1,500 participants including 300 investors, 66 speakers and 120 startups
Signs are there of a maturing ecosystem, more funding avenues
THE fifth edition of Echelon began with a bang today (June 10) with a capacity crowd of more than 1,500 at the MAX Atria @ Singapore EXPO venue.
Calling Echelon his “baby,” e27 chief executive officer (CEO) and cofounder Mohan Belani (pic above) noted in his opening remarks that in the course of organising and hosting the startup conference and exhibition event over the years, the growing maturity of founders in the ecosystem could clearly be seen.
“When we first started, it was mostly students with their first venture; today, we’re seeing more seasoned entrepreneurs with more experience getting into the scene.
“This is evident in the quality of startups we’re seeing every year at Echelon – it really is the progression from boys to men,” he said.
The additional signs of a thriving startup ecosystem lie in the avenues of funding that are now available in the region, Mohan noted.
“There’s always this lament about a funding issue in the region but we’re completely proven them wrong. The number of investors we get at Echelon every year is increasing, not just in number but in quality too.
“This year alone there are more than 300 investors in attendance and the best part is that most of them don’t focus on the early stage.
“We’re starting to see more and more corporate venture funds and private equity houses from outside South-East Asia who don’t normally invest in tech startups but have started to take notice of the region,” he added.
This year’s Echelon features 66 speakers and 120 startups from around the Asia Pacific region showcasing their work over the course of two days.
Edgar Hardless, CEO at SingTel Innov8 Pte Ltd, the main sponsors of Echelon this year, declared that “now is the time for Asian startups.”
“It’s particularly encouraging to see this event grow from strength to strength. This year is the largest yet, which serves to demonstrate the rapid growth of the region’s startup ecosystem,” he said in his opening remarks.
Hardless said that according to the Singapore Venture Capital & Private Equity Association, total venture investment in South-East Asia was US$250 million in 2012, but hit close to US$1 billion in 2013 and is still growing.
“In Singapore alone, venture capital investment in startups almost doubled to US$500 million in the same year,” he added.
It is this increasing volume of and attention to startups that led SingTel Innov8 to launch the Innov8 Sparks initiative in early April.
Touted as a “first of its kind alliance” in the region by the SingTel Group and its regional mobile associates, Innov8 Sparks was created with the mission to provide assistance to eligible startups to expand outside their respective home markets, and into Australia, Indonesia, the Philippines, Singapore and Thailand.
Tips for angel investors
Among the speakers on the first day of Echelon were 500 Startups founding partner Dave McClure (pic above, left) and venture partner Khailee Ng (right), whose session focused on some dos and don’ts for would-be angel investors.
500 Startups is a Silicon Valley-based global venture capital firm that runs an accelerator programme and has invested in 25 startups in South-East Asia to date.
McClure began the session with a quip to the audience: “The No 1 rule for angels? Don't assume that you’re too damn smart and don’t turn down Uber at a US$10-million valuation because that’s what I did!”
He said that given the high volatility of startups as an investment category, it is advisable for investors to take on a portfolio approach.
“The theory is that most things will fail, so a minimum of investing in 10-20 is critical for some shot at success,” he said.
McClure added that a problem with investors coming from more traditional investment backgrounds or portfolios is that they think “everything is going to be a Facebook or an Instagram.”
“This results in too much concentration in particular areas, when the reality is that few things will succeed asymmetrically, and in order to take advantage of that, you need a large portfolio of investee companies,” he said.
Ng cautioned startup founders about taking money from “predatory angel investors” who in their “seduction process” of their value proposition to a startup, would oversell what kind of value and support they can bring to the table.
“There is also a trend where angels take too much capital from the startup, thereby damaging the prospects of future funding rounds,” he added.
To illustrate, Ng shared a story about a startup which showcased its venture at Echelon a couple of years ago, and while both the founder and the business held extremely strong potential, trouble arose when an angel investor took 85% equity.
“They took that much equity and the value-adds the investor promised in terms of connections and other support were not delivered, and the founder was left with only 15% of the company,” he said. [Figures corrected]
According to Ng, angels that listen intently to the startup’s proposition and problems, connecting the dots in areas the founders may have missed, “is utterly refreshing.”
“It makes startups want to take that person’s money because they are excited to spend time with them and learn more,” he added.
Even angels need to pitch themselves to founders and McClure said that one of the initial exercises investors might want to go through is how they want to present themselves to the entrepreneurial community.
“It’s similar to founders doing a competitive ecosystem analysis. You’d want to decide whether you are going to be focusing on a specific area, maybe even choosing a vertical or stage to specialise in,” he said.
McClure’s other tips to would-be angels included co-investing with more experienced investors to “learn the ropes.”
“When I first started investing, I had to learn about a lot of different legal issues that come attached with startups. So I co-invested with more experienced investors and via their guidance, managed to get to reasonable documentation and portfolio selection,” he said.
In closing, McClure raised the issue of the process of due diligence by investors into prospective investees, noting that while important, said it must not be the end-all to the process.
“There was one startup we ran a background check on, and we got results like one founder having spent time in jail while another had several name changes,” he shared.
In the end, the decision was made to invest in the startup anyway, as McClure noted they still liked the founding team and they had a strong product.
“Very few things kind of work and trying to identify what will be a winning strategy is more important. We were all young at one time and make our own share of stupid mistakes,” he said.
McClure pointed out that taking a long time to come to a decision spells death for a startup as speed is of the essence, not to mention an indication of what the eventual working relationship would be like. Taking a long time to make a decision is not something investors should intentionally seek to do.
“A quick ‘no’ is better than a long ‘yes.’ Ultimately, you’re trying to find outsized wins so try to make decisions quickly and optimise for the long-term,” he said.
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