Aug. 12, 2020

Cross-border investing and global expansion, discussing Asian markets with Sungjoon Cho.

Sungjoon Cho, General Partner at D20 Capital explains who should try to expand globally and how to prepare for an abroad expansion. We specifically focused on Asian markets expansion and talked how founders can benefit from working with cross-border investors.

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Transcript

The reason redo, and today's a guest speaker, we have soon chose general partner at D, twenty capital. And this episode we'll talk about cross border investing when can a US based company expect to go global and how U. S. 

based companies can leverage partnerships with cross border investors in the US. So, unless you come by, you're giving us some background on yourself and on T twenty capital. Sure. Yes, so I'll start with the twenty. 

So the twenty is a new venture fund based in the Bay area, it's totally back by design, which is a large conglomerate with broad operations in the industrial sectors. 

We set up shop last year and started investing this year. 

We lead a series A, in a Bay area, construction tech startup, and have invested in a few other unannounced rounds ranging from see the series B as for my background. 

I'm an engineer by training study, electrical engineering and then was a product manager at Samsung. 

So, we build processes for the first iPhones and smart Galaxy smartphones back in the day when, like, you know, there's, there's like, serious debates on whether. 

People will watch video on their smartphones laughs. That was a real thing. The execs were like, 

why would we watch video when you can watch a laptop where you're nice how how times have changed and so I spent a few years there a couple of years in the Samsung family office. 

And then I shifted gears a little bit came back to the US I went to business school at Columbia, in New York. I did a couple of years of consulting on McKenzie and then I moved over to the Bay area in twenty fifteen to joint venture. 

So formation eight was the first one that I joined and then and now the twenty so it's kind of been a mix of large and small institutional funds and now also a corporate back fund. 

So it's kind of I run again on different kinds of venture plans. That's really cool. Really nice. Beggar. I know. Just thinking that there were times when people were not sure if people will watch video on their phones. 

It's insane. For me. I'm too young for that stuff, but let's talk more about the twenty. So you mentioned that you've invest in one, construction tech and couple announced drones generally would you investing? 

Are there any specific fields that you are looking for, or some specific rounds as usual invest in Plus? Or is it as well? 

Yeah, so in terms of sectors, we're a journalist from so there's no mandate one sector that we have gone deep in is in industrials sectors. 

That are adjacent to what our parent company operates and so, the construction and manufacturing we are very bullish on many other sectors. 

And kinda tech world, then we,
as, 
as probably with all other investors in the industry and spending a lot of time and energy thinking through what are the implications of it on other sectors and spending private sectors, 

like education and the tech in terms of stage. 

We're really flexible actually, but then I'd say the sweet spot is around the Series A, when there's some metrics and then, you know, we've done, we've committed to the deal as well as a series B deal. So that's kind of the range right there. 

Alright, nice. So, let's talk about deal. Sourcing does the question that generally ask all my investors speakers so you're not an exception. How do you source your deals or do you find those investments that you make? 

Finally yeah, so for sourcing it's interesting. Right? Because I've been at the a branding, which actually that firm, no longer exists. 

But, and I've also been a small firm and now a brand new firm. So it really depends on what kind of from your end. Right? So, you know, kinda the brand name firms. 

I'd say the vast majority of deals are just kind of a flow in inbound for newer firms. Like us. We have to be much more proactive. Right? 

So, our sourcing is this kind of, I'd say, like three vectors. So, one is inbound. There's still, you know, deals that are introduced to us from other entrepreneurs and industry that I, that we know or other. 

So that's one. The second one is syndicating with other BC. 

So, talking to friends in the industry, just asking what they're working on, or if we have a thesis finding investors that have invested a lot in a certain space and saying, hey, we're really excited about the space. 

What what companies have you seen that are exciting or fun? Fundraising right now or coming up. And then the third one, my previous from this, this, this a lot, but is outbound sourcing right?
So,
you dive deep on a certain sector, 

kind of create a market map to figure out, which companies are interesting, whether you can kind of guess,
like, 

roughly when they'll be fundraising and when you reach out and kinda start the relationship and when they are fundraising because you spend lot of time thinking about that sector sometimes not all the time, 

but sometimes they'll reach out and say,
hey,
we did cover funding so it's kinda three three vectors. 
Nice. I really so, sometimes let's talk about the third one a little bit in depth. So that's another question that personally get a lot. So, like, founders asked me how do I get my company out there? 

So that, you know, investors could do some outbound as well will know is my company specifically. So, what are the sources that you find those companies that you actual reach out to? 

Are those some articles on CrunchBase CrunchBase itself based on some metrics or where do you find those companies that you reach out to? Yeah. So I think there's. 

There's, there's multiple ways, right? 

So one is, let's take construction tech, for example so there's several of industry, you know, conferences or industry research organizations. 

So, in construction, there's something called billed worlds and a lot of folks from the industry as well as investors as well as startups are involved. 

And so, you know, like those kinds of forums are great ways to get your name out there. 

And then also, I think some level of PR, and this is something that I thought a lot about over the years, how important is PR, I think you obviously don't want to spend too much time and much money on it. 

Right in a certain extent, when there's there's an opportunity to really showcase something that you've built, like a major customer relationships that you sign. 

And sometimes customers are really willing to stuff off the bat on that as well, because they want to show that they're kind of on the cutting edge. 

So, I think it's just really spending a lot of not a lot for spending a good amount of energy on figuring out how to get your name out there. 

So that when somebody is Googling for, you know, construction payments, for example, your name pops up or when what? I was speaking to other. 

Industry experts, they say, oh, there's, you know, company a B and C better plan the sector and we've seen some great things. Nice. Yeah, that's great advice. 

And personally, still, you know, I've spoken to multiple investors and founders and no one really gave me a good answer on how to PR. 

So hopefully, one day I'll have an episode where a person will be able to say a B and C and PR will give you X Y, Z in funding but it didn't happen yet. So let's go back into your earlier description of D. twenty. 

You said it's fully funded by a conglomerates and my question is, is it basically corporate venture capital? Or is it a family offices is a actual venture capital. 

Yeah, so I'd say it probably is closest to either just corporate. I mean, it is a corporate venture arm, right? So we are solely backed by corporate, which makes us a corporate venture. 

I guess the way we're a little bit different is that we're structured as an institutional in the sense that we have independent fun. The decision is made independently and there's no strategic angle. 

Right? So, you don't have to go back to our corporate backers and say, hey, we found this company to approve and we also don't have to say, like, you know, this company operates in construction. 
So we're only looking for construction tech companies. Right? So, we're very independent much like 
the other institutional VC funds that just the differences that we have one vector, which is a. 
That's really cool that you're, like, combine both good stuff from both worlds. So that's worth that. 

My next question would be about the differences between CBC and actual institutional investors in terms of the value proposition that those two have. So, can you name the major value proposition? 

That's let's say twenty specifically has versus some other venture capitals that you see or maybe even family offices. Sure. So, in terms of value proposition, I think with cbc's is quite clear right? 

So this access to the parent company, hopefully customer and partnership opportunities, but the downside, I certainly there too, right? 

So, 

sometimes some CVSS, 

it's not as common anymore, 

but we'll ask for, 

like, 

very strategic terms like, 

don't work with our competitors, 

et cetera and another potential potential downside is this is definitely not always the case, 

but is some signaling risk right? 

So, if you have a CBC meeting around, or it's priced around, sometimes, you know, follow on investors might say, or my think that that investor was not that sensitive on price. 

So did not optimized replace. So, it's kind of pros and cons. Right? Ten for institutional investors. I think it's less clear of what the value proposition is. 

So, I think it really comes, you know, you hear, like everybody says the value add and everybody will have some level some angle. But I think. 

And really comes down it's like the specific investor right? So you just have to do diligence on was this investor really helpful when invested in terms of their time, and energy, were they, you know, pleasant to work with. Right? 

Because if you partner with an investor, your kind of partner, we're partnering with, that person's for ten years, right? For branding firms. I think there's certainly positive signaling. Right? 

So, whether it's hiring or whether it's for follow on rounds and syndicating rounds, if Sequoia invested, then everybody's like, how, how great. 

So, and branding firms will certainly have that, right? Absolutely. Yeah. I mean, if you can get doesn't even if you don't need them as I would personally get that for sure. 

Like, no questions asked, but it's always up to you. So figure it out how to get that tide ship wasted. 

But let's talk about, who should go out and actually specifically targeted to, I mean, specifically targeted cbc's versus venture capital. So who should actually reach out to corporate venture capitalist 
versus venture capitalist themselves? 
Yeah, sure. So, I think I think every fund race should kind of the structure as a well organized process, almost like an enterprise sales process. You should have both institutional and corporate DC to begin with. Right? So. 

And on the on the CBC front, you know, trying to figure out which cbc's would be the best fit, not only from, like, the parent level, or actually. 

More from like the CBC level, right? So there might be a CBC of a large corporation that, at at a high level is such a great fit to your business by. 

But is that CBC actually have close ties with with the parent and will be actually be able to help and so so I think you kind of have to do that research, 

have, 

you know, 

a broader list of both institutional and CBC. 

And then if you do, have the luxury to prioritize our locations, and you can do that down the road. So, I mean, kind of a more directly to answer. 

Your question is, like, I don't think I don't think there's really a case where you say, I'm only going to raise capital from, you know, quote, unquote strategics are only gonna raise from institutional. 

I think you have to start the process with kind of the broader spectrum and then prioritize when you can. Right? Absolutely. That's great advice. You just narrow down your target as long. 

I mean, down the way, once you see who's interested and who's not that interested but let's talk about our main topic for the side of which is cross border investing. So use. So, D, twelve is connected to Asian markets, right? 

Yeah, so it's our, our backyard corporate Becker is a Korean company with most operations in Asia. This is a global company, but stronger in Asia so that's, you know, you could put it that way for sure. 

So does it question it doesn't make sense for a US based company would see if they want to probably, 

they don't even need to raise more money, 

but they want to go, 

let's say, 

to Asian markets doesn't make sense for them to go out and reach out to those crossport investing working with specifically with Asian markets. 

So so in the case where the company has no interest in in, going to Asia at some point. No,
there is specifically there is,
like, 
let's say, 
my companies very much interested in go into Asia as soon as possible, 

but we don't might not even need capital as much, 

but I know that there is, 

let's say I know that you are well connected to Asian markets sure, 

I go out and, 

you know, 

try to get some sort of. 

I see. No, I don't think so. 

I don't think you need to elaborately go out and fundraise just to develop those relationships and I mean, 

if you don't need the capital right now,
then I think you can develop the relationships without raising capital for those investors. 

Right? So, we're more than happy to develop relationships with entrepreneurs. I actually prefer it. Right? 

So that potentially, like, without needing to inject capital at this time, we can to use this process of partnering as part of our diligence. Right? 

If if whether it's our corporate back or its other industrials companies or other broader companies that we know I started working with the startup and we like them then it's much easier today. 

Conviction to invest down the road. And so I definitely don't think that you need a fundraise just for that reason, obviously, if you, if you need that extra capital. 

To go to a new market, then those kinds of investors can be higher on that priority list. Right right. Yeah, I just realized, like, how not good. My question sounded so sorry for that one. 

But the, let me try to rephrase that question and I want to put in the way that basically, if a US based company wants to expand to Asian markets, what's the best way to do it through angel investors here who are both working in the US? 

And Asia is it through corporate venture capital? Is it through venture capitals was basically the best way to expand to Asian market, specifically from the United States? Well, I mean, to to kinda put another way. 

And one thing that I don't think our early stage startup should be saying we want to go to Asia unless there's some specific pool. Right? 

So,
if you're a, you know, 
kind of deeper tech,
deep tech company,
then where,
where you work very closely with large companies on, like, 

a technology partnership,
then you probably want to go to Asia. 

Because some Samsung has expressed interest in your suddenly conductor or something like that. Right? 

And that's when you want to go, let's say a consumer company or a SAS company, you probably want to think about Asia if there's some organic. Cool. Right? So, if. 

You're finding you don't have a presence out there, you haven't even localize to the language, but but there's consumers from Asia that are signing up right then and that's probably the best catalyst as an example. Right? 

So, we want to my previous funds, we invested in an online learning platform. They didn't even have a local payments system, set up. 

They didn't have localized languages, but they still had a bunch of people signing up from Asia. Right? And so that's when,
you know,
from that company's perspective, 

you kind of prioritize your resources and say,
okay,
do we go international now and really set up an office there and localized and if, so,
which markets to directly question I think,
without that kind of pool just to kind of blindly say,
let's,
let's go to Asia,
I think,
is is pretty risky for an early stage startup. 

And so, when you do have that pulled, and there's more there's a broader array of people they can lean on, whether they're resellers and whether they're, you know, strategic partners in in Asia or any other 
markets. 
So you don't necessarily the investors. But if you do have, that's if you do have an investor that does have expertise in that market or, you know, international markets, they can help you think through. 

Which markets to prioritize and the timing right right. So, my next question was, which stage should founders start thinking of going in globally or going specifically to Asia? But I think you kind of answered that. 

So, my next question would be, how should they prepare for that? So, let's see, I'm somewhat early stage start. I started getting some customers from Asia. I know that I should go there someday. How should I start preparing for that? 

If I don't really, I'm not ready to go there now, but I know that in a year I'll be in Asia. My company open. Yeah. So kind of referencing that online learning company. 

I think you focus on your own market or your major market if the product is great if the, you know,
if it's a two second market,
if you have supply and then organically, 

you'll get interest international. Right?
So,
I, 

I don't think it's necessarily, 

especially for early say, 

starts really kind of proactively preparing is more really kind of perfect the product, 

make your home market customers happy and then the rest will follow. 

So there's because it's just such a huge endeavor to try to prepare in advance for to go into Korea, for example, right. There's different payment systems so you have to localize the language. 

There's many different nuances and so, yeah, I wouldn't really recommend preparing too far in advance. And I kind of let your customers dictate where you want to focus on that. 

Right, right that's good advice. I think, you know, don't spread yourself too thin that killed multiple company. So be careful with that. My next question would be about. 

Fundraising now, so, during the you mentioned that, you know, you spent quite a while, you know, thinking about how your investment thesis changed and what's your advice to early stage founders now trying to raise my yeah. 

So, there's, 
you know,
there's a lot of talk about activity being high right now, 

but I think there is a of so can value insiders or startup world insiders being able to raise versus founders without a strong of a network or entrepreneurial tech record. 

They're finding a tougher right because it's just hard to the network. It's hard to just kind of plop yourself down and San Francisco and, you know, try to meet as many as possible. And so I think. 

Just overall right there, so it's not, I think, I think it's still a tough environment to raise capital. 

So, I think, you know, from that sense is important, kind of, as I mentioned, mentioned before to get organized and create an enterprise sales type process in doing investor outreach. 

I think it's important, not to optimize on evaluation and kind of let the market dictate the price. And then I think it's important not to take things personally. Right? So I can anecdotal experience, right? 

On the, on the other side of the table. I've pitched hundreds of limited partners invest in my previous funds. Right? And, and many times, to be honest, I took it personally when I was turned down. 

But now so, you know, twenty has invested in a couple clients. So, beyond the other side of the table, I quickly realized that see, tons and tons of different funds and invest in new ones a year, such a stack. 

Right stack rank them. It's hard to make a case that the funds that I was a part of in the past were the absolute best. Right? Likewise. Probably over a thousand companies a year, right? Yeah. 

And so, you start a founder and your business will be the right fit for someone. But, not for all, and maybe not for many. Right? So I think it's. 

It's important, you know, not take it personally, kind of take any feedback that you get. You know, sometimes the feedback will be very helpful and sometimes kinda DBS to take that. 

And, 

you know, 

if if you've developed the relationship with even if they pass, 

you know, 

try to ask for other intros if somebody says, 

so it was too early to maybe ask the, 

do you know any kind of earlier stage investors that you had before as you probably won't always get like a very good. 

You know, meaningful intros, but you might get some and those are going back to the enterprise sales process that, you know, those intros kind of fill that fill the top of the funnel again. 

The processing you to go down, right? Absolutely. And that's the advice. In terms of, you know, asking for more chose it is great. You never know who you're gonna run into. 

Sometimes you get completely useless people, but sometimes you just get golden nuggets out of nowhere. It happened to me both times. And I'm like, how did this even happen? And the answer is you just, I just kept asking for that. 
So, let's move onto the last question of these episode, which is a call to action. What's the one thing that you want deletion to do? As soon as the app is always over. Yeah. 

So I guess this is fundraising radio, assuming listener is fundraising, or considering fundraising in the, you know, 

in the near term I think, 

I I know it's kind of a broken record at this point, 

but just getting organized, 

treating it as a, 

you know, 

very organized sales process use a tool if if you have one or, 

you know, 

a very organized spreadsheet can work as well and then, 

and then, 

you know, 

try to get to fill the top of that funnel. 

So with investor outreach, warm intros are always recommended. 

But also, you know, we recognize that not everybody has has those connections to make those warm tones. Right? So, I think, you know, don't be afraid to, for email. 

And once again, you know, don't take it personally, if that's just like, it's, it's worth a shot and just make sure that those emails are a thoughtful and a personalized message. 

A lot of times I I just did very, 

obviously kind of a mail merge or just, 

you know, 

random ads on LinkedIn and so that's not really that's not really creating a high chance for you. 

So, I think being thoughtful and and personalizing the message and cold emails, me, we try to at least respond to all of those, right? Yeah. 

I mean, if you right get high quality, personalized email, the chances are really high that the personal ways we'll say. 
I'm sorry, it's not a good time for us right now, to get. Definitely do that. Put time into that. And as you 
said, don't take it personally, you know, stuff happens all the time. So we'll wrap it up here. My personal recommendation is go to the description of this episode. 

First of all, we have started our YouTube channel. So now, fundraising radio is not audio only but video as well and I'll leave a link to D twenty. Of course. So that you can take a look at the website. 

And if you think that you're a good fit, reach out to them. So, have a great day everyone and check the description of the interview.