Haiyan Wu, Managing Partner at venture capital firm China Growth Capital, can tell whether an entrepreneur will be successful within minutes of meeting them.
Haiyan Wu is one of the “Forbes Top 25 Female Venture Capitalists in China” two years in a row, in 2018 and 2019. She has met with hundreds of early-stage business owners hoping to secure funding. Here are her top tips on how to win investor hearts and be in the 10% of entrepreneurs whose start-ups survive more than three years.
Here are the top 4 things Chinese venture capitalists are looking for in entrepreneurs, according to Haiyan Wu:
1. If you know it, show it
Industry knowledge is one of the most important things investors look for at the fundraising stage. Many entrepreneurs have extensive industry knowledge and experience but fail to demonstrate them clearly during the pitching process.
You can demonstrate industry knowledge by showing the following:
- Your previous work experience in the industry.
- You’re aware of the latest developments and news in your industry and market.
- You can quote credible industry publications or websites.
- You have written thought-leadership content.
- You have endorsements from industry experts.
- You can articulate why similar companies in your field have been successful.
- You know of external factors that have influenced your industry in recent years. Consider the PESTEL factors: political, economic, social, technological, environmental and legal.
To impress investors, you should rehearse your pitches and have a well-researched pitch deck. If you know it, show it.
2. Score above 80% every single day
Business consultant and former entrepreneur Larry Alton describes the process of creating a business model as “mapping out how you will create ongoing value for your customers”. Investors are looking for entrepreneurs with long-term mindset who care deeply about customer satisfaction. Many early stage investment are on an investment period of 10 or 12 years. If the vision is too short-term, then the business decisions are more likely to be wrong.
For me, thinking long term means finishing work tasks every day above 80% quality level. Only when daily tasks are completely to an excellent standard can your long term vision be realized. Feeling passionate and dreaming about the future is nothing without the daily work.
Investors are looking for entrepreneurs that are patient and have grit. The process and the grind itself is the real key to success. It’s not wise to focus everything on quantitative measures. My advice is to develop a daily work rhythm and build a team with the same passion and vision. These things will help you go further in the long run.
3. Everyone should be clear on the evolving business model
Everyone on your executive team should know the ins and outs of a business plan thoroughly. Investors will check to see that it is not just the founder who knows the business model clearly.
Great leadership is about team work. The executive team should work together to consider every aspect of the business model, especially the target audience, their pain points and the market potential. 42% of start-ups fail because of a bad product-market fit, something no amount of venture capital funding can fix.
Furthermore, your business plan should be a continually-evolving document. It should be updated at least every six months to meet changing market conditions and consumer needs. Start-ups often run out of financial headroom because a market takes longer to mature than expected, or they are unable to deliver on predicted growth rates due to low levels of demand. Therefore a leader needs to be detail-oriented, logical and decisive. They need be able to adapt quickly to the unexpected, and keep the whole team up to date.
4. Go on, show off your team
Depending on the stage of your company, your team makeup and culture should demonstrate different characteristics. In an early-stage startup, team members are likely to take on a variety of roles, so you should focus on building a multi-disciplinary team that can be flexible, innovative and embodies your company culture. Remember to hire slow and fire fast.
As the company grows, you should bring onboard team members with specific skill sets and experiences that are needed in the firm. Every firm needs a good HR department. Then after a certain stage, you would need a Chief Financial Officer, then a Chief Technology Officer.
During the recruitment process, don’t be afraid to hire people who are smarter than you. These star hires should complement your weak points. In some cases, the founder should put their ego aside and bring onboard an experience CEO to take the company to the next level.
According to angel investor and entrepreneur Neil Patel, start-up teams must possess the ability to “change…adjust…take up a new marketing approach, shift industries, rebrand or even tear down a business and start all over again.” The more versatile your team is, the more likely you are to overcome any difficulties that come your way during those first few difficult years.
Plenty of opportunities
Lastly, Chinese VCs can move at lightning speed. We have met with entrepreneurs on a Friday and decide to invest in them on a Monday. Follow these 4 tips above in your start-up journey and you’ll find that there are plenty of opportunities for the forward-thinking entrepreneur.
Haiyan Wu is a Managing Partner at early-stage venture capital firm, China Growth Capital. She won Forbes “Top 25 Female Venture Capitalist in China” in 2018 and 2019. She leads the investments in the financial service, enterprise software, and services sectors.
China Growth Capital is a leading early-stage venture capital firm in China with an extended interest in Silicon Valley. The firm funds seed to Series B in fintech, enterprise tech, and internet consumer sectors. Since its founding in 2006, China Growth Capital has grown to manage 8 Billion RMB (approximately 1.2 Billion USD) in assets and close to 300 portfolio companies as of 2019.