Do VCs get caught in hype? This Vertex Ventures partner shares her hot takes

This article is adapted from Tech in Asia

In any social context, there are many open secrets or unspoken rules.

Perhaps your friend group has someone that’s gone for some plastic surgery but everyone’s too awkward to talk about it. Or maybe there’s that colleague who tends to suggest after-work drinks a little too often.

The tech sector has its fair share of them too. Instead of letting these discussions happen only behind closed doors, we’ve decided to bring them out in the open. Carmen Yuen, general partner at Vertex Ventures Southeast Asia & India and one of the speakers at this year’s Tech in Asia Conference Kuala Lumpur, joins us to share some of her thoughts on these controversial topics.

The following interview has been edited for clarity and brevity

1. Do you agree that VCs get caught up too easily in hype without a proper understanding of what they are backing?

VCs sometimes do get caught up in hype – there are times where they will jump in, in the heat of the moment. Then again, there are instances where it can be a strategic move. For a VC to invest in a startup that will do well and realize VC-level returns, one key element is that they’ve got to hit the right timing in the right cycle.

Entering at the right time for a VC usually means that there is good talent and resources available to the startup, which could accelerate its growth more significantly at the time than in other periods. Hence, riding the wave of emerging trends allows VCs to capitalize on market momentum, attract co-investors, and position their portfolios to benefit from the next big breakthrough.

However, there are nuances within the cycle, and the part where the investments are made matters too. For instance, the rapid capital injections in AI and machine learning startups reflect both the current hype and the genuine belief in their transformative potential. For VCs, we should not only claim to invest in AI, but also have a thesis on which part of the AI continuum we choose to invest in. Without such clarity and conviction, we will indeed be seen as investing in hype.

2. ‘Thought leadership’ posts on LinkedIn – fluff and overdone, or nah?

From a VC perspective, thought leadership posts by founders on LinkedIn can be a strategic asset when executed thoughtfully. When done right, this content can contribute significantly to a founder’s credibility and the perceived value of their company.

For one, regularly sharing insightful content could showcase that a founder is deeply knowledgeable about their industry and current trends. This level of expertise can reassure VCs that the founder understands the market, has a vision for the future, and is capable of navigating challenges and opportunities.

Additionally, active participation in industry conversations indicates that a founder is engaged, up-to-date, and invested in their field. This engagement – which includes commenting on relevant posts, sharing articles, and participating in discussions – shows that the founder is not only informed but also actively contributing to the broader industry dialogue.

Further, a strong LinkedIn presence can significantly enhance a founder’s and their startup’s visibility, attracting other investors, potential partners, or talented individuals interested in joining the venture.

Having said that, I believe founders also need to show that they can strike a balance between spending time promoting themselves and running business operations. The business should be prioritized above LinkedIn promotion.

3. Why do you think some VCs get a bad rap from founders?

Some people might say that we’re biased when choosing who to invest in. But what they should know is that VC investment decisions involve thorough due diligence, market analysis, and evaluation of potential risks and rewards. That said, this process can appear opaque to outsiders, so I do get that it could lead to misconceptions about how VCs select investments and allocate capital.

Another common negative stereotype is that we’re “stealing” ideas. Ultimately, we meet with hundreds of startups and many of them could have similar business storylines. When one gets funded and not the other, the latter could feel as if the VCs had taken their business idea and passed it along to the former. While it may appear so, the level of differentiation could lie in the execution, not merely the idea.

After the short spike in funding activity in 2020, startups now need way longer time to raise funds. Many are going through the grind of keeping the business afloat, cutting burn, and raising capital.

Some founders might feel that their investors have written them off and are not working closely with them to navigate this tough period. This could happen when VCs have too many portfolio companies to manage and many of them are in the same situation.

---

Want to hear more about what Carmen Yuen and other speakers like her have to say about the startup sector? Catch them in action at this year’s Tech in Asia Conference Kuala Lumpur, happening from July 24 to 25. The limited finale sale is ongoing, so get your tickets here before we’re all sold out!

For the latest news on Vertex Ventures SE Asia and India and our portfolio companies, follow us on Linkedin or subscribe to our monthly newsletter.