What’s the difference between an angel investor and a venture capitalist? | Money Talks podcast

Summary

In the 'Money Talks' podcast, Andrea Hang discusses the intricacies of entrepreneurship and funding with Vanessa Ho, co-founder of fintech nation. They explore the differences between angel investors and venture capitalists, the strategies for pitching to them, and the expectations for returns. Ho emphasizes the importance of due diligence, the value of strategic investments, and the reality of startup failure. The conversation provides insights into the world of personal finance and the entrepreneurial journey.

Takeaways

• 💡 Entrepreneurs often face difficulties raising funds from banks due to the lack of track record and incorporation time.
• 🚀 Angel investing is compared to investing in individual stocks, while venture capitalism is likened to a diversified portfolio like mutual funds or ETFs.
• 🤔 Angel investors tend to invest based on personal understanding and the ability to add value, often without a structured mandate.
• 💼 Venture capitalists operate with a clear strategy and investment mandate, aiming for stable returns similar to a TV actress following a script.
• 🌟 The potential for high returns in angel investing is offset by the low probability of success, with the hope that one or two 'moonshot' investments will carry the entire portfolio.
• 🧐 Personal connection and familiarity with the industry are significant factors for angel investors when choosing startups to invest in.
• 👥 The personality and character of startup founders weigh heavily in the decision-making process for both angel investors and VCs.
• 🔍 Experienced investors rely on their network for reference checks and due diligence to identify the right characteristics in founders.
• 🤝 The level of involvement from angel investors and VCs can vary, but proactive communication from founders is key to leveraging their networks and expertise.
• 📈 The benefits of angel investment include personal support and referrals, while the downsides include smaller ticket sizes and potential for demanding investors.
• 🏦 When a startup fails, the assets are liquidated, and the funds are returned to investors according to the liquidation preference outlined in the term sheet.

Q & A

What is the primary topic of the 'Money Talks' podcast episode featuring David Gun from Tipsy Collective?

The primary topic of the episode is about entrepreneurship and the challenges of raising funds for a business, specifically discussing the experiences of David Gun from Tipsy Collective.

Why did banks refuse to provide loans to David Gun and his late partner when they first started Tipsy Collective?

Banks refused to provide loans because they lacked a track record and their company had not been incorporated for a long time, which is a common issue for new entrepreneurs.

What are the two main sources of funding for entrepreneurs mentioned in the podcast?

The two main sources of funding mentioned are Angel Investing and Venture Capitalism.

How does Vanessa Ho differentiate between Angel Investors and Venture Capitalists?

Vanessa Ho differentiates them by comparing Angel Investors to social media creators who can invest in various things without a structured mandate, while Venture Capitalists are like TV actresses who follow certain branding guidelines and investment mandates for stable returns.

What is the main strategy for Angel Investors when choosing companies to invest in, according to Vanessa Ho?

Angel Investors often invest in areas they understand and where they can add value, but they may not have a clear strategy or formula. They might invest in one deal out of many they see, hoping for a 'moonshot' success.

What are the three main character points Vanessa Ho looks for in startup founders?

The three main character points are team dynamics and product fit, character and values, and signs of operational and executional capabilities.

How does Vanessa Ho suggest verifying the legitimacy of potential Angel Investors or Venture Capitalists?

Vanessa Ho suggests verifying their identity through a corporate secretary company, doing reference checks, and ensuring they are accredited investors if investing directly in Singapore.

What are the pros and cons of raising funds from Angel Investors according to the podcast?

Pros include the potential for strategic referrals and emotional support. Cons include smaller ticket sizes which can lead to more time-consuming fundraising processes and potential for demanding or overbearing investors.

What is the difference in ticket sizes between Angel Investors and Venture Capitalists?

Angel Investors typically invest smaller amounts, often in the sub 50k range in Singapore, while Venture Capitalists can invest much larger amounts, from 100K to several million dollars.

What happens to the funds invested by Angel Investors or Venture Capitalists if a startup fails?

In the event of a startup failure, there is a liquidation process where public assets are liquidated and the remaining funds are dispersed according to the liquidation preference outlined in the investment agreement.

What advice does Vanessa Ho give to startup founders regarding their pitch to Angel Investors or Venture Capitalists?

Vanessa advises that the pitch should be tailored to the individuals being addressed, concise, and focused on selling the founder's capabilities, especially in early stages. It should also consider the technical expertise and interests of the potential investors.

Outlines

00:00

💼 Entrepreneurship and Fundraising Insights

The first paragraph introduces the Money Talks podcast, hosted by Andrea Hang, focusing on personal finance with a spotlight on entrepreneurship. Guest David Gun, co-founder of Tipsy Collective, shares his experience with raising funds, highlighting the challenges faced by new businesses in securing bank loans due to the lack of track record. The conversation pivots to explore alternative funding sources like Angel Investing and Venture Capitalism, with Vanessa Ho, co-founder of fintech nation, providing expert insights. The discussion aims to clarify the differences between angel investors and venture capitalists, evaluate their pros and cons, and consider the implications of a company's failure post-funding.

05:02

🤝 The Dynamics of Angel Investing vs. Venture Capitalism

In this segment, Vanessa Ho uses analogies to distinguish between angel investors and venture capitalists. She likens angel investing to social media creation with a focus on individual stocks, while venture capitalism is compared to a diversified portfolio akin to mutual funds or ETFs. The conversation delves into the strategies of angel investors, who often invest based on personal understanding and the potential to add value, as opposed to venture capitalists who operate within a structured mandate for stable returns. The importance of personal connection and the founder's personality in investment decisions is also emphasized, along with the significance of operational and executional capabilities.

10:02

🔍 Due Diligence and Investor Engagement

The third paragraph discusses the due diligence process and the level of engagement expected from angel investors and venture capitalists. It highlights the importance of building a network for reference checks and the varying degrees of involvement from investors. The paragraph also touches on the cons of angel investing, such as the time-consuming process of managing multiple small investments and the potential for demanding or overbearing investors. Strategies for startups to approach and verify potential investors are also discussed, including working with corporate secretaries and conducting thorough reference checks.

15:02

💰 Pros and Cons of Angel and Venture Capital Funding

This paragraph outlines the benefits and downsides of seeking funds from angel investors and venture capitalists. Angel investors can provide strategic value and emotional support, but managing multiple small investments can be challenging. Venture capitalists offer larger ticket sizes and branding benefits, but the due diligence process can be lengthy and stringent. The paragraph also addresses the importance of verifying the legitimacy of investors and the necessity of understanding the terms and conditions of investment agreements, including liquidation preferences and repayment sequences.

20:02

📈 Pitching Strategies and Expectations from Investors

The focus of this paragraph is on how entrepreneurs should pitch to angel investors and venture capitalists, emphasizing the need to tailor the pitch to the audience and to be concise. It discusses the expectations of returns from angel investors and venture capitalists, with the former expecting high returns from a few successful investments in their portfolio, and the latter looking for more modest returns from mature companies. The paragraph also covers the responsibilities of founders when a company fails, including the liquidation of assets and the order of repayment according to the terms of the investment agreement.

🎙️ Final Thoughts and Personal Insights from Vanessa Ho

In the concluding paragraph, Vanessa Ho summarizes key takeaways for entrepreneurs seeking funding, including understanding the priorities of different investors, knowing the party providing funds, and having an exit strategy. She also shares a personal anecdote about her choice of a public figure to have a meal with, selecting Jeff Bezos to learn about his entrepreneurial journey and the growth of Amazon. The podcast wraps up with a call to action for listeners to engage with the show and a credit to the team behind Money Talks.

Keywords

💡Angel Investing

Angel investing refers to the financial backing of startups by affluent individuals who are not institutional investors. These investors often provide capital in the early stages of a company's development in exchange for equity or convertible debt. In the script, Vanessa Ho explains that angel investors are similar to friends and family in the sense that they invest based on personal connections and understanding of the business, rather than a structured mandate.

💡Venture Capitalism

Venture capitalism is a form of financing that involves venture capitalists who manage funds, investing in companies in exchange for equity and providing strategic direction and oversight. Unlike angel investors, venture capitalists operate with a structured mandate and are compared to a mixed portfolio of investments in the script, emphasizing the difference in approach between individual angel investors and venture capital firms.

💡Fundraising

Fundraising in the context of the script refers to the process of collecting capital from investors, which can include both angel investors and venture capitalists. It is a critical activity for startups and entrepreneurs looking to grow their businesses. David Gun, co-founder of the Tipsy Collective, discusses the challenges of raising funds for his business, particularly the difficulty of obtaining bank loans due to the lack of track record.

💡Personal Credit Line

A personal credit line is an arrangement with a financial institution that allows an individual to borrow up to a certain limit based on their creditworthiness. In the script, it is mentioned as a common source of funds for entrepreneurs when traditional loans are not available, highlighting the personal financial risk entrepreneurs often take.

💡Government Grants

Government grants are funds provided by the government to support specific projects or initiatives, often with the aim of fostering innovation or economic development. In the script, they are mentioned as one of the sources entrepreneurs can tap into for raising funds, alongside angel investing and venture capitalism.

💡Due Diligence

Due diligence is the process of thoroughly investigating a business or investment opportunity to confirm its viability and to identify any potential risks. In the script, Vanessa Ho describes the due diligence process that venture capitalists go through before investing, which can take several months and includes an audit process.

💡Liquidation Preference

Liquidation preference is a term used in venture capital and private equity financing to describe the preferential right of certain shareholders to receive a return of their investment before other shareholders in the event of a liquidation. In the script, it is explained as part of the agreement that determines the order in which money is dispersed if a company goes bust.

💡Exit Strategy

An exit strategy is a plan devised by entrepreneurs and investors to divest ownership of a company or investment. It typically involves the sale of the company or an initial public offering (IPO). In the script, Vanessa emphasizes the importance of having an exit strategy in mind, particularly in the context of understanding what happens to the funds invested if the company fails.

💡Accredited Investor

An accredited investor is an individual or a business entity that is recognized by financial regulatory authorities as having sufficient income or net worth to be able to invest in securities that may carry a higher level of risk. In the script, Vanessa mentions that in Singapore, there is a law requiring individuals to be accredited investors to invest directly, which is a way to ensure that investors have the financial means to take on such risks.

💡KYC (Know Your Customer)

KYC is a process used by financial institutions to verify the identity of their clients to prevent fraud, money laundering, and other illegal activities. In the script, Vanessa Ho suggests working with a corporate secretary company to verify the identity and bank account details of angel investors before accepting their investments, which is a part of the KYC process.

Highlights

Entrepreneurs often face difficulty in getting loans from banks due to lack of track record.

Personal credit lines are commonly used by entrepreneurs as an alternative to bank loans.

Angel investing and venture capitalism are two distinct methods for entrepreneurs to raise funds.

Angel investors are compared to social media creators with flexibility, while venture capitalists are like TV actresses with structured mandates.

Angel investors often invest in areas they understand and can add value to, lacking a strict investment formula.

Venture capitalists deal with a high volume of investment opportunities and have a structured approach to selecting startups.

The success rate of startups is low, with the expectation that one or two will provide significant returns to cover the failures.

Angel investors may gravitate towards startups they feel a personal connection with due to sector familiarity.

Investors often consider the personality and character of startup founders in their decision-making process.

Operational and executional capabilities are key traits investors look for in startup founders.

Experienced investors can spot red flags in founders based on past experiences, similar to recognizing bad relationships.

The level of involvement by angel investors and venture capitalists can vary greatly, with no set expectation.

Startup founders should proactively engage with investors for advice and support, leveraging their networks and expertise.

Angel investors can provide emotional support and strategic value, while venture capitalists offer larger funding and branding benefits.

When a company fails, assets may be liquidated, and investors typically get repaid before founders based on the terms of the agreement.

It's crucial for founders to understand the terms of investment, including liquidation preferences and repayment sequences.

Having a lawyer or someone knowledgeable in the space review term sheets is advised for founders before signing.

The pitch to angel investors and venture capitalists should be tailored to the individuals and their backgrounds.

In the event of a company's failure, founders should have an exit strategy and understand their financial responsibilities.

Transcripts

you're listening to a CNA

podcast hey what's up everyone this is

Andrea hang and welcome to the Money

Talks podcast this is where we talk

about everything there is to know about

personal finance I want to take you back

to an episode of Money Talks where we

got to ask about

entrepreneurship David gun he's the

co-founder of the Tipsy Collective

remember him and this is what had to say

about what it was like raising funds for

his business when I first started Tipsy

back then with my late partner we tried

to approach the banks for loans right

absolutely no banks will touch Us by the

way they always ask what's your track

record how long your company has been

Incorporated so more than often you'll

be tapping into your own personal credit

line so what David said got me thinking

about how entrepreneurs raise funds now

aside from all the government grants

offered in Singapore there are a number

of sources you can tap on one of those

ways is through Angel Investing and

Venture capitalism but what is the

difference and which one works better so

I would like to tackle this chat by

asking three questions the scenarios

that call for an angel investor versus a

venture capitalist the pros and cons of

either route and what happens if your

company goes bust after all of that

money is raised and spent

and the one in the hot seat to answer

them is Vanessa ho she's co-founder of

fintech nation she's also adviser to N

US alumni Ventures you might also have

seen her on the big spark on CNA welcome

to the Money Talks podcast Vanessa

thanks for having me Andrea all right so

the majority of us are salary workers

right but we've heard of two terms Angel

Investors and Venture capitalists you

are in a unique situation where you're

involved in both so using a simple

analogy describe the biggest difference

between the two I think people talk

about your first funraising round like

raising from the three FS friends family

and force Angel Investors are not too

far away from friends family and fors

okay if you want to compare Angel versus

VC Angel Investing investing in one

stock like an Nvidia stock or a

Microsoft stock VC like a mixed

portfolio like a mutual fund or an ETFs

or is this is very relevant to myself is

as an angel it's like being a social

media Creator you can do anything you

want you can post any content invest in

any sort of things you don't have a

structured mandate where oh you can only

do this amount of content and this brief

and then some things may go viral and

then some things just fail but being a

VC is like being a TV actress or a movie

actress you have to follow a certain

branding guideline just like your

investment mandate you have a certain

structure to do it and you can expect

stable returns because your TV and

movies will do at least lease ex amount

of free and awareness but you may or may

not get the moona opportunity like the

angel investors okay that's a really

interesting way of putting it so when it

comes to picking the company to invest

in how different is the strategy for an

angel investor compared to a venture

capitalist most angels that I meet

because of my work at N US alumni

Ventures and technation fund as well

they don't exactly have a clear strategy

in terms of investing and even for

myself I know what I can do better in

and what I don't but it's not so much a

formula I invest in things that I

understand and I can value add in as an

inel investor essentially as an inur

investor especially when you become more

prolific you can have decks coming to

you every single day and of hundreds of

DS that you see in the single year and

even if you have the time to do so how

do you pick the few that's going to make

it exactly and the hit rate or the pick

rate right is like we do maybe one deal

out of 50 Decks that we see wow and

out of all these say example if you

invest in 20 or 30 startups and maybe

only one or two will be moonshot and by

moonshot 100x and above wow so the

probability of a startup really giving

you returns is very low and you are

expecting that one or two to carry a

whole portfolio everybody else will tank

they'll go bust and one big unicorn

potential unicorn is going to carry the

rest of your portfolio and give you

quite crazy returns right my primitive

understanding of it before is that angel

investors they tend to gravitate to

companies or startups that they feel a

personal connection with does that

happen with you as well yes correct like

if you are maybe a sea Suite in a bank

for example and you invest in fintech

companies it makes a lot of sense

because firstly you know what the

founders are talking about and you know

as well even better than the founders

they're not going to tell you about some

product or strategy that completely

doesn't work but if you're in an

entirely different field how going to

analyze and be like okay this is the

right startup that's going to do well

right so it's about comfort zone

familiarity at the end of the day but at

the same time even as an angel or VC you

make bets in sectors that you don't

understand right for example we invested

in a health tech company even though

we're a fin Tech Nation fund but Co

Founders we really like them and the

other partner at the VC know them since

they were like 18 years old so that's

pure founder B because they're great

people they've proven success great

track record we may not know the product

they're pre-product Revenue like

basically just a deck but we really like

them and the bet is really on that

person that's a great Point how much is

a startup owner's

personality character how much do these

weigh on an angel investor or a VC's

decision-making process I mean it sounds

like it's pretty significant I think any

early stage company which is like series

a and before you're looking at valuation

of say on the 30 million or 40 million

it's all about the people because the

product's going to iterate and the

startup idea might pivot along the way

right and we're looking out for three

main character points right one is the

team Dynamic and the product and team

fit are these the two or one best

co-founders or founder that is going to

tackle this problem and solve this

problem maybe because of a domain

expertise or maybe they're driven by a

certain purpose or problem they're

facing themselves that they would

sacrifice a lot of things to solve this

problem that's one second is character

and values

uh in one of the previous VC that I was

working at we pulled out a deal because

the founder of a automotive tech company

started being a bit Shady started

hitting on some of the investment

analysts dear and it's such a bad

reflection of character if this is your

values what are you going to bring to

the table when you deal with your

business counterparts future investors

ex exactly and then the last bit is I

think signs of operational and

executional capabilities right now a lot

of Founders are excellent speakers and

sales people they oh you can train to do

that now it's so easy exactly and I

think one thing that the CNA show the

big spark producer was saying that you

cannot confuse eloquence with competence

a lot of Founders can talk and pitch

really well raise a lot of money but can

they actually get a hands dirty and get

things done so I think these are the

three things we look out for right so

you can talk a big game at the end of

the day it's whether you can walk the

walk and talk the talk

are you then expected to learn how to

pick out these characteristics how to

identify them it's more complex than it

seems and I think the very senior

experienced investors know how to spot

that they've just met thousands of

Founders and they know how to spot like

red Flex same thing in a relationship

right if you date enough you probably

know some of the red Flex based on past

experience and being burn before but for

me I Rely a lot on my network to do

reference check before making any

decision the due diligence process can

take a few weeks right and I just asked

industry friends what do you think of

this person how is it like working with

this person and basically seeing Mutual

connections that we form along the way

so that has really helped and I think

it's really important to build industry

friends and connections to protect

yourself oh yeah what about the

involvement the activity level that an

angel investor versus a venture

capitalist would have once that company

has been chosen and you're investing in

it I have seen like a spread of

investors both individuals as well as

VCS who have been Hands-On and those

have just gone silent just because

they're busy maybe building their own

businesses or they have their own

corporate jobs that occupi most of their

time so there's no hard and fast rule

really for this correct there's no

expectation when you invest but of

course it's a good value ad I have seen

best practices from companies who

constantly checking the investors it

shouldn't be like oh the investors

coming in to support you and advise you

because they're not employee

but the founder should be proactive and

reaching out and be like okay hey I'm

thinking of this new product idea what

do you think of it oh can you connect me

with this person or I'm penetrating

Australia can you connect to me with

some ecosystem players there and usually

no one says no I think it's more like

understanding the angel investors their

Network and their expertise and same

thing the VCS working very closely with

the partners of the VCS who have the

most resources and knowledge and also in

some of the bigger VCS they have a

portfolio management team who can

provide a lot of resources to the

startups as well next up we talk about

the pros and cons of taking either route

as a startup

owner all right so now from the

perspective of an entrepreneur that's

what I want to delve into now we want to

determine who we should approach for

funds right as you said an angel

investor Works quite differently from a

VC so give us the top pro and con of

going to an angel investor I think from

my own experience angel investors if you

manage the raise from the right

strategic one they can give you

referrals that will drive your revenue

or even Investments for your future

fundraising rounds the position of a in

investor is not just for funding because

a lot of times the investment check is

small maybe 10K 50k maximum 100K but

usually in the sub 50k range in

Singapore but they become your friend

they are the kinds who can provide you

emotional support especially when being

a Founder is so difficult when you have

to juggle the business firefighting of

competition and the market but with VCS

you have to obviously be more guarded

sometimes depending on your relationship

with the VC and you only want to maybe

show the highlights of your work and

maybe not to get too personal unless you

become personal friends with of course

the investment team in the VC okay the

cons is for sure because the ticket

sizes are smaller it takes more time to

raise for example if everybody's putting

in 10 to 20K checks you need a lot of

them and it's harder to manage so many

people especially when one or angels can

be very demanding asking for a lot of

requests or like unfavorable terms when

the ticket size is Chinese so it's

people management that's the con how

would you know if your angel investor

has those capabilities that you need has

the support system that you need to get

by really I think before taking money

from a angel investor if you're taking

it directly get to know that person in

one to one over coffee or dinners

firstly not just for the expertise which

is usually very clear if you can Google

them maybe they're a top researcher or a

doctor that can help maybe your medical

Tech startup that's awesome that one is

Undisputed but maybe about the

personality are they like very

overbearing are they going to tell you

XYZ instructions when they invest even

though they put in say 20K check so get

to know whether there are like the kind

who's going to be too intrusive or

overbearing and you don't want that as

well or the kind who's going to invest

and just disappear that is also maybe

the kind of investors you may not want

if you want more strategic value I think

it also depends on what kind of person

you are as a startup business owner

because it depends I guess on what kind

of Engagement you are expecting for

yourself right yeah it varies but the

other alternative is we see a lot of

Angel networks who can lead the round

right for example any Salam ventes one

of them and then we have other Angel

networks in Singapore as well bansy one

of the oldest southeast Asia Angel

networks there XA Network and many other

Angel networks and there's one Angel

lead where the inel network verify and

curate all these inel investors before

letting them Co invest with them and

even do the legality the term sheets the

structuring for you it makes life

simpler of course the Angels pay a

certain fee when it comes to that but

the founders is basically the same thing

and usually these Angel syndicates can

pull together money which is like 100k

to like even up to 1 million dollar alog

together and basically save you all the

hassle and also do some sort of like

reference check of the investors before

letting them in the pool oh that's

interesting and that's really helpful as

well for someone who is just starting so

now I want to talk about the VCS what

the biggest benefit and the biggest

downside to seeking funds from a venture

capitalist the most obvious benefit is

that ticket sizes are generally bigger

so you save a lot of time but the due

diligence process can be months VCS you

have a long stringent process there's

audit process as well but then when you

get a certain check from them it's maybe

100K to a few million dollars like $5

million $10 million as well so it fills

out the round and then that's it you

don't have to go around around picking

up small tickets as well second is VCS

come with a lot of branding right if you

can raise money from the big guys like

Seas your a16 z's your ggv Capital that

branding of having that VC in your cap

table already alleviates your status and

your credibility and it helps you even

get clients because they're like wow

you're G back you must be really

credible and awesome team it helps the

subsequent fundraising rounds it helps

you get subse injur investors to fill up

the rest of the rounds and also for

clients which is the most important

indeed here's the thing we see a lot of

people online claiming to be VCS

claiming to be Angel

Investors sometimes they are even among

our own Social Circles how do we verify

if this person is legit they have this

money they have these expectations and

they everything matches up how do we

know that this person's for real I think

three things one is honestly anybody can

be an angel investor as long as you get

some spare cash you can Ango invest in

Singapore there is a law where you have

to be accredited investor to inter

invest directly right but there are

different vehicles and means to do it

especially when maybe a company is not

Incorporated in Singapore then it

doesn't apply directly so if you don't

take it too seriously and you find some

value in that person and that person is

not shady and need investor just anybody

any individual who has the interest to

invest that has the money to invest I

typically recommend Founders to not take

checks below 10K it's too complicated

anything above 10K the guy is probably

invested enough to support you and it

doesn't make things too messy on the

corporate finance level second is to

work with a great corporate secretary

company that can help you with the

compliance in the kyc what's kyc know

your customer ah okay we work with Sleek

which is also a portfolio company from

the past to basically verify the

identity bank account Det sales of all

these Angel Investors before a company

takes money so that basically comes in

and then they do the all the legal work

as well which saves you a lot of time so

finding the right copack to do it is

important and the third is definitely

reference check if you've never heard of

this person and this person wants to

water you a million dollars you have to

start wondering how did this $1 million

happen if this person's not on Google

not on LinkedIn and have magical money

up here don't touch it because your bank

account is going to be Frozen and you're

going to be so stuck oh yeah coming up

what happens when you spend all that

money and your company doesn't make

it okay so Vanessa I want to talk now

about expectations Angel Investors and

VCS are not giving away this money for

free like Oprah does with her car to the

audience right so given the careful

consideration that angel investors and

VCS take to fund a company what kind of

returns do they actually expect Angel

Investors are probably expecting one or

two out of their massive portfolio of of

even small portfolio to really make it

and that's like the uh 50x 100x kind of

returns and the rest tank because when

Angel Investors uh invest typically

they're at preed stage maybe even

pre-product pre-revenue early traction

it's not very conclusive yet whether

this company's going to make it cuz it's

just so new maybe one year in the making

two years in the making so they're just

expecting that one or two shot to carry

the whole portfolio for VCS it depends

in early stage Investments say preed

stage cve we expect a few Moon shots but

then the rest May potentially fail right

but when it comes to say VCS that invest

in series B onwards right larger funds

especially they're just happy with maybe

a 5 10x return and does that have to do

with the maturity of that company as

well by that stage yes exactly the

maturity reflects the valuation of the

company which just like the price so

from an entrepreneurs perspective I

could go to either an angel investor or

a VC right or both especially if I know

that they are Keen to fund a business

like mine what's the key difference in

how I should pitch to either one of them

I don't think it has to be too different

your pitch deck should be tailored to

the individuals that you're speaking to

and also it should be concise and you

should sell yourself especially in early

stage stage is really about yourself

when you're pre-product when you're at

the later stage maybe sell your numbers

and your traction as well and yourself

and your capabilities but at the end of

the day the people deciding between VCS

are also individual people so know who

you're pitching to if they have

technical expertise maybe they used to

be an engineer or developer in the past

maybe highlight the technical mode in

your product while we have the best

developers we have the proprietary Tech

and codes versus maybe someone who is

always in the back that maybe show your

projections more and how well you have

calculated your financials and done your

projections so everybody whether it's a

VC or Angel there are also people so if

my company goes bust what happens then

to the funds that I've taken from you or

from a VC essentially what's my

responsibility with those funds then

what happens when a company goes bust is

there are public assets that can be

liquidated okay maybe some property or

assets that the bank will liquidate and

then with this x amount of balance cash

left you have something called the

liquidation preference and in every

agreement that you sign whether you're

an angel or VC it will show you the

order where the money will be dispersed

right so example you invest in the later

stage for example you might get your

money before and after certain other

investors so do check that and sometime

there's liquidation preference where you

might get maybe 2x of the amount you

invested in first and it's usually pro

rated across but sad part is the

founders always get the money lost they

can work the hardest they spend most

Blood Sweat and Tears in this but the

investors get their money first before

the founders which is very unfortunate

and then when it comes to loans just

check in your agreement whether your

loan is more senior than other loans in

the past which also means whether in a

repayment scenario do get your payment

first or other lenders first so

everything has a certain sequence and

everything's in the term sheet I do

advise like basically every founder and

investor right to get a lawyer or legal

friend someone who knows the space to

check the ter sheets very carefully

before signing anything okay so let's

wrap with a summary Vanessa first it's

important to know who your target

audience is because a VC has quite

different priorities than an angel

investor depending on who and what kind

of check size You're Expecting number

two it's important to know as much as

possible about the party you're getting

your funds from that way you know how to

pitch your idea the right way and

strategically too and number three just

in case things don't go according to

plan and generally it's a good idea to

have an exit strategy in mind in terms

of trying to figure out what happens to

those funds and what your expectations

are when there's a

[Music]

dissolution so Vanessa before we let you

go we have a segment it's called

questions from a hat and you'll have to

pick a question from here and hand it to

me and I'll read it out to you for you

to answer oh this is a good one Vanessa

if you could have a meal with any public

figure Dead or Alive who would it be and

why wow good question I think I would

probably want to have a meal with Jeff

Bezos wow okay Amazon guy yes I think he

basically went from small company to a

huge share of the S&P 500 which is

insane I don't know how he does it I

want to learn entrepreneurship skills

from people like Jeff Bezos yeah I think

it's a certain kind of Courage that they

have Vanessa you've been such great

company thank you so much for being on

the podcast and just offering such sound

advice for budding entrepreneurs out

there we really appreciate it thank you

Andre maybe next time you can invest in

some mediate Tech startup or something o

very tempting I'm going to have to think

about that really exciting world but not

for the fainter part I'll tell you that

and listener if you have any thoughts or

questions about this episode all you got

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enjoying our content my thanks to the

team crispina Robert Tiffany Ang Jani

Johari Joan Chan and say wind I'm Andrea

H this has been Money Talks