500 Startups – Eddie Thai, and the Art of Investing
It’s a story that we’ve heard a thousand times before—a hardworking couple migrates to the United States to find the American Dream, who then establish a life for their son or daughter upon whom they instill the same hardworking values, who then pushes himself to highest echelons of success, and who eventually decides to return to the home and dedicate his life to helping out the land of his forefathers. But it’s a story that so rarely plays out without hiccups, speedbumps, and life-changing revelations.
One man who has embodied the age-old tale and still exudes it with each day is Eddie Thai of 500 Startups, a leading global venture capital seed fund and startup accelerator. Eddie Thai has spent his professional life helping startups and small businesses move forward—from the fringe logistics to the heart and soul of operations—and continues to search for startups to invest in everyday. We sat down with Eddie and asked a few questions about the life of a man who plays a modern day God with startups.
Starting in the Industry
Eddie grew up with the average American childhood after his parents migrated to the States from Vietnam in the 70s. It could only have been the pinnacle of the American Dream when he was accepted into Harvard University, where Eddie studied Government and Economics. Unsure of what to do with his life (like most college students), he went into Management Consulting, where he experienced what would perhaps become the roots for his career—managing and consulting for a variety of businesses in different industries, with tech startups drawing the most interest. “It was strange,” Eddie says with a chuckle, “because most tech startups don’t have the budget to hire a high-priced consultant.”
“We got all these cases you could choose, or you could choose a startup that needs help.” According to Eddie, choosing the scrappy startup over the established business was always more rewarding. Why? “Observable impact,” Eddie answers. “When you work with a startup, you can see an observable impact with the way consumers live or the way businesses run.”
It was this initial exposure that orchestrated Eddie’s philosophy not only in his career choice, but in his entire life plan. Soon after Eddie realized his impact would be much greater in Vietnam than in the States, where the problems were larger but at the same time more susceptible to his influence. After partnering with 500 Startups, Eddie received ten million dollars for investing purposes in Vietnam.
The Vietnamese Startup Scene
When asked about Eddie’s first impressions with the Vietnamese startup scene, he had one automatic answer: “They’re scrappy, definitely.” So what exactly is scrappy? Eddie gave us an example: If he consults with a certain group, gives them advice, tells them areas they can work on, and if he comes back to them a week or two weeks later and sees that they’ve had little to no progress on his recommendations, then that’s a clear red sign. Scrappiness is how much hardwork a group is willing to seriously put in for what they love—scrappiness, in Eddie’s words, is your pain. “Passion is easy—anyone can be passionate. But if you show me that you can go through pain? That’s great.”
Vietnamese founders surprised Eddie. While the environment was as he had expected it to be—young population, strong in math and science—the personal touch was something he couldn’t find off Wikipedia. “Vietnamese founders were a lot stronger than I expected them to be. Whatever advice I gave them, they knew how to apply it right away.”
How To Lure The Best Investors
So how do investors like Eddie pick and choose the right startups? The ability to suffer and the acumen to apply advice quickly, as mentioned above, but Eddie’s third point is, as he says, “The capacity to sell.”
The difference between developed markets and emerging markets is huge, but perhaps the most relevant difference is the type of startup the market requires. When you’re competing in the Western developed markets, most needs have already been filled, and the only way to make it big is to develop something truly innovative. But emerging markets are a different story: most of the time, these basic needs haven’t been filled, and so the easiest way to find success is to mimic a popular app or product from the West and apply it to the local scene. If you have the ability to localize a proven product, with the numbers and know-how to back you up, you already have what Eddie calls the “Unfair advantage”, which should get you investors in no time.
Diving Into The Deep End
A startup can be a serious commitment, one in which you have to decide on three fundamental questions right from the beginning. Firstly, are you trying to build the next billion dollar company, or are you trying to build a lifestyle company, which will earn a steady stream of cash for a few years? Secondly, as a founder, what is your financial position, and how much risk tolerance can you afford? Thirdly, do you have a target audience in mind, and are you solving a real problem this target audience may have? These are questions Eddie thinks about before backing any startup, questions any startup must ask themselves before they seek any kind of funding.
In the end, it’s all about your level of commitment towards your goal. There are a ton of cases where Eddie ends up comparing two different startups with exactly the same product. One company has some focus on fundraising, on side projects, and on advertising, while another company has all of its focus entirely on product and ensuring that they’re solving tangible problems to a tangible audience. The answer? Always the company going all the way. Always the founders who are willing to suffer.