Amidst the challenges of a tough funding climate, e27 is launching an exciting new article series called Angel’s Advocate to provide fresh perspectives on angel funding. In this exclusive series, we sit with prominent angels to hear their stories and strategies and gain unique insights about early-stage financing.

Adriel Yong is currently the Head of Community at Ascend Angels, one of the largest angel networks in Singapore with over 400 members. Yong’s journey as an angel began when he started angel investing in SEA startups such as Doyobi, AcadArena, JiPay, StackUp, Lumina and Acme.

He also works with Jeremy Au on the BRAVE Podcast and co-authored their publication featuring the top 10 stories on the show since its inception. Outside of startups, Yong is passionate about social mobility and continues to support Access Singapore, an education non-profit that he helped to found back in 2019.

In this edition, Yong shares his take on angel funding.

Edited excerpts:

How do you typically approach investing during a funding winter?

During a funding winter, we focus on companies with strong fundamentals and a high potential for growth, especially those with proprietary technology and experienced teams. We invest smaller initial amounts and look for startups that can scale with less capital.

What are your typical investment criteria, such as industry, stage, and geographic location?

As one of the largest angel networks in Southeast Asia, we are excited to back the next generation of founders in the region across various sectors and stages. Our sector and regional focus is a reflection of the concentration of membership in this part of the world, which allows us to best source, evaluate and support our portfolio companies.

We particularly like to back second-time founders and founders with a deep understanding of the problems they are going after because of a hard-earned insight or significant operating experience.

Can you describe your investment process from initial contact to closing a deal?

Our team and extended angel network can often be found in startup events and industry mixers. After the initial contact, the investment team will speak with a company to better understand their proposition and evaluate if there is a mutual fit to proceed further.

Also Read: Angels should play a more hands-off role: Sanjay Shivkumar of Carousell

Thereafter, we will start to speak with relevant members of the angel network to do initial due diligence and gather interest to support the company in its current round of fundraising. Once we have gathered initial conviction and interest in the company, we will share it with the wider angel network and arrange calls for the founder to speak with interested parties before collecting commitments.

How do you evaluate a startup’s potential for growth and success?

We think about companies from first principles and try to understand what is the problem they are actually going after, how large that problem is and how much people would pay to solve that problem. We ask ourselves if this is the best team to tackle this problem and whether we are able to effectively partner with them to accelerate their growth with our network over the medium to long term.

How important is the founder’s experience and background when making investment decisions?

We have observed that the founder’s experience and background can influence product, commercial and hiring outcomes significantly, especially at an early stage. Second-time founders often have an advantage in understanding pitfalls in company building, such as how to hire, fundraise and structure teams effectively.

Founders with deep operating experience in particular industries will have a massive advantage in attracting the best talent to work with them, have higher clarity on their customer persona and tend to see much quicker commercial traction. All these translate to stronger growth in the business and better fundraising outcomes.

Can you share your successful investment and what made that investment successful?

One investment we are particularly excited about is Ringkas, a digital mortgage platform in Indonesia. The founding team previously built large companies in Southeast Asia and had a good combination of startup, property and financial expertise.

What makes Ringkas impressive is its ability to structure and secure complex partnerships with top banks in Indonesia and the largest property developers to secure over $2 billion in property supply over a short span of time.

Furthermore, the gap in Indonesia’s mortgage industry is massive with Indonesia’s mortgage penetration rate, currently at a modest 3.25 per cent of the total GDP, which significantly lags behind countries like India and the United States, which have penetration rates of 11 per cent and over 50 per cent of GDP, respectively.

What are some common mistakes that startups make when pitching to angel investors? What are some myths about angel investment?

Startups need to inspire confidence in prospective investors when they pitch. Some common mistakes would be being vague about product differentiation, the business model and unit economics and the details of going to market.

Even though a pitch might have gone well for angels, some might not participate in the end when they feel that the deal terms are not sufficiently fair for the company’s stage.

How important is the alignment of values between the investor and the startup founder?

Venture investing is often thought of as a one-way street in terms of whether an investor finds a startup attractive. I argue that a mutual alignment of values between investors and startups is important for long terms success.

Also Read: It is important that founders see investors as their partners: Christina Teo of she1K

For instance, if the investor prioritises high topline growth and not strong fundamental unit economics, while the founder does, then it might not be the best investor-investee relationship over the medium to long term. This is especially challenging if such an investor is a major shareholder or board member with additional levers to compel the founder to their vision for the company.

Our advice to portfolio founders is to speak to other portfolio companies of potential investors to understand how the fund manages their portfolio companies, what they prioritise, how they have managed crises in their investees and the individual working style of Partners that will be board members.

How do you manage risk when investing in startups? Are there any specific metrics or indicators you look for?

To manage risk effectively when investing in startups, we first have to be able to identify the risks. As an angel network with over 400+ accredited angels across Southeast Asia, we tap into our extensive network to do industry and founder due diligence.

This helps us accelerate our internal education on new markets that we might be unfamiliar with and helps us get better clarity of the backgrounds of the founders we work with. Beyond the network, we also tap into our portfolio companies (over 60+) and funds that we are limited partners.

As a network that invests across the early stage and growth stages, we also have the flexibility of revisiting investments in the future that we do not feel the most comfortable with at the current stage because of certain product or market risks that we are unable to underwrite.

Finally, when we do make an investment, we leverage our angel network to derisk things related to commercialisation, hiring and further fundraising.

For individual angel investors, a key part of risk management is sizing your bets and dealing with fair terms. I previously discussed how to think about angel investing ticket sizes and deal terms with Jeremy Au on the BRAVE podcast, do check out the episode here if it’s something you might be thinking about.

Can you share any advice for startups looking to raise funds from angel investors?

The truth is, your fundraising journey started way before you decided to find a company. Angel investors will do extensive reference checks with people whom you have worked for previously and those that have worked with and for you.

Are you someone that the best talent will want to work with and for? Founders should actively think about cultivating strong relationships with their previous teammates and bosses and leveraging them when they want to start out on their fundraising journey with angel investors.

There is also a cliché: “When you ask for money, you get advice. When you ask for advice, you get money.” I have seen advisors of startups/founders become the first angel investor in companies and actively advocated for them to other investors based on their working experience with the team.

In this regard, actively seek advice at each point of your journey, and that can reap both direct benefits (better product and traction) and indirect benefits (greater trust and advocacy from advisors).

—

Fundraising or preparing your startup for fundraising? Build your investor network, search from 400+ SEA investors on e27, and get connected or get insights regarding fundraising. Try e27 Pro for free today.

The post Startups need to inspire confidence in prospective investors: Adriel Yong of Ascend Angels appeared first on e27.