Startups should pay more attention to Southeast Asia than China, which is rather "hyped up" with the growth of its economy.
Vinnie Lauria, founding partner of venture capitalist firm Golden Gate Ventures, told ZDNet Asia in an interview a major disadvantage in China was its blocking of Facebook and Twitter.
"Startups often get out in the market leveraging both networks. They are so vital to a startup's success so they can't easily operate in China," he said.
The venture capitalist, who has invested in a "few hundred" startups, tells ZDNet Asia how he picks his companies. He also shares insights from the other side of the fence, having run startups in Silicon Valley--the now defunct location-based social network Meetro, and forum site Lefora which was acquired by CrowdGather last January.
Q: What do you usually choose to invest in?
Lauria: They're usually a hybrid of Internet and mobile. Mobile is very big in Southeast Asia, because it is the fastest growing smartphone region in the world. There's been a lot of traction around social networks but if you're creating something similar to Facebook or Twitter, you're crazy.
You need to leverage it, but not compete with it, unless you're in China when both are blocked. Social gaming, is large. To me, everything is going to be more social, because it's so easy to plop in some codes and link it to Facebook.
Southeast Asia has a lot of potential for startups to grow due to the rapidly growing market and economy opening up, and hence is a good location for overseas startups to tap on.
China has a tremendous amount of opportunity but most products are very China-focused and I will be late to the game if I decide to be a venture capitalist there.
How do you decide on which startup is worth investing in?
I look at the qualities of the entrepreneur. He must be really driven, more so than the average person. He must be willing to do anything, especially break and bend rules. He must also be "coachable" and listen to feedback, work well with their team and be charismatic. They must basically have the guts to say, "f*** the world, this is what I'm going to do and let's see what happens and push forward".
Product or service qualities are not as important as these personality traits. If I have a team of everything I just listed--they are smart, technical and have an understanding of the Internet space--even if they do not have a great product yet, I'm quite sure they will in the future.
Do you consider the age of an entrepreneur a factor of success?
Most of our startups are owners aged 30 years and below but there are a few who are pretty old. Generally, the older you are, the more successful you are because you are wiser and more experienced.
However, the Internet has changed things because it creates a culture of its own.
A member of the younger generation who does not have any experience, but deeply understands the workings of the Internet can also be quite successful. A younger person is also more willing to take an exceptional amount of risk such as sleeping on the floor of an apartment and eating cheap food while someone older is not going to live that lifestyle.
What are some key things Asian startups can learn from those in Silicon Valley?
Be open with what you work on, launch early, embrace failure, take risks and think big--really, really big. Also, Asian culture is rooted to respecting hierarchy and authority. In the U.S. and Silicon Valley, there's an attitude of wanting to take over the world, which is a valuable quality for a startup entrepreneur.
The good thing is, Asian startups, especially Singapore is hungry and embracing these concepts. Startups here should not try to copy the culture in Silicon Valley but embrace their own. Singaporean startups are really mixing the different cultures, and seeing what evolves into a really good brand.
What other things do venture capitalists do, other than offer money to startups and hope they do well?
It is a lot about relationships. I spend the majority of my time building relationships with the startup communities, other investors and multinational corporations (MNCs). I hope to leverage those relationships in different ways. For example, if I invest in a Singapore startup that wants to launch in Indonesia, I help them make introductions to the relevant people.
However, I have a background in product development and marketing, so I also spend a significant amount of time sitting down with them, doing product check-ins every now and then, see if I can help and give some feedback.
We also guide and coach the startup founders, by meeting the team. For companies that are not based here, we do this over Skype.
How does investing as a venture capitalist pay off?
Many people assume startups pay us a monthly fee but the truth is, the venture capitalist business is a unique investment model. If we invest one million in a startup and they make ten million, we get nothing. The only time we get money is when they are acquired by another company, get an initial public offering (IPO) on the stock market or somebody decides to buy out our stake.
With that in mind, we only look for companies which we can see either of these scenarios happening. I'm never going to invest in a restaurant because it will never IPO or exit. This is why we are pushing for startups to get acquired. It creates a serial entrepreneur, or somebody who earns a lot with each company and goes on to create better things. The founder of Twitter for example, created many startups before it.