How investors are born and where to find them? What to ask when you meet one and what they are looking for in your startup? Nobody will answer those questions better than Joseph de Leon, Director of Gravitas Prime, a marketing professional, angel investor, Seedstars mentor, ambassador and a judge of multiple startup competitions. We had a chance to chat with him about investment opportunities and his career path.
At what point did you start investing in startups? And what does it take or require to be an independent angel investor?
After quitting my job in advertising strategy, I joined an M&A Advisory firm and found that I needed to learn about how investors think. The most efficient method was to become an investor myself. So I joined as a founding member of Manila Angel Investors Network (MAIN).
To become an independent angel investor, it takes a little capital to invest in a business, a lot of patience to sift through the bad investments until you find the one that is a right fit for you. It also requires a lot of discipline not to panic when the startups take you on a rollercoaster ride.
To become a successful angel investor, I believe the trick is not to be independent. Collaborate with other investors and market insiders so you can avoid mistakes and access more opportunities.
What kind of startups are you looking for - which industries, regions, technologies?
My investment strategy is to focus on startups with the potential to scale at a regional ASEAN level (Association of Southeast Asian Nations) because this is where I anticipate, is the next wave of opportunity, which I can help navigate. So I have chosen to be industry and technology agnostic. While I may not fully grasp the technology behind the startup, I always can find friends to vet the tech. Where I add value is in grounding the fundamental economics of how the business will eventually make money and evaluating the potential strategic trajectory of where it might go.
Even if I don't get how the tech works, I might make a play. If it makes no sense how the startup generates money, or there is no market, then I leave the sandbox for the smarter, bolder or richer players.
What do you consider the most successful case in your investment portfolio so far?
The most successful investment in my portfolio is probably Acudeen, Seedstars World Competiton winner of 2017. Since we invested in Acudeen, it has expanded into new markets, refined its business model, solidified the platform and increased its valuation multiple times.
What do you like the most in your work with startups?
It is a privilege to have entrepreneurs share their vision and trust you to nudge them in the right direction.
What goals do you set as an investor? What do you want to achieve or change?
As with any investor, the objective is to make more money. As an angel investor, there is probably a more profound inclination to make a difference as well. As a Filipino Angel Investor, I hope to have a chance to help some of these local startups become genuine global decacorns. But in the absence of unicorns and rainbows, I'll be happy with a portfolio of tigers, cash cows, and cockroaches.
As a marketing professional, you probably know how easy it is to create a beautiful picture and convince everyone that you are worth big money (and I'm referring now to the famous Theranos case). How do you validate startups before you invest in them?
By listening and dreaming.
As I mentioned, I avoid investing on my own and collaborate with other angels to leverage their insight and expertise. We listen to each other. For market validation, one of the things I do is try to break it down as if it was my own business. In other words, I try to figure out how much they have to sell at a profit to be worth what they say they are worth and what it will take to make that happen. If the number is tangible and the path to profitability is clear, then it is likely a valid valuation.
So when I say dreaming, the thought experiment above is one part of it. The other part is that I try to sleep on it. There is often a sense of false urgency in the startup game. Sometimes, you need to slow down to speed up.
Let's say you met a great startup which wants to scale to the Asian market. What advice would you give to the team?
Choose your Asia wisely and pick local partners carefully. From the outside, Asia is often seen as a single market, but the dynamics from country to country can be quite diverse.
So we have seen several great startups fail to expand because they tried to take on too many markets at once. Just because you have the capital, it doesn't mean you should try to swallow the whole bowl of noodles in one gulp.
The other strategic mistake is to approach each market in the same way. Focus on your highest common factor across the markets but be mindful of the critical barriers within each of them.
Before approaching you, the startup should... (please continue the sentence).
To get the answer to this question, just check my deck on how to approach investors and ask the right questions.
Are you willing to meet the most promising startups from emerging markets and enrich your investment portfolio with successful cases? Then come to the Seedstars Summit Asia 2019 taking place on the 29th of November in Phnom Penh, Cambodia!