Sramana Mitra: What was the stage at which you got involved?
Waikit Lau: In this case, I was the third or the fourth check. I was very early. There was no lead. They had raised a little bit of angel money. I just said, “I like you guys so much. I like your team and technology. I will help you find a lead. I’ll write my check now.” For them, it’s very early.
Sramana Mitra: What’s very inspiring listening to you for this community is that we constantly see investors who are all wanting to come in after there is validation. When you’re developing complex technology, especially making some very serious technological breakthroughs, it’s not so easy to check all those boxes before going out to raise financing. You need financing to get to those checkpoints.
Waikit Lau: That’s a good point. When I do the check before the lead comes in, the one thing that I do ask them to promise me is to make sure whatever their financing plan, it is well-capitalized. I’ve made many investment mistakes where I would write the check. It turns out they ended up under-capitalizing. They don’t have enough runway to get to the milestones for the next round. Whatever money they have raised in that round, it just gets wasted. They couldn’t raise the next round. They have to shut the company.
One of the things I tell these guys early on is, “Guys, let’s work through your financing plan, and let’s look at your product milestones.” Let’s work backward. What’s your burn? Then let’s just add six months of buffer. That’s the amount you need to raise. For me to write a check now, I need you to promise me and look me in the eye that this is the amount you’re going to raise.
Sramana Mitra: In our methodology, we differentiate between lean startups and fat startups. There are certain companies that can be built as lean startups. That can get to validation, traction, and adoption quickly. There are all sorts of bootstrapping techniques that we’re using.
Before you came on the line, there was a presentation from Ram Ramdas who actually has a question for you. He presented a very interesting FinTech company in India that took its first customer in for a couple of hundred thousand dollars of upfront license fee payments plus maintenance, which allowed them to use that as seed money. That’s fine. Those kinds of strategies for bootstrapping are fine, but if you are going the route of raising money for investors and you don’t capitalize it enough in a fat startup scenario, that is a recipe for disaster.
Waikit Lau: Exactly.
Sramana Mitra: You have a couple of questions from the audience. Ram Ramdas is asking if you invest in India startups focused on solving problems in the Indian market but related to your domains of interest.
Waikit Lau: I don’t. The reason is I find startups in different countries are very different. You even see differences between startups in the West Coast in Silicon Valley versus building a startup in the Southeast. They take on very different cultures. Even with that, I sometimes struggle with understanding their way of doing things. With international startups, I can’t be as helpful beyond the check. Number two is, I just don’t really understand the cadence.
Sramana Mitra: There are very specific investors, both angel, micro-VCs, and VCs, who will invest in Indian startups. The next question you have is, “How do you find the right team when you just have an idea?” If you could answer with your entrepreneur hat on, that would be great.
Waikit Lau: That’s the $6.5 million question. Forget team formation. How do you find your co-founders? If you want to do something, you want to start a company with an idea. You have to be thoughtful. I generally don’t recommend people doing it alone unless you’re a Jack of all trades. It’s good to have another person to bounce things off of.