Sramana Mitra: Talk a bit about your current portfolio. This is your second fund. How much was the first fund?
Alan Chiu: The first fund was $50 million and it was invested across FinTech and software.
Sramana Mitra: How many companies did you invest in from the first fund?
Alan Chiu: I wasn’t with XSeed then. That’s not a part that I can speak about.
Sramana Mitra: When did you raise this fund?
Alan Chiu: I was with the second fund from the beginning. We’ve invested in more than 30 companies. A number of them have grown to be pretty significant entities. There’s a company called Zooz, which is a payment and analytics company. They are especially strong in handling cross-border payments. We also have an enterprise business intelligence platform company called AtScale that is enjoying tremendous growth. Any enterprise that is handling data points will find AtScale to be indispensable.
Sramana Mitra: What kind of use cases is it gaining traction in?
Alan Chiu: A retailer with a lot of products trying to predict demand for specific products in specific geographies can process high-volumes of data very quickly and try to make decisions that will have a direct impact on the margins.
Sramana Mitra: What stage did you get involved with AtScale? What did they have when they came to you?
Alan Chiu: They were still building their product with no customers, but they had done dozens of customer interviews. They have a very strong background in business intelligence, so they knew what they were doing. They were solving deep customer pain points that nobody else was solving yet. There was a lot to like about the team – deep technology with a team with deep experience.
Sramana Mitra: You would be okay with investing in companies at a stage where there are no customers yet, but there has been a lot of customer immersion in designing the product.
Alan Chiu: Absolutely.
Sramana Mitra: It sounds like you have a group of investors that you co-invest with who are okay with that stage of business as well.
Alan Chiu: Definitely. We’re taking on market risk if we’re investing pre-revenue and pre-customers. That could be balanced off against a very strong team who understands the market very deeply.
Sramana Mitra: Who are the funds that you co-invest with with that same stage thesis?
Alan Chiu: Your usual suspects in the institutional seed ecosystem.
Sramana Mitra: Can you name some of the funds that you’ve co-invested in these deals with?
Alan Chiu: We’ve invested with Storm Ventures, Engineering Capital, and many others.
Sramana Mitra: If you look back on 2017, what are the trends that you saw? From a much broader pool of deals, what highlights stand out?
Alan Chiu: I’m seeing more and more entrepreneurs who are being extremely capital-efficient. They are able to get more done with less capital. That’s a continuing trend. It’s not a slowdown in volume but investment pace. That’s a reflection of the fact that we’ve had an explosion in seed investments four or five years ago.
Many of the early investors felt that they wanted to see some of these companies exit or have liquidity before they pick up the investment pace again. We are coaching the entrepreneurs we back up to allow for more buffer to adjust to the new reality of early stage fund raising.