The startup ecosystem in Southeast Asia is broken
Problem number one in Southeast Asia is a lack of standardisation
Inefficiencies abound: Too many early-stage investors are uninformed and impose unfair and self-defeating terms on their invested startups. Founders are equally, if not more, ignorant about how to manage early-stage investment, let alone their companies. The result is that more startups fail than should, creating financial ruin, destroying jobs, and preventing us from reaching our potential as a leading global startup and innovation engine for the world.
Southeast Asia has so much going for it: A large, young and diverse population, rapid technology adoption, diminishing red tape and more money available than ever before to invest in startups. It’s like we are driving a car and have one foot on the accelerator with the other on the brake at the same time.
Startup founders in the region are often ignorant about how to run a company, how to raise funds and other topics crucial to their success (so was I at that stage). At muru-D and other startup accelerators, incubators, etc., we provide education, tools, investment and a deep network of expertise to help them plug these gaps. However, options like this don’t exist for Angel investors. Where do they go to learn how to be good investors? Sure, there are a smattering of Angel groups around, but many are talk shops that invest in few companies and often are part of the problem when it comes to efficiency and fairness in investing. Most Angels have to learn the hard way.
That’s why I’m working with ecosystem partners to increase the knowledge of Angel investors in the region and to help them understand how to create a standardised process for startup investing that requires less time and money for them and founders and will result in more startup success.
Problem number one in Southeast Asia is a lack of standardisation
According to Ben Sand, co-founder of Meta which has raised over US$70 million in The Valley:
“As a startup founder in Silicon Valley you can go from a conversation with an investor who found you via TechCrunch to US$200k in your bank account within a week. It takes 15 minutes to understand what the startup is doing, where they’re at and agree on a valuation cap and discount. Then you fill out a SAFE note, sign it and send the money. There is no haggling over terms. Everyone just uses the same standard document. There is no diligence process. You trust them and believe in them or you don’t and everyone gets on with their day.A startup’s only advantage is speed. Good investors know that they need to act appropriately. The worst thing for an investor’s reputation is to drag a process out. Investors who do things slowly or look to vary terms from the standard get added to a list. It’s not a good list to be on.”
In Southeast Asia, by contrast, it often takes 3–6 months for investors to decide whether or not they are even interested to invest, sometimes asking the founders for all kinds of financial forecasts and sales updates, draining the founders time and increasing their stress. Only then are the terms discussed and often they are unfair and non-standard. It’s a hugely wasteful exercise.
A startup’s only advantage is speed
I’ll soon be publishing a blog series titled “Angel Investing Basics”. I’m hopeful that current and aspiring Angels can learn from the over 50 investment deals that I’ve been a part of as a founder, investor and/or advisor as well as the great advice I get from experienced Angel partners, invested founders and other ecosystem friends. Maybe someday an Angel Investor Accelerator will exist. For now, we’ll do what we can to educate Founders and Angels and build a better startup ecosystem from the grassroots.
I’ll end on a positive note: I meet aspiring Angel investors every week. They are good people who are passionate about helping startups, eager to teach and to learn. The potential is there; let’s run with it!
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