Financing gets difficult under the pandemic, as VC become increasingly cautious

English translation of an interview by HKEJ/ StartupBeat (http://startupbeat.hkej.com/?p=91778)

Yina Chan (Left) and Aditya Mehta (right) believe that early-stage financing has always lacked effective means for start-up founders to seek suitable investors and for investors to discover exceptional start-ups.  

Bamboo Network cofounder Yina Chan has the experience engaging in venture capital work as she is currently working in the venture capital firm Saltagen Ventures as well. She admits that there are very few venture capital funds in Hong Kong and they generally show little interest in investing in local start-ups. Besides, local start-up founders lack connections, which makes it difficult for them to seek capital injection from investors.

Yina Chan believes that the venture capital industry has always been lacking effective means for start-up founders to seek suitable investors; and for investors to discover exceptional start-ups, “As such, VCs mostly only attend social events in hopes of expanding their network of referrals.” She further revealed that although VCs receive up to 1000 investment referrals each year, over half of these referrals do not meet the requirements. “The other half of the start-ups usually depend on the trustworthiness of referrers before they spend time on due diligence.”

Additional Consulting Matching Service

Aditya Mehta, the other co-founder of Bamboo Network believes that start-ups aspire to innovate as “start-ups will do things that traditional companies will not or cannot do. However, the risks brought by innovation have made it difficult for traditional banks or financial institutions to provide services for start-ups.” He created the platform to help start-ups find resources for long-term development. As such, the platform will not charge start-ups any fees but will only charge a subscription fee on users who wish to access premium services. Besides, the platform includes a consultant matching service. “Start-up founders can provide equity or monetary rewards to the experts who provide assistance and we will draw a certain percentage of such benefits as income.”

Yina Chan further mentioned that the pandemic has prevented investors from visiting foreign countries to meet with start-ups physically. “Some VCs have shared that since the outbreak of the coronavirus, they have changed their methodology of deal evaluation. They will ask the founders more questions to get a deeper understanding of the founder’s goals and obtain additional data from the company, to prove that the company is currently growing as they cannot negotiate face-to-face and build a relationship of trust. For investors, trust in the other party is a determining factor on whether they should invest in an early-stage start-up.”

The start-up may create a company profile on Bamboo Network once they have registered for an account and verified its identity through the platform.