Key Funding Strategies for Web3 Projects

Summary

In this episode, Alexander Piskunov, a partner at a renowned special situations fund, shares his insights into the world of venture capital and deep tech startups. He discusses his journey into investing and his recent exposure to the Web3 space. Alexander highlights the funding trends and challenges in the Web3 landscape, particularly in Southeast Asia. He provides advice for startups on factors to consider when seeking investment and emphasizes the importance of commercialization. Alexander also discusses the role of technology in changing the fundraising scene for Web3 startups in the next five years. In this episode, Alexander Piskunov shares valuable insights on building a successful startup. The conversation covers the importance of market research, building a strong team, product development and iteration, funding and investor relations, and setting long-term goals.

Takeaways

• Focus on commercialization, especially in developed markets, to attract investors
• Consider the regional differences and investor preferences when seeking funding
• Prioritize warm introductions and due diligence on potential investors
• Avoid chasing high valuations and focus on strategic alignment with investors
• Expect more funding options for Web3 startups in emerging markets in the future Conduct thorough market research to understand your target audience and competition.
• Build a strong team with complementary skills and a shared vision.
• Iterate and improve your product based on user feedback and market trends.
• Develop relationships with investors and communicate your long-term goals effectively.

The Startup Voyage Podcast is ranked top #15 Web3 podcast show compared to 45 others per Feedspot (https://podcasts.feedspot.com/web3_podcasts)

Be a guest: https://thestartupvoyage.com

Connect on Social:
IG: @thestartupvoyage
Twitter: @_thestartupvoyage

About:
The Startup Journey podcast is dedicated to spotlighting the journeys and insights of tech founders and investors shaping Web3. Guests of The Startup Voyage podcast join a world of industry leaders, startup visionaries, and seasoned investors who share valuable lessons, stories, and advice to inspire and empower a global community of tech founders.​

We take a journalistic / reality show concept to ignite conversations that empower the next generation of disruptors. Join us as we dive deep into the dynamic world of technology, unraveling success stories, industry trends, and game-changing innovations.

Transcript

0:03

Let me get here. OK. Hey, everyone. Welcome to another episode of the Startup Voyage podcast and this show where we deep dive into the world of technology, startups, and future of innovation. Arthur Lee, your host today, and we're thrilled to shed some light into today's world adventure capital and startup growth. Joining us today is a partner at a renowned special situations fund with over a decade experience spanning the US, Europe, and Asia. Our guest brings a wealth of knowledge and insights into the ever evolving landscape of VC world. Well, this person is not just an investor, but a catalyst for growth, specializing in scaling deep tech ventures to new heights with an impressive tracker record of leading 20 investments and successfully navigating seven exits. This person's expertise in identifying and nurturing potential. projects is unparalleled. So our guest today stands out not only for their knack in investments, but also for their exceptional skill in fundraising, having raised a staggering 260 million over his career. This feat not only underscores their strength in financial aspects of VC world, but also their deep understanding of the intricate dynamics of the startup ecosystem. So if you're an entrepreneur, an investor, or simply fascinated by the world of high tech startups, you're in for a treat. Get ready to gain some valuable insights from someone who's been at the forefront of driving innovation and success in the deep tech sector and VC world. Join me in welcoming our guest, Alexander Piskanov, a true visionary and leader in the world of tech startups and venture capital. Welcome to the show, Alexander. Arso, it's a pleasure. Wonderful introduction. I could not have said it better myself. I would love to share my insights with your audience. Great, great. Well, I mean, that was my version of introduction. Why don't you briefly describe your journey into this investing world and how you came to specialize and focus on deep tech and maybe your recent exposure to the Web3 space. Well, look, so right now, partner TVC Fund used to work in venture capital for the past seven years. But when I was first beginning my professional journey, I could not have imagined that, you know, I would be involved in such a tech-heavy space, especially, you know, when it comes to the early stage deals. Because, well, look, I've had a traditional start to my career, started out back in investment banking. left after a couple of years, realizing that, you know, hey, money is great, exposure is great, but not as great in terms of responsibility, not as fun in terms of, you know, the hours we put in. So, jump ship to private equity after some time, which was much better because, you know, I got to network with quite a few entrepreneurs, those businesses we bought, I got to actually, you know, have a meaningful conversation and, you know, see what exactly motivates them, how does it solve their challenges, what does it do about strategy. And after some time it did inspire me to move away from the buy side and launch my own business. But back then my education was mainly in economics and finance, my professional experience was in IBM But in fact, me and my partner, we dealt with imports of exotic wines from destinations like Latin America, South Africa and Georgia, in the British hotels, restaurants and bars. And for me, I must say that, you know, it was a great time, great education by itself, because we had to figure out almost everything from scratch, from logistics to contract negotiation to, you know, selecting all the best wines to put in the portfolio. Until a certain point when Britain decided to leave the EU, which for us meant that, you know, few key suppliers went away, business costs went up and basically business became less profitable. So I sold my stake, moved over to the investment world once again, but since then primarily been active on the venture capital side. So left initially to join an American VC fund, which dealt with early stage investments in deep tech. It was based out of San Francisco and we bugged startup at seed stage, at series A in areas like robotics, AI, smart cities, new materials, quantum computing and many others. And, you know, that's when I truly realized that, you know, venture capital, it's exciting. But what particularly interested me about the field or the fact that I could not, you know, deal with marketplace startups or, you know, back another delivery service or ride sharing. Of course, they all have their clients, they all have their business models who are often case ultimately successful. But when you are a VC, especially at early stages, your whole job is to find the undervalued competencies. And in tech, especially in deep tech, there are simply just so many more of them. But on the downside, you do have to occasionally deal with entrepreneurs whose eyes are lighting up. as a mention of idea, but on paper, there is not as much years, right? So the early stage game was much more about your own gut feeling and about your sharing of the vision with the founding team of a startup. So I stayed with that US firm for three years until 2021. And just like I decided to make a change when Brexit came for the UK, COVID made me reconsider my options and move over to Singapore and work at later stages. So look, in terms of later stages investments, we are right now primarily specializing in series B plus also in deep tech. And on that front, at least, you know, from the perspective of portfolio management, I would definitely say that it's much more meaningful because the earlier stage guys, you know, everybody in venture capital loves to say the, hey, you know, we're super helpful. Here is how we're assisting your growth, but unfortunately, sometimes they just say it's not the case, right? So it is only by later stages when the fund has more resources under management, when they do have a big investment team and the network to actually facilitate that assistance, then the portfolio companies can actually receive something meaningful. So for example, how do we work with our portfolio companies? Well, it's normally helped to do with, for example, Is there a leader in the local national market who are helping them to expand internationally, be it through facilitating key M&As or opening up offices abroad or fundraising from international VCs, for example, in the Valley or in London, or a bunch of other things, which is not just related to key introductions or maybe a C-level higher or two, which the majority of the early stage VC funds do. But just on the last point, I would say that, yes, venture capital is fun and great, but I just wanted to give a word of warning for some people who come into the field thinking, hey, it's a super cool field. I'll make a lot of money. I will be the darling of Forbes and whatnot. Usually, you know. especially at the early stages, you do have to wait for quite a long time until a meaningful exit, especially in deep tech because obviously it's just so much more R&D and financing heavy. And at later stages, it's not as much about 10 or 15x exits as it is about backing an already established company who is on set perhaps to do an IPO at a few years or maybe arrange a meaningful M&A exit in a couple. So ultimately, it's good to have a solid strategy of what you want to achieve. And what's also very important is to actually go and become an investor in the industry, which you have prior experience in before, because look, well, for example, what COVID has taught me is that it's very bad to chase after FOMO because... Back then, a lot of venture capital funds, the family offices of corporations, they were looking to back healthcare and biotech startups, which led to a huge increase in valuations, and it led to an increase in competition, but unfortunately, it did not lead as much to an increase in the amount of those companies becoming ultimately successful. And when you're dealing with very tech-heavy fields or fields which are related to health. then I would probably say let's leave it to the specialized investors because they do have the right team and the right contacts to actually make the company successful. OK. Yeah, I know or recall earlier this year or even later last year when there was a lot of hype around AI. And I've heard from some investors that they believe, well, AI has been the one tech that has given return faster than any other tech has ever before. Meaning, I guess, maybe exits were less than seven years. It's like maybe it's a three-year exit or four or five-year exit, something like that. But to your point. What I've recognized in my perception is a lot of companies do get the funding, but you look at where they are now and how far they've grown or their product roadmap. And who knows how the money is being allocated, but it seems like a lot of these companies are not moving forward. And maybe a lot of money has been thrown in to be based on FOMO and not really picking the right projects, the right team. You're basically throwing resources at a company that... maybe has a lower chance of actually succeeding. I guess that's your point, yeah. For sure, and I mean, look, one of the most important things that we should consider when deciding whether or not to invest is actually the aspect of portfolio synergy, right? Because if other companies have an opportunity to draw from the same pool of talent or R&D resources or access to new markets, then definitely, there'll be more opportunities for potential growth. But to your first point, you know, regarding the exits and valuations, what a lot of... VCs don't really talk about is, you know, there are exits and there are exits and that you can potentially, you know, make a sale of your equity over to a corporation or a family office, which would be not as meaningful as if you were potentially willing to wait for longer and then wait for IPO. Unfortunately, not everybody can wait until an IPO, especially if you're an early stage investor. But ultimately, even if sometimes a founder makes a meaningful exit in terms of the options that he was given or the actual financial compensation, it does not mean that the VC does the same because they ultimately, when they're fundraising for the fund, they have agreed their own milestones and KPIs to their investors, which sometimes might not be as meaningful if they're selling in two or three years instead of five or seven. Right. also, you know, on the other side, just, you know, as an additional point, sometimes it is the other way around. So, for example, a VC can and is willing to afford to wait until a meaningful exit. But sometimes his own investors are wanting a return on the original amount that they have put in, right? So they're pushing the VC to potentially make an exit before the right time. Right. And normally what the VC is doing in that case is sell through secondaries. Right. So for example, when a startup is fundraising, there is more demand for equities than there is supply. And there's the opportunity for earlier stage investors to exit. But in terms of, you know, the actual financial returns, it is often case not as great. Right, right. So I could believe they get you. To put it simply, if you're an early investor and your KPI is let just throw a number out there to hit some 20% gain, right? At the very minimum. And maybe the market is bad and their investors are asking for liquidity. And, you know, like you mentioned, there's an opportunity to sell those to someone else, secondary market or not, and gain their KPI. Well, so be it. So there's no, it's not meaningful. They didn't wait for the big you know, bucket that could potentially happen and flow in through, like you said, an IPO or something like that. So that's essentially what you're saying, right? So sometimes they're happy to exit. They say that they're performing based on the KPIs of the fund. So they are making it seem like, oh yeah, we're, we've done well, right? Because they've achieved their target. For sure, for sure. Okay, okay. So, you know, you talk about early stage startups and, you know, my audience mostly are Web3 founders or investors. So I'm just kind of curious because you've probably seen a lot of alternative fundraising activities, obviously, through token raises, so and so forth, which is not traditional. How have you seen the Web3 landscape for these early stage projects and how they're... gaining capital? Is it sustainable? I mean, what trends have you seen that has kind of evolved over the past few years? Well, Lukas, so in my own experience, I am quite a big believer in the Web3 space, especially in the region of Southeast Asia, right? Because it is growing massively in terms of population, in terms of the actual purchasing power and in terms of the ability of local startups to project their own products and original ideas to overseas. But when we talk about Southeast Asia, we have to understand that, especially in terms of the Web3 ecosystem, it is definitely not a uniform market. So you have the more developed countries, like, for example, Hong Kong or Singapore or Japan or Taiwan, where there is an established legal system, where there is quite a bit of big infrastructure which has already been built. And then on the other side, you're dealing with countries like, for example, Vietnam or Malaysia or the Philippines, where, yes, you know, the growth rates are higher. But from the Web3 space, there is just so much more of a wild west out there, right? Where, you know, yes, ideas can fly, but they can also flop. And from the perspective of an investor, what I personally found is that in the developed economies in South East Asia, present, what is missing is an opportunity for a Web3 startup to grow from an ideal stage all the way to a pre-IPO company, right? So there are early-stage investors, there are growth-stage investors, and there are M&A players or private equity funds who are willing to work and support a Web3 startup at a different point in time. But if you look at Malaysia, if you look at Vietnam, yes, over the past three or four years, What I did see was an explosion of earlier stage financing for Web3 startups. For example, from the viewpoint of business angels, right, who are looking to potentially pass their own experiences and a small chunk of money to aspiring entrepreneurs or from family offices, right, who originally made their money through perhaps, you know, natural resources or logistics or manufacturing. But since then, a bit of time has passed and the reigns of power has moved on to the next generation who is in the family of space much more tech savvy and much more willing and able to sort of make their mark. And they're trying to make their mark by focusing on areas like Web3, which is sometimes, yes, it's driven off a case by FOMO, but there are also many opportunities where it can actually transform. the existing infrastructure and frameworks within many Southeast Asian economies. So, you know, I would say that in Malaysia or in Vietnam, for example, when we look at Southeast Asia, what one of the biggest problems that you would see is the fact that yes, you know, there are early stage investors, yes, you know, there are big corporates, but in the middle, in the growth stage, for example, series A and series B, there is almost nobody, right? And I think that this is one of the big problems, because it does mean that, yes, a startup did have access to earlier stage financing, but once it comes to, for example, building that original team into a company that can dominate not the local market, but the surrounding region, it will be very difficult for the startup to find the right partners, right? So what they often have to do is go to the corporates who, don't really understand early stage tech, or go to the government who, yes, they have their own quarters. Yes, they have to showcase that they support entrepreneurship. But ultimately, they don't really know how it's done. So what is missing in the developing countries in Southeast Asia in the field of Web3 is the right amount of understanding within the ecosystem as to how it should be done. And from my own experience, I would not say. that in the majority of the countries they have managed to draw upon the right amount of international best practices and apply them to the existing ecosystem within the local countries to actually make an impact. But the situation is changing and I would love to sort of elaborate on that. Yeah, yeah. When I first came to Asia, so I'm originally from the US, I was in a startup, maybe let's say, I guess like six or seven years ago. And we did get two rounds of seed funding. And I recall back then, it was basically a SaaS platform. We were bringing in maybe close to It was a good start for us and we're trying to go out and get some more money so we can scale it. And as you mentioned, and it sounds like it's still a problem, getting more mature funding, you go series A or B, it's not easy. And when we did approach these people, these four money, they said, well, we'd be happy to invest in you if you brought in 10 million a year ARR. And then I was thinking, if we could do that, I don't think we need your money, right? It's kind of like, it was a really big gap from, us raising maybe 3 million as a seed. We were just asking for another, I guess 5 million at the time. And they said, no, I mean, we, I guess they had a minimum ticket size, I suppose. But I mean, there's always this gap in between to try to get capital for scaling. So I thought it was, it sounds familiar. It sounds like that's what you're saying, that a lot of startups, in order to get to the next stage. They go to government, they go to the corporates, try to, and like, who don't understand, like early stage. So, you know, getting a decision is difficult, yeah. Well, look, so when it comes to the Web3 space, you know, in terms of the gap that you've just mentioned and I've addressed previously, I think that another key player that is missing, which is present in regions like the UK or the States is the presence of, for example, the venture studios, right? So the guys who are supporting the Web3 startups from the early stage, but in Southeast Asia, even in markets like Taiwan and Singapore, it is still... you know, very risky for the corporations, or for the governments to actually pull their money together and hire the right team of experts to devise the right program. And even when they do, is they don't really understand, you know, how long it still takes to back a web three company, you know, from an idea stage to become a meaningful revenue generating business. And part of the reason for that is because unfortunately in... the majority of regions within South East Asia, because as I've mentioned, you know, it's still quite a wild west out there. It's still so much more about competition, not cooperation. And as a result, you know, everybody just tries to pull the rug under himself rather than, you know, perhaps maybe lose something in the short run, but build up the ecosystem, get great tech and ultimately win over the long run, which is a problem. All right. Well, like, okay, so you've led, what, 20 investments with seven exits. From your perspectives, what type of factors do you look at when you're looking, let's say if you're looking at some Web3 startups before deciding to invest, what do you think are the main key factors? Well, look, so once again, for example, if we look at the South East Asia region, I would say that one of the most significant factors for us that we look at is what would be the potential impact of that economy not right now, but maybe in the next three or four years down the line, because we do understand that, you know, Web3, one of its major advantages is that if applied correctly, it can really transform the way in which activities are done, not in a single sector, but across different sectors. So for example, we are loving a Web3 innovations in the financial technology space, especially when it comes to the emerging markets. It does mean that it's normally to do with, for example, financial services was underbind previously in big countries like India or in Pakistan or... perhaps decentralized wallets or other areas. Also, in terms of the segments within Websteries that I'm personally quite passionate about, I would definitely say it's a gaming subsector, right? Because for example, once again, if you look at Southeast Asia, you have, for example, South Korea, as you might or might not know, they are one of the largest gaming markets all over the world. I think maybe fourth or fifth. And as a result, they are having a great ecosystem which includes not only the gaming development studios, but also the government who is relatively supportive and also the consumer who already knows what exactly they want. And it is a good opportunity for even the Western companies, not only the local ones, to come in and turn the digital product into a web-thru product. And then you also have the more developing markets in the gaming space, for example, Vietnam or Philippines, where... there is still a bunch of local talent available and they can leverage the advantage of the local markets such as for example the relatively lower employment costs for example you know the development costs to make a product which ultimately would not be maybe demanded as much in the west but still would make a definite splash in the region of South East Asia. But to keep going back to answering your question, I would say that the other thing that we look out for when it comes to, let's say, saying yes or no to a specific investment opportunity, other than its ability to scale across multiple industries and derive similar solutions, would be the international expansion factor. Because once again, if you're looking at the US, a company in the US in the web space doesn't have to go international to become big. If you're looking at China or India, if they understand the local market, yes, the situation is relatively similar. But if you're looking at Vietnam, in Singapore, in Hong Kong, even if you know that a lot of the relatively developed markets, you would also understand that the local market is very small. And just by focusing on the local consumer. not only the company would not become big, but also you as an investor would not really make a meaningful exit. And that's part of the reason why we're doing this. So the international expansion opportunity would be another key thing. And for a company to be much more successful in terms of its international expansion, I would say that one of the more important aspects would be the actual innovation factor. of the idea, right? Because the founder needs to understand what kind of trends are going on, maybe even halfway across the world, back in Western Europe or North America, how exactly is his own product unique, and how exactly, let's say, maybe he's not even generating revenues right now, but he has pilots, so what it will take to turn those pilots into paid contracts, and how exactly would he turn his one existing product into a product line down the road, perhaps? So strategic alignment is also very important for us. Okay, well thank you for sharing that. And I think for sure the idea with a lot of these founders that I've met before, it has to go beyond raising through a token sale before they actually build a viable product. I've met too many projects that feel that, okay well I've got an idea if I can raise money through token sale to start my project and then they start building would be viable to market, which I think sometimes, I guess, that's just the game, right? Everyone's chasing after the money to build something. But in that respect, could you provide us an understanding from your perspective of what it looks like when you are raising money for a Web3 venture or a venture just in general? Because I think that it would be helpful for a lot of founders. who maybe don't understand the process because maybe for them, they go out on LinkedIn or whatever to their network, they say, hey, do you know any investors? They start having all these conversations, not really understanding who they should target. It's just almost like anyone who would listen and is interested in maybe their vertical, investing in their vertical. So can you walk us through then, like fundraising from your perspective? Sure, I would love to walk you through fundraising, but just as a first note about the token sales, it used to be the case in Web3 that token sales used to be an alternative financing route to the traditional VC route, but since then, there were quite a few crypto winters, quite a few scams, a lot of people were burning a huge pile of their own money. And as a result, even the successful... Web3 and crypto startups, they eventually found themselves having to still go to the VCs but for the VCs is actually a major turn-off when you have raised quite a bit of money through a token sale or through an ICO and then you're going to VCs, right? Because it does mean that perhaps, you know, you were not able to achieve the results that you have originally projected or the early stage investors who are, you know, in the traditional VC route, there may be business angels, accelerators, incubators But in the case of the token sale, usually the general public, they were not as super helpful to your own progress in development. So it will be perhaps more difficult to fundraise for you in the future, even if they do give you the money now. So I would say that for Web3 founders who have fundraised for a token sale and now they're considering the VC route, they really need to pay attention to the fact decide as to why exactly and what exactly do the one from the VCs. And perhaps, you know, even as I was speaking in the beginning of our call today, when it comes to health tech investors, only perhaps, you know, investing in health tech, I think that Web3 founders ideally should prioritize raising from the Web3 funds because without that it would be very difficult to achieve synergy. Without that, it would be, you know, difficult to arrive at the right KPI with the investors, because usually one party wants one thing and other wants another. And when it comes to the actual fundraising process, I would say that one of the more important things for the founders to consider is just like venture capitalists do due diligence on their potential portfolio companies. You as founders should really need to do due diligence on your potential investors. So how it can be done? So first of all, do look at the media that perhaps they're releasing, whether they're market reports, whether there are maybe marketing videos, also talk to their potential portfolio companies in the same space who have already received financing from them and do understand the red flags because it is, even if you like... the potential investor, it is still better to find out the bad things before you have actually signed the term sheet, even though often case the term sheet is not binding, it will be a bad idea for you to sort of start and rearrange all the terms after you have agreed to them. So do the diligence on your investors, talk to portfolio companies, also do try and understand. what exactly do you want from those investors other than the money? Right? Because for me, as a VC, if I talk to an entrepreneur who maybe, yes, he is more pushy, maybe he is argumentative, but he knows what exactly he wants and he knows how to achieve it. And he knows what exactly in terms of support he wants from me and I can actually provide it. Then... I would actually be much more willing to work with him because I know that it's a more meaningful relationship where I as an investor, yes, I can help sometimes, but my job is to manage a portfolio and not to get super involved in one or two companies out of the whole portfolio. So for me, it would still be the situation where the founder is the one who is projecting the idea forward, making sales, making international expansion possible and whatnot. And without the founder knowing what exactly he wants and how exactly he plans to achieve it, it is very, very difficult, right? And this is one of the reasons why, especially in the website space, quite a few VCs, when a company grows from an early stage to a growth stage company, they are looking to replace the original CEO, because the original CEO may have the vision and, you know, the... original idea of how things should be done. But he is not as great when it comes to marketing. He is not as great as about, you know, the strategic collaborations and partnerships. And as a result, at a certain stage, he's just no longer as useful, right? And, you know, especially when it comes to the web space, here is another difference when we are considering, for example, the developed markets like the UK as a state to the developing markets in Southeast Asia. in the developed markets, you would find the case that when VCs are looking to replace a founder, he still understands that he would receive quite a big chunk of equity. And if the company grows, so does the value of that equity. And after a certain point of time, he's free to go and do something else with all the stump that he is a serial founder. While in the developing markets, especially in Asia, usually, you know, it's a big... conflict between entrepreneurs and investors because entrepreneurs have perhaps rightly told the thing that their startup is their baby and they're not as willing to relinquish a reins of power, which sometimes leads the startup to just imploding, right? So nobody wins, which is a bad situation to be in for the founder and for the investor. Right, right. Well, I say that quite often because I think a lot of it is driven by ego for sure and feeling that they're the ones with a vision that needs to see it through until the bitter end. But the fact is sometimes, or not sometimes, actually a lot of times, the resources in your company need to recognize its own capacity and capabilities. Maybe they've taken them to where the company needed to be, but they need some fresh new talent to kind of take it to the next level. not saying these people can't still play a part in the company, like a CEO being replaced, I would find that it's not a big deal if that CEO can just continue with its own core capabilities and help the company under a different title or responsibility. Yeah, but I see it often. I've been part of some startups where the founders are, even the co-founders have very different viewpoints. in how to bring a company to an outcome, which is shared, but then there's this internal struggle that is felt by the employees of trying to figure out, okay, which way do we go? And that really handicaps a lot of companies. Well, for sure, Arthur. So like for us, as VCs, one of the things that we do look out for when it comes to the potential investment deal in terms of the founding team is how long they have actually worked with each other before. So maybe they've studied together, maybe they've worked together. Did they have any meaningful sort of startup foundation experience? Because we do understand that the startup world, especially if it's earlier stage, especially if it's in such a rapidly emerging market as Web3, everything can and often case does go wrong. And if you don't understand how the co-founder of your things and how does he react in stressful situations, the likelihood is, it will all end quite badly. And it's just for us as an investor, another red flag to really consider when it comes to, let's say, backing. a startup, a startup, B with relatively similar technology in a similar market. Right. So sometimes red flags are such that we just don't want to take the risk, even though we love the product, even though we love the tech and we do believe that, you know, the segment we just start up is growing, we'll continue to rapidly improve the lives of the people. Okay. Well, I want to move into this next segment around how startup founders should go about looking for capital on a regional basis. I bring this up because I had formed a partnership with a company based out of India who has basically a database of investors throughout the world. And their pitch is like, come with us and, you know, come onto our platform. information on there and somehow I guess they do a lot of the BD to set up the meeting. I guess that's how they get paid and they get a percentage of any raises. But when I was really looking to the business model or trying to understand from a founder's point of view, yes, internet is wide. There's so many different platforms to go and find investors, but it seems quite overwhelming. So maybe in your perspective. What is that approach? What are the differences for looking for investors in different regions? Or how should project owners look at it? Well, actually, you've raised quite a good question, because I do see quite a lot of entrepreneurs spending quite a lot of time on the efforts in terms of fundraising, which are not as meaningful or are very, very long in relation to what they actually end up accomplishing. And from my own perspective, cold outreaches sometimes do work. but often case is just an exception to the rule, right? Like for us, for example, we get hundreds of code emails with pitch decks, with financial models every week. And ultimately, you know, if you look at the amount of projects that arrived at the mailbox were reviewed, were seriously considered, were conducted due diligence on. then pass through the investment committee and actually receive the financing from us. I would actually say also that this is a least likely option out of all the deal flow generation sources for us. And I would imagine that the situation is the same for the majority of the other VCs. Why? Well, look, one of the reasons for that is because quite a few entrepreneurs, is they don't really do proper the decisions or even the basic checks on the VC whom they're mailing to, they just know that he potentially has the money and they run for it, right? So usually it is startups pitching us with a completely different product that is outside of our investment focus in a completely different geography at a different stage. And sometimes it is just a crazy opportunity like, hey, you know... please invest in our street stalls, selling fried potatoes or whatever, right? So completely non-tech projects, right? So it's part of the fun of being a VC, but for you as an entrepreneur, I would imagine that it's not the right way to do things. So when it comes to talking about the better way of doing things, I would say that first of all, I would advise fundraising from a market. where you are legally located and where the majority of your current customers or potentially future customers would come from. Why is that? Well, first of all, when it comes to the jurisdiction, the likelihood is the investors in that region would be, let's say, if you're located in Singapore and you're fundraising from Southeast Asia, the investors in Southeast Asia would know that Singapore is a great legal hub. It has a... a system where both the entrepreneurs and investors, given the right term, should be adequately supported. And it does have good links with the bigger markets, like for example, the States of the UK, while if you're, for example, looking to fundraise from Southeast Asia and you're actually located in Delaware, then one of the common questions would be, you know, who are you and why are you approaching us, right? So you can still fundraise on that matter, but... You just need to understand how exactly to answer the question to have the right story. So for early stage startups, I would definitely say that fundraise from the market by your located. For the growth stage startups, so when you are already having a certain amount of money, when you're already thinking about maybe local or international expansion, then do consider what kind of smart money would you be looking for the most and where you can potentially obtain it. So. Another thing I would say is definitely try, once again, not go through the cold mail approach, but go through the warm introductions. Because if you, for example, previously worked in a large corporation, maybe this large corporation has its own incubation program or VC fund. Maybe its top managers are often case acting as angel investors. And do try and leverage all the potential connections that you can get because if it's a woman production, then the likelihood that your email would at least be opened just so much more meaningful. And another thing I would say is do try make the most of the marketing that you can get. For example, if you are developing an innovative product, do try and present it in local national fairs or be featured in magazines or, you know, do a YouTube channel or something because yes, you know, it might take time. Yes, you know, a lot of that exposure might be wasted, but it's still better than doing nothing. And it's still an opportunity for you to start selling your product and the idea of your fundraising round. So a different quite interesting for a different kind of a lesson. Okay. If I, if I, okay, I'm trying to put together a list here just in general. So if I, like to your point, go after warm introductions, obviously better than cold. But if I'm going to look at someone that came across like, let's say my feed somewhere, or I saw someone raise some money from this person recently, I should probably look at the, or understand and learn the type of startups. based on the vertical and regions that they're targeting, maybe the stage of growth, like you said, someone who's basically at early stage or at the growth stage, and perhaps the minimum ticket size, which sometimes you really can't get. I guess there's an expectation or range, like if you're seed, you can go anywhere from 10,000 to 100,000. I mean, is that a fair minimum amount to kind of look at, to look at a profile of an investor? Well, look, I mean, one of the advantages of any developed market is the abundance of investors across many different levels. So for example, at early stages, you do have the business angels. The business angels usually write quite small checks. But in terms of your startup, they are much more interested in yourself and in your vision rather than the business metrics. So it's relatively easy to convince them. For example, at an idea stage, it's going to be for you to convince a corporation or an established VC fund. And on the downside, the business angels do write smaller checks. And it does mean that it will take more of them for you to arrive at a meaningful investment round. Another thing that you need to consider is the actual valuations. So valuations, especially in the Web3 space, are wildly different across markets. in the States. On average, I would say that the website startup at the seed stage in the States is three to four times as big in terms of valuation as it will be even in a developed market in Southeast Asia like in Singapore or in Taiwan, simply because it is slightly easier to grow a company from seed stage to a big company. in a developed market like the States, right? And they're also more investors. So if you have a meaningful technology and you have a good enough founding team, it's slightly easier for you to fundraise and perhaps twist some arms. But ultimately, I would not, you know, gamble if I was an entrepreneur on arriving at as high valuation as possible, because even though, you know, you might be... relinquishing a lower amount of equity in the short run, if you are not able, over the medium run, to justify that valuation, right? So to arrive at meaningful KPIs or to achieve the metric that you have agreed with investors, then the likelihood is even if you fundraise the next time, you would be fundraising on a down round, right? And a down round means that, you know, your original investors' trust in you was misplaced. Yep. And as a result, it will be much more difficult for you to actually get the good guys in the next round. Good point, good points. Okay. Let's go into advice for startups. Do you have just, I mean, I know you've said actually a lot already, great points of advice. Is there anything specific that is always part of your mantra that you're gonna tell whoever is gonna start a company, what are the, I don't know, top three or five things or your top three or five advice? Well, look, I would say that one of the most important things that I would like startups, especially if they are launching the Web3 product in a developed market, like the States or like Singapore, like Taiwan or Hong Kong, is to focus even at the early stages on commercialization, right? Because in those markets, you would find a situation where there is. a greater abundance of potential investors where often case, you know, the infrastructure is only present, but there is also more competition. So the way that this is, for example, access here is by how exactly are you commercializing a product at even the earliest stage, right? So maybe it would not be, you know, meaningful revenues when compared to series B company, but for this it will be a sign that they would not be trying to kickstart a steel train, but they will be just adding more coal onto the fire of the already moving one. And for me, it is a very important aspect because myself coming from an emerging market, I do understand that in the emerging markets, usually the entrepreneurs try and build the most technologically savvy product as possible, not understanding that there is no end to technological perfection. And when it comes to the international innovation race, they often get beaten out of the market by their competitors who have commercialized earlier, who have fundraised money for meaningful VCs, and who have managed to make a bigger mark on the PR space. So don't spend too much time on R&D, on patents. do try and commercialise, I would say that this is one of the most important things. Okay, cool. Let's see. All right, so I'm going to ask you one last question, and I guess it's just your opinion. You know, tech always has a way of intermediating current processes. When it comes to venture capital, a lot of platforms out there that are promoting projects, trying to make it easier to do the matching between the investors and also the project owners. Do you really see that technology will change much in fundraising for Web3 startups in the next five years? Well, look, I would say that the systems, the platforms that you mentioned, I have not really seen them being very successful. And one of the reasons for that is that the investors who go on those platforms, usually they're either quite un-sophisticated, right? So they draw the majority of their startups from the specific batch offered by the platform, and they're not really as able to do property diligence by themselves, or they're not really able to support those companies by themselves. Or if they're an established VC fund, they're using that platform only as a smaller portion of the overall deal flow generation efforts. So for them, spending too much time to engage and actually learn about the startups on the platform would not be ideal. So for the startups, I think that this is one of the things that should be done. if at least, as I say, spread your eggs across multiple baskets. But this is definitely not the thing in terms of fundraising that the entrepreneur should prioritize, because ultimately, in terms of the amount of time that you put in, the overall outcomes would not be ideal. But when it comes to your original question as to how would I see the fundraising scene, for the Web3 startups changing over the next five years, I would definitely say that, especially in the emerging markets, be them South East Asia or Latam, not as much about Africa, but Latam or South East Asia, I would definitely say that at any given stage, there'll be much more fundraising options than there were before, because for example, the corporations are increasingly finding that, yes, Web3 tech, is sometimes raw. Yes, it's sometimes still many years in terms of the actual business impact or strategic alignment with their own goals, but the potential changes that they can bring to an organization are huge, right? And the changes, they are also being impacted on by related technologies, such as for example, the onset of 5G. which is increasing the communication speeds and, for example, increasing the rate at which bank transfers are afforded by, you know, DeFi and the leverage finance could be, you know, implemented and things like that, right? So there are opportunities across different angles. And as a result, I think it's a good time to be a web-free startup. So don't chase after valuations. Do pick the right investors and do... understand exactly what you want to achieve in a year's time, in two years time and in five years time. And if you are an early stage company, do not go to your investors and say, hey, I want to exit my company in three years, because for your investors, it's not a good sign, it's a red flag. Thanks. All right, Alexander. Well, thanks for joining us on the Startup a Voyage podcast, and you provided a lot of insight. I'm sure the listeners will learn a lot. I'm going to actually take a lot of what you said and actually form a lot of social media posts because I think it's worthy to kind of put out there for people to learn. Thank you. It's been a pleasure. Okay, I'm going to stop the recording and you can just wait until it continues.