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Days of excess are over, investors warn founders

Deal activity in Asia Pacific fell 26.3% YoY in 2023.

At a time of decreased capital deployment and lower valuations, experts stressed the importance of capital efficiency for startup funding success.

“The days of excess are over. The bar is certainly higher now for founders,” Brinc’s head of Portfolio Management based in Singapore, Milan Thakkar, told the magazine.

Thakkar, however, said many investors still have dry powder and are looking for exceptional founders to back.

“You need to prove that you know how to appropriately allocate the capital invested. This is why we specifically look for resourceful founders that have accomplished impressive things despite facing financial and resourcing constraints,” Thakkar said.

Neha Singh, chairperson and managing director of research platform Tracxn, shared a similar sentiment saying that the narrative of venture capitalists has now centred around capital efficiency.

Apart from having a path to profitability, Singh said investors look at three things: how big the market is, team, and execution.

READ MORE: Venture capitalists sharpen focus on targeting startups’ profit paths

“Some look at teams more than market, some of the other ones will say they look at markets more than team; but essentially they’re always looking at new waves which will create the next set of large companies,” Singh said.

“For instance, there was an internet wave, there was a SaaS wave. Now, obviously, there’s an AI [wave], which they feel that on the back of this, there will be a lot of large companies which will get created.”

For East Ventures, the investment strategy has always been based on 2Ps: People and Potential Market.

“We look for strong founders and companies that help to solve large problem statements in a large addressable market. Meanwhile, for the growth-stage companies, we also focus on their traction and ability to scale,” Wesley Tay, principal at East Ventures, said.

RELATED: Sustainability, biomedical startups draw investors, founder focus

“We invest in good companies in both the early and growth stages. Focus on your core strength and provide the solutions that can be the painkiller to the pain points of society,” Tay said he had told founders.

Vickers Ventures has a similar approach, investing in startups that have seen “early product-market fit and are in the process of scaling.”

“For healthcare or biotech investments, we invest when lead programs are finishing pre-clinical studies or have initial human data. We mostly lead in Series A investment rounds,” PohHui Chia, associate director at Vickers Venture Partners, said.

RELATED: Foodtech, fintech emerge as bright spots in Hong Kong’s startup landscape

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