Singapore’s potential in angel investment is huge, believes AngelCentral’s partner and “chief angel” Huang Shao Ning. “In the next three to five years, it’s really the time for the ecosystem to grow,” Huang said during KrASIA’s Venture Matters TV episode 7 on Thursday evening. “We have really strong startups coming in. The quality of founders are so good, and good people are willing to take risks.”
Huang co-founded AngelCentral in 2016, as a community initiative to bring angel investors together. Officially incorporated in 2018, it is headquartered in Singapore and now one of Southeast Asia’s fastest-growing investment networks.
“Because of our own experiences, a lot of startups came to us to ask for help,” Huang said, when host Swee En Tan asked how she started angel investing. Fresh out of university, she was “bitten by the dotcom bug” in 2000 and co-founded JobsCentral, an online recruitment platform. She ran JobsCentral until 2011, when it was acquired by US-based CareerBuilder. Since then, she has pivoted to angel investing, and now has a portfolio of 35 startups.
“Most people think of angel investing [as if] you have some spare cash, and it’s money that you can afford to throw away,” Huang noted. “There are angels who function this way. But if you track them, you will notice that they don’t last very long.”
Angel investing involves investing in startups at a very early stage, typically in their first or second year of operations. “For angels who just casually invest, you notice that they phase out very fast, because very seldom will you see a company that gets bought out by the third year.”
Misconceptions like these are part of the reason why Huang feels passionate about angel investment. “Angel investing is not a gambling tool,” she emphasized.
High-risk, high-reward
Investors should see angel investing as a separate asset class in their portfolio management. “It’s high-risk, high-reward, you really need to have a deep strategy, have discipline, and have the rigor to really understand the spaces where you want to go,” she warned.
While angels are well-positioned and vital to helping startups grow in the nascent stages, angels themselves must be able to filter out which startups they want to help.
When asked about what advice she would share with new angels, Huang pointed to AngelCentral’s once-a-quarter workshop on angel investing. “We talk about mindsets, how we work with founders, how we deal-source, and how we evaluate,” she said.
Angel investing is extremely founder-centric for her. “We try to get a sense of whether founders have different sets of abilities, that you see what a business will need, let’s say, when it comes to year five,” she said. “If you think that they cannot come down from their high horse, then no matter how attractive the space or the deal term is, I would say: Just keep in touch!”
Huang also highlighted the difference between markets. In the US, for instance, an investment of USD 5,000 is considered a large check for angel investing. But in Singapore, each company can have at most 49 investors due to limitations like the Companies Act. “So imagine: 5,000 dollars. I use 30 slots on my cap table, how much is that? It’s not going to be enough.”
Risk appetite is also higher in the United States. Investors in Asia look for more traction, execution, and potential, and are seen as more risk-averse because they want to see actual revenue.
Some advice for founders
Founders need to understand the investors’ perspective. “It’s still a reward-seeking mindset, not a charity mindset,” she said. Founders do not necessarily need to go for it. “Investment is just one way of financing.”
It is more crucial to see things from your own point of view, Huang explained. “If your business allows you take home 100,000 dollar of income every month, but lacks investment interest because it doesn’t generate high returns, there is nothing wrong.” The question here is, why to fundraise? The business is actually doing well on its own. “Don’t get caught up by the glossy, nice stories. Evaluate based on your own situation,” she advised.
Huang listed four categories that she uses to evaluate: Founders, business opportunity, execution, and deal terms. Founders should put themselves in the shoes of an investor and go through these four criteria. “One trick that I use on some founders: I ask them, will you invest in your business?” she mused. “Put yourself as an investor, then you will get a sense of where you are.”
Singapore’s growing ecosystem
With many accelerators and incubators, it is now easier to become a founder in Singapore. The government is making a concerted push to support startups, such as through the Startup SG Founder program.
Huang acknowledged that while these are good developments, they also demand more self-awareness. “It encourages people to try, but discourages the deep thinking you need to have. Founders need to be more reflective and know [what] you’re getting yourself into,” she said.
The investor recounted that just that morning alone she spent hours talking about telemedicine and underwater robotics. “You have to be comfortable with that, and you must enjoy the process,” Huang said. “To be a good angel, you must have the financial preparedness. At the same time, you must be prepared to do a lot of research. And because it’s a learning journey, you learn on your own, you learn through the founders.”
The “Venture Matters” webinar series will return on September 24 for the 8th episode with Dr Finian Tan, founder and chairman of Vickers Venture Partners.