As I started having a conversation with international VCs and CVCs, I noticed there is a big difference in the way they ask questions when they meet a startup founder for the first time.
Domestics VCs or Japanese investors always start a conversation by asking a question like what kind of problem the startup is trying to solve, a product or service the startup is offering, and traction the startup is having at the moment. In short, they want to know a product/market fit and potential market size. Simple.
In contrast, those who are based in North America, the Middle East, SE Asia, and China tend to start a conversation by asking how co-founders meet, the background of each founding member, and a history of the company formation. Their focus is on the people, not on the product. This applies to a startup beyond series A stage that is ready to scale its business.
When I talk to domestics VCs, I never pay too much attention to talking about the founding member’s background because I’m never asked to do so. The slide about the founding members always comes at the end in the pitch deck and I often have to skip it by running out of time. However, I was recently advised to bring that slide to the beginning when I talk to international VCs because that’s what they want to know first.
Why the difference? My understanding is that the belief of the latter group of people is the best investment return comes from a strong founding team, not a strong product. This makes sense given that the startup might have multiple products or businesses in the future. Some might work out okay while others might not.
The startup can survive as long as there is a strong founding team even if all products fail. They can pivot or make adjustments according to changes in the market, and release a new product along the way. If the startup has a strong product but no strong founding team, then it will have to face serious trouble when a big company enters the same market or the product is not selling well anymore.
Maybe this difference is partly due to the fact that there are more serial entrepreneurs internationally than in Japan. VCs need to justify if the founder is a serial entrepreneur or not because that fact alone can change the success ratio of their investment a lot.
Not sure if I’m considered serial enough, but I like the way they treat entrepreneurs. I really encourage Japanese investors to take a hard look at the founder’s background and put more weight on the uniqueness of the founding team.