Gen.T+
The founder of early-stage venture fund S28 Capital shares his investment strategy, what he looks for in a founder and the pitfalls to avoid in the early years of a startup
Valuations, venture capital and a very uncertain economic outlook—this may not be the optimal time for fundraising, but there are still pockets of opportunity, says Kent Ho, founder of S28 Capital.
The US-based early-stage venture fund with $300 million under management invests primarily in enterprise SaaS (Software as a service) companies. It has invested in companies such as Zoom, Coupang, Teleport, and helped to build Panther Labs and Rudder Stack.
Last December, Ho participated in our Catalyst Series roundtable with J.P. Morgan Private Bank, speaking to a group of Gen.T honourees about investing and innovation in Hong Kong.
Read more: In pictures: Roundtable discussion with S28 Capital founder Kent Ho
Regarding himself as a generalist investor, Ho enjoys discovering new opportunities in old industries, where software has an opportunity to drastically improve productivity and efficiency.
The Kentucky-born, former Goldman Sachs banker spent a decade in Silicon Valley before moving to Hong Kong in 2012 where he is currently based. He also serves as a board member of Hong Kong Science and Technology Park (HKSTP).
Here, he shares more about his investment strategy and whether startups should be raising funds in this current economic climate.
Just because you can raise money doesn't mean you should. You have to ask yourself why you are raising money
What do you look for when considering investing in a startup?
Kent Ho (KH): It’s different depending on what stage of investing you’re doing. We’re seed investors, so we’re oftentimes investing in companies at a pre-product or no-revenue stage. So it’s a function of evaluating market size and founders. I always say it's founders first and market sizing second.
Market sizing is obviously important—is somebody building a company in a market that is worth building something?
There are many layers you can peel back, and evaluate a market and the opportunity. Every market is not a $100 billion market opportunity, and [the next question is] what percentage of the market are you really going to capture? These are things you have to come to some sort of unique insight or have conviction about.
The other really important thing is the founder because you need to understand that personalities are all different.
It’s really challenging to be a founder because it’s such a long grind. [The journey is] not always rosy; it’s probably more negative [and filled] with problems than it is rosy. And you never have perfect information, so you’re trying to figure things out and make decisions rapidly.
You need to be able to identify which founders are special. Sometimes they have great strengths and extreme weaknesses—how do you identify these and combine them with other people to be able to build companies? That’s an art, and that’s also why you need to have a portfolio approach to venture capital. You can’t just invest in three companies and call it a day.
It’s interesting how you describe the founder selection process as an art.
KH: There isn't a formula. Think about [it in the context of] art—how do you know which artists will be popular and successful in the long term and which will do well as an investment? It’s hard to tell, although some people may have personal connections with certain artists and think they’re geniuses and that kind of drives demand.
I think it’s similar, in a sense, with founders. The only difference is, for companies, we have to find product-market fit.
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