How angels can prime startups for VC deals in South-east Asia

South-east Asia’s tech industry is gearing up for a slew of IPO exits. Some of them are even being hailed as watershed moments, such as Indonesia’s tech darling GoTo, which raised US$1.1 billion in its debut on the Indonesian Stock Exchange (IDX) in mid-April. 

In fact, at least 25 tech startups in the region have expressed some form of interest in going public within the next two years. 

With more VCs looking to pre-IPO consolidation trends and putting their focus on imminent exits, some of them appear to have moved on from their once-championed seed and pre-seed investment activities. This creates significant opportunities for a new generation of angel investors to occupy an important part of the startup pipeline. 

Angel investors are often high-net-worth individuals with long investment horizons. They can run the gamut from c-level executives to celebrities and influencers, or even other successful entrepreneurs themselves. 

Often, these individuals (and VCs alike) stand to gain the most when they invest in startups during the most nascent stages. 

Venture is about being bold

Though South-east Asia’s angels typically take a more cautious approach — ticket sizes rarely go beyond US$500,000, and most clock in at US$100,000 for growing and mature markets — this is gradually starting to change, especially with more young and tech-savvy angels now entering the fray. 

The rise of angel investment networks around the region has also spurred a growing trend of high-net-worth individuals willing to place bets on what they think will be the next GoTo or Grab.

With this in mind, angels are increasingly diversifying their bets. Compared to the past – when they would stereotypically invest in startups that could directly support, say, the core business of their family office – angels are now gravitating toward portfolios with a variety of niches and geographies. 

SEE ALSO

5 Questions with VC venturer Helen Wong

Diversification is synonymous with risk mitigation. In tech, insiders will tell you that the ultimate form of risk mitigation is simply backing more mature companies (think series A deals and beyond). 

Don’t get me wrong. Asean markets like Indonesia do have VC players that go in for seed and pre-seed rounds. But there are simply not enough of them. This is where a new, organized generation of angel investors needs to step up to the plate.

Don’t wait for permission 

In particular, when it comes to early-stage deals, VC firms love any kind of validation about a startup they can get. In my view, angel investors are just the right type of early believers who can lend mentorship, legitimacy, and credibility to a startup that already has the right vision, leadership, and product.

When an early-stage startup already has a syndicate of prominent angel investors on board, it can be a significant point of validation for VCs (or even other angles) to invest at the seed stage. 

This is especially true if the angels are tech executives or famous founders themselves, as they more often than not have a good eye for which startups will succeed. 

For example, startups backed by Eduardo Saverin often make headlines. This should come as no surprise — he’s one of Facebook’s co-founders. Having the trust of a well-respected angel investor can go a long way for scrappy startups seeking follow-on funding.

Simplicity is sophistication 

For angels who’ve already decided they want to get into the game, but are unsure about how to source the best deals, the first thing is to build a personal brand. I submit that you don’t even have to have a particularly deep or complex investment thesis. Start by keeping things simple. 

As an angel, you should make it clear to the startup community how you can add value to a company, whether it is by providing expertise, connecting them to a larger network of potential clients and partners, or by helping to carve out an audience. Proactive startup founders who align with your claims and ethos will naturally seek you out. 

Next, individual stakeholders in Asean’s tech sector need to form strategies for investing at seed and pre-seed stages. My philosophy is once again pretty simple. Many early-stage tech investors around town like to crow: “We invest in people, not ideas.” 

But, with apologies to my peers, that’s just not true. We need to be excited about the founder and their idea if we’re to have an actual ball game.     

Early-stage entrepreneurs may not even have a minimum viable product yet, and that’s okay. But with a small amount of capital, a little bit of guidance, and the angels’ official stamp of endorsement, a startup you believe in is far more likely to raise a proper VC round later, and ultimately go the distance.

Join a gang or start your own

Similar to a gunslinger on the frontier, it’s important for a new angel to seek out other angels. This allows you to form your own collective and, once again, spread out the risk on any given deal. Alternatively, you can join an existing angel investor network in the region to get your feet wet. 

In Asean, there are already 22 formal angel investment networks, most of them concentrated in Singapore, such as BANSEA, Angels of Impact, and Angel-eQ. 

In Indonesia, the co-founders of popular coffee chain Kopi Kenangan started Kenangan Fund in 2021. It took the form of an angel syndicate and has since helped several startups get to their next stages of growth and funding. 

Meanwhile, MDI Ventures, the corporate VC firm of Telkom Indonesia, launched its own angel network earlier this year called eMerge. It offers hands-on deal sourcing for participating angels and MDI may even co-invest alongside the angels.       

Even with industry knowledge, you still have to learn the ins and outs of tech investing. Eventually, you can come up with your own investment thesis and rules based on what you think VCs will fast-track in the future. This can help hone your eye for the best deals and seek out startups that are likely to succeed.

With various forms of expertise and experience, angels are well-placed to prep young startups for VC deals in Southeast Asia. But it’s important to remember that this role is not just about capital. It’s also about sharing knowledge, building connections, and providing flexibility that institutional investors do not.

The writer is a seed-stage angel investor in South-east Asia, via his firm Prasetia Dwidharma.