VentureCraft is a regional venture capital company in Asia that bets on medical technology (MedTech) and the information and communications technology (ICT) sectors.
Ho told CNBC about one of his early investments that went south. VentureCraft backed a company in the clean-tech and water technology space. The firm did a financial due diligence but skipped out on looking into the background of the founders. The company folded within three weeks.
Digging further, Ho said the firm realized the management team fought among each other, the CTO was fundraising by himself and the company didn’t pay employees for the past four months. The founder also owed debt for several months.
“By the time he got the money, he had to fold” said Ho. He added that a good CEO would know how to delegate, when to release his power or consolidate as needed.
Today, as part of his due diligence, Ho said VentureCraft looks deep into founder’s’ background – into their classmates, their college reputation, their relationships with their vendors and other stakeholders. One quirky piece of addition Ho adds to the due diligence is assessing how long it takes a founder to respond to his texts on the messaging service WhatsApp.
“If you take days to respond to me, when you are seeking my finance, what will happen during the bad days? Do you take months to reply?”
Lacking expertise in the product or service area
Chintaka Ranatunga, venture partner at Sparkbox Ventures, however, thinks the CEO personality trope is a bit “overplayed” by investors.
Sparkbox is an early-stage, roughly $40 million VC fund with offices in Auckland and Taipei and they invest in Serie A level in business-to-business (B2B) software and hardware companies.
“I don’t actually think the CEO personality thing is that important. I think it’s a bit overplayed. I do think particularly in the B2B space, domain expertise is extremely important,” he told CNBC. He added that some of the portfolio companies he has invested in have founders with between five to 20 years of expertise in their areas of operation.
A common mistake Ranatunga sees among startups in Asia, particularly Singapore, is the blind copying of successful business models from the U.S. and China, without accounting for the relatively smaller local and regional market size.
“You see too many people trying to blindly copy and replicate what’s been successful in other markets, without necessarily adjusting enough for the local concept.”
