Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Alan Chiu of XSeed was recorded in February 2018.
Alan Chiu is Partner at XSeed, a seed-focused venture fund based in Silicon Valley. Alan talks about the level of risk his firm is willing to take and under what circumstances.
Sramana Mitra: Let’s introduce our audience to XSeed. Tell us about the firm.
Alan Chiu: XSeed is a seed-stage focused technology venture firm. We look for the best entrepreneurs we can find who are building technology startups and give them capital to make their dreams into reality.
Sramana Mitra: How big is the fund?
Alan Chiu: We’re investing out of our second fund. It’s $60 million. Our average check size is around $750,000 to start. We don’t have straight guidelines on how big that initial check is. It depends on the needs of the company and where they are in terms of state of development.
Sramana Mitra: What about stage? This would be pre-seed or seed?
Alan Chiu: It’s $750,000. It’s institutional seed. The round size is usually around $1.5 million to $2.5 million. A lot of times, the entrepreneurs have made a lot of progress.
Sramana Mitra: What about industry sector? What is your comfort zone, preference, and focus?
Alan Chiu: We generally look at B2B because we believe that, at seed stage, it’s easier to assess the potential of B2B opportunities versus more consumer internet products, which usually takes a little longer to validate. That’s also the majority of my background as well.
Sramana Mitra: What about geography?
Alan Chiu: US-focused. Most of our investments are made in the San Francisco area. We do have a small number of companies that are based outside of this region. We usually do that if we find that the entrepreneur is special or compelling and we are able to find local investors to support the entrepreneurs and make local introductions when it comes to talent.
Sramana Mitra: I imagine that you are seeing a lot of companies that are not just completely Bay Area based. They may be having their front end in the Bay Area, but they do their development work somewhere else. Is that an acceptable configuration?
Alan Chiu: Absolutely. We’re seeing more and more of that. Often because they have good talent elsewhere and don’t want to move to the Bay Area, that’s very common.
Sramana Mitra: Tell us about some specifics of what you are looking for right now that you would like to invest in. Have you come up with specifics?
Alan Chiu: We’re not sector-focused at the moment. First and foremost, we’re looking for the most compelling entrepreneurs. What do we mean by that? These are entrepreneurs who are always able to create momentum regardless of the obstacles in front of them. They are high energy. They attract top talent around them. They are what we call truth seekers. That’s hard.
Entrepreneurs are very opinionated but you’ve got to balance that with being adaptable and coachable, and be able to learn from market feedback. The focus is on getting it right rather than being right. That’s one of the key qualities that we look for.