500 Startups is one of the most prolific venture capital firms in the world. They’ve made over 1500 investments globally, over 150 of which are in South-East Asia including Grab, Carousell and Bukalapak. Their Singapore-based partner, Vishal Harnal, shares how they operate.
You were a lawyer before joining 500 Startups. Tell us how you made that switch to being a VC.
During my time in law school I was an entrepreneur and ran a communication skills consultancy that I had founded. I really enjoyed the experience of building and growing a company from the ground up but at that time, I felt it was a hobby until I qualified for my “real job” as a lawyer.
Once I graduated from law school, I practiced commercial dispute resolution for five years at one of the most renowned firms in Asia. Although I found the work intellectually stimulating and was surrounded by some of the brightest legal minds, I missed the dynamism, variety and hustle of growing a business.
I applied to business school and while awaiting the results, happened to meet Dave McClure (the founder of 500 Startups) and Khailee Ng (a Managing Partner at 500 Startups) while they were in Singapore. Although I was unfamiliar with the venture capital scene, I was immediately drawn to the vision and culture of 500 Startups. The rest, as they say, was history.
And what do you do as a VC now?
I manage and lead 500 Startups’ investments and activities across South-East Asia through our aptly named “Durians Fund”. That involves building our brand presence in the region, sourcing for investments, supporting our portfolio companies and building our teams and operational capabilities. We’re invested in over 150 companies in the region and that takes a lot of time and hard work!
500 Startups invest in early stage startups but there’s no clear pattern to favoured verticals or how you invest.
We invest on a portfolio theory, which means we make many small bets into a variety of startups at the Seed to Series A stage. As a general rule, we don’t invest in ideas but look for companies that have launched their products / services and have promising early traction. We invest in exceptional founders who we feel have an unfair advantage over their competition.
What is your advice to founders looking for funding?
There’s plenty of good information available online these days on fundraising for founders. The one piece of advice that I have is that founders would benefit from researching the investors that they’re approaching for funding. They should target investors who are active or interested in the area in which they are operating. Founders should also personalise the introductions they send to potential investors as much as possible to create rapport and distinguish themselves from the deluge of emails that investors receive daily.
How involved are you once you make an investment?
Because we invest on a portfolio theory, there’s a limit to how active we can be in the companies in which we invest. We do not take board seats in companies and do not have operating partners to run companies. What we instead do is provide our companies with support and make ourselves available as and when they ask us to. We help our companies with fundraising, strategy, recruiting, PR, expansion and to connect with our global network.
After seeing so many pitch decks, do you see a pattern emerging in the scene?
There are three main trends that I’ve been seeing. First, the volume of decks that we’re been receiving is increasing significantly, especially from Indonesia. Second, the quality and sophistication of the businesses and founders are increasing. Third, there’s a lot more activity in the fintech space than there was a year ago.