I recently spoke with Shiyan Koh, Managing Partner at Hustle Fund, a VC fund investing in early-stage software startups. In our wide-ranging talk, Shiyan shared her fascinating journey into VC. This included changing her career from investment banking to becoming an early employee at NerdWallet.
She also gave insightful views on startup fundraising, founder psychology, her investment checklist, and key differences between Southeast Asian and U.S. startup ecosystems. Shiyan offered thoughtful advice to founders on persevering after rejections and not focusing too much on fundraising.
With experience both growing a startup and now investing in them, her learned lessons are invaluable. I'm excited to summarize some highlights from our conversation in this post.
On the next episode of my podcast, I'll be chatting with David S. Rose, a renowned figure in entrepreneurship and angel investing, often praised by top business publications. Got questions? Drop them here!
Son Nguyen's Dat Bike Journey
Shiyan Koh recounts the story of a Vietnamese founder who, despite the challenges of the hardware space, impressively self-taught himself the necessary skills via YouTube, bootstrapped an innovative electric motorcycle company, and attracted international talent, leading to Hustle Fund's investment.
* Son Nguyen, founder of Dat Bike, ventured into the hardware startup space, which is less common for venture capital firms like Hustle Fund.
* Educated in the US as a software engineer, Nguyen returned to Vietnam driven by the desire to address the growing issue of air pollution.
* He self-taught mechanical and electrical engineering using online resources to design and prototype a competitive electric motorcycle.
* His prototype gained early validation by pre-selling 100 units on Shark Tank Vietnam, showcasing the market's interest in sustainable transportation.
* Nguyen's vision and determination brought two American co-founders on board, highlighting the project's global appeal.
* By utilizing local university facilities and the help of engineering interns, he kept the startup costs low and operations efficient.
* His resourcefulness and attention to quality led to the development of Dat Bike's models like Quantum and Weaver, which feature long ranges, rapid charging, and robust design.
* The success of Nguyen's approach and the potential of Dat Bike in a growing sustainability-focused market culminated in a significant investment from Hustle Fund.
Decision Making
Shiyan uses both standard criteria and intuition when making early stage investment decisions.
* Looks at typical checklist like market, team, product, traction
* Leverages pattern recognition from experience to assess founder interactions
* Checks if founders can prioritize what's really important
* Intuition helps gauge things like co-founder dynamics that may impact future success
* Hard to completely systematize early stage investing, need interaction to understand founders' thinking
Investment Checklist
Shiyan's investment decision checklist includes:
* Market - Is it a large, compelling market opportunity?
* Team - Does the team have the skills and experience to execute on the opportunity?
* Product - How good and differentiated is the actual product?
* Traction - What momentum or adoption does the product have so far?
* Fundraising ability - Can this team attract future capital if needed?
"I'd tell my younger self to take more risks and start earlier. You don't need to wait until everything is perfect or until you have a lot of money to start investing or joining a startup. The lessons you learn from those risks are invaluable." – Shiyan Koh
Winning Formula for Success
Are there common factors that in the winning startups?:
* Shiyan said there may not be one formula for winning startups, but some commonalities emerge.
* One is that the founders refuse to give up and die. They survive near-death experiences and find a way to pull through.
* This likely indicates some survivorship bias though, as some companies should probably shut down.
* Another common trait is that successful founders are excellent at learning. They learn incredibly fast and are very open to feedback.
* So resilience in tough times and adaptability to learn seem to be traits of many winning startup founders.
* But there is no single formula - different startups succeed via different business models and strategies.
Overcome Rejections
Facing rejection from investors is a common hurdle for startups.
* Rejection is a part of the startup journey. Focus on finding that one investor who shares your vision.
* Treat fundraising like a sales funnel, knowing each 'no' brings you closer to a 'yes'.
* Use rejections to build resilience. Each feedback is an opportunity to improve.
* A single enthusiastic investor is worth more than many indifferent ones.
The Hidden Challenges of Venture Capital
Shiyan Koh discusses the venture capital system in the U.S., highlighting its risk-heavy approach, possible disagreements between founders and investors, and industry-wide biases.
* Venture capital in the U.S. aims for big wins, but often at the cost of many startups not making it.
* Entrepreneurs need to understand the intense growth expectations and pressures of VC funding.
* Differences in growth vision can lead to conflicts between startup founders and their investors.
* The VC field faces issues of diversity, influencing which entrepreneurs and ideas get funded.
Diving Deep into Business Insights with Podcasts
Shiyan Koh enriches her understanding of business through podcasts, focusing on business history and current economic trends.
* Prefers podcasts over traditional reading for business insights.
* Regularly listens to the "Acquired" podcast for in-depth analyses of iconic businesses.
* Enjoys the "Odd Lots" podcast for its economic perspective on current trends.
Embracing Risk Early On
Shiyan Koh would advise her younger self to take more risks earlier in her career, emphasizing that the entrepreneurial journey could have begun sooner.
* Acknowledges that her current role involves taking significant risks, indicating she eventually embraced the idea of risk-taking.
* Reflects on her past, noting that as a foreign student in the US, she had visa constraints that influenced her career choices.
* Suggests that she could have engaged in more startup activities or angel investing during her earlier years.
* Encourages young professionals to consider angel investing with smaller amounts, which she did not realize was possible at the time.
* Recommends that individuals interested in investing should experience the stakes firsthand, including the potential to lose investments, to fully understand and learn from the process.
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