The market’s massive tumble has left many investors shellshocked in recent days. However, for those who follow small caps and startup investing, these challenges are nothing new. The small cap market has stubbornly lagged behind even during the height of the post-recession recovery, leaving aspiring entrepreneurs eager to get in touch with potential investors in any way they can.
That’s what makes the new platform VCNetwork such a fascinating proposition. VCNetwork seeks to break down the barriers that traditional funding models place between VCs and entrepreneurs by connecting startup founders with the right investors for their specific needs. Equities recently had the opportunity to sit down with VCNetwork founders Jenny Q. Ta and Shinta Dhanuwardoyo to discuss VCNetwork, and how they intend to capitalize on a pivotal moment for startup entrepreneurship.
Equities: Thank you for taking the time to speak with me today, Jenny and Shinta. To start, what is VCNetwork, and how does it work?
Shinta: VCNetwork is a matchmaking platform in which we match up startups with the right investor for their business type. We liken it to the popular reality TV series Shark Tank. VCNetwork uses the Shark Tank model to bridge and connect startups and investors on a global scale.
Equities: Sounds like a very interesting business model. Can you break down how exactly you bring investors and entrepreneurs together?
Shinta: Sure. Startups and investors can register for free. The startup leaders can then upload their pitch deck and business plan, and answer a few basic questions about their startup for evaluation. Basically, they can answer the questions that a shark or a potential investor would ask prior to making its investment. From there, VCNetwork judiciously matches that startup with investors.
After entrepreneurs register their profiles, the VCNetwork judiciously matches up each startup with one of the investors within our network based on location, sector or whatever business types they're looking for. VCNetwork's business model is actually quite simple - besides connecting startups with potential investors, the first connection is free of charge, but any additional connection will require a flat fee.
Equities: We’re in a challenging business climate right now for startups. Why do you think VCNetwork can succeed in such a tricky environment?
Jenny: VCNetwork came about through a brief lunch that I had with this friend of mine on Wall Street. I was on Wall Street for 18 years, and I founded two investment banks. I ran into a few of my old friends on Wall Street around August of last year. This friend of mine shared a lot of valuable information with me regarding investment banking on Wall Street, and how the ways startups raise venture capital will soon change - upsetting a lot of traditional VCs. They don’t really like change if they’re already dominating the industry.
Basically, being a startup owner myself, and an innovator and entrepreneur all my life, I analyzed the information that he gave me. He’s not an entrepreneur, so basically he doesn’t really care. I literally ran with it and built this global centralized hub connecting startups and investors according to what Shinta explained earlier.
Shinta herself is also an angel investor, and a VC prior to that. When she heard my story and business plan, we clicked right away. We put our minds together and launched the platform earlier this month.
Equities: What sort of barriers do you see that you're trying to bridge with VCNetwork?
Jenny: Let’s say I have some friends who are VCs in the Boston area. Seventeen percent of most startups come from Silicon Valley. The guys in Boston will say “You know what? They're out of our territory we can’t work with them.” Right now, I believe this geographic barrier is very common. They’re limiting themselves to startups within their area.
If you look at the vision and the concept for VCNetwork, Shinta and I are half a world away - she’s half a world away, in Indonesia. I’m in America, and we were still able to form VCNetwork. That means that the world is becoming globalized regardless of how we think about it.
Shinta: When I go to Silicon Valley, one of the venture capitalists actually approached me asking me if there's anything to invest in Indonesia, because right now, Indonesia is one of the upcoming emerging countries - we’ll likely be the seventh largest economy by 2030. A lot of the venture capital starts to have interest. Having a VCNetwork profile means that any venture capitalist can check out different companies in countries that are a world away. I think that could also be an advantage to being the bridge between investors and entrepreneurs across the globe.
Equities: At VCNetworks you have your own network of designated VCs. How do you select a designated VC?
Jenny: “Designated VC” is essentially just a piece of terminology to help make clear that these are credible VCs for our entrepreneurs to get in touch with.
Our designated VCs can be found around the world. They have their own firms, they have their own offices. They’re independently connected to us, meaning they don’t work for us, and we don’t work for them. We don’t pay their salary, we're not connected with them in any way.
We launched with about 300 VCs in our database. It's only been a couple of days, and we're nearly at 400 now. We continue to add and we believe it's going to be over a thousand within the next month or two. So, essentially, that’s what designated VC means: We designate the package, the startup, the business plan, the pitch deck to certain VCs, and eventually we will get to know them all one by one.
Shinta: Of course, of the ones we’re going to review, there's probably going to be some that are weaker than others. If that is the case, we will have mentors for them. As for the proposals that are already great: We will push them to get the funds they need, so that they can bring their brands and products out there.
Equities: On your site, you also mention that you have a focus on helping female entrepreneurs secure the funding they need. How do you focus on female entrepreneurs?
Shinta: Right now in the world, I think there are fewer female leaders than men. Jenny and I are both women and we're leaders. We would like to help other women leaders to be able to shine. I’ve been in the industry for almost 20 years, and I think Jenny has been in the industry that long as well. I think it is our duty to support other women.
Equities: Is there anything else that you wanted to say before I let you go, or anything else you wanted to touch on?
Shinta: Right now, we're looking at the emerging market countries in Indonesia - where I currently reside - China and India, because I believe that emerging countries like mine are great places for investors to start investing. I know there is a huge increase in investors coming in to my country compared from last year to this year. I think that is also our next step. I will be populating our database with the region’s venture capital, Southeast Asia venture capitalists, Indonesian venture capitalists, and even Asian venture capitalists.
Jenny: Dan, I also wanted to add something. I’m sure you've heard of AngelList. Both Shinta and I studied AngelList, and we believe that they utilize what we call a bottom up approach. A bottom up approach meaning they're very aggressive in terms of having startups keep listing on their site, but then the problems begin. As of the end of last year, they probably have close to 700,000 companies listed on AngelList. They have a button on there too, that if you click, you can see that only 765 companies got funded. That’s only 1/10 of 1.00%, meaning 99.99% of all companies listed on there do not get funded. This is a problem.
As entrepreneurs and as innovators, Shinta and I love to look at problems, and we try to build things to resolve the problemS. VCNetwork is actually the opposite of AngelList, because again, we want to resolve their problem.
We reverse their mission, their vision, their psychology. Ours is literally a top-down approach. The top-down approach doesn’t mean that we don’t care about startups listing stuff on our site, it means we're not going to promote it aggressively. Our first step is to aggressively get all of the VCs, all of the high net worth investors, all of the institutional investors on the platform, and once that is accomplished, we believe for every single startup there should be at least three, four, five VCs to look at the package - which is not the case on AngelList.
So if you’re wondering what the difference is between VCNetwork and AngelList, that is your answer. We’re the reverse of who they are. Of course, since our launch on Tuesday, we've already got over a dozen startups sending in their pitch deck and business plan. As they come in, we're talking to VC investors, and again, they're very interested in looking at startups, because with the market the way it is the last couple of days, they keep their cash in the private sector instead of going to Wall Street and investing in the public market.
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