Interview: what makes a startup investible?

Interview: what makes a startup investible?

Startup founders and tech investors make up a significant slice of the LEAP audience, and we’re committed to supporting the growth of a robust investment ecosystem in tech – both in the MENA region and around the world. A big part of that is giving investors the knowledge and mentorship to create thriving portfolios; while also upskilling founders in the art of pitching to VCs. 

SOSV is a global, multi-stage VC firm that drives early-stage startup development through its diverse programs – including HAX (hard tech), IndieBio (biotech), and Orbit Startups (for startups in emerging and frontier markets). 

We’ll be welcoming William Bao Bean (General Partner at SOSV and Managing Director of Orbit Startups) to the stage at #LEAP23. So we caught up with him ahead of the event to get first-hand insights into his approach to supporting startups, and find out what he wished he’d known about investing when he was just starting out. 

What advice do you wish someone had given you earlier in your career?

“One of the biggest challenges that I have encountered is timing. On the one hand, there are challenges and opportunities and problems to be solved. Then the other side is technology. Often it’s quite clear that a problem exists, but the challenge is to make sure the technology or the solution is actually ready, or will be ready soon, to solve that challenge.

“Very often, early on in my career, I invested in solutions to problems. The problem was definitely there but it was just too early to solve because the technology wasn’t ready. 

“For example, when I started investing in Vietnam internet in 2007 and 2008 there was a lot of excitement around ecommerce, around things like search; but fundamentally, the market was missing essential services – payment, delivery, or even inexpensive internet. 

“So it’s important to identify the problem. But it’s just as important to identify whether or not this is the right time to solve that problem.” 

What’s your approach to selecting and supporting startups?

“Most VCs use a unicorn-hunting approach. So they’re trying to identify the best teams with the most interesting problems to solve. What we are doing is different in that we’re taking a process-based, data-driven, systematic approach to early stage investing where on the enterprise side, we work with our corporate partners who are the end customers. For the startups, we start with the customers then work back to the startup, as opposed to starting with the startups and working to the customer. 

“A lot of people are looking for startups; whereas we spend a huge amount of time with the industry, understanding what their challenges are, what their opportunities are, what their problems are and most especially what they’re willing to pay to solve them.

“On the consumer side, there’s a lot of herd behavior – where an innovative view solution comes out and then a bunch of startups flood into the area and then a bunch of VCs crowd in behind. One example is the blitzscaling approach, in which startups spend a huge amount of money to acquire users but don’t worry about a positive view of the economics. They get market penetration first, monetise much later, all driven by venture money. 

“Our approach is early-stage and seed investing where we do not write huge cheques. We take an ecosystem approach where we encourage companies that we invest in to partner with each other and to help each other.” 

What makes a good match between an investor and a startup?

“For us the number one driver is ‘Can we be helpful?’. No one works with Orbit for our money, they work with us for our help. We write small cheques and we take a good amount of equity. So what really matters is the help, because we do our best in every company we work with and then we follow on – but we take equity for our programs as well and it’s expensive. We have a very high Net Promoter Score from our startups because they feel that they get value.

“The majority of our investments come from referral. But for it to continue we need to constantly drive a huge amount of value for the startups that we invest in. So apart from factors such as whether the company is solving the problem and whether they have a great team, the question of whether we can be helpful. Can we help the company get from zero to one, one to ten, and then ten to one hundred? A program lasts forever and we continue working with the company throughout its lifetime. We need to be able to be at service.” 

What’s one thing that makes a potential investment stand out in a sea of other potential investments?

“The most important thing that we look for is the passion to solve the particular problem that we’ve identified. For example, we wanted to create an  innovation program for a corporation a few years ago in China, and we were looking for a solution to a big problem: how do you get people in the countryside to take their chronic disease medication every day. We didn’t find a great solution in China, but a couple of months later we discovered a founder in India who’s so passionate about this problem because his own brother passed away due to chronic disease. He decided to solve that. The company is Phable and the founder is Sumit. Today, Phable is the number one chronic disease management platform in India. 

“For us, it’s passion that really makes a difference. Drive to solve the challenge or attack the opportunity.”

Thanks to William Bao Bean at SOSV and Orbit Startups. Join us at #LEAP23 to learn more.

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