence over your startups, your work and how you manage the company. It is not for nothing that people like to compare an investor to a board member or your “boss”. So make sure you find someone that is supportive and shares your values. Do they care about integrity and treating their employees well? It is essential that you have lots of conversations to make sure that in the long run, 5 or 10 years, this person will remain your steadfast ally. As this process is highly personal, the best advice I can give is never choose an investor solely because of their money.
In fundraising, unless you are highly experienced or you work with professional consultants, it is likely that you will not be fully prepared. Particularly for first-time founders, you can always find the necessary support from third-party consultants. In reality, the larger the company, the bigger the check, the presence of professionals is increasingly important. We can always see dozens of lawyers and accountants poring over the fineprints in corporate M&As.
In the process of fundraising, the investors would want to see your records, how you manage the company, whether your employees are talented and devoted, your business plan, and financial projections for the future. The founder must prepare all of that and more so that they can always immediately showcase the potential of the company and competence of the founding team. You can even be asked about your previous startups, whether you have a good relationship with investors. Are you good enough, competent enough, trustworthy enough to lead your startup?
The best way to know what you need to do is sit down with the investor and take a deep dive into their expectations. The biggest mistake that I see is underestimating the amount of work that needs to be done. If you are a founder or CEO, fundraising will increasingly become a full-time job as your company grows. Most of your time is spent speaking with investors, preparing necessary files. As such, having a good team, whether in-house or outsourced, to always support you as best they can, is very important.
My advice is, if you’re beginning your startup journey and you know you will have to raise funds, prepare your images and that of the company as best you can. Make sure everything you show publicly, from your morals to your manners, is always appropriate.
Furthermore, company records should be prepared as early as possible. Documents like business plans and financial statements are essential elements to any investment round. As the founder, you should try stepping into the shoes of the investors to see the factors they might be looking for when evaluating your startup.
Last but not least, your pitch deck. This is the single most important tool in your journey of selling your startup. To build up a good pitch deck is a long and difficult journey even for those working with third-party consultants. As the founder, the stories and images that investors will see in the pitch deck is one of your most important decisions.
The biggest mistake that I often see is founders getting so excited at the prospects of anyone being interested in their company that they will easily say yes to whatever term sheet offered. However, the experienced professionals generally use this document to integrate a maze of different clauses to protect themselves. This is not wrong, however, you need to clearly understand that the term sheet is more than just a contract on how the deal will proceed and how much money is on the table, it also dictates a matrix of things you can and cannot do after the deal goes through. If you find that you cannot understand anything in the contract, it is likely that it is to your disadvantage.
My advice here is to spend time asking for advice, talk to experienced founders and listen to the stories of those who have seen similar clauses. It is most important to read carefully and have a clear picture of how this clause can be exercised, and what consequences it will lead to.
