On 28 August 2021, 3 pm-4.30 pm (VNT), the Etalk – Adventure to the Venture: Special Chapter – Dermot Berkery with the theme Venture Capital in the emerging world was held by Wiziin Inc. via Zoom. The webinar was open to entrepreneurs, experts in the venture capital industry, or anyone else who is interested to learn more about venture capital. 80 people from many countries including Vietnam, Ireland, Singapore, Canada… were in attendance.
Host Tien Nguyen is the co-founder and CEO of Wiziin Inc., an AI-Based Investment Platform helping small and medium enterprises to get better and cheaper fundraising support while creating more value for venture investors. As a former Government of Ireland Fellow, Tien Nguyen has numerous entrepreneurial experiences throughout Ireland, Germany, and China.
Guest Speaker – Dermot Berkery is a General Partner at Delta Partners, a leading European venture capital company that invests in Ireland and the United Kingdom, for 22 years. Dermot has made 163 investments and 66 exits and has 32 companies in his current portfolio. Dermot wrote the book Raising Venture Capital for the Serious Entrepreneur, which is used as a textbook on VC in MBA programs around the world and in the Top 10 Best Venture Capital Book of All Time.
Tien kick-started the webinar by sharing his view on Ireland & Vietnam Entrepreneurship ecosystem and the bilateral relationship between the two countries. According to Tien, Ireland is a well-established entrepreneurial market with an active network of professional angels and syndicates, low taxes for businesses, multiple acceleration programs, and a strong and growing network of local seed funds and venture capitalists. Ireland has been investing heavily in Fintech, Biotech, Pharmaceutical, and currently renewable energy. Meanwhile, Tien opines that Vietnam is a nascent entrepreneurship market with a young and big population, stable political scene, high urbanization and technology adoption rate, good internet infrastructure, and numerous technology talents. However, Vietnam still has multiple challenges for VCs including lack of Government support, regulations and standards for VCs are not yet established, and foundational sciences are still developing. The market is very young and properties are not well protected, making investors hesitate to make investments due to high risks. As Ireland aims to build long-term and strategic relationships with Asiapacific for bilateral development, Tien opines that Vietnam can also learn a lot from Ireland to grow its VC ecosystem.
Following this, Dermot shared his experience of investments with Delta Partners. Delta Partners has invested in 120 companies in the IT, internet and digital sector during seed and early-stage (Series A) with a draw ranges from $300k-$800k and $2m-$3m, respectively. A typical growth path for a startup lasts 5-9 years, going through 5 stages as illustrated in the diagram below.
Delta Partners leverages its network and experience to help entrepreneurs to grow their small businesses in the first five years and then sell them to US big companies in the next five years. Dermot shared that Delta Partners does not do theme investments but invests in any business that works. Dermot stressed that it is important for entrepreneurs to hit the milestones set for each stage, as it would increase the valuation of the company and convince investors to continue pouring money in to grow the company.
Dermot stated the rule of thumb for $100mil is that each investment must have the chance of returning 10 times the investment, or 20% of the total fund, which is approximate $20mil. Some people might think the 10-time return from an investment is crazy, but Dermot opines that unless a business has such potential, investors will not invest in it in the first place. The below chart shows the investments and returns made by Delta Partners, where some investments lost all the money, but a few made more than 80% of the fund and that saved all the rest.
Dermot clearly highlighted the interesting philosophy of venture capital is to make small bets to win big money. “It is not so terrible for venture capital to lose money, but it is terrible not to win big when it does win.”, he said.
Dermot then moved on to answer the queries posted by the host and the participants. Below are the 5 most interesting Q&A of the session:-
- Could you share your experience of raising money from Partners and how do you feel about it from a VC point of view?
- For those who don’t know yet, VCs don’t just do investments but they have to fundraise from Partners, typically Government or high net worth individuals.
- It might be hard for entrepreneurs to fundraise as capital is scarce, but it is even harder for VC as the investors have to invest for 10 years.
- It is advisable to start your VC career with one that already has good track record and credibility so that the investors are more confident to invest.
- Investors usually do not want to be the first to invest, they follow other investors. Government or the bank can be the cornerstone of the investment.
- Should entrepreneurs in countries such as Ireland and Vietnam copy business models from fast-growing companies in the United States?
- Dermot advised that a thorough analysis should be carried out to determine which business and market to go for. For example, Ireland with a population of only 5 million people is too small a market to develop a business like Google for Ireland.
- In general, VCs look for innovative businesses instead of just copycats.
- What do you do in a day?
- Half of the time we help the companies in our portfolio to grow their businesses, acting as their adviser.
- The rest of the time, we hunt for good business. We seriously HUNT, taking the initiative instead of waiting for entrepreneurs to find us. If you have a good business idea, we want to find you first before you come to others for investments.
- What do investors look for from entrepreneurs?
- VCs make up their minds very quickly, and they can decide whether a business can work within 10 minutes in the presentation. VCs will lose their interest if entrepreneurs cannot summarize their businesses in 1-2 slides. The entrepreneurs have to be able to show their thorough understanding of the industry they are going in, and issues that they are trying to solve, and how their products can solve the issues.
- Dermot opines that ideally there are 2 to 3 founders for a business, and all founders should speak up in the presentation instead of only 1 person doing all the talking.
- VCs do not necessarily know exactly how technologies work as these could be easily examined by third parties, but VCs expect entrepreneurs to pitch their business ideas clearly in plain English so even a person with no technology background can understand.
- Do you keep in contact with the companies who lost?
- Of course! These entrepreneurs spent many years developing their products and they learned valuable lessons from their failures. Hence, they are very good resources for the next projects!
This online sharing event with Dermot Berkery has closed the webinar series of six chapters Etalk: Adventure to the Venture by Wiziin Inc. We hope that the speakers’ sharing and insights have benefited greatly to all who are interested in the venture capital industry.
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