Best Practices for Fundraising Capital in Southeast Asia | Interview with 500 Startups

Greenhouse has served over a hundred startups in expanding their business in the Asia Pacific region. More recently, some of our bigger clients and accelerators have raised the issue that perhaps certain aspects of fundraising and understanding opportunities in the Southeast Asian region are a whole different ball game compared to other parts of the world. As such, many of their portfolio companies, and maybe yourself, are asking questions like, "What are the best practices to fundraise in Southeast Asia?", "What do Southeast Asian VC firms pay attention to?", and "What common mistakes should we avoid when approaching VC firms?".

In order to get insights and answers to these pertinent questions, Greenhouse's CEO and COO, Drew Calin and Viktor Kyosev decided to turn to Twwo, from 500 Startups, for his advice. 500 Startups is one of the most active Venture Capital (VC) firms in not just Southeast Asia, but globally. They have invested in over 2,600 companies and more than $565 million in committed capital as of 2020.

The interview covers the following topics:

Background of Twwo

Twwo currently holds the role of Senior Investment Manager at 500 TukTuks, an early-stage VC investing across various verticals in Thailand & Cambodia, Laos, Myanmar, and Vietnam (CLMV). In this interview, he shares with us his thoughts on some of the common best practices and mistakes he has seen with startups’ approaches towards fundraising in this part of the world and gives a glimpse into what criteria VC firms look out for in early-stage startups before investing in them.

Summary of the interview

Twwo begins by sharing that the key difference between raising capital in the West compared to in Southeast Asia is in the aggressiveness of the founders. While the Western founders are much more aggressive where they are constantly trying to grab hold of the investors’ attention to pitch their solution, Southeast Asian founders tend to be slightly more conservative and less aggressive. Therefore, Twwo advises Southeast Asian founders to be more aggressive, yet be polite and nice at the same time.

“Don’t be afraid to reach out to these VCs…”


Twwo then continues to share why it is important to study the VCs and how doing your due diligence can help you to better tailor your pitch to them. In turn, that can be a game-changer for your company as it will position you as a thoughtful and well prepared founder.

“Do your homework on the VCs… pick the investors or choose who's the right investors to come and join the cap table.”


Twwo then brought us through the three factors that VCs usually pay attention to most in the Seed to Series A startups. For early-stage startups, VCs usually look out for:

  1. The team. How uniquely and excellently the team is executing their solution, if they possess key basic skills like management, and if the founder is a talent magnet.
  2. How large the target market is that the company is addressing.
  3. Whether the company understands their business well.

Following this, Twwo listed common mistakes that startups make when fundraising in the past, and should avoid in the future:

  1. Constantly pitching and going to startup competitions, but not focusing on building your business.
  2. Overburdening your finances when you do not have the money yet.
  3. Not having a good team.
  4. Spending all your money developing a product but not testing it with real customers.
  5. Being overprotective about sharing information with VCs.

Towards the end of the interview, Twwo wrapped up by listing the two most active investors in the Southeast Asian region, 500 Startups and Sequoia (through their Surge program), and shares his thoughts on the impact investment landscape.

Also read: 2021 Ultimate List of the Top Venture Capitalists in Southeast Asia

Greenhouse has helped hundreds of startups from around the world to expand to Southeast Asia. Our network of VCs is quite extensive and we often coach startups on how to adapt their decks to fit the expectations of investors based in Asia. Check out some of our programs on the topic here.


Differences between raising capital in the West and in Southeast Asia

Viktor: So, I'm sure that you follow a lot of best practices coming from the west being a developed ecosystem and there is a lot of noise around all the success cases coming out of there. But, in your opinion, what are the biggest differences between raising capital, let’s say, in the United States versus raising capital in Southeast Asia?

The aggressiveness of the founders in the West

Twwo: I would say on the startup side where I think there's a clear difference between the aggressiveness of the founders in the West and the founders here in this region. I've experienced that myself as well, with going to conferences in Europe and the US for web summits. But, in these places where you have a tag on with a VC brand, or “500 startups”, everywhere you walk, there are people coming to talk to you, come in to drag you in to pitch.

Southeast Asian founders

But, here in Thailand, at some events, even though we’re one of the most active investors here and I can just walk through a conference without being disturbed or talked to at all. So, I think that's one of the differences; where there's a cultural difference here.

So I think my advice would be for the founders here to be aggressive, but you can always be aggressive in a nice and polite way. So, that would be my kind of advice to the founders: Don’t be afraid to reach out to these VCs, not be afraid of taking rejections or “No”s, because there's a lot of times it's a few three, four meetings before you get to a “Yes” from a VC, right? If you think about it after you’ve got to talk to 20-30 investors and if one of them or two of them, says “Yes”, then you've secured your funding round. So you've got to get accustomed and used to the rejections from VCs, which a lot of times might not have anything to do with your business at all, it might just be a mismatch of the thesis, the different stages of investments that the VC does, or just even the situation with the VCs themselves. When they initially raise a fund, they have low capital, they might be trigger happy. But when they are towards the end of the investment period, they might be a bit more conservative.

Best practices for raising capital in Southeast Asia

Viktor: Okay and following that chain of thinking, what are the best practices for raising capital in Southeast Asia? What have you seen that works again and again with founders in this part of the world? Have you noticed some patterns that work?

Twwo: First and foremost, if you focus on the core basic business building and if your startup is built the right way and has the right potential, investors will come to you naturally.

I think it'd be hard to fix things vice versa, where if the startup is not doing too well; you don't really have a good team, or you have not really fully thought through the business and you don't really understand the business and you're spending a lot of time trying to find investors. I think you’d struggle that way. A lot of the companies that we've had the chance to invest in, we saw the potential from the outside; it's not them coming to pitch to us. Sometimes, for the top best companies, we are the ones reaching out to them to ask them for a chance to invest. But for others that are fundraising, I think the best thing to do is really to re-understand your business so that you can communicate it well with investors. Once you really understand your own business well, then you have to do your homework on the VCs.

Importance of understanding your VCs

I've had some founders where they do their due diligence on the VCs to really understand: What they're looking for, what type of companies they invested in, and then even tailor each pitch differently to each VC. So if they know that this VC has invested in companies A, B, C, and D, which burn a lot of money and grows very fast, very aggressively, they might tailor their pitch towards that style of a startup. Whereas some other VCs might be a bit more conservative and they would tailor their pitch to that accordingly. Really dig deep and do homework on who you're meeting, where they went to school, what kind of experiences they have. A lot of the time VCs are very visible on social media, they write blogs, they do a lot of content, a lot of interviews. So if you spend a little bit of time accessing those kinds of content, you’d understand much more what the VCs are looking for and what they want. There's no one size fits all. Every VC is different, they look for different things and they view things differently. So I’d say definitely do your homework on the VCs and it's also something that the startup should do anyway to pick the investors or choose who's the right investors to come and join the cap table. It's not like when you're fundraising and you get money from whoever. It's a long-term partnership. So companies should do their due diligence and pick the VCs as much as the VCs pick the startups.

What VCs pay attention to most in the Seed to Series A startups

Viktor: In the early days, when it's Seed to Series A, I understand that every VC have a different thesis and they work differently, given their unique experiences. But in your experience, what are the metrics? Or the things that VCs pay attention to most in the early days? Is it the team, or the vision, or the market size? What have you seen to be a common theme?

  1. Team
  2. Team is uniquely and excellently executing their skills

Twwo: From my experience, there are three things. Especially at the early stages, I think a lot of investors would say the team is the most important because when your product isn't mature yet, you haven't really had a lot of traction in the market. So then the team is the most important because it’s the constant thing that will stay with this startup for a long while. So, we actually dig down into what we are actually looking for in a team. Often, we're looking for teams that have unique skills that are great. We're not looking for teams that are a 7 out of 10 in all areas, we'd rather prefer a team that is a 10 out of 10 in one area and might be a 4 or 5 out of 10 in other areas. For the other areas, we can help them later on with hiring by funding them. But to find somebody who's super great at something is much rarer. So we're looking for a team that is great in one key thing, whether be it building products or selling products.

B. Possess key basic skills

Then with the team, we look for the key basic skills that you need for startup building which is management, in terms of tech engineering, marketing growth, and customer support. So those three or four key areas that you need to cover. Then for the founders, to have a match between somebody who can really build a great product and another person who can really sell the product. If a founder can do both, then great, but most of the time somebody is only good at one key area so you need a partner for that.

C. Founder is a talent magnet

I think the other thing that's overlooked sometimes, for me, is whether the founders can be a talent magnet. I think talent is the most important thing, not just how great the founders are, but how well they can attract talent to help them build out their vision or their startup later on. No matter how great you are, if you only have a three, four-person team that you can recruit with great talent to help you achieve your goals, then you're not really going to get anywhere. Even very intangible things. For example, where I just sit in a meeting with a startup and I think about it myself, as a young person and in my career, “Would I want to work for this guy?” I've walked out from a few meetings feeling, “Hey, I actually want to quit my job and help and join this company and to build out the vision” or those kinds of feelings where you feel, “This founder is a great founder and has a vision. He can sell it. You can definitely recruit great talent to help him out with.” So, that would be the first thing the team.

2. Targeting large market size

The second thing in terms of the market that I think a lot of people talk about. Your market size has to be big enough, otherwise, the VCs wouldn't be interested in you. I think the point to note here is to really understand the difference between your initial beachhead market, which is small and can be small, it should be the easiest market for you to initially go out to, and then the larger bigger market that you eventually grow into in the future. For example, when you're starting out with barely any traction, there's no point in talking about a 10 billion market when it has nothing to do with what you're doing right now. So for startups, I would say, to really understand when presenting your initial small beachhead market to also include the gradual bigger picture and larger market later on that you're gonna sell to the VCs.

3. Company understands the business

Lastly is going back to the earlier point of really understanding the business. So usually, I like to ask startups, “What are the most important three to five metrics that you care about?” So it shows how well they really understand the key drivers of their business. Sometimes it's just only one metric. If you really understand the business and if you're really data-driven that way, you can have those few key metrics that are on top of the company which you then break down into smaller metrics that each one of your team is responsible for. So with everything you do, you can track and see if it's working or not and you're going off real data, rather than just intuition and subjective opinions. Those would be my three key main things.

Testing your assumptions

If there's something else to add, I’d say know what are the assumptions that you're making for your own startups. There are typically a few assumptions that the founder is making such as, “Customers will like this”, “They'll be willing to pay”, or “People will come onto the platform”. So really be aware of the assumptions that you're making and find ways to test and prove whether your assumptions are correct or not. If not, then think about how you would adapt or change to at least be aware of it? I think some founders feel the pressure to be perfect, to always present the whole startup as all good. But the reality is no company is perfect when they're starting out,  even at 10 years old. So I think it's a matter of being aware of what the risks and challenges are, what the other assumptions that you're making are, and how you're going to measure and test for them. Then with that, how you're going to adapt things if things don't go as planned.

Common mistakes that founders do in Southeast Asia when raising funds

Viktor: Understood. Thank you very much for that. You kind of touched on my next question. What I'm trying to understand is also, what are the most common mistakes founders do in this part of the world in fundraising? You talked about how some are not able to articulate very well because they don't have a really deep understanding of what they're doing, or some are not also aggressive enough where they don't chase enough and don't really stand out that much. But is there anything else that you would like to add on common mistakes that founders do in Southeast Asia and raising funds?

Twwo: I think trying to kind of oversell the startup too much rather than really talking about the business, understanding the business, and having a back and forth on that they're trying to paint a rosy picture of the business. But from the VCs’ perspective, you see so many startups and you can tell from miles away when it's not really authentic or genuine.

  1. Constantly pitching and going to competitions, but not focusing on building your business

I don't know about other markets but I think certain other markets in Southeast Asia are quite similar, especially pre-COVID is that the startup goes to all the competitions or the pitching events. So it's more super PR-heavy rather than sitting quietly and focusing on building out your business. But the mistake lies in where some teams, I don't know if they get a high from it or whatever, they just go out to every event and they join every program. I think joining a few programs is great when you're starting out you get the support system, you get the insights and experience from people who might have done it before. But at a certain point, you have to spend time building your business rather than going out to pitch winning awards...

Viktor: I'm totally guilty of that. In my first startup, we won every freaking competition in Northern Europe, every one of the competitions. It was a complete waste of time.

2. Overburdening your finances when you do not have the money yet

Twwo: Yeah, so in Thai, we have a word for it that’s like a showcase startup or whatever. So, I think that's something to be aware of. The other thing is if you don't have the money yet, do not overburden. I think a lot of people underestimate how long and how difficult it is to raise money. Obviously, you don't want to be in a position where you're running out of cash and you're trying to find investors because that puts you in a very unfavorable position in terms of negotiating with the investors.

3. Not having a good team

Thirdly, I think, is just to have a really good team around because sometimes if you're the sole founder and you have teams, especially in Asian culture where Junior employees might not have the courage to speak up to you frankly or honestly. Instead, they're just, “Yes, man” underneath you, and then you can get a certain way.

4. Spending all your money developing a product but not testing it

Next, I think this one I've seen a few times before, is where some people use their own money to bootstrap and spend a lot of that developing a product, but not testing it along the way. Especially people from more traditional backgrounds where they feel like they have to just lock themselves up in the room for six months, spend time and a lot of money building up products. Some of them wouldn't even let it out to the market because they feel like it's not finished yet. While some people are afraid that people will copy their product. Then once they go into the market, which usually takes a very long time because they always feel that it's never ready. But, when they go out they might find out all the customers don't really want this or they're not really willing to pay for it. So I think it's the classic startup “Build, Measure, Learn” thing where you test it out as you build, rather than spend that time and money, and then find out later.

5. Being overprotective about sharing information with the VCs

Then lastly, with some companies as well, it’s with being protective about sharing information with the VCs. I think, obviously, if you know that the VC has invested in a very competitive or similar company in their portfolio, it might be reasonable to be a bit guarded. If not, I think usually there's no reason to be too protective of the information of your company. I think you can decide what you can share and not to share and balance it out with anything proprietary. If that's your secret sauce, obviously, you can keep it private. But to have a VC sign a non-disclosure agreement (NDA) and be super protective about your product, a lot of VCs just wouldn't bother to be honest.

Most active investors in Southeast Asia

Viktor: Yeah, a lot of very, very good points. In the interest of time, I will ask one more question because I'm sure you have a lot of other things going on as well. Who are the most active players other than you guys? What other VCs are also quite active? I’m asking because everyone wants to talk but it can also be a waste of time for the founder to just meet everyone. So who is actually deploying capital actively in Southeast Asia?

Twwo: So I think for like a Series A,1-2 mil check, I've seen Sequoia being quite active with their search program. So there's a batch of like 10 to 12 companies and they do two to three batches every year. So I think they're quite active. But to be honest, apart from 500, I think it would have to be... I don't know, it's different. I think the other funds they do just a few investments per year, like less than 10 I think. So Surge by Sequoia is quite active as well with a similar kind of strategy with 500 Startups. In a sense where it's a smaller check, but writing a lot of checks. So I think if you look at the list usually at the end of the year, it's usually SOSV, 500 Startups…

Viktor: They call it “spray-and-pray”, right?

Twwo: Yeah haha. So I think those two are really active and I think at the SEA level, sometimes it's quite difficult. So I think business angels might be the way to go for a lot of startups, pre-VC, and some government grants as well... I think you guys have a few good programs there in Singapore. The Thai government has been a bit more supportive lately as well with a lot of grants, but smaller checks. But it's helpful enough to get you to a stage where you can then raise from a VC.

Impact investment landscape

Viktor: Yes, and the last question. We are actually helping a social enterprise accelerator. How is the impact investment landscape in your view?

Twwo: So, I think the impact investment landscape is definitely a trend that is growing. But I think it's pushed more from the public company side where nowadays if you're not ESG-qualified, or whatever certain funds can invest in you guys. So it's actually driven by money as well where if the world is moving that way, where if you don’t fit the criteria if you don’t fall into the standards that they said, you're not allowed to kind of take investments or take money from certain funds. Then it boils down to the earliest stages of companies as well. But I think one thing to be aware of is whitewashing and greenwashing where these companies that do the most damage, spend a bit of money on CSR and ESG to kind of certify themselves and qualify themselves to be able to receive these kinds of investments but the core business is drilling, fossil fuels out of the earth. So I think it's a bit tricky as well but I think it's a move in the right direction, where people are being much more aware of environmental and social impacts of things. I think governance is very important, especially for startups to have a good governance structure where you can have offensive and defensive players on your board, somebody who kind of keep you out of jail, make sure that you're complying with the laws, your books are correct, and somebody who is more aggressive in terms of helping you go. But I think in terms of social enterprises, at the startup level, I've seen many spectrums where you could be a complete nonprofit or you could rely on grants and donation, and charity, which I think is a bit more of a traditional model thing. Which you can debate the long-term values of it, if something has to constantly be subsidized by donation. And then a new hybrid mix of these like double bottom line companies where they try to generate a profit to sustain themselves, but in the meantime, they try to generate an impact as well. So I think there's a growing breed of that. I think, in terms of the secular trends and the interesting trends that you see today, I think a lot of the trends now with health-tech, med-tech, biotech, I think that kind of stuff will make huge money. But they'll make a lot of impacts as well. You look at the companies that are making the vaccine right now, their stocks are going crazy. Well, they're helping in people's lives. So on that front and on the food front as well. So I think a lot of startups sometimes can think about impact, or they don't have to think about impact. But if they're in certain industries, doing things the right way, they will create an impact anyway. I think if you look at the guys like from Grab, I'm not sure if they started out with a vision to create impact, but look at the number of jobs they created for people.

Viktor: Sure, thank you. Thank you so much. Yeah, we're running out of time, we could continue the conversation of this and a lot of other discussions surrounding these. These have been super helpful because a lot of companies are very clueless about that topic. We do our best to share our experiences and observations and it's also good for us from time to time to have a check on reality and see whether what we're seeing it's actually true. Hence that's why we have this conversation. And also it's a great opportunity to write good content which we're going to share with you hopefully by the end of the week.

Twwo: Awesome, thank you. I hope it was helpful. And if there's any other follow-up just ping me, happy to answer, and always good to chat with you guys.

Viktor: Thank you so much.

Drew: Thanks Twwo!

-End of transcript-

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