 Welcome to the first ReConnect Tech Connect live broadcast. We're very excited to welcome our viewers to today's conversation about raising smart capital for your venture. We have a very knowledgeable panel with us today to speak on the topic and answer your questions about how to best raise capital for your startup and also provide an insight into their own personal experience in raising capital. I'm Ovidio Bujaran and I'm the Senior Manager of Entrepreneurship and Innovation at CRDF Global. In partnership with the Department of State, we have launched a while ago the Global Innovation through Science and Technology, known as the GIST Initiative, that for the past two years identified, trained and coached the most promising entrepreneurs in over 60 countries. Inspired by GIST, I'm very proud to say that we are launching today a new initiative that focuses on empowering the next generation of entrepreneurs in South and Central Asia, in particular, to turn their ideas into viable ventures that could catalyze economic growth in their respective countries and the larger region. CRDF Global has been proudly supporting technology entrepreneurs in more than 60 countries for more than 15 years. The ReConnect project that we are launching, which stands for Regional Entrepreneurs Connect, is centered on fostering the most promising tech entrepreneurs in IT, healthcare, and energy and agriculture from South Central Asia through very practical venture development training in depth mentorship and access to networks, capital and global expertise. This project also provides the opportunity for entrepreneurs not only to capitalize on the quality expertise and mentorship that we provide through the big network that we have in US and internationally, but also a venue for our entrepreneurs to network, connect with one another and learn from other ambitious business-minded peers, entrepreneurs from the region. Today, we are very pleased to host the Virtual Connex web chat connecting entrepreneurs and innovators across geographies and continents. Specifically, today is focused on the South Central Asia. I would like to ask you for today's conversation to use rec, tech, connect, hashtag when tweeting about the event. We are collecting your questions that you can ask our panelists as we go through the program. So I very much encourage you to start sending your questions now as we'll be collecting them and we will be start asking them in about 10 minutes. You're also very welcome to send questions via Twitter with the hashtag that we mentioned. With us in the studio, we have Faisal Sohail, chairman of Altair Group, Carl Mehta, who is a venture partner at Menlo Ventures, and also Shao Kat Shao Min, co-founder and CEO of BySight. And joining us from India, from Bangalore, is Anand Daniel, principal at Axel Partners India and a good friend and a former classmate from MIT Sloan. Good to have you with us, Anand from Bangalore. Thank you for making the time. Basically, one other thing I'd like to highlight is to thank our partners in the viewing sites and also to the various embassies that have been very supportive in organizing viewing sites around the world. We have a very good number of them in South Central Asia. And in particular, I wanna thank Mr. Alan Tuladar from Microsoft Innovation Center in Nepal, who mobilized a very good effort for outreach in Nepal. And so before we get questions from our audience, I would like to start off by asking each one of the speaker's questions. In general, what we would like to speak today is about raising capital, smart capital for your own venture. Our audience is focused, is based in South Central Asia. So that's where we have the audience today. So we'd encourage each one of our speakers whenever we answer the questions, just to look through that specific lens. We'll start with Anand. Anand, you have been a venture capitalist both in Cambridge with Flybridge Capital and IDG Ventures. And then you went on to join as principal Axel in India and Bangalore. What type of similarities and differences do you see in the field of raising capital for the various technology ventures in US and in India in particular? And if you also looked at deals in the region beyond India. Great, thanks for being excited to be here. So as you mentioned, I was with Flybridge Capital in Boston now with Axel in India. In Axel, we mainly focus on five different areas, consumer internet, enterprise software companies, education, healthcare and digital media. So in these sectors, so if you look at most of probably 50, 50, 50% of our investments are focused on consumer companies, consumer-facing companies that are solving local Indian problems. And so the most of the focus for these companies are taking something basic in India and trying to solve those. So for example, we invested in a company called Flipkart around about 2008, which was one of the early movers in the e-commerce space in India. So if you look at that particular investment, the company has gone recently well in the past few years and recently touched $1 billion in GMV. But if you look at that kind of a problem, it's very local to India. If you look at the US as a market, it's more than 10 years ahead of India and the problems are very different, probably second order and third order problems in e-commerce are being solved there. Whereas in India, the basic ones are even being solved right now. So half the time we focus on investments like that, which are taking up very specific local Indian problems in solving them. And we look for entrepreneurs who are going after such problems. And the other half of the time, we're looking at companies that are looking for global problems and solving them. Classic example of that is a company called Fresh Desk in the customer support space. So they have customers in over 50 countries globally and they have a lot of customers in the US as well, US, UK and other developed markets. So in those kind of scenarios, they left to the companies, most of the companies based out of Chennai in India and they're able to address the global problem in customer support in the software as a service model. And in that particular case, the entrepreneurs needs to build a product that's world-class. So we see both kind of these problems and entrepreneurs going after solutions in both those categories. So it's pretty similar from that point of view. If you look at Boston and the kind of problems particularly on the enterprise side that the teams that are solving, just that you're trying to sit here and look at it more from a global lens and not look at it only from the US concept, but globally and how do you solve that? So probably at a very 10,000 foot level, that's how we look at the world here and we can go into specifics of what do we look for at the very early stages of investment and things like that later on. Hopefully that gives a quick overview. Yes, yes, very useful. Thank you very much, Anand. And I'd like to build on that and turn to Faisal covering the perspective of an investor from Silicon Valley, successful investor that also is very active internationally. And you actually, from our prior conversation, you mentioned that you are looking to invest both in the Middle East and you have looked also at India and invested in a couple of companies there. Would be interesting to kind of learn from your perspective on how you actually looking at the various potential deals in the region, in the South Central Asia region and what are some of the, also again, similarities, differences and what type, what is the potential that you see in the region? Sure, great. Thank you. So I was an entrepreneur in Silicon Valley and then for the last 10, 15 years been doing investments. And about seven years ago, we decided to look at India as a potential market and other emerging markets. And we entered India through an investment into a fund. So we became a LP and a fund. And through that fund, we've been able to make some very interesting investments. Similar to what Anand is talking about, things like a snap deal, which is a very large local e-commerce company in India. Also things like Maintra, which are e-commerce plays in fashion verticals and so on and so forth. The strategy that we take is we look at what are the local plays that can solve massive local problems that are not being addressed by U.S. companies. But then also, how can we take those local plays and take them regional? They may not be quite ready to go global or the competition global may be very large or as Anand said, they may be 10 years ahead. So you may need to solve a different set of problems. But we see massive markets that are local that can be addressed much better with local companies. And then once they address their home markets, it becomes easier for them to grow in the region. And the region also offers a great opportunity. So with that strategy, we're now investing in, as you said, Middle East, as well as India, as well as other South Asian countries looking to grow enterprises. Great, great. So, and we will come later about how the value that you bring to the table by actually being able to bridge Silicon Valley with the specific regions that you are currently investing in. Carl, very glad to have you with us. You are a very successful entrepreneur, now an investor with Menlo Ventures. So one of the key questions I wanted to ask you is basically to share a few of your insights into kind of the value of capital. I mean, what type of value the capital brings to the specific ventures and entrepreneurs and how when an entrepreneur looks for different sources of capital, how can you assess the value, the specific value you can actually extract from and build with from the specific different types of sources of capital. Specifically, is it just money or it's more than money? Sure, thanks, Ovis. I'll try to answer your question by wearing two different hats as a VC. I'll try to answer that, and then I'll answer as an entrepreneur. And I might contradict myself, you know, because both of them, you know, a VC and an entrepreneur sometimes have a very different view on capital. Different hats, actually, yes, that's why I saw it. They're sitting on the two sides of the table. So let me first answer as a VC because that's where I'm paid for currently as I'm working where I am. So in the venture capital world, the venture returns, if you look at the data, it's highly correlated with domain expertise. So as an entrepreneur, if you want to look for smart money, so how do you define smart money, is you want to really work with investors who have either a very strong domain expertise in the area that you are working or who has a great passion in that area and who is very smart and well-connected and can help you. So those are the characteristics that an entrepreneur should be looking for from a venture capital. But before we go into what is a smart capital, I think there are four different types of capital that most entrepreneurs don't really think about when they're building a venture. One of the biggest mistakes that we do as an entrepreneur is we think that, hey, we need money or we need capital. So the first capital that I look at from an entrepreneur standpoint is employee or sweat capital. So you really, when you come up with an idea, you really don't need to go out and start looking for money. If you can convince three or four or five people about your idea, and if they are willing to work with you without any salary, right there, you got capital. Because let's assume whatever, if it is $100,000 a year, you got half a million dollars capital right there with five people. So I think that's one scrappy way to start it and actually it's a better way because if four or five people are willing to give their time just for equity, that means your idea has some legs and these people are really committed to it. And you will need those people actually in the long haul. The second capital is also a sweat capital but it is angel slash mentor, I mean mentor slash advisor capital. So the second thing that I've done as an entrepreneur is go out and reach out to people who are experts in my space and then bring them as an advisor or a mentor to me. And if they are giving me time, then that is also a capital because time equals money. So that's the second form of capital which is very, actually very smart capital and it's better than the money. And expertise, time and expertise. Time and expertise, right? The third form of capital is also not money but it's customer capital. So once you have an idea, you have a team and you have advisors and mentors, what I would do is you anyway as a good entrepreneur want to go out and validate your idea and talk to a few dozen people who could be your potential customer. And if some of these customers are willing to give you some form of small NRE or some form of even credit, that's again a very good form of capital and that would go a long way even when you go to a real risk taking venture capital or an angel investor. So those are the three forms of capital that really can get you started and yes, I have all the empathy and sympathy with all the entrepreneurs in the world for raising money because it's one of the hardest thing that you have to do when you have an idea but if you follow the steps one, two, three, before you go to people for the actual, the real money, I think you're in a much better position. I really like the way you highlighted the various types of capital, especially because the venture capital industry of course is not as developed in the countries we're working with as in the valley so on and so forth. So, and also from what you are saying and also what I know is the investors that you are connecting with, they want to see a very good team in place. They want to see you, what type of mentors, advisors you have and they want to see some customer attraction. So you want to kind of address some of those things before you even, front road before you even go attract the capital and we will go a little bit later specifically on how you can leverage and how you should kind of identify the right type of investors for your own ventures and also how you leverage, I mean we'll ask in a minute in a show cut, how you use the diaspora networks to kind of connect with the specific investors internationally. So let's move to show cut now. Basically, we spoke a little bit, Carl just mentioned about the importance of connectivity and the importance of actually bridging and connecting with people that may have the expertise and also access to investors and kind of as we have a lot of entrepreneurs in our audience from the region, I think it's important to highlight in a way one is how you navigate the different networks and diaspora network is one of one of the networks. Sometimes if the entrepreneurs will seek for capital in US but also locally, how do you navigate and how do you connect with specific entrepreneurs and investors? If you can share with us some of your ideas, you're also the connecting point between Silicon Valley and Bangladesh entrepreneurial community. If you can share some of your experience on this. Sure, thank you. You know, I think as an entrepreneur it is about, so the capital that we are really talking about is actually what I call risk. From the entrepreneur side is actually about managing risk and from the venture side is about taking risk. So when you try to manage risk, what you really look for is what can I do to really add to my side that will get me better access to money, cheaper access to money and give me some added benefits like what Carl was talking about. Now imagine he's been an entrepreneur. From the venture side, it is actually the opposite. You're not trying to manage the money, you're actually taking the risk, right? And sometimes I see entrepreneurs and VCs, they make this mistake of being on the opposite side. Like if you're really managing risk, it should not be VC, it should be somebody else. But when you're talking about what do you do to, let's say you're starting a company and you are trying to raise money, what do you do? One and only thing that you should focus on if you're an entrepreneur, whatever you are, is using the network. And the better way to actually utilize the network is to latch on to something that is already working. So for example, both of us, we are quite involved with an organization called Thai which is there, they have a sole mission of fostering entrepreneurship worldwide. And that's the only mission. And the only one way we do that is creating a bigger and better network where entrepreneurs, by the way, entrepreneurship is a very lonely journey. So when you tell people that if you are an entrepreneur and you go tell people that help others, usually they do, and that's the power of Thai. And I see, I've been fortunate to actually see this entrepreneurship ecosystem kind of growing now in Bangladesh, I just came back from Dhaka. And I have to say, the energy that I saw that is absolutely impressive what people are doing there. What we have done in Silicon Valley is basically figuring that road to your dream, through money and employees and founders and advisors and all this stuff. But we have an advantage, they're all there. But just imagine, just imagine how difficult it is for an entrepreneur who has a great idea sitting in Dhaka and they are basically looking at the screen and saying, wish I could talk to these VCs. It's very tough. But they are figuring it out, it's impressive because they are actually a new generation of entrepreneurs who are playing in a worldwide ecosystem while the investor may actually not sit across the table. Fascinating to me. So and I think just to build on your point, the way we got the two of you here, it was also to the Taiwan of our mentors from Dubai, P.K. Gulati, who I asked, I connected with and I said, you know, who do we have that will kind of could talk to these issues of raising capital, but also have a really good regional understanding as well. He recommended both of you. So another example. So I'd like to just kind of move to one more question for another question for Anand. You mentioned if you can share with us a little bit of a kind of what are some of the key elements that you are looking at when you look at the deal in India and also in the region, Anand. If you just reference it towards the end of your earlier answer. Sure. I think it's probably the same that all the investors that are also going to be saying the same things. So it's probably two primary things we look for. One is something we have no control over is the market. Is the problem that you're trying to solve, is it addressing a large enough audience? In India, as you can probably tell, everything has a billion people, like you can assume it's a billion people. So all the problems are going to be big, billion dollar problems. But you'll quickly realize that there's probably about 120, 150 million people on the internet. And many of the problems that you're trying to solve through internet-based technologies are going after them. And then you boil down to how many of them are actually transacting and paying money and buying things. Then you quickly drill down to a smaller number of people transacting on the internet. And how much money can you make per transaction or per individual? So if you do this kind of what's called as the TAM, the Targeted TAM analysis, Targeted Adjustable Market Analysis. So you quickly boil down to only a handful of problems that are big enough in the Indian context that as a venture capital investor, we are keen on backing and taking the risk that was talked about to create big, sizable outcomes. When I say sizable outcomes in the Indian context, these are probably where companies can achieve a market cap of at least $200 million or more. So in the US context, it used to be billion dollar market cap companies or more. In India, I would say, even if you can achieve a $200 million market cap or more kind of a company, that's a reasonable outcome. So it's just directly tied to the market, total adjustable market that we talked about. That's probably the first thing. And the second thing is the team we don't necessarily, at least at the seed stage, we have written checks as low as $100,000. We don't look for a fully formed team, but whether the founder or the founders normally it's a couple of people or more, right? Do they have the right balanced skill set to be able to take the company through the initial phases of the company, through the seed funding to a point where they're in a place where they've proven out that the product or service they're building can scale as well as the market is actually buying whatever they're building, right? Those proof points, can they take it to that point and raise a series around, which is normally in the tune of $2 to $5 million, right? So anything less than a million dollars is a seed investment. So at a seed stage, it's normal. The first order things are team and market. Then there are second order things like technology differentiation, are they getting any early traction? And as the business model, is there any early signs of it working? All those are second order things. I would say the first order things that we look for is this outstanding team, which hopefully we can help add to that team over time, but hopefully we don't have to replace anyone in that founding team. So, and then it's a big market, a big problem to solve in the Indian context. If it's a consumer internet, Indian company or a consumer facing Indian company. And the other half, I talked about a global problems which are normally B2B in nature, those same things apply that, except that globally the markets are normally bigger. The team becomes even more important. Can they build a product that's more world class? Have they really been able to demonstrate growth, not in the current startup, but in their previous avatars, have been able to grow their products or companies into reasonable size globally and things, questions like that around the team. Great, great. So, one of you mentioned NRE, if you can define NRE, was it you? Yeah, sorry for using the acronyms. No worries, for the future let's just use the filter. I would advise not to use it. So, NRE is meant for non-recurring engineering. So, generally and you know, maybe I'm telling off my age, how old I am by saying that because maybe the new generation don't know this, but- It's a new acronym for sure. In the old days, in the old days when venture capital and angel investors were not easily available and actually it is a good thing to know because a lot of time you may not have that money available. In the old days the entrepreneurs used to do was that you come up with a product idea and you go and pitch to the customer and you say, look, this is kind of a concept or a prototype of a product that I want to build and would you buy it? And the customer will say, well, sure, if you can really turn this into a product, we would buy it. And then you would say, okay, what would be, what price would you buy? And let's say the customer says, I'll buy it for per devices, let's say $1,000. And you would say that, look, it will cost me like $50,000 to make this. Would you pay me just 50% of this money to just towards building this product? And that is kind of the engineering money that you take from the customer before even selling the product, which is a great thing because A, the customer is giving you the validation that they would buy potentially if you build the product, but the B is that they're even giving you the money, which is you have a very strong deal and that is a very great thing for even investors who would say, wow, your customer is giving you an NRE. And he can, Faisal can actually expand. He has a lot more experience than me. It's interesting because it's like in life, more things change, more they stay the same. So my second company that I built, we raised venture capital from a couple of the big Silicon Valley firms and we didn't use a penny of it. The day we sold the company, we had not used a single penny because from day one, we became profitable through these non-recurring engineering projects with large customers. But what's interesting is that if you fast forward to today, that was 25 years ago, nothing has changed. It's just that the medium has changed. Now it's a Kickstarter. And it's crowdfunding, I don't have to say that for funding to the customers, they fund your development. But these are now, you know, customers. So you, whether you're selling a phone or a watch or something, and you're getting 50, 100,000 customers that are paying for your, so it's a great non-dilutive way of raising equity. And it's reducing risk as well, talking about the point of risk up front. Absolutely. Well, this pebble watch is, I paid on the Kickstarter campaign. There we go. Okay, great. So customer paid venture capital. Do you have any additions to what Anand mentioned on the types of things that you are looking at in terms of when you are investing? I think Anand then nailed it. I would just reverse the order. I would say A plus teams first because my experience both as an entrepreneur and as a VCA is that companies hardly ever end up implementing what they came to us as a business plan. So I always look to see, is the entrepreneur a world-class person who will figure out what is wrong with his plan, change the product, change the market focus, and get to the right answer. So that's why I would say A plus teams first. And then the second component Anand talked about, I think hits it on the head as well. I just look at three words, large, growing, and underserved markets. So if you keep those three words in mind, large because unless it's a large market, you can't build a large outcome. Growing is important because if the market is not growing, you tend to be stagnant and you have price pressures and margin pressures. And if it's underserved, if it's not underserved, that means you have a lot of competitions and you will be fighting for very small pieces of the market. So if you look at those three components, large, growing, and underserved, coupled that with a world-class team, I think that's sort of my experience. That's the winning formula for the things that I look for. Great. Another question I have is basically about more about the regional opportunities in your, and any one of you who wants to comment. So how does the lack of information about markets and opportunities that may exist in a neighboring country or region affect the decision-making of small business or technology entrepreneurs and other economic factors? What I mean is that I think from what we see, there's a lot of untapped potential in the region and what we spoke earlier in the morning is like the countries are not necessarily connected. I'm talking South Central Asia. How would, what does information about the opportunities about opportunities in the region? How can we kind of help trigger a little bit more entrepreneurship at the intersection of the various countries that, of course, you have to start in a country, build your kind of proof of concepts on and so forth. But how kind of you can expand on that? Any one of you wants to? You know, I'll take a crack at it. I will say that's actually, I think, one of the core problems to solve. I'll give you an example from Bangladesh's perspective, okay? So remember the globe, Bangladesh is sitting inside India, kind of, right? India is now the 10th largest economy in the world and it's growing faster than anything. Billion people, great stuff. And whenever I meet with entrepreneurs and government officials and whoever, and people are thinking of investing in Bangladesh in local business, they talk about looking at US companies and they actually, they visit here and they spend a lot of time here and my advice to them is don't come here. They don't like that. I said, have you been to Bangalore? They're right there. It's a huge market. It's right next door. You can actually really capitalize on that. You can take the benefit of it, learn from that. It's the next door to your neighbor, right? I'm not actually sitting in Bangalore. That's right. And I think the reason they don't do that, for whatever reason is that interconnection in that region is extremely poor and it is easier for them to actually tune in into something that is happening in the US, although it is almost too difficult to replicate Silicon Valley anywhere else. It's almost impossible to do that but they shouldn't be doing that. There's a better example right next door, right? I think this problem is very common in throughout that region, not just in Bangladesh or anywhere. It's like they don't, for some reason, I think we used to be one country long time ago and that is playing against us. We kind of don't like to work with each other. But there may be an opportunity and that's part of the goals for this program that we're launching is actually how we, even digitally now with all the opportunities of the Facebook and the other digital communities, how we can bring people together from the region for both sharing. Well, I think you brought up a really good question because I think that's very much to my heart that I also feel just like Shakur that it's a huge problem to solve and it's a great opportunity that somehow people in our region in South Asia, they are not talking to each other. They're not connected very well. And if entrepreneurs and people in Pakistan would work more closely with folks in India and folks in Bangladesh, they have a lot more to help out to each other and they can grow very fast rather than looking at the US as the model. One of the things that I have tried to do is I run a nonprofit called Code for India which is a bunch of coder software engineers who code during their volunteering time. And I'm trying to set up hackathons in Pakistan and take Indian engineers to Pakistan and bring Pakistan engineers to India because I want that regional cooperation between engineers and entrepreneurs. So this is a problem that I think we all need to solve and it will help the people there. I mean, that's a real issue. So I've invested in both countries successfully now and I just, one of my companies just bought an Indian company and a Pakistani company and a Dubai company and brought it all together in US. And it's in the content aggregation and content market for Southeast Asian content but the CEO can't go to India and the team. So we end up now using the buy office as our... The bridging point. As a bridging point, everybody flies to Dubai and we have meetings in Dubai, which is silly but that's kind of what we're doing in the short term. So we have to get over some of the cultural and some of the logistic issues. Yeah, no, great, all great points. So thank you, thank you all and let's move to the live questions. I'd like to basically start with our first live questions comes from the American corner in Bishak. Shaokat, how can one get credits and investments in high interest rate countries? What would be your advice? You got the easy one. Does it name there too from the person who was asking the question? So, you know, it is very interesting. So I was on a television show with the ambassador like a month and a half ago and it was right after the election and this was the topic that it's actually very dear to me. So I'll give you a solution of it. So Bangladesh particularly, the central bank is adding like a little over a billion dollars per month in the bank. They're basically putting the money in the bank. But nobody in that country likes taking money from the bank. The reason is that interest rate is like 20 some odd percent. I said, wait a minute, if you're taking a money at 20 something odd percent interest, how much profit do you make? They say, you know, we make profit like 20, like 4%. So you basically make no money. All the money you make, that's a bad business. Doesn't matter what market you're doing, how good you are. It's a bad business because it's broken, right? So no wonder it's not growing. Okay, all right, so there could be solutions for it which is how I think government couldn't get involved with it, right? So we talk about, especially in that country, but we want foreign investment to come into the country, right? But how much foreign investment are we talking about? Like India for all practical purposes, last year didn't cross a billion dollars in total investment, right? And keep in mind that government is adding a billion per month, right? How about they take some part of it and offer them a little bit lower interest, not zero interest, a little bit lower interest, like people do here. So they kind of laughed at me, I guess. But this is a real problem. The access to capital is extremely hard in a favorable term. And if you are paying 20%, it doesn't matter what you do. You're gonna die one day, like very soon, right? So how do you get money on this one? You know, I think there are some initiatives that are starting there, which is, you know, the venture capital industry is not fully established, but people are doing equity investment, which is an alternative in that. And I guess that's the only way you can go there. Just to build, just a quick question, maybe you have a reaction. So from what I know, in India, you already start to have serial entrepreneurs and this happened in US, too. Each one of you has been an entrepreneur, now turned investor. So to the degree that in any of the countries you start having some early successes, then the entrepreneurs can come and they turn, become investors, and they help start nourish the local entrepreneurial ecosystem. And Anna, feel free to kind of jump in whenever or make me a sign, so, and I'll make sure, you know, to bring you in, you wanna? Yeah, I mean, I agree. It's 20%, 30%, which are normal lending rates. It's just egregious. You can't build businesses. The one area that I'm personally interested in funding now, and the same exists, by the way, in the Middle East markets. So one of the ways, I think, to get around that, which will be the most likely, is crowdfunding. Because there is plenty of capital available. It's very risk-averse. Banks are absolutely risk-averse. Banks will not loan money unless it's 20%, 30% to even SMEs. Forget about, you know, startups, even to SMEs. So I think the best way to go about this is, yes, some of it is going to be angel investors, but that's a very small group today in a lot of these economies, because they're just first generation of successful entrepreneurs are coming out. And the older generations, the big family offices, they're very risk-averse. So I think it will be more crowdfunding as a potential way of getting around this. The other example I have is from Turkey. Basically, the TEB is a local very development bank. They actually, because there's a lot of competition on the banking sector, basically, they redefined and added a very key component on serving the entrepreneurs, the up-and-coming entrepreneurs. And what they did is they provided, they trained their staff on the kind of working with entrepreneurs. They even got, I think, the IFC World Bank Award for this type of banking services, including access to capital tailored for entrepreneurs. But that's an anomaly because... It's an anomaly, but... Because other countries, I see the banks the other way. They view it as competition because they're lending at such a high rate that this is a great business for them with no risk. So they don't want that competition. Yes, no, I understand, but in Turkey, there is a lot of competition between banks, too. So you want to differentiate yourself in terms of that. But we have two models in Silicon Valley. So the same thing what you mentioned about Turkey. We have Silicon Valley Bank that pioneered the same model of venture debt. And we have several companies in our Menlo Ventures portfolio who have to take venture debt sometimes to bridge between an A round and a B round because you are just not ready for the B round and they get venture debt. So I'm sure there'll be a lot of banks. But the other point that I would love to make is that as much as this is a huge problem, I think for the entrepreneurs who are in the audience, this is a great opportunity to do a startup. Think about this company called Lending Club in San Francisco. They have become a billion dollars company and will be going in IPO pretty soon. And they've actually exactly solved this problem to bring in very low interest rates, loans and credit and lending to SMEs, small and medium-sized businesses. So people like you and me who get almost nothing in our savings account in the bank, we put in money into Lending Club and then Lending Club gives us 80% way better than the bank. So folks, if you are really struggling with this problem, you can turn around and actually solve this problem by starting a startup in that area. As long as the central banks allow you to be a lender, which is an issue with them. So who knows, maybe some of the countries will be able to regulate us. That's a great opportunity. Yeah, we have a question for all of our guests from an alumni in Hyderabad, India. I'm a woman entrepreneur. Funding is a big problem for women entrepreneurs and banks don't really encourage women entrepreneurs. What is your advice? Anand, you wanna get this one? Yeah, so if you're looking for women entrepreneurs by, we have about 50 odd companies and sadly only about six, seven of them have women entrepreneurs. So love to see more women entrepreneurs out there. So do drop me an email. So maybe offline. Okay, okay, great. So I'll just make sure we'll make the connection. Any other perspectives? But I think in her question, she says that banks don't really encourage women entrepreneurs. I think you shouldn't be talking to banks. Thanks, that's right. I think that I would advise that banks are not the people to go to. It's folks like Anand or find in your city somebody who has successfully built a venture in your area where you wanna do something and that should be your first person to go to. And that person can either connect you to people like Anand or connect you maybe even to some venture debt. But don't spend your time and waste your time talking to bankers. Sorry, sorry. Might be too rude to bankers. But I think it's also because you associate banks with money. So I think it was great that initially you define what type of capital that they can look at that sometimes by getting the right mentor or the right advisors that could lead you to access to capital. So because you kind of look for the right profile of mentors or advisors that are connecting or connected also to funding sources. Absolutely. Let's move to the next question. Mohammad in Jordan has a question for Carl. How do you define a smart method to test your ideas and models that work regionally and globally? Wow, that's a very good question. So I think there is this book that I would recommend about the talks all about this market testing. It's called the Lean Startup by Eric Rees. And Eric is a great friend back in Silicon Valley. And I think this book has become now kind of the textbook for startups. And it has this concept of how you build your products in a very lean way, which is you're not taking too much capital. And it's very relevant for the countries that we are working with, but the venture capital is not very established. Not easily available, exactly. Excepting for India. Yeah, and I think the whole method is about testing, market testing, and then iterating from that. And there are many ways. First, you have to define an early adopter segment. And there is another book that I would recommend as well, which is called Crossing the Chasm by Jeff Moore. And it heavily goes into, if you're an entrepreneur, you have to understand the concept and the term called early adopters, because that is the segment that you have to go to for the question that you asked about where and how do you test. Wherever you are, if you can find an early adopter segment within your city or town, or even just broadly on the internet, if you are an internet-based or online company, there are various sites that you can go to, which are people who are tech people. And so by nature, they are early adopters. And you have to focus on those early adopters and keep testing. So both the books will basically expand into how to do exactly what you're asking for. And we will be providing the resources after the event. We always do a visual summary with all the key ideas, concepts. We'll insert those resources and share it with everyone in the audience. Very glad to have great questions from the audience. I'm encouraging all of you to continue to send us questions. We have a question now from Amit in Nepal, who'd like to ask Faisal for some advice on his startup, picovico.com. His question is, how do we evaluate the value of our startups in terms of money? How much funding should we seek for and at what equity? Of course, you will need some company background. But from your point, we just talk a little bit about valuation and how investors are looking too. Yeah, so I think evaluation is a tricky thing, which is it bases on how far along are you in your company? How much traction do you have? So how early are you? Do you have customers? Do you have proof of concept? Do you have revenue? All of those things make a difference. But also think about it from the venture capitalist perspective, what they are trying to do is they're trying to own certain percentage of the company at an exit. So what you have to do is you have to think about how much capital do you need from here till you exit. And then you have to work backwards to figure out what's a reasonable amount of equity for the investor to own. Because if the investor doesn't own enough equity, he's not going to be interested. He's not really going to put in the money or the time or the effort. So it has to be a win-win for both sides. Without knowing particulars of how far along you are, there are a lot of metrics for early stage companies where you may do a seed financing at a million or $2 million pre-money. A lot of time what we end up doing is if it's unclear what the company is really worth at this stage, because there isn't enough proof, we just put in the money as a convertible note. So it's a convertible debt. And when the company really has enough traction to raise real venture capital money, we convert our debt at that time into equity. So that's one way to make sure you don't start fighting over an evaluation which is so unclear at an early stage. But if it's a later stage company where there's traction, customers, revenue, then there are many, many other metrics of revenue multiple to comps of other companies of equal size. So there are many different ways of looking at it. Right, I think one of the good resources is venturehacks.com that introduces some of the key terms and also discussing more on valuation. One other very quick question is if you have a venture that requires consecutive rounds of funding, so one question is how it's best to deploy the initial funding, you already need to think that you will be needing consequent rounds of funding and at some point you'll be needing to connect with another type of investors. Any very quick advice before we go to... Very quick advice is we think of these things in 18 month chunks. So think about 18 months, the reason we fund these companies in an 18 month chunk is because that's a great way to understand the progress you're making and it's a great breakpoint to see, measure the success and if things are going well, you can step up and need more capital. If things aren't going well, you may not require more capital or you may not be a going concern. So think about sort of 18 months which should be enough time to show measurable progress in your business for your next step of financing. So that's why we kind of break up the financing into 18 months. Great, thank you. Let's move to the next question. Fazli joining us from Pakistan would like to know more about overcoming obstacles in business cooperation between the countries. How can we take advantage of the incredible opportunities and expertise with investors in India while working here in Pakistan? Maybe Anand, you can say a few words about that. Sure, so I think there are the practical issues that we talked about earlier where it's tough for entrepreneurs to go back and forth between the two countries that's the unfortunate reality of the situation. But if there are problems that are being solved globally, I'll give you an example. So we backed a company which was in Singapore and they were trying solving problems in the local Singapore area as well as doing some things in India as well. So similarly, if you're based in Pakistan, Nepal or any of the other countries close by, if you're solving a problem that is local, the geography as well as applicable across borders, be it in India or other countries, those are all areas where from an investment perspective, you would be open to looking at. From a structure point of view, you might have structured in a way that from both the investment as well as from the teams being able to talk to each other and travel. So you might have to do it in a neutral place like a Singapore or Dubai that was mentioned earlier or even a Delaware car and have subsidiaries in the various geographies. So all those are, I think, solvable. The important thing is the problem you're solving relevant across these geographies and picking at least one market that we talked about the initial market earlier on. So at least picking one market that has depth in it where you can really test out and prove that whatever you're building can scale within that geography. Instead of trying to go after five different geographies right off the bat, the 18-month period that Faisal talked about is very critical for a young startup. So be able to show that in one geography, you're able to scale before trying to go more aggressively across. That's a great answer. Thank you very much. We are getting a lot of questions from the audience so it would be great to kind of connect and speed it up so that we go through a lot of questions. So Faisal Chandra from Nepal asks, what's your take on the trend that most of Indian startups are localizing proven models of successful global ventures? Do investors prefer investing in models that work already? Yeah, so it's a low risk way of entering a new market for a lot of the investors. That's why you'll see a lot of them will chase after the shoe dazzle of the buy to the eBay of India and so on and so forth. But I think that is just the fact that it's the maturity of the market. I think that is just the first step. The bigger opportunities are going to come from untapped market potentials that exist in those geographies that are particular, the issues that are particular to those geographies. To me, I think that's where a lot of the big opportunity lies. But for investors, yes, the first thing they gravitate towards is the known model that they can scale quickly. But it doesn't always work because each geography has its own challenges and issues and so it's not so simple to just copy the model. Great question from Shaokat from the Karachi party. How do you get mentorship and advice from experts who have global experience and perspective and how do we find ways to pitch to overseas VCs? Maybe Carl or... Well, we do have a Thai chapter in Karachi. So go and join that, right? Yeah, totally. I say, be shameless. Big borrow steal, do whatever is needed. Like if you think you should contact somebody, just do it. Most likely, very likely, you will get a response from it because entrepreneurs, I think most of the entrepreneurs, I know, we respect entrepreneurship. We respect entrepreneurs. And we know how hard it is. When somebody reaches out to me, for example, personally, I think it's my entrepreneurship debt that I have to pay it forward. So I will always, always take a call from an entrepreneur. Regardless of how busy you will get on my calendar. Right? Okay. You'll be getting a lot of calls out of your phone, yeah. Publishes emails. But most of the people are like that, I think. Yeah, no, I think persistence pays and I think we will be also discussing in some of our programs how to actually connect with the investors but using networks and actually using entrepreneurs from the portfolio of the venture firms. It's also a great way to connect with investors because investors will always kind of an anand and everyone here can confirm. I think if you come recommended by a CEO or like a founder of a very successful company from a portfolio of a VC, that has a lot of value. We have a question for Anand from Hyderabad, India. What industries are USVCs targeting in India? Do you see a lot of interest to invest in India? How to reach VCs from the US if one has a product concept? I think it's a two-part question. One is for Anand on the industries there and maybe the other one for Faisal. Sure, so the first question was how to reach USVCs. No, no, first part was basically what sort of industries are the USVCs looking in India? What sort of specific industries? So one clarification I have to make is I don't think USVCs are based in the valley and are not necessarily looking to invest in India without an office here or not necessarily looking at India at all, right? So very rarely are they looking aggressively in India. So investors, you need to target our people. So Axel is a global fund, but we have a local presence in Bangalore. Similarly, there's at least 10 other funds, if not more that are global funds with India local Indian presence. So if you go to, let's say, your story or next big what or take runs and look up which are the active VC funds in India, you'll get a quick sense for, these are all popular blogs, right? You'll get a quick sense for where are they investing and broad areas or consumer internet, enterprise software, cloud, big data, healthcare, both on technology and delivery side and education. These are some of the areas where the Indian visas are spending significant amount of effort and mobile, of course. So those are probably the broad areas they're focusing on. Okay, great. I think you clarified the second part of the question too. So the next question is coming from our audience. We have a lot of similar questions. How do you handle failure? Any advice from moving on from a failed failure? When do you call it quits? And how do you package the learning and use it in the next venture? Yeah, I call it fail fast and fail cheap. So, I would actually, I wouldn't quite agree with that. I would actually say fail with celebration. So one thing that makes Silicon Valley so special and if you ask this thing, it will boil down to this one particular thing that Silicon Valley does that is very special. We celebrate failure. What does that mean? That means if you are an entrepreneur, by the way startups fail all the time. So regardless of how smart you are, how whatever logic you use, companies do fail. They fail a lot, right? But if you look at Silicon Valley entrepreneurs, when they fail, they basically get up and they do it again and the VCs will actually value you or because you actually learned, you got better and your stock went up, which is a very, very precious thing that I think Silicon Valley has that. It's very hard to replicate and you do that with grace and if it didn't work, but you have to learn from it. But you move on, never give up. One of the ideas I heard is also this very practical experience that you gain in the process of building ventures is also helpful when you are interviewed by let's say a bigger company that actually could appreciate the level of experience that you have compared with other people that just kind of fresh out of college. Second question is for Shaukat as well. Aghalal asks, as a consumer targeted e-commerce marketplace for services, how do we raise the next round of investment if our company is making money, but it's not yet profitable? Raising money is not about profits. Amazing money is proving that you have a business and business doesn't necessarily mean that you have profit today. It's showing that you have the business fundamentals figured out. So let me tell you this. It is always about proving the riskiest part of the business first, okay? And if that is making money and you haven't made money, then clearly you shouldn't be raising more money, right? Because you haven't proven that. But if your riskiest part actually will change over time, in the early time clearly you don't, you're just building the stuff. So you said, hey, I make money. That means nothing. You haven't proven anything, right? So if you can always focus on what the company is about and focus on solving the riskiest part of the business at any given time and phase of the company, then you are always have a good shot of raising money. And when you are, I highly encourage you to, when you're trying to raise money, if you start your pitch that I am profitable, that means any VC will basically take that profit and multiply with any kind of multiplier they are used to. By the way, if you're a startup, you're most likely not making that much money. So that multiplier is not gonna be that high. So be very careful about that. Always try to prove what the business is about. And always try to prove or always keep in mind that you are not there yet. You're climbing a ladder and you are at a step. And that step that you've taken matters for the ultimate return of the business, ultimate return for the company and you. So hence change the game. Great. An entrepreneur in Pakistan asks, as an entrepreneur sharing my big idea with an investor sometimes scares me because there's a risk of stealing ideas. How to overcome this fear? Maybe Carl? Well, I would say this is the biggest myth that most entrepreneurs have, especially the first time entrepreneurs have, by the time you do the second time you are out of this. So I would say, well, clear answer is no need to worry about that. Look, idea is 1% of success or even less than 1%. 99% is what they call, you know, perspiration, execution. And it's all about execution. So don't ever worry about ideas. Ideas are a dime a dozen. If you have an idea, you have to believe that there are 100 other people who have the exact same idea, maybe at the same time or maybe even before you. So nobody's idea is unique. Just go with that assumption and focus on execution and go ahead and talk to people. Even if they want to copy, let them copy. Don't worry about it. If you see them copying, don't even worry about that. Just keep staying focused on your execution and you'll still win. Yeah. But also as a VC, I mean, that's not our business. If our business was to steal our entrepreneurs' ideas, we wouldn't be in business very long. Very long, yeah. It's just not something we do because we are not starting these companies. You are the ones who are starting these companies and we're backing you. So it's really not an issue. I know I hear that concern a lot from first-time entrepreneurs, as Carl said. It shouldn't even be on your list of concerns. So let me just say this, that in Silicon Valley, if an entrepreneur comes and says, oh, I want to pitch you, but you have to sign an NDA, most investors will say, sorry, I don't want to hear you. So... Well, I would say anybody. Meeting is over. Yeah, yeah. It's also, I think, because the IP protection is not very high, but even in the US, most of the differentiating is through execution, not necessarily through patent protection. Question for Faisal from Alex Acidoro from Kazakhstan. The population of Central Asia is 50 million. Is the market large enough for the VCs to be interested to fund an internet startup, for example? Yeah, I mean, 50 million is a very large number, but I think, as Anand pointed out earlier in the session, if you're talking about an internet company, it's really going to depend upon how many people of that 50 million are on the internet. What is the use patterns? What is the bandwidth availability? What are the credit transaction capabilities? Those are the things that matter. It's not the 50 million necessarily population. So if a large percentage of that population is on the internet and has the disposable income and the credit facilities exist, that would be a great market. That's bigger than a lot of other markets that people look at. And Anand mentioned as a total addressable market. So it's not just the population, but the specifics of that market that you are targeting and what sort of characteristics it should have. I want to encourage our audience to continue to send us questions. We are getting very good questions from the audience. What are some of the criteria you use as investors in assessing the viability of a venture investment? Carl, if you could share both Anand and Faisal mentioned a little bit earlier. Yeah, well, I think it's probably the same reputation, but number one is the team in assessing the viability. So how good is the team? What is the level of commitment? What's the level of expertise they have in that area that they are building? Number two is the size of the market, because even if you have a great team and working on something great, but if the market is very small, we don't want to spend our time and money on that venture. We want to have larger exits, both for the entrepreneur and the investor. The third would be then the strength of the product idea, the strength of the idea, but it's not that very important because as Faisal mentioned that, seldom companies end up in the business that they started with. So the ideas will change, and we expect a number of pivots and iteration on the way, but I think those are the, and the fourth thing is the model, the business model. So in that order, at least for me, which is the team, the market, the product idea and the business model. Great, great. So we have a photo of, hi there about the Tech Connect viewing party. Thanks for joining us today. Let's see that now. So I think you'll be seeing it on your screen. So thanks. We don't get to see it. We'll see it after the program. We'll see it after. I would like to ask you some questions on basically, on exits. What type of exits you think there, right now in India, maybe Anand you can talk to it and what sort of level of exits. In India and the region as well, what would make the region more appealing in terms of attracting the interest of outside capital that could set up presence there? I mean, for the initial steps, you have to mobilize all the resources locally, try to aggregate, to connect with angel investors if you have. But what sort of things you see on the market? I think it depends upon the stage of the company. We are certainly in India seeing large global players that are interested in the market. So one of our companies, Snapdeal, eBay, for example, just invested over a hundred million dollar equity investment in the company. So we are starting to now attract global players to the Indian market, which is very unusual for a startup companies at that level of funding. So certainly there's public markets, which are when they're open and liquidity is there, that's great. I think strategic exits will be most of the exits in any market in U.S. even. Most of the exits, 80% of them end up being strategic. So I think I'm seeing now that the global players are interested in the Indian market for strategic purposes, which is great news. Okay, great. So we have time for one last question. And it goes to Shaokat. Kailan Bastola from Nepal asks, how do we get involved in entrepreneurship being graduate students? What would be the major obstacle for a student to start working on an adventure? Fear, your fear is only thing stopping it. Now you will have a lot of risk to get started. And I started my first company right out of college because I was afraid that I would never get a job. I still have that fear. But I think if you get started, you're smart enough, you're here, you're asking questions to us that you will figure that way out. But don't let that fear stop you. Go get started. But make sure what you start, impress people with the depth of your idea. Because at the end of the day, what people will really give you value is how passionate are you about the value creation that you're proposing in front of them? Not who you are because you're a graduate student. You don't have the resume yet. But nobody says that your thought process need to be shallow. Just think about that, what you are proposing to them and impress them with it. And trust me, people will be impressed if you do your homework right. Great. I'm afraid we are out of time. Thank you so much, Anand, Shaokat, Carl and Faisal for your wonderful contributions. Our guests will stay for about 10 more minutes to answer questions in the web chat. Special thank you to the TechConnect viewing site hosts around the globe for mobilizing their entrepreneurial community. We can continue to help each other in our local entrepreneurship communities by staying involved with the ReConnect program. To find out more about how to get involved with ReConnect, please visit our website and follow us on the Facebook and Twitter links that are presented near to the screen. The social media sites are also an excellent means to meet and stay connected with other entrepreneurs from South and Central Asia. ReConnect builds capacity and strengthens the entrepreneurial ecosystem in South and Central Asia. This initiative, which is led by the US Department of State and CRDF Global, identifies and supports young entrepreneurs through skills development, networking, and financial advice. The ReConnect regional program includes a regional competition in conjunction with the annual Entrepreneurship Summit on the ground startup boot camps that provide in-depth training and mentorship. And, of course, these TechConnects that bring together the entrepreneurial community to learn and exchange ideas. It's very important that we'll have an upcoming regional startup boot camp in Nepal early May. And we'll also be organizing the second follow-on ReConnect TechConnect on building your dream startup team. Karl mentioned about the sweat equity, the sweat capital. I think that's a very critical piece in the process of also raising capital. So we'll be approaching that in the next TechConnect. Today's program is just the starting point of our journey. Be sure to visit our site and find out more about the upcoming programs, such as the regional competition, which will begin taking application in March. And the ReConnect boot camp in Nepal, which will be taking place early May. We know you can do it. It's all about creating new opportunities, looking at the problems, and building on the needs that exist in the market. We are here to support you in any way we can. And we wish you all the best and hope to see you at our future events. Stay informed about the other programs by signing up for our newsletter using the link on your screen or joining our Facebook community. Until then, take care and keep in touch. Thank you. Bye. This program has been brought to you by Kinex.