The 4 types of VCs in Asia

The sparkling glitter that spread across the night sky you saw on your last camping trip is perhaps how most entrepreneurs see venture capital firms.

Photo credit: Greg Rakozy

Some are gargantuan in size, some are small and focused, while some shine brightly and bring the heat along with them. I will use the solar system to illustrate the different types of VCs we see in Asia.

Different VCs will have different funding strategies. Despite the differences, I believe that VCs fall into one of these 4 general categories. As an entrepreneur, you’ve probably met, pitched to, and even received an investment from a VC from at least one of these categories.

1. The “spray and pray”

The “spray and pray” VC has deep pockets, a fund size of more than US$100m, is usually run by charismatic ex-entrepreneurs cum investors and they tend have a strong FOMO (Fear Of Missing Out) mindset, which is not a bad thing at all.

This is the VC that is the most suitable for greenhorns, visionaries and daredevil-type entrepreneurs as they take the gamble in your forward-looking, let’s-change-the-world kind of energy. This type of VCs usually appear in the list of “most deals made in a year”.

Solar system classification: Jupiter — size matters.

2. “Government-linked fund”

Now these are the tricky ones. These VCs have a huge fund size, but you will face tons of red tape before they invest and release the funds to you.

Usually, exit-ers, executors and visionaries love this type of VC. With strong government connections, their funded entrepreneurs would end up running their accelerator/ incubator program and become mentors, depending on the government initiatives.

Screw with them shall you not, although they may not hunt you down and blacklist you. They would spread the news, and even if you manage to get your business properly up and running, your chances of getting other VCs to fund you will be low.

This is why posers and bullshitters avoid them at all cost.

Solar system classification: The sun — brings the heat of the sun on your back.

3. “Incubate, hold my hand, and let’s make money”

Usually a fund branched out from some accelerator/ incubator.

They usually invest in small amounts, but tend to support your business very closely.

4. “Let’s make billions!”