Joseph is a Partner who joined in 2013 and has since covered our “kitchen” — portfolio management, operations and advising startups on finance and fundraising. He is also in charge of connecting the ecosystems between Japan and Taiwan. Prior to AppWorks, Joseph spent 11 years with the CID Group, a Greater China leading venture firm, where he helped raise US$575M across multiple funds and headed portfolio management. Prior to that, Joseph served as a Manager of Backbone Network at Gigamedia, a NASDAQ-listed broadband ISP. Joseph earned his Master in Agriculture Machinery Engineering from National Taiwan University. He is native in both Mandarin and Japanese.
One of the biggest challenges among first-time founders is putting together their first priced fundraising round. In markets like Taiwan and Southeast Asia, the venture ecosystem is still relatively young, leaving a number of misconceptions around deal making among both entrepreneurs and investors alike. Some first-time founders, especially those from blue-chip backgrounds or elite pedigrees, may treat the deal process as a competition driven by game theory—where there must be a winner and a loser. From my experience, however, treating discussions with investors as a win-lose proposition only leads to mutually-assured failure. Everyone should leave their egos at the door.
What’s at stake when a founder tries to over optimize their own self-interest? Some investors may choose to walk, making the fundraising process that much tougher. Worse yet, you may end up bringing on angel investors who begrudgingly put some skin in the game, but not enough to really help you out when push comes to shove. Setting a good faith tone between founders and investors from the getgo will make it much easier for both sides to come to an agreement. While a startup’s first round of fundraising may seem like a standard process, it sets the long-term legal and financial foundation for the company’s relationship with investors, making it mission-critical for founders to understand exactly what they’re getting into.
1. Find a founder-mentor
The most valuable thing that a first-time founder should do—and maybe the first thing they should do when starting a company in general—is find a founder-mentor, someone who has been there, done that, and knows the ropes of fundraising and term setting with early-stage investors. Founder-mentors can be powerful advocates and filters for your company when sourcing customers or potential backers. Remember, as investors run due diligence on you, it’s important that you also conduct due diligence on them as well. Not all investors are created equal, and you may sometimes find that their actions contradict their words only after the ink has dried.
That’s why first-time founders need to surround themselves with the right people. Mentors and angel investors play an indispensable role in guiding founders to understand the true nature of the founder-investor relationship. By seeking out founder-mentors or angel investors who have experience working with venture capital firms or joining an accelerator program that provides mentorship, first-time founders can better navigate the fundraising process with much greater ease. Finding such advocates will help founders avoid bad actors, understand term sheet best practices, and put the startup on a solid footing for the journey ahead.
2. Mind your timing
Before any team looks to fundraise, the most important factor is timing. Timing is everything. Investors want to invest in attractive companies in an attractive space. First-time founders should initiate fundraising efforts after gaining traction, signing on new customers, or proving out your MVP. The less founders have to show for the company, the worse the valuation and terms investors are likely to provide to discount the uncertainty, unless you already have some sort of track record or successful exit behind you. On a more macro level, VCs tend to invest in underlying paradigm shifts, so always be prepared to answer: why now and why you?
3. Use a savvy lawyer
Another area that frequently trips up first-time founders is finding quality legal counsel. In developing markets, founders cannot rely solely on lawyers to negotiate in their best interest. Outside of the Bay Area, venture capital is simply not a large or profitable enough vertical for legal specialization—so venture deals are often a low priority for emerging market lawyers. When it comes to structuring a deal, lawyers play a fleeting role as the relationship may be strictly transactional. Their nature is based purely on winning something on paper for their clients, and once the deal is done, they move on to the next client. For investors and founders, the first term sheet is just the beginning, as each round of investment adds another layer of complexity, requiring a solid foundation to build off of, with the initial term sheet setting sustainable grounds for the company’s development. Accepting a lousy term sheet is like building a house on poor soil, setting the structure up for collapse under adverse circumstances.
4. Understand the value of vesting
One of the most frequently misunderstood terms among first-time founders is vesting. Many founders ask me, why is vesting necessary? Or perhaps fear that the investors may try to drive out the founding team down the road for replacements. Vesting is a prevalent industry practice, acting as a mechanism to create forward-looking incentivization and alignment between founders and investors. Investors want founders to be in the deal for the long haul, rewarding their dedication to the company. I have found that vesting-related issues most commonly arise among solo founders, where there is significant key-man risk, whereas teams with multiple co-founders tend to reinforce one another to buy into vesting terms. If there is no founder vesting in place, co-founders who leave abruptly can just as easily take their shares with them. I’ve seen cases where 40% of the cap table is locked away due to a co-founder who decided to jump ship, leaving the other founders and investors with little recourse to salvage the company’s ownership outlook. For a more comprehensive explanation of founder vesting, you can reference this article.
5. Be wary of uncommon practices
As far as industry best practices go, there are some less common terms that may put founders at a disadvantage if not understood properly. For example, an investor can try to secure excessively generous veto rights, which could come into play if a company is looking to stay afloat by initiating a down round of financing. In some cases, I’ve seen an investor veto the round as they thought the company could still raise at a markup. In the end, the company had to shut down. To mitigate such an issue, it is important for founders to carefully design your cap table and avoid agreeing to unnecessarily strong minority veto rights, unless you believe the situation truly calls for them.
There are even more stringent examples of uncommon terms. Some investors may force upon founder unfair guarantees, requiring founders to be personally liable for unforeseen tax consequences and subsequent reimbursements to the company. This should be a major cause for consideration, as founders typically should not be responsible for these kinds of issues outside of integrity or fiduciary duty-related issues. Nevertheless, unusual terms are put in place for unusual circumstances. Every deal is contextual, so be sure to understand the full scope of your situation and adjust the terms accordingly.
It is also worth noting that in emerging and frontier markets where venture capital tends to be more scarce, some investors—especially those from traditional backgrounds—may view and treat founders as employees on the cap table. Now, there are certainly founders that do in fact appreciate and require this level of involvement or guidance; but, for many, these types of investors may end up micromanaging every course of action, leaving little room for creative freedom, flexibility, or control. It’s imperative to understand which camp you prefer.
Playing the long game
Now, is there any difference in term sheets for emerging markets compared to mature markets like Silicon Valley? Not really. There are global standard practices and terms that appear across markets that are consistent with the asset class; however, each market and sector have their own unique conditions that require investors and founders to adjust terms accordingly. Local investors may better understand regulatory conditions or cultural sensitivities, which allow both sides to come to an agreement that may better suit the on-the-ground circumstances of the market and company.
Ultimately, a term sheet is just a framework for partnership. What’s more important is whether or not you can see yourself working with this investor for the next 5-10 years, and then setting the terms from there. Over the past decade, financial literacy among first-time founders in Taiwan and Southeast Asia has improved dramatically. Investors have also adopted global best practices to help them win deals by removing once-common archaic harsh terms. For AppWorks, we aspire to work with founders throughout the entrepreneurial life cycle, guiding first-time founders in term sheet discussions and ensuring that founders are equipped with the tools for long-term success. Term sheets should not be a win-lose proposition for investors and founders. As the ecosystem matures, the market will naturally filter out bad terms, leading to better investor-founder dynamics that foster higher-quality investment and innovation.
【If you are a founder working on a startup in SEA, or working with AI, Blockchain, and NFT, apply to AppWorks Accelerator to join the largest founder community in Greater Southeast Asia.】
AppWorks’ a number of key internal promotions, including 2 Principals Alyssa Chen, Ching Tseng, and Associate Jun Wakabayashi (from left to right).
AppWorks, a leading venture capital firm and accelerator in Greater Southeast Asia, today announced a series of institutional and organizational developments in tandem with a number of key internal promotions.
As part of its organizational upgrades, AppWorks has established new arms that encapsulate the firm’s core mandate components, including dedicated arms for its accelerator and web3 practices. To drive these programs, AppWorks made a number of key promotions, including Alyssa Chen, from Associate to Principal to oversee AppWorks Accelerator arm; Ching Tseng, from Associate to Principal to lead the newly created web3 arm; as well as Jun Wakabayashi, from Analyst to Associate to head AppWorks Beacon Funds operations. These promotions reflect AppWorks commitment to cultivating talent and recognizing and rewarding excellence within the firm.
In addition to these developments, AppWorks will begin its fundraising process in Q2 for AppWorks Fund IV at a target size of US$360 million.
As the foundation of the AppWorks ecosystem, the AppWorks Accelerator is held twice annually, welcoming entrepreneurs focused on the firm’s core mandate of AI, blockchain and Southeast Asia (“A.B.S.”) to attend and gain close mentorship from the program to build founder fundamentals, accelerate business growth, and gain access to funding opportunities. Since its establishment in 2010, AppWorks Accelerator has built a community of 1,402 alumni entrepreneurs, operating 435 active startups spanning across the region with combined revenues of US$13.9 billion, cumulative fundraising of US$4.7 billion, and 20,169 jobs created.
The firm also runs the bi-annual Wistron Accelerator, a joint collaboration between Wistron, one of the world’s largest suppliers of information and communications products, and AppWorks, that recruits outstanding founders across AI, IoT, cloud, information security, education and medical verticals. As more corporates aspire to establish their own vertical accelerator to bring them closer to startups as well as help startups partner with traditional industries, AppWorks decided to further institutionalize its accelerator arm to bridge the gap and amplify the firm’s existing efforts to cultivate the next generation of founders.
For the firm’s web3 investment strategy, as a new paradigm in technology transforming the digital economy, by establishing the web3 arm, AppWorks will focus on providing entrepreneurs with targeted resources to drive web3 mass adoption and support innovation in new business models. The firm will also assist founders in web1 and web2 spaces of its founder community to pivot to web3 models, bridging traditional startups into the blockchain space. Since its entry into blockchain in 2018, AppWorks has accelerated and invested in a total of 75 active new startups and 141 entrepreneurs in the web3 space, including Dapper Labs, Figment, Animoca Brands, Blocto and XREX, among others.
As part of AppWorks commitment to building a comprehensive venture ecosystem connecting Taiwan with Southeast Asia and the global blockchain industry, the firm has launched the AppWorks Beacon Funds strategy, to date backing more than 20 venture capital funds off AppWorks GP’s own balance sheet. Select AppWorks Beacon Funds include Pantera Capital, Animoca Ventures, AC Ventures, Asia Partners, Golden Gate Ventures, and others. In addition to sharing know-how, through cooperation, AppWorks Beacon Funds strategy generates co-investment opportunities, provides global due diligence and landing support, and builds portfolio company synergies throughout the ecosystem. Roughly one-third of all AppWorks investments are now sourced from AppWorks Beacon Funds. The firm plans to invest in 10 more funds every year aligned with AppWorks’ core investment mandate.
“Through the combined effort of the AppWorks portfolio company founders and our team, the AppWorks ecosystem has experienced remarkable growth since its inception. We are proud of the performance and contributions of Alyssa, Ching, and Jun—and we have decided to put on their shoulders greater responsibilities as part of our institutionalization process,” said Jamie Lin, Chairman and Partner, AppWorks. “With these structural improvements and our upcoming Fund IV, AppWorks will be more ready to create an even greater impact on the development of Taiwan and Southeast Asia, supporting more entrepreneurs, and accelerate emerging and innovative new segments of the digital economy.”
The organizational upgrades come with the firm’s recent success in key investments, such as 91APP and FLOW, designed to accelerate the firm’s momentum in key investment areas. With a 2014 vintage, AppWorks Fund II (US$51 million) has achieved an annualized internal rate of return (IRR) of 29.3% and a distribution to paid-in multiple (DPI) of 1.34x. The firm’s AppWorks Fund III (US$150 million), vintage 2018, currently posts an annualized IRR of 92.9% and has also begun to generate substantial distributions.
To further drive the growth of the AppWorks ecosystem, the firm is actively recruiting investment associates passionate about venture capital in Taiwan, Southeast Asia, and the global web3 industry. AppWorks offers globally competitive pay and packages, with salaries ranging between US$92,000 to US$180,000, and annual childcare assistance of US$12,000 for each child 0-6 years old.
Alyssa Chen – Principal
Alyssa Chen oversees the AppWorks Accelerator, Wistron Accelerator, as well as AppWorks alumni, mentor network, and community programs. Alyssa joined AppWorks as an intern during university, later returning to the firm as an Analyst in 2016 and promoted to Associate in 2019. During this period, Alyssa drove the rapid growth and regionalization of AppWorks Accelerator, incorporating the core mandate of AI, blockchain, and Southeast Asia (“A.B.S.”) and successfully implementing a hybrid in-person/digital model for the accelerator in response to the global pandemic. In 2021, Alyssa successfully launched the Wistron Accelerator vertical accelerator in cooperation with Wistron.
Ching Tseng – Principal
Ching Tseng oversees AppWorks investments in global web3 projects, and started with the firm as an intern in 2015. Joining the firm after graduation as an analyst, Ching was promoted to Associate in 2019. With a passion for blockchain and its associated applications, Ching has built the firm’s web3 practice from the ground up as an early mover in Asia’s web3 ecosystem, bridging Taiwan to global projects and teams. Select investments include Dapper Labs, Animoca Brands, Blocto, and CHOCO TV (acquired by LINE), among others.
Jun Wakabayashi – Associate
Jun Wakabayashi leads the day-to-day operations of AppWorks Beacon Funds, overseeing investment activity in Greater Southeast Asia and coaching the accelerator team. Born and raised in the United States, Jun joined AppWorks as an Analyst in 2017, driving the regionalization process of the AppWorks platform, and engaging with startup communities in Greater Southeast Asia, gradually winning the trust of entrepreneurs, investors, and ecosystem builders. Jun’s efforts have enabled AppWorks Accelerator to attract outstanding entrepreneurs in Southeast Asia, generate tangible results for the AppWorks Beacon Funds, and investing in regional startups including EMQ and Beam.
【If you are a founder working on a startup in SEA, or working with AI, Blockchain, and NFT, apply to AppWorks Accelerator to join the largest founder community in Greater Southeast Asia.】
對身為台灣第一批報導數位產業的記者，至今從未離開過這個產業的我來說，見證台灣過往 20 多年的發展，一定會有某種程度的「不甘心」。在 1990 年代後期，全球 Internet 第一波浪潮中，台灣曾經位居跑得很前面的領先集團，在入口網站 (Portal)、電子商務、搜尋引擎、通訊軟體或是其他不少垂直領域中，台灣都曾有很優秀的創業者，在當時的起跑點，寫下讓人非常驕傲的成績，但在 .com 泡沫後，劇情急轉直下，在隨後而來的 Mobile Internet 浪潮，我們卻只是擦身而過。
