Raising Capital: Team, Product, Economics Filters & Investor Psychology - E566

Jeremy Au shares insights into how venture capitalists evaluate early-stage startups in Southeast Asia. Speaking directly to aspiring founders, he breaks down how investors assess potential through three core lenses: exponential growth, clarity of thinking, and personal trust. Drawing on personal stories, failed bets, and breakout wins, he explains that execution matters more than the idea itself, and that successful fundraising often comes down to preparation, communication, and timing. He also demystifies how power shifts when founders build momentum moving from pitching for approval to choosing among term sheets. The conversation is a practical roadmap for anyone serious about turning a startup into a venture-backable business.

1. VCs bet on growth and execution: Investors look for startups that can grow 4–9x in two years, led by 10x teams solving painful problems with strong economics. Execution beats ideas.

2. Pitching is a clarity test: A good pitch clearly shows the problem, market, and revenue model. Demos work better than words. VC money is high-risk, high-reward founders must know the trade-offs.

3. Trust drives fundraising leverage: Founders earn trust through credibility and results. When momentum builds, investors compete like Rewind AI’s 170 term sheets via Google Doc.

(00:57) So what we have here is that VCs are looking for (01:00) founders that will create a billion dollar company in 10 years.

(01:04) And so people forget that what people looked like 10 years ago is very different. So 10 years ago, I was doing my small thing. A lot of people look at Jeremy and say this is a nobody to whoever it is.

(01:14) But I had wonderful mentors and wonderful people who looked at me and said, this is who Jeremy can be at the age of 37. 10 years is a lot of time and for many of you, you are all around, 21, 20 years old You guys I think will be better than me at my age.

(01:27) 'cause When I was 30 years old, I only had Google, I only had books. I didn't have check GPT, I didn't have all these tools and there was very little technology frameworks and understanding to support me. So at that time, when I was 30 years old, lean Startup was relatively new. A lot of these things were new.

(01:42) So I mentor somebody who's a fresh grad. And he's doing really well. He graduated also from NUS, and he graduated around 25 years old.

(01:50) But yeah, I look at him and I'm like, yeah, this guy is way better than me in a professional of venture capital than I ever was at 25. 'cause venture capital as a job didn't exist in Southeast Asia (02:00) when I was 25 years old. But again, it's really about potential.

(02:03) Can you identify people that are going to be fantastic? And obviously you're gonna pick people who will look cute. And turn out they cannot be a unicorn. And then you also identify people who are look cute, but actually do become a unicorn. And a more transactional or financial way of looking at this is, if I'm looking at you right now and you have a startup today, can you double, triple your value this year?

(02:23) And then can you double, triple your revenue again the following year so it can grow between four to nine times in the next two years. That's how that people will be thinking about it from a more quantitative point of view. And so VCs have to assess the founders. Then they had assess the strategy that it goes to, and then they go and look at the pitch deck.

(02:40) And the pitch deck is a way to introduce the founders and the strategy. When we are strangers, we don't know each other yet. You send me a pitch deck. So I got WhatsApp message. This person's a doctor. He's sent me a message several times now over WhatsApp and Hey, Jeremy, Can we get a coffee?

(02:54) And I'm like, I just don't have time. I'm busy teaching here. I'm doing this and doing that. And so he's Hey Jeremy, can I send you a (03:00) pitch track? And I don't know who he is. So I'm looking forward to see his pitch deck and I will find out who he is. And whether I wanna get coffee with him, right?

(03:07) Because if not, I have other things to do, right? And VCs are judging based on three major aspects. A 10 x team, a 10 x product, and 10 x economics. So a 10 x team is saying, is this team 10 x better than everybody else? A rock star team. That's the hunger, the drive, the humility is that 10 x product, is this product makes sense?

(03:25) Is it solving a problem that is really painful and 10 x economics? Is it something that's gonna be able to preserve? That monopoly power, ability to maintain pricing and profit for a period of time. And for us as a unicorn, if you are a very early stage investor, angel investor I've invested in a founder, everybody wrote him off or did basically because his first company failed.

(03:46) I was doing a bit of coaching and support. Everybody written him off or his previous investors wouldn't invest in him again. And I, yeah, I just sat down with him, et cetera, et cetera. And then I can tell you right now that. Fast forward a year on, he's gotten a lot better, a lot stronger, and now he's (04:00) recently go on his way to successfully raise $20 million of venture capital, right?

(04:04) So imagine like for one year company failed Zero body. Nobody was hanging with me, him, Jeremy hangs out with him. Fast forward now by the end of this year, he will have a company's worth $25 million valuation, right? So things can change very quickly. But obviously when you're early stage, you are obviously looking at the earliest investment.

(04:23) And now obviously in terms of the product, when I underwrote him, he was at a team, then he here for product, but now the product has gone well. So now he's going to go for a 25 million valuation and then. I hope that he'll be able to become a hundred billion dollar, a billion dollar company.

(04:37) Alright. And this guy is also relatively young as well. As a result, I have a decision tree. Everybody's decision tree. A lot of is intuitive, obviously. I meet you, do, I wanna meet you again. Obviously there's a more logical way and I think this is a helpful way for folks to be thinking about the fact that there is a relatively structured process that VCs are looking at, and as a result we talk about how he.

(04:58) Heuristics are great. VCs are making very (05:00) quick decisions. Who to spend time with, who not to spend time with. The average pitch deck is only looked for three minutes at a pitch deck. So when a person sends me a pitch deck, I'm gonna look at a WhatsApp and I'm gonna spend about three minutes scanning through it.

(05:11) And obviously I'm gonna make some judgements based on that, and I could be wrong. And so it's very important for me to not, in my time compression dealing with different items. I need to be thoughtful about the risks. 

(05:21) But again, pitching is a way to articulate the business logic. And if we say something that's logical, everyone will understand. It's illogical, right? So I was meeting with a company today. They are relatively, I say entering the growth stage. And what's interesting was that this person was explaining certain aspects about the expansion model.

(05:38) And I was thinking to myself like, this actually had been proposed to me two years ago, two, three years ago. Everything they're doing today was proposed by another founder several years ago, right? And so both of them arrive at the same type of business. Logic about how the company should grow is just that one was able to execute and get it done, and the other person did not execute and get it done right.

(05:59) But (06:00) the logic of it was sound. And people will sign, reinvent the logic over and over again because if it's a good idea. It'll come to life. If it's a bad idea, it'll come to life and they'll get killed by everybody. So there is a Darwinian approach to good ideas. And so when you pitch, you need to be thinking about yourself.

(06:17) How do I prove it? How do I get stuff done? There's no point having a good pitch. Results are really the key thing. So if you deliver results, everybody pay attention to you. The second, of course, is building trust about who you are. And lastly, of course.

(06:29) Is putting together a pitch track that Y View representing, and we talk about how trust is a system, and I really hope that all of you will be able to graduate and be thinking about your credibility, your reliability, your intimacy, as well as your self orientation, and using that as a formula to build rapport with your teammates as well as your supervisors, as well as with society.

(06:49) Everybody should be thinking about your capital stack, which is raising money from customers. First. Then there's a lot of capital that's available. And venture capital is the most version of this (07:00) because when I put in a million dollars, I own 20% of your company for life, right?

(07:04) And that's a big chunk of your profits in perpetuity. So it's actually very expensive. But of course, in return for that, I am taking on the most amount of risk. So I'm willing to do that deal. Nobody wants you. Nobody likes you. The banks won't give you money or they require personal guarantee. So I'll reward myself a high reward because I give myself the domain of working in a high risk area.

(07:24) Obviously you wanna hire the best investors and then structure an auction where there are multiple VCs that are competing to be on your term sheet. And so we talked about how the are two examples. One in 2018 bench sites. Bench which is the AI for lab operations, was able to get five term sheets in three weeks.

(07:41) So imagine before that, the founder is in a weak position. They are asking VCs for money, and then suddenly. If you are a company that has built the right idea at the right time with the right team, then the other way around. All the VCs are fighting to be on your company cap table, right?

(07:57) And then we talk about how Rewind AI is the most extreme (08:00) version of that, where they receive 170 term sheets and they end up giving a Google document to say, Hey, please submit your bid via Google Docs. So great founders get to pick. Obviously you're looking for people with personal chemistry, speed, high experience.

(08:14) And then after that we talk about a 10 slide. Is that all of your writing? The cover slide, the market problem, the market opportunity, your solution, the team traction, competition, revenue acquisition model, and how much money you're asking for. And what we talked about is that one, you wanna make sure that it's clear what the problem is.

(08:31) Make sure you explain why people are not solving this problem. Is Jeremy's number one problem? Maybe it is. I feel if people are not paying attention, maybe, but I think that's my, that could be my number one problem at this point of time. But of course you also need to explain why has it not been solved, right?

(08:46) So that when you understand the problem, then you can understand the number one problem that people have. Now obviously based on a problem that you have that is really engaging and true, that obviously is understood how big the total addressable market is, (09:00) right? So for example we talked about friend.com, which is AI companion.

(09:05) So their pitch or replica says everybody is lonely. Okay, so that pitch is everybody in this world is lonely and everybody will pay $10 a month to not feel lonely, to have somebody who will accepts them for truly who they are. And they don't need to go dates. They don't need to go find a boyfriend or girlfriend.

(09:23) They don't need to have a husband or wife to be accepted. They don't need a therapist. Everybody feels lonely. So 5 billion people around the world, all paid a month equals to 5 billion AI companions running as your best friend. So that would be the total addressable market. That somebody could claim to, obviously to build.

(09:39) Then obviously we talk about your solutions. A demo, right? To show don't tell in general. And you wanna show the customer journey about how the person experiences it, but also why the experience is 10 x better, 10 x faster, 10 x cheaper, and of course you'll be building a team slide. That's based on the current team that is actually building it. The leadership team and (10:00) the startup they're doing obviously use photos, explain why they're good, explain why they're legit. And now obviously talk about the performance, the milestones. Obviously some of it will have public revenue numbers.

(10:10) You can share that. Some of them may not. But then you show the awards or the soft milestones that they have about how they're growing and why they're amazing. And then of course, you then will wanna show your competition. Every startup is competition direct and indirect. And so this is normally shown as a two by two to show what it is.

(10:27) And what I challenge you to think about a little bit here is that at least one of the Xes should be better or faster or cheaper, right? So a toothbrush we talked about in the past, is it better? No. It makes a teeth as clean as a normal toothbrush, but is it faster? Because it's more convenient from perception, right?

(10:45) It's definitely not cheaper. It's more expensive, right? So we need to be thinking about the Axis of competition. So the best products that we saw from like SpaceX and starlink is that they actually outperform on two Xes, right? Is both better and cheaper, for example. Or you could be so and so (11:00) forth. But these are different ways for you to think about.

(11:02) You are happy to help you folks in those things as well. Then we wanna talk about having a slide for revenue. You wanna be able very clearly explain, okay, this is how we make money for every a hundred clients. We charge them X amount of money and they normally stay for 10 years, and therefore. They don't turn that much of ability, which means a certain customer lifetime value.

(11:21) So we wanna make sure that we understand the revenue, how you make money from these customers. Then you wanna talk about the financials, right? Which is, what is the cost? What are the ways that you activate them, sell them, buy them, market to them, and what does the customer acquisition cost from your estimate as a team, roughly what that is, and then as a result, generate what the estimated lifetime value to customer acquisition cost ratio is.

(11:44) And then of course, the last slide that you have is that you wanna ask them and say, Hey, how much money do I want to have? So if you look at the pitch deck samples that we have some of them will say, I want to ask for $10 million, right? For a certain amount of raise. And so forth. So these are the (12:00) ways that you want to talk about how you are going to use this money and what you're gonna build as a result of that.