Selling Everything to Everybody is A Recipe For Failure

Six-year-old Accelerating Asia Ventures is filling a gap in the Asian startup ecosystem that very few investors are looking at.

Craig Bristol Dixon, who co-founded Accelerating Asia in mid-2018 with Amra Naidoo, got a whiff of this particular gap while running a corporate accelerator for an Australian telco company in Singapore. 

According to Craig, there is not much help available for startups that have started earning revenues, but at the same time don’t have a complete hold on their product offering.

In an exclusive interview with Hedwig by The Content House, Craig explains this further: “You're too mature for incubators and early-stage investors, but you're not quite mature enough for the venture capital firms to invest in you. That's the gap in the market that we fill with Accelerating Asia.”

In addition to this, Accelerating Asia found another gap in the market: the knowledge gap.

The founders, Craig says, aren't necessarily good at explaining their business to investors. And investors don't necessarily know how to separate the good opportunities from the less good opportunities.

This is especially true for evaluating early-stage startups when there's not much data, and VCs are evaluating people as much as the companies. Accelerating Asia helps both founders and VCs understand each other’s potential better.

"These are the two gaps we are trying to plug. That's our raison d'etre,” Craig adds.

Accelerating Asia, which largely invests in B2B companies, is on its second micro-fund of USD 20 million. It plans to back 125 companies from this fund, investing up to USD 250,000.

In a few months, Accelerating Asia will start accepting applications for its 10th cohort. While it has backed a few startups from India, it plans to become more active in the country now. 

For Accelerating Asia, India is the fastest-growing market, and we are open to collaborations for a better reach, Craig says.

Hedwig spoke to Craig at length about:

• How he evaluates startups

• Sectors and markets he is excited about

• How founders can build a sustainable business

While evaluating startups, what makes you go, “Here, take my money”?

Craig Dixon: There's a lot of qualitative analysis in addition to quantitative analysis that goes into it. When I invest, I want to ensure it’s a 20x opportunity to get 20x ROI.

We look at the usual things first. Is this a big problem that the startup is solving? Is the potential market size large enough?

Then we look at the reasons why this team is the right one. Since many people may be trying to solve similar problems, we need to know why this company. Very often, in emerging markets, it has to do with technology because you have a lot of people tackling this problem, but not necessarily every company implements technology efficiently.

Then there are other things like startup-geography fit. Sometimes I see really interesting startups with good teams, but they are not in the right market.

The other criterion to evaluate is whether the startup can attract downstream capital in future rounds.

There are different ways to think about that. It could be what the downstream VCs are investing in and what they like. We're in touch with a lot of them to understand that. Because we are essentially creating products for them to buy later.

And then some markets that will get bonus points from us. Companies from India and Indonesia would get extra points because these are big markets with a larger pool of downstream capital.

On the qualitative side, we've become much more sophisticated and evolved. We use "The Big 5” or “OCEAN” framework. These tests are popular among psychiatrists and psychotherapists. I think it's really valuable for anybody to take it. It helps you lead a more successful life because it matches your temperament to your environment.

Essentially there are two traits that the best founders test highly in. One of them is conscientiousness and one of them is openness. And only about 3% of the human population tests highly in both of these.

It's not something you must have, but it's a really good signal that you have the right mentality to scale a startup effectively.

Craig Bristol Dixon, Co-Founder and General Partner at Accelerating Asia

Apart from India and Indonesia, are there any other major markets you focus on? 

Craig Dixon: We invest a lot in different markets as well. India is growing fast, but we've also invested in several Pakistani companies.

Two of our last cohort companies were from Pakistan and both of them are now in at least three different markets.

One of our startups from Pakistan is called ORKO, they are an EV fleet management platform. They've already launched in both Indonesia and Malaysia in partnership with two of our other portfolio companies located in those countries.

The other one is an AI machine vision company called Brick and Mortar, which helps mom-and-pop shops get data directly from their CCTV cameras around customer demographics, traffic, and behavior. This helps optimize revenue, product mix, and things like that.

They've since done a JV with one of our other portfolio companies and launched a pilot at Universal Studios Singapore. They're talking to a few very large global brands and are looking to launch into 20,000 retail establishments across South Asia and Southeast Asia.

What made you show interest in the Indian market and how come you didn't do that much earlier?

Craig Dixon: I would love to say that investing in Indian startups was a strategic move, but it was just following the demand. About 80% of the startups we invest in are through referrals. India also happened like that. A lot of our Bangladeshi alumni started to refer Indian and Pakistani startups to our program.

Around the fourth cohort, we started getting much higher quality Indian and Pakistani applications to our program.

Currently, we have seven investments in Pakistan and six in India. Going forward, we expect about 30% of startups coming from India or Pakistan for our cohorts.

Besides, we now have resources across the Middle East, South Asia, and the US, so we can add more value to Indian startups than we would have been a few years ago.

India is the third most sophisticated market in the world after the US and China. India has some good accelerators, but considering the sophistication and size of the market, it’s less than you think. We are getting some awesome startups for our program, so there does seem to be a gap we're filling.

Are there any particular areas that you find exciting in Southeast Asia?

Craig Dixon: I don't have any particular sectors because it kind of evens out if you jump into the sexy sectors. A million other people are looking at those. And then if you look at the ones that aren't sexy, there is probably a reason why they're not sexy, but you might be able to find some diamonds in the rough.

My favorite thing about B2B is that there are really big problems that nobody even knows about. That’s what I love when I interview the founders. I get to listen to solutions to problems that I didn't even know existed. And that's awesome.

A lot of our startups are digitizing old economy businesses like fleet logistics and that's huge. Someone has to move all the raw materials or the finished products between ports and factories.

One of our portfolio companies is working with Mass Rapid Transit in Singapore to design better passenger flow through the public transport system.

I don't go into any cohort evaluation or application evaluation with a fixed frame of mind. I go into it with a completely open mind and I'm like, Oh my God, I never thought about that. That's amazing, let's give you some money.

As a founder, how can you create a sustainable business when you have to drive growth while aiming for positive unit economics?

Craig Dixon: Almost every startup I come across wants to sell everything to everybody, which is a recipe for failure.

As an entrepreneur, you should offer a solution to a specific demographic facing a specific problem. I think almost no startup is doing this properly, which is to find a large enough demography of people with a large common problem.

Finding the right user group is very important. What's the persona of your specifically targeted customer and what is the problem?  Is it 25-year-old women in India who have a college education and are single?

Once you find them, define the problem in dollars and or time. For example, they spend this much time per week on this, and with my solution, they will cut that by 30%. Then go to the market to hundreds of these exact people and see if they'll pay for your solution.

And if you're right, that's great. Go find more of them. And all of your marketing and customer acquisition efforts should only focus on these identical people.

Once that's growing nicely, look out for the next user group that's tangential to that. Having a super homogeneous user group is the best thing you could ever do once you identify which is the right user group.

A part of the solution involves figuring out where to find these people. But if you do this efficiently, you’ll see customer LTV (lifetime value) going up, and customer acquisition cost as well as churn going down over time.

These are the three things that you have to measure to see if you're doing things right. And if you're going in the right direction, you're going to get VC money even if you don't ask for it.

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