#394 Demystifying Startup Fundraising: Gagan Singh on Private Markets and Secondary Deals

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Mehmet: Hello and welcome back to a new episode of the CTO show with Mehmet. Today I'm very pleased joining a friend which I knew him since like a long time now, I think almost two years, Gagan. So Gagan Singh is the founder and CEO of WoWs Global. The way I love to do it, Gagan, is [00:01:00] always I keep it to my guests to introduce themselves.

Mehmet: So tell us more about you, your journey, and what you're currently up to, and then we can take the conversation from there.

Gagan: Thanks, Mehmet. It's an absolute pleasure to be here on your show. So, for your audience, hello everyone. My name is Gagan Singh. I am founder and CEO of WoWs Global. Before I tell you what I do right now, I would like to share a little bit of my back story because that would give you a better context.

Gagan: So, I'm originally from India. a very small town in India, uh, started my career in corporate finance, worked in India and overseas for the first few years of my career, uh, became a venture capitalist, uh, in 2013 14, wild, wild west days of venture capital. During those days, I was based in Thailand. So I joined a fund called Inspire Ventures.

Gagan: It was a 40 million fund, early stage sector agnostic. So I was part of their team. Uh, I was there in the capacity of partner, so ran that fund or was [00:02:00] associated with that fund for roughly two years when the fund did almost seven to eight deals during my tenure there. And after that, went into entrepreneurship with this B2B tech logistics company called Deliveree.

Gagan: So deliveree was started in Thailand and was actually incubated by the same fund I was working with. So we started deliveree in Thailand, then expanded to Indonesia and then Philippines. I ran deliveree in the capacity of group CFO for roughly seven and a half years. And during my tenure at deliveree, deliveree in total, roughly raised $120 million in equity and debt financing.

Gagan: So the company grew pretty well, but, uh, so had a great experience of being on both sides of the table. So, combined my skillset and decided to do what I'm currently doing at Wows Global. So in 2022, I decided to quit my full-time role at delivery. Uh, I was also part of the board, so I resigned from board as well [00:03:00] to build Wow, global.

Gagan: And as I said, it essentially does what a VC and entrepreneurship problems had to solve all the problems that I personally faced. So, Wilds Global is essentially an operating system for private markets, where we work with venture backable businesses and help them raise capital. It can be primary financing, that means raising fresh money.

Gagan: We also facilitate alternative transactions like Venture debt, term loans, revenue based financing. So that's a very active part of our offering. And last but not the least, we also facilitate secondary transactions. That means selling a portion of founders equity or selling a portion of early investors equity to clean up the cap table.

Gagan: But that is only applicable for mid to late stage companies, particularly series B and beyond. And all our offerings, that means in terms of private markets, are available for accredited and institutional investors only. So we are not a crowdfunding platform. Now, our core offering actually has two parts.

Gagan: That's how I would like to put it. [00:04:00] One is the tech stack and the second one is a network. So when it comes to tech stack, you can say, essentially Kata and AngelList combined. So we haven't reinvented the wheel, neither we aspire to. But what we did was we brought all the tools together at one place. So for the companies in our network, we have tools like capital management, ESOP management, uh, listings, um, uh, profile management.

Gagan: So virtual data room. So whatever the company needs in order to raise capital and to look and feel in a certain standardized and proper corporate governance fashion. We provide that while for the investor side, we work, we act as an active deal flow partners, but our tool also works as the portfolio management tool for them as well as investor relations.

Gagan: But Mehmet, uh, you know, as much as I do, tech is just one portion of our offering because the nature of the business is such that only tech cannot solve the problem. It is nice to have, but ultimately it's a very [00:05:00] relationship based, uh, nature of the business that you need to know people personally in order for them to trust you and to invest in the companies that you present.

Gagan: So I'll say 50 percent offering and that's bring me to our second core offering is of network. So today we work with roughly 400 institutional investors out of Southeast Asia, a majority of which are either venture capital firms or private equity and family offices. We also work with quite a few ultra high net worth individuals, but that's still comprised of roughly 15 percent of our network because even an ultra high net worth with individuals, we haven't seen check sizes above million dollars so far in each transaction, whereas for institutions.

Gagan: Typically the starting point is above a million us. So yeah, sorry for the super long intro But I hope that gives your audience full context of my background and most importantly why i'm doing what i'm doing at WoWs global

Mehmet: No, that's fantastic. And thank you again again for for you know, I know how things get busy and you know You are you are in a busy [00:06:00] You know, on a mission actually to, uh, like both sides of the table.

Mehmet: And, you know, we, we, even before the podcast, I mean, in real life, we talk a lot about this. So. You know, you've been, I would say on the both sides of the table again. So there must be, you know, some, some common, uh, I would call them patterns, right? That you spotted that you said, you know what, like there is something missing over here, right?

Mehmet: So, so, uh, and I love always, you know, on the show to ask anyone who comes up with these fantastic ideas and turn them into life. And to your point, it's not the technology, it's more about, you know, what problem we are solving. So like, When did you decide that, like, you know what, like, really, I need to build this thing?

Mehmet: Because You know, you saw, you saw the gap. So I'm, I'm really interested to understand, you know, what, like the major gaps you saw, because you mentioned a couple of platforms and so on, but like really the [00:07:00] real problem that both sides of the table face today for, for, you know, their journeys.

Gagan: So that's a very interesting question, Mehmet.

Gagan: Um, so if I'm not wrong, what you're trying to learn is what was the genesis of this idea, exactly.

Mehmet: Exactly.

Gagan: So it's actually my personal problem. So what happened was I, when I became part of delivery, I was roughly in my late twenties, 29 years old. I was, and I ran that company until I was 36, 37 years old.

Gagan: And during that time, The company grew considerably. So right from zero to one in real sense, the company, which was, um, not doing anything on day one, eventually we saw a very sizable top line revenue, um, in nine figures, top line GTV, in fact. So we saw a considerable growth. And during those seven and a half years, a lot of life happened to me.

Gagan: I mean, I lost my father in 2016, [00:08:00] uh, which was extremely. Devastating for me personally. I had my son six months later in 2017. So a lot of, a lot of life happened during that time. So balance sheet wise, my assets were looking pretty good because I was holding shares in the company and the company's valuation was going well.

Gagan: So balance sheet wise, I was very comfortable. I didn't see any liquidity against those shares. And that kind of bummed me out because it would have nice to, it would have been nice to liquidate a portion of my equity and perhaps diversify my assets because a majority of my assets still share, sits in private company's shares.

Gagan: So it's, and it's extremely risky, right? Um, once, and now since I'm no longer part of the company, it further, Sometimes makes me nervous because what if the company is not being run in the way I, when I was there and all these, so long story short, uh, there were multiple [00:09:00] instances during those seven years when I wanted to sell my portion of my equity and diversify my assets, probably invest in real estate.

Gagan: perhaps would have probably put a small portfolio in crypto back then as well. Uh, which wouldn't have been a bad idea, actually, uh, and perhaps bonds and all these things so that at least I, my family is secure, but that didn't happen. I didn't see any liquidity against my shares and delivery was not. a small company was CDC company.

Gagan: So, uh, and I was like, if I am facing this problem, perhaps there are so many startup, uh, early stage employees and founders who would be facing the same problem. And then I looked at the West and then I discovered this company called Forge Global, which was actually very active in the secondary market space.

Gagan: And they were 2 billion back then. Now, the valuations have dropped, but back then and when they also went and did IPO. So the value market cap was roughly 2. 1 billion. So like, okay, Southeast Asia perhaps can use a similar platform where people can get liquidity against their assets. So that was the [00:10:00] genesis of building Wells Global, but over a period of time, one thing led to another.

Gagan: So when we started building the marketplace, we realized that private company shares are very different from public company shares. They come with a lot of. Inherent restrictions and sometimes a lot of fraud also is it's akin to that kind of fraud. So unless we have visibility on the shares, we can't build a scalable secondary market.

Gagan: So that's what led us to build CapTable and eStock management tool. But then what happened by the time our tool was completed, that was the marketplace and the CapTable and eStock management. The funding winter came and forget about secondary market. Private market was not getting any traction. So you're like, okay, uh, what do we do?

Gagan: So we found ourself in a limbo by two, uh, late 2020 to early 2023. So that's when we like, okay, we built this too. We can do secondary market, but if we add virtual data room here, we can perhaps cater to primary. Uh, requirements of the companies as well and primary, uh, finance raising capital was [00:11:00] even more tough.

Gagan: So I thought with my experience, I could help a lot more companies raise capital at a faster pace. So then, instead of just doing secondary, we started doing primary and then after primary, we got some debt service partners who said, Hey, there's so many good companies, we would like to service debt to them.

Gagan: So one thing led to another and today we are full fledged end to end integrated system. But coming back to your original question, what was the genesis? I'm just trying to solve my own problem, but bring liquidity to the very elusive, uh, private market space.

Mehmet: Absolutely. You know, like that makes a lot of sense because they always say like the best, uh, startups comes when the founders, uh, they face it themselves.

Mehmet: Right. So they, they, they understand it and then they validate that other people, they have the same problem, which is of course, like you, you, you guessed it and you guessed it, of course, again, in the, in the right way. Now, what Before we move to the investing, which is the most interesting part, to be honest, because I know a lot of, of the founders and even the investor that will be [00:12:00] watching or listening, it was, they, this is what will attract them.

Mehmet: But I want to start because I believe, and because you, you, you, you touch base a little bit on it, but I want like a little bit to extract it more. The, the cap table, uh, and the ESOP, right? So, so these two, you know, I think they are the. Two most mysterious, because I talk to a lot of founders and for them, they sometimes are like, what, you know, like, what are you talking about?

Mehmet: And then they start to figure it out. And then they go, they go and do some research and, Oh yeah, we need to have the cap table ready. Oh, like, you know, like now we're going to raise the first round and then we need to prepare things. And then especially they get it when they move from, let's say maybe C to, to see this day and above.

Mehmet: And you know, The esop, they start to think about it, oh, like this is what they do like in the West, and now this is how, how we have to, to, to shift also to, to building this. So what are the challenges that you have seen, uh, again, in, in, in that space specifically? Uh, when it comes to the cap table [00:13:00] and the esop,

Gagan: I think, uh, your question had the answer in itself, ma It's the lack, lack of awareness and it literally shocks me.

Gagan: How little awareness do people have? And, uh, Asia and Middle East on the cap table, trust me, like, I'm pretty sure most of your audience cater to the startup space. Uh, and this is a question for themselves. Do they really understand the difference between the post valuation cap and the pre money valuation cap and the impact it has on the cap table?

Gagan: Let me tell you today, the industry standard of, uh, uh, raising safe note that means simple agreement of future equity is post money valuation cap. That's the industry standard. So everybody says, I talked to everyone, how did you raise capital? Hey, we use this Y combinator great safe note. It's an industry standard.

Gagan: We are using it. And my answer to them is, you have done a disastrous mistake because previously when it, this, uh, this safe note was originally [00:14:00] presented by Y Combinator, it had a pre money valuation gap. But now they changed, in 2019 20, they changed it to post money valuation gap. And I'll tell you the, how, how, This difference is impacting the founders with majority of the founders don't have zero idea of like, if it's a pre money valuation gap, it works pretty simple.

Gagan: So for example, you and I are founders in the company, we own 50, 50 percent of shares of the company. Now, a third investor comes, uh, on a new person comes and say, I'm going to invest and take 10 percent of the equity in the company. Now, in that case, Uh, you will, uh, lose 5 percent of your shares, I will lose 5 percent and, uh, they will have, uh, 10%.

Gagan: So 45 45 10. Now, say, uh, another investor comes in who says, we, I'm going to take 20 percent of the company. Now, in that case, you will lose 20%. That is 45, 20 percent of 45 is nine. So, uh, you will have 36%. I will have 36%. The investor before us will have 8%. [00:15:00] 8 percent and the remaining person will have 20%. So that means the investor who came, the first investor who came will also be diluted.

Gagan: And that's how it works, right? Simple calculation. So everybody reduces on a post, uh, on a pro radar basis. Now, you know what post money valuation cap does? If the, in this case, the investor came who took 10%, so nothing changes until there, but the second investor who came with 20%, the investor who came in 10%, their shareholding still stays 10%.

Gagan: So the 20 percent comes from you and me. Imagine it is happening. Second safe note, third safe note. So only one who's diluting is the founders, not the investors. And it has suddenly out of the blue become industry standard and nobody knows the implication. So this is just one example of how critical the cap table, uh, is for the company Because sometimes founders think oh we are stacking safe node, but we have just dilute They don't even understand the dilution impact [00:16:00] of those stacking safe nodes one after the other and when they actually issue the shares They are shocked because in their mind they have just given away 20 of the company Right.

Gagan: They see they have lost almost 40 percent of the company. And what happens if by seed stage or pre series A stage, you have already given 40 percent of the company, then your company becomes uninvestable. Why? Because you already have too little in the company. And building a company is a long haul process, right?

Gagan: It's not one or two rounds. It's perhaps a 10 years process or perhaps 15 years process. And you do multiple rounds. So if you're just owning 60 percent or below after first round, by the time you are in the Series B, Series C, you'll have very little incentive and that might not be enough for you to get going because founders, you have to understand founders mindset is not very different from employees mindset because you need to have skin in the game, enough skin in the game to fight that battle.

Gagan: Right. And if there's very little equity left, then as a founder, I [00:17:00] said, perhaps it's not like, it's not worth the effort anymore. I'm working 16 hours a day. I've gone through the grind. Uh, it still seems to go nowhere. Perhaps it's time for me to give up because there's very little left anyways. So that's a long way of me saying the lack of awareness is, is, is, is incredibly high, but still founders refuse to listen.

Gagan: They say, because they talk to their friends and their friends tell them, Hey, I used CapTable for Excel, Excel CapTable, and I know everything. And then they say, maybe perhaps if somebody is advising them to use true digital CapTable tools for them to get full, get full picture at all times, they refuse to do that.

Gagan: So a lot of education is needed in this space. Does that answer your question?

Mehmet: Absolutely. But my career, you know, out of curiosity, why, you know, the, um, you know, one model became like, is it like, because they don't know how to value the company? I mean, the post post money valuation, like you said, like it became like the more, uh, uh, [00:18:00] used one.

Mehmet: So, so is it like, because it's easy for them, it's easy, like, Why I'm just out of curiosity like want to understand and this is will also like it's kind of a loaded question I know because one of the points that people ask about a lot, you know, and all the time How do I value my company especially you know for the ones?

Mehmet: Okay, so the revenue generating ones There are come kind of I would say best practices and you know common Methodologies to do this but especially for the ones who are still maybe in the early stages, maybe this is why they need to go there. Like, I'm just, you know, I want to get this wisdom out of you again.

Gagan: So if, so actually there are multiple questions, but I think I'll go with the first one, change was made. So this change, even good intentions, actually, there was no bad intention at the time, because the issue was that investors started complaining. So, because when it's pre money valuation, I don't know the [00:19:00] exact percentage of the company I'd be holding because you keep on taking, erasing new safe notes, money through it.

Gagan: I don't know. And by the time the conversion happened as an investor, I think I've owned 10%, but you have raised so much, uh, safe notes ultimately, but my percentage was 7%. So investors were not happy. So this change was made to make investor comfortable and to give them the exact shareholding they'll be holding.

Gagan: So I know I own 10%, no matter how many safe notes, but that, that was. That was the idea to give investors visibility and it works perfectly well if the company is just raising one or maximum two safe notes before doing an equity round. But what happened in this part of the world was because of this funding winter, uh, uh, and the lack of access to capital, very little equity rounds happened.

Gagan: So founders, because of the lack of awareness of the implication of the safe, Kept on raising multiple saves three, four, five, six times. So that led to a major impact onto their, onto their shareholdings. [00:20:00] So, yeah, that's a long way of me saying the idea was to give investors full visibility on the exact shareholding, but because founders started using it way too much than what we was originally imagined to be, the implication of them was quite disastrous.

Mehmet: Right. And what about the valuation of the company, Gagan?

Gagan: So valuation, again, it's actually very, it's quite a different topic and I'll need to spend a lot of time explaining to you. So valuation for early stage companies is done very differently for late stage companies. Early stage companies, it's more of an art rather than science.

Gagan: I'll be honest. Yes, there are multiple. So on a broad, on a broad basis, there are three, three different methodologies for the valuations that are used by the investors. One is the discounted cash flow. What does that mean? That based on the business plan that you're projected to the company. The company calculates the free [00:21:00] cash flow, your business plan shows the free cash flows the company would be generating in the years to come.

Gagan: And those free cash flows are discounted based on the inflation rate. And then the enterprise value is calculated. Okay, that's one way of doing the valuation discounted cash flow. But most of the startups for the first few years are actually not having free cash flow. They're investing into the business.

Gagan: So the DCF discounted cash flow model is sometimes not very workable for them. So, but it works perfectly fine. For B and C stage company onwards, which are have path to profitability because then it makes sense. But during early stage, nobody knows and all the projections are anyways will go up for a toss.

Gagan: And so everybody knows that. So it's not very commonly used, but it is one of the methodologies for valuations. The second one is, and I think one of the more common ones is trading multiple. Where, uh, every industry has a certain trading multiple with, uh, it can be a multiple of your revenue number, or it can be multiple of a gross profit number, or it can be multiple of your EBITDA numbers.

Gagan: But EBITDA, [00:22:00] again, most of the companies are burning money during early days, so EBITDA is zero or negative, so it doesn't make sense. Typically, it's a revenue number multiple is taken and it varies per industry. Like, uh, today. Generative AI companies with revenue have a much higher multiple than traditional e commerce companies and keeps on changing.

Gagan: So that's the second and third is a precedent transaction. Precedent transaction is to look at the similar transactions that have happened either in the public market or in the private market and they take that number as a benchmark. So out of these three methodologies, the second one that is the trading multiple is very common, right?

Gagan: So that's how the valuations are coming. But what. But coming back to your original question, how will I value my pre seed company, pre revenue company on day one? So in that case, the numbers were, there's a reverse calculation. How it works is, so it is not advisable to founders to not dilute over 20 percent of the company, 25 percent in extreme places, but [00:23:00] typically it should be 10 to 20 percent dilution per round.

Gagan: Right. If you as a business, you feel that you need 2 million. So you should aim at not diluting anywhere between 10 to 20%. So 10 on the lower side, 20 percent on the higher side. So that means that your company's pre money valuation, naturally, Even on day zero becomes anywhere between 4 million to 8 million, 10%.

Gagan: Then your prep pre money valuation is 8 million because pre money 8 million plus 2 million that you get. So total post money valuation becomes 10 million. So, uh, so that's how it works. Uh, so, so yeah, so based on the person, the, the quantum of financing you are seeking, uh, that's how you will be diluted, but that doesn't, that doesn't mean that people should say, okay, then it's wiser for me to raise larger capital early on.

Gagan: Uh, and that would, uh, help me dilute and naturally makes my [00:24:00] company's valuation. Yes. Yes. Theoretically that makes sense, but you have to understand higher valuation backfires. a lot more often than founders can imagine. Because if you are raising your early stage rounds at 8 million or 10 million valuation, then by the time the next investor comes, they would, you would, you, you will have to raise at least 2x the valuation, 20 million.

Gagan: How will you justify that? During early days, yeah, you probably, Played the, uh, uh, uh, like game of business plan and investing and everything. But if you're not able to perform as a business plan, it will literally backfire. And then your company becomes very expensive. And then you have to go through the download process, which is again, a very different discussion.

Gagan: So what I'm saying is be very careful. Price the companies. Uh, In a such a manner where, uh, it doesn't put pressure on them on the following rounds, because as I said, it's a long haul. So you have to think for the future. So the correct balance is, uh, try diluting 10 to 15%. Fake the, make your raise [00:25:00] in such a way that you know that you're following round, you would be able to raise at a two X valuation.

Gagan: Uh, so that's backward calculation.

Mehmet: That's very, I would say helpful to, to, I think a lot of founders. And thank you for sharing that. I'm, I'm sure like this, this part of the podcast will be the most listened one because I get this question a lot. I always get the same question and again, and again, now coming to one thing, which is good.

Mehmet: I'm liking the flow. Cool. Of our discussion today. So you talked about the the funding winter, right? So And in you you lived it also and i'm sure like you have seen it all as we can say How hard?

Mehmet: How hard it is to raise fun and one of the things that you know Of course, you, you, you spot this in the market, um, is how startups can really prepare [00:26:00] themselves to fundraise from, from VCs and maybe angels. And, you know, that's usually, we talk about VCs, of course, like in our, especially like the tech startups.

Mehmet: So it's usually like, it's with the VCs when, especially when they have maybe raised from family and friends and then they want to go to the next step. Right. So. Here, like you built, you've built, you know, something fantastic. I've seen it. I know it very well, which is like matching the investors with the startups.

Mehmet: But what you have done is you gave them this ability to build their virtual data rooms, right? So now, again, this is, I believe one thing that a lot of people are not aware about, you know, and I think they need some education from the best. So first of all, let's start, you know, about the importance of building the data room early, even maybe before you start and start to, to look for, for the investors.

Gagan: Okay. So [00:27:00] Mehmet, I, data room is, is a great question, but what I would want to do in this case is to just. Create the framework of the entire journey, please. People will understand better. Uh, what is the importance of data room? Because if I just jumped to the data room, then a lot of context that I want to give to your audience, we might lose it.

Gagan: Of course. You said how difficult it is. It's incredibly difficult. Um, uh, we all have seen the data. Uh, I was looking at the Statist start report. Uh, again, this is Southeast Asia data, so the total funding has come down by roughly 65%. So, uh, in 2022, the company's roughly raised 28 20 $9 billion, which dropped to like $10 billion, under $10 billion, and the number of gains above a hundred million dollars also.

Gagan: brought by around 60, 65%. So it's not good. And 2024 is also slow. Things are improving a little bit, little bit, but still nowhere [00:28:00] close to what it was during the peak time of 2021. It might not be the bad, bad thing also because the market needed correction, much needed correction. The companies were being overvalued.

Gagan: There was too much free capital running in the market. So I think it's good because now people are forced to build fundamentally solid business rather than just raising on optics. So I hope that answers your question. That's tough. But for the right companies, there's still enough capital in the market.

Gagan: Now, second thing is before any founders want to start this journey, I tell them to brace yourself, uh, because it's going to be incredible rough because it's extremely resource intensive and it's not just resource intensive for the founders because they are pitching to so many people, but it's also for the team members.

Gagan: It can be the CTO, the operations person. If they have a finance person as well, because the founder will need all these people support during the due diligence process. So So it's a lot of, it requires a lot of resources and a lot of founders time and their team members time. So they have to brace themselves for a journey.

Gagan: Second is, uh, [00:29:00] it's a, uh, quite complex process, uh, because a lot of terminologies that we are using, valuation, pre money, post money, liquidation preference, anti dilution, bah! Founders need to learn this, unfortunately. Uh, because if you don't know, you don't know the deal you're getting yourself into. So it's a complex process.

Gagan: So founders need to spend a lot of time educating, uh, themselves. Probably, perhaps this podcast would be one of that medium when founders listen to it and try to understand what to do, what not to do. Third is networking and relationships. You have to meet a lot of people. You have to kiss a lot of frogs to find your prince.

Gagan: So, uh, so yeah, a lot of meeting a lot of people, perhaps partners, going to events, pitching competitions, uh, creating founders, branding. That's another big thing these days from the subject matter, uh, exposed to all these networking and relationships take time. So it's a six, at least a six months process earlier.

Gagan: It was four, four and a half months, but the time tenure is continuous to increase. [00:30:00] Now, long process, so brace yourself. Now, the first thing which any founder should do is take the founder's fundability test. It's extremely important. So I'll tell you what is that? So on an, there are two founders should be aware of two T's.

Gagan: One is a track record and the second one is traction. So I created kind of a, uh, an X axis and a Y axis chart. So X axis is track record and Y axis is traction. So what is a track record? So if you have no track record. Then the chances of you getting refunded are very low, but on the other hand, if you're an Ivy League student, you have a Stanford, Harvard, uh, uh, Kellogg, Princeton, uh, you naturally become more fundable because there's a certain, uh, track record there.

Gagan: If you're a C level or an exec of a FAANG companies, for your audience who don't know what FAANG companies are, FAANG is F A A N G, that's Facebook, Amazon, Apple, uh, Netflix, and Google. Uh, so these companies have also, if you come with these blue chip companies, then [00:31:00] your fundability is higher. And last but not the least, if you already have a track record of building a company, exiting eight figures, nine figures, definitely everybody would want to back on you.

Gagan: So that's, that's track record. But if you don't have a track record, then the only way you can get funding is you have a traction So if your company is growing month on month 20 percent 30 percent then definitely no matter what your background is You clearly have built something meaningful Uh for the market and the investors will flock and work.

Gagan: So if you look if you imagine a graph So if you have to position yourself, okay, if I low traction no track record You'll barely get anything, but if you have high traction and you're from exited founders, clearly you'll have more money than you actually need. So you have to position yourself and So sometimes I see founders or first time founders don't have an MVP complaining about investors not investing in them.

Gagan: But I think it's unfair on their part because you have to see investors are playing this big game. It's a high risk games and [00:32:00] they are looking for 100x investment. So you are in principle by accepting that money promising them 100x returns. So not every business is VC backable. That doesn't mean it's a bad business.

Gagan: It can be an incredibly profitable business, but VCs have a certain way of investing because they're looking for 100x returns, 1000x returns, outliers, the companies which can become zero to 100 million within the first five years of operations in terms of revenues. So not, and not every business is programmed for that.

Gagan: So, What I'm saying is like sometimes know thyself. That's what I say. Um, know yourself under, uh, acknowledge the reality and then set your expectations because once you take VC money, there's no looking back. Then you are playing that you agreed to play that game. They will agree to promise them return in principle.

Gagan: Then you have to probably perhaps do anything and everything in your capacity to grow. And if it doesn't go along, then it's a, it leaves a bitter taste in everyone's mouth. So yeah, no, no yourself now comes to you. I'm coming to your main [00:33:00] question. Virtual data. I come across so many founders, man. It's unbelievable.

Gagan: Just seeing Gagan and fundraising and this. And I was like, okay, send me your data room. He said, I don't have a data room, but I have a deck. And that really bumps me. In fact, personally, last month, I lost a deal because of the lack of data room. So I'll tell you, investment is a very emotional process.

Mehmet: It is.

Gagan: If I'm an angel investor, for example, I come across a founder like you, I like your energy. I like your grind and your vision and everything. You might get me excited. I'm like, yeah, man, I'm going to invest in your company. Uh, send me your data. But then. You take one month, one and a half month to prepare your business plan, your management accounts and your KPI reports, your cohort analysis, everything that you expect me to see before investing in you because due diligence is an integral part of your process, right?

Gagan: Of an [00:34:00] investor's process. So when then you take one and a half month to send that information to me, but by that time I'm not excited anymore. I got something happened in my life or some, I spoke to some of my other friends who talked to me, say, Hey, I knew another guy who was doing that. It didn't work out.

Gagan: So I lost momentum. I lost that enthusiasm. And then you come back to me, Hey, Gagan, uh, this is your data room. Please look at it. I'm saying, man, it's probably as fast as time because you lose momentum. So it's extremely important for founders to be due diligence ready and create everything in the virtual data room.

Gagan: Do not use Google drive. Because, because Google Drive is a very unsecure place. So now, the world is changing. There has been so many frauds happening in the startup world that founders want proper corporate governance. And the best form of corporate governance is a proper, secured virtual data room where you can track everything, who's viewing the files you are.

Gagan: And the founders, investors also, I can ensure that these are the right files, watermark and [00:35:00] everything that you cannot play a game like, okay, this was not the file I wanted to send this. So it standardizes the entire process while giving comfort to both the parties. So what I recommend to founders is first get DD room ready, like not just your deck, but your business plan, your management accounts, your key KPI metrics that you are tracking, your tech stack report, be ready so that if you do a good.

Gagan: If you get the founders, uh, investor excited, immediately get the NDA signed and send over the data room within the next 24 hours. That's how you're keeping the momentum. And I actually lost a deal. Because, uh, there was a great conversation. The founder did we match make, it was clearly a done deal.

Gagan: Investor called me after that. Thanks for bringing this. I'm clearly going to do that. Took two months to prepare the data room investor, like changed her mind on that. So what's your data room is a very integral part. It's, it's your, like a depository where all the key things about the company that you [00:36:00] expect an investor to do the due diligence on should be there.

Gagan: And. It should be ready prior to you start pitching the investors, not, not, uh, uh, not,

Mehmet: uh, uh, like two things, just quick to commence from me, like about your point, I think, and this is something, I don't know why it is there. Is it like, because they saw it in the movies, they read it somewhere. So a lot of people, they think, okay, let's say I'm the founder, you're the investor.

Mehmet: I will pitch you. And then you know at the end it's like a kind of a shark tank thing Okay, I gotta invest money in you. I think some people they have this Um, they they don't know what happens in the background. They don't know like after okay So let's say you talk to a vc probably one of their uh, I don't know Maybe an associate first he will he will talk to you and then one of the partners he will talk to you So like there's like a process that happens and then after you finish all your presentations You know, you they will go back to the due diligence and then they will might this is where they will ask you Okay, send us your data room and I think people they they think like [00:37:00] oh, it's like oh, I will I will Let's say do the pitch today after one week.

Mehmet: I'm gonna have the the check in my in in in my back account Which is doesn't happen the second thing Which is I think it's uh, because again, this is all from my personal experience again When I speak to founders I start because of course I had to understand it myself because I was ignorant also I didn't know it.

Mehmet: So vcs they have you know, they don't have unlimited money, right? So they have a fund and this fund they Let's say they have to deploy it in a certain amount of time, and they need to, for example, they project, okay, we're gonna invest in X number of companies. Our average, right? The investment will be such and they need to be selective from their side.

Mehmet: This is where they would go and ask for the due diligence. And I think this is like these two things. A lot of founders, It's not like because they don't want to know. No one told them actually. And this is why I'm happy I'm doing this podcast with you again today, because it enlightened a lot. [00:38:00] And the good thing is that what you did with, with, uh, while building was global is that you've made this ready for the founders, right?

Mehmet: I mean, from, Oh,

Gagan: so actually

Mehmet: this

Gagan: is a problem that we was trying to solve for the investors as well, because as I said, I've been an investor myself, I was a part of a fund and I also did few deals in the usual capacity as well. So my problem was that there was a lot of back and forth, you know, even if I like the company, I like the idea of looking at this logistic space, I want to invest in an early stage logistics company who is growing decently a hundred percent year on year.

Gagan: Now I get that information. But that's pretty much it. Then there were like 100 email exchanges between me and the founder, and that was tedious. What we do is at WoWs Global, we make the decision making process for investors super easy. Everything is organized. Everything is as per like, uh, international industry standards.

Gagan: No excels, nothing. Everything is properly laid out. The company's one pager would be very nicely done automatically on the [00:39:00] platform where key information are there. Pitch deck. You can move, you can request access to the data room. NDA can be done, and then you can deep dive into the data room. So typically the, the back and forth between the investors and the company used to take, say, two months.

Gagan: We reduce that time to less than two weeks for you to do the, so we, we don't guarantee investments. We are not saying that we oversell your company. No, we don't do that, but we at least expedite the decision making process. That's what our value proposition to companies and investors is the companies that we are going to organize in such a way that you'll know that this isn't in two weeks rather than hearing the no after two, after eight weeks, because we deal on the platter to the investors.

Gagan: Everything is there. They can deep dive check. Okay. Yeah. Nice, probably interested or not nice, not interested. So the, the, the back and forth that is typically done, which is exhausting. We, we remove that.

Mehmet: Absolutely. And, you know, I think for investors, one of the, you know, things that it's all for them, and this is maybe a lot of founders, they don't know, [00:40:00] let's share like some secrets is that.

Mehmet: You know don't think the VCs themselves are not always looking and they need what we call a deal flow for them because when The VC, you know, they they raise money themselves from LPs limited partners And then they have also, you know, the clock start to tick the moment You know, they have the fund in their bank account and they need to start investing and deploying the money So Gagan, like how have you seen investors reaction to to?

Mehmet: You What was the global build? Because you know, you bring to the table for them also like deal flow as well. Maybe something that it wasn't under their radar, you know, maybe their associates and you know, the people who like or their scouts as they call it, they were not aware of. So tell me about like this part from from the Investor's perspective.

Gagan: That's a very good question. So, um, you have, I think you made a very good point that VCs get money from LPs, right? And [00:41:00] then they have to deploy it. But VCs also have their own budgets. You have to understand. So the way VC model works is 2%, 20%. What does that mean? So 2 percent is management fee, 20 percent is carrying interest.

Gagan: Complex. I'm going to explain it to you. So management fee is, so because When the VC is running a shop, they need some, they have some expenses, right? They have to hire analyst teams, they have to hire offices, they have to travel, and there are a lot, a lot of other administrative costs, uh, even the accounting and audit fee for the fund that needs to be done.

Gagan: And that comes from the, uh, from the fund size that they have raised. So, VCC has based a hundred million dollar fund This's Ave on a, this is on a very high side, right? So you get $2 million every year. to manage the fund as a management fee. And then you make investments. So whatever investments you make, After that, uh, say you invested, say 80 million hypothetically or 98 million, right?

Gagan: But then the exit value was 130 million. [00:42:00] Then on the 32 million that you made on the investments, you take 20 percent of that as a general part. That's how it works. So now, but this number, these numbers sound very good, right? 100 million, but not, most of the VCs are small VCs, right? So they have very limited, uh, management fee.

Gagan: So they cannot hire analysts everywhere across the In all the markets and the Southeast Asia particularly is very fragmented. Singapore is very different from Indonesia. Indonesia is very different from Thailand. Vietnam is a very absolute different market in Philippines. So it's not possible for VCs to have analysts on the ground on their payroll, uh, on the payroll, uh, in each market, right?

Gagan: So. So we act as one of the analysts on the ground and what we're building with a robust technology, like once you fill every once you fill the application on the form, a system tells us how we have an internal algorithm that tells us whether you're fundable or not. And if you're not fundable, then we don't overly pitch you based on our [00:43:00] assessment.

Gagan: We might be wrong, but at least what algorithm that we have built, it gives a very good indication to evaluate most of the VCs even today are using Google Forms. Right. But there are a lot of intangible things like founders, LinkedIn profiles, checking their universities, backgrounds, that's another soft skill element that comes into play.

Gagan: And there are multiple other bases on which we evaluate the company. So I think we have automated a lot of process which allows us access to much better companies than it. Typical analysts because we built a branding over these three years. We spend a lot of money on marketing. We do a lot of events So that's a long way of me saying that We have teams on the ground.

Gagan: We have relatively higher budget. We are operating our company as a startup. So Uh, we have teams on the ground in each of the market and then we act as a deal flow partners Uh for the investors at zero fee Add zero fee. So there's no harm for them to use us, right? Even if they're like had we I we've been charging them then of course, there's [00:44:00] a question comes but we act as a Uh deal flow partner and they they trust the algorithm because of the credibility that we have built in the market So I think it's a win win for everyone.

Mehmet: It is a win win Of course again, because you know, we we talked about it even when we met the first time uh, like it's it's solving a You Problem for both sides of the table, right? So, so getting, uh, the founders fund ready, as you mentioned it, this is very important. I believe I want to highlight it. And at the same time, get the default for these investors.

Mehmet: And then, you know, the, you explained the model, uh, in a very, I think, clear way for everyone. Now, you know, the, you have a, Like bigger goal is to democratize, you know, the whole funding journey for both sides and deploying the funds and, you know, get funded But and you know, you started with southeast asia and you know I read the reports there and it's like the trance is is like You mentioned some, some, you know, [00:45:00] statistics, but in the future, how are you seeing this?

Mehmet: And I can relate also to, to Middle East and Africa also as well from my side. So how are you seeing the trends in, in, in the private, I mean, in this market, I mean, the private equity market and in, in, uh, in general, in the startups and the VC world. So what are you seeing in, in, Southeast Asia.

Gagan: So talking about Southeast Asia, particularly Mehmet.

Gagan: The exits have been a massive issue. massive issue. They barely, you can kind of counter fingers how many IPOs have happened in this part of the world. And most of the companies, in fact, I think all the companies didn't do very well post IPO. So the problem with most of the companies today in Southeast Asia facing is they are Either too small for IPO or even post IPO, the retail market completely disregards them because the unit economics are not that [00:46:00] great.

Gagan: Most of the companies. Or, and on the other hand, they're too big for M& A. Because if you add like 200, 300, 400 million dollars, there are very few buyers at that scale. So, I think Southeast Asia needs to find their sweet spot. So, now the players like us have a massive opportunity of not just helping companies in the fundraising, but also perhaps find them early liquidity or exit opportunities in the form of small, uh, Uh, in the form of trade sale or many opportunities because the the region is right for consolidation at the moment.

Gagan: I think that Too many players in the market in almost every space and everyone have their own share, but it's not sizable enough. So the market needs consolidation, and that perhaps we will see in the years of come, in the years to, uh, in the future years where you'll see, uh, a lot of consolidation happening in the market.

Gagan: So two things. One is consolidation and second is small M& A's will grow, and that's where [00:47:00] the platforms like us will have even more opportunities. Uh, because we will help source. So we already have all the infrastructure in place technology wise. And even on the buyer side, we continue to expand our network.

Gagan: So now, for example, somebody who is running a logistic company in Europe wants to expand to Southeast Asia. So through platforms like us, they can get access to those companies because we have our own vetting process and everything. And at the end of the day, only invest or buy if The numbers make sense to them, but at least we give them access, which previously they had to pay a humongous fees to the boutique investment firms in order to even get that kind of access.

Mehmet: Absolutely. Just, you know, before I put my comment on the Maya market or Mina market, uh, any specific sector you see like kind of boom in Southeast Asia?

Gagan: I mean, boom,

Mehmet: uh,

Gagan: um, see generative AI is hot, but I think most of the companies who are [00:48:00] positioning them as AI are not really AI companies. So yeah, these are attracting funding.

Gagan: Uh, but I, I think it's still a rapper companies. That's what I call them. They have used existing OpenAI or Gemini solutions and built on top of it, which I don't think makes them a true AI company, but it continues to be hot and attract a lot of capital. But I think in Southeast Asia, FinTech continues to be hot.

Gagan: Like it continues to attract a lot of capital on the credit size on the b2b buy now play Pay later that's getting hot. Um payments is a bit saturated On the consumer side, but the b2b payments Look pretty good. So I think uh And I was looking at the data actually So even in 2023 fintech continued to dominate it was the most funded sector In this part of the world.

Gagan: So, AI, yeah, we are yet to see a true revolutionary product coming out from this part of the world, but there are a lot of companies. So, yeah, I [00:49:00] think it's more like, uh, it's similar to what, uh, some people won't like this, but I think it might have the same outcome as what perhaps metaverse companies had.

Gagan: Um, uh, because it was hot at one time, but not, but I think FinTech is still, there's a huge opportunity. Um, I think you don't need to be disrupt the market, like completely with a noble solution. They're still within the existing segment. There's so many opportunities, I think, ready right for disruption. So I hope that answers the question.

Gagan: So FinTech today is hot in this part of the world.

Mehmet: Definitely, definitely, definitely, Gagan. By the way, like, what I'm going to say now very shortly is actually similar to what you mentioned, but it applies to the MENA region. First, you know, like, the UAE is different than Saudi, different than Egypt, different, you know, than Morocco and all this.

Mehmet: So, so this is applies, the same thing. Um, and I think also like, I had, uh, an episode with the founder of Money Hash, [00:50:00] which is one of the FinTech companies that enables actually like other payment, uh, or like FinTech companies with the infrastructure. So we had like the same thing, like we are stuck in a way that we are not going to an IPO.

Mehmet: And at the same time, you know, on the verge of staying like in this mid-range, very few now are making it. To the point of the trance. Actually, it's kind of we didn't see this AI attracting Or actually I didn't see much of AI startups, but the fintech keeps booming Actually the latest number from h1 at least in the mina region.

Mehmet: So fintech since dominate now The two major bnpl companies One of them is going after an IPO because you know, they, they grew so much and I, I believe, you know, the same thing applies, but I'm big believer. I have to say this again, like I'm big believer in our markets, like both of our markets, like the Southeast Asia and MENA market.

Mehmet: And the reason is because from my interaction with you and, [00:51:00] you know, like other people, uh, in, in Southeast Asia, and For me, because I'm here in Dubai, what excites me, like, of course, all the investments, the money and the exits and all this, but I think the talent, right? So I see the talent because we know a lot of people, they go, for example, to Singapore, to Indonesia, to Thailand, you know, like all these great minds, the great people who sits there and same thing.

Mehmet: I'm seeing like a good talent pool here in the Middle East, especially in Saudi and UAE, and the good thing also is that Shift which is slow, but it's good. It's happening also this Um, you know, like we don't invest in less than like series b or series key companies. I'm talking about the local vcs here So this is quietly changing where money is being deployed in the early stages also as well So this is probably will help us, you know to see like more uh dominant, uh You know, start ups in, in their domain.

Mehmet: So I'm hoping for this and yeah, like, uh, the, as we want to wrap [00:52:00] up this again now, so where's the best way to, whether I'm an investor or my founder to get on boarded on what was global.

Gagan: I mean, just go to our website, uh, www.WoWsglobal.com. Wows global spells at W-O-W-S-G-L-O-B l.com. You can sign up. Our customer service team will reach out to you and, uh, we can help you do concierge onboarding.

Gagan: But otherwise, also the tool is very, uh, I'll say self manageable. And, uh, so our system tells you the exact steps you need to take in order to create your profile of your company. And also if you're an investor. You need to be an accredited and institutional investor, uh, to apply for it. So we do a little bit of KYC, uh, but then once you pass a KYC, you get access to the platform right away.

Gagan: So very simple, seamless process. And best part, it, it is absolutely free for both the parties, companies, and investors. Yes, we have tiered tiers plan, but as you want more [00:53:00] solutions, of course that would be chargeable. You can get started at zero dollars. That's the best part. So I, I would really appreciate it for your audience.

Gagan: Try it out and give the feedback to us.

Mehmet: Yeah. And for, for people like if you are in the MENA region, reach out to me directly. I can guide you on this journey also as well. Um, because me and Gagan, like we, we wanted to like the same thing, by the way, what Gagan have done with the team, of course, in Southeast Asia is fantastic.

Mehmet: You know, You change the game again, I can see this. You should follow Gagan also on LinkedIn. I highly advise you because he shares a lot of insights and you know, uh, valuable information for both parties. So make sure you follow him. And at the same time, like followers global, because, uh, the guys, they're, The the team marketing team again, they do fantastic job also sharing these blogs and articles also as well organizing events And we will plan something for the mina region also from from events perspective very soon.

Mehmet: So stay tuned for [00:54:00] that Uh, again, really I enjoyed the conversation the time really flew very very fast. So thank you for your time

Gagan: And thank you for having me on your show, I hope it was valuable for your audience

Mehmet: I am sure it is. So again, thank you. And for the audience, the links that Gagan mentioned, they will be in the show notes. So if you are listening on your favorite podcasting application, you will find them in the show notes.

Mehmet: If you're watching this on YouTube, they are in the description and you can reach out to me also directly for anything like you, you want more information. I'm happy to arrange Gagan also as well. So, uh, reach out. And as I say, always, thank you for tuning in. If you just discovered this podcast by luck, thank you for passing by.

Mehmet: If you did, so Subscribe and share it with your friends and colleagues. And if you are one of the people who keeps coming and send me their request, their questions, comments, keep doing so because I really all of them and I value your, uh, feedback, whether it's something good, something bad, please [00:55:00] tell me, I would love to see how I can make this better.

Mehmet: Thank you very much for tuning in and we'll meet again very soon. Thank you. Bye bye.