On April 27, 2022, we were honored to invite Larry Li, Co-Founder and Managing Partner of Amino Capital, to speak to the audience about how investors evaluate and add value to startup companies.

Guest Speaker Information

Larry Li is the co-founder and Managing Partner of Amino Capital. He graduated from the Tsinghua University. He later relocated to the U.S. in 1990 to study big data, and joined the
Wachovia Bank in 1997. After working at several tech companies and founding his own startup Larry founded Amino Capital in 2012, located in Silicon Valley. In 2021, he was named as one of the top 20 notable Chinese Americans in North America by Forbes.

About Amino Capital

Amino Capital was founded in Silicon Valley in 2012 and has seven funds under its umbrella. Amino Capital has invested in over 200 companies in the US, China and Israel, and 13 have since become unicorns, such as Weee! and Chime Bank.

How do investors evaluate empowering innovation companies?

Each individual learns differently, but it can be a matter of a few sentences that can alter the trajectory of one’s life. That was the case for me, and I hope that I can share some words of inspiration to others today. In the startup fields there is no one-size-fits-all truth, and every company succeeds or fails in its own way, so I will give you my own experience and understanding as a starting point.

How do VCs evaluate a startup?

The answer to this question determines whether a venture capital firm will succeed. Finding inexpensive and high-quality investments is difficult. While the early teams of the startup company do not have to be perfect, it is not sufficient for the company to have only one strength. It should be noted that every founding team has a different level of market potential, business models, and technical strengths, and what investors are most interested in is the growth potential of the founding team and their ability to expand and develop their company to become significant. Successful entrepreneurs possess the ability to continuously solve various problems. Founders do not fear copycats and always possess the potential for innovation. Investors must evaluate the ability of the founders to consistently grow the business based on the existing products. Founders must constantly exercise the execution of their team during the process of product development and upgrading.

The Importance of Continuous Founder Growth

In fact, most early-stage companies fail within five years. The growth trend of founders is important to investors, but their vision and problem-solving skills are equally important. Over 50% of companies fail because of founder misfit. Your present product or project is at its current level; investors are also interested in the possibilities for the future. The founder must determine which problems are the most important. The most successful founders do not get stuck in one place with one problem or one person and expand their realize that letting go makes problems easier to solve. Therefore, they make the growth process more efficient.

Companies that achieve greatness begin by doing insignificant tasks. For example, when Uber was founded, shared travel was already a very crowded market, but most of those companies were performing simple technical functions. Uber showed up and solved the most troublesome problems, such as government regulations, and redefined the ride-sharing market, so it can be the best option on the market. As another example, the market was already flooded with 18 similar companies when Google first started. The key factors that contributed to Google’s success were its crisp pages, powerful technology, and ability to continually consolidate its technological lead. The ability to do what others are unable, or unwilling, to do will determine the success of a startup.

How Do Investors Look for the Hidden Values of Founders?

 

In terms of the wealth creation chain, technological innovation is at the top, new applications are at the middle, and new markets and business models are at the bottom. As many young start-ups in new technologies do not require a large amount of capital to launch, investors are proactive and look for opportunities from the bottom up in this chain. Different venture capital firms find projects in various ways, such as focusing on students, attending entrepreneurial events, etc. Most VCs today do not disclose their contact information, and when LinkedIn was launched, many VCs revealed their email addresses, and LinkedIn gained significant traction by collecting these addresses.

Now there is a trick, many funds’ primary partner email address is firstname+lastname@companyname.com. In addition, it is recommended that entrepreneurs participate in a variety of social events themselves to talk to potential investors. However, meeting VCs is only the first step in the process of establishing a long-term relationship.

Characteristics of a Good VC

The vast majority of Silicon Valley venture capitalists do not make money. The majority of venture capital firms last no longer than five years and complete three stages at most. Ineffective VCs are detrimental to the founding team, as they do not add any value to the team. Only 20% of venture capital investors can double their asset, and less than 10% can grow it more than four or five times. The 5 Cs of a successful venture capital firm are Cash, Contact, Connection, Capability to assist founders in all aspects, and Content for research and investment. It is natural for a successful VC to have a strong output capability. Amino Capital has this capability in spades.

What is the Value of VC Firms?

Because the function of VC is to allocate limited resources on the most effective people, VC can generate great social value. 

Young people often aspire to do venture capital, but I do not recommend venture capital to individuals without social or entrepreneurial experience. One of the most important aspects of VC firm services is to provide startup companies with additional resources and empowerment (capability) abilities, and without venture capital experience, it is impossible for the individual to assist founders. The biggest artificial intelligence is the market economy. For me, the most interesting aspect of the job is dealing with people, and making money for investors by validating the market is the most rewarding aspect of my position

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