"A Southeast Asia fund may see more than 5,000 startups in the ecosystem. From that, they will do deep due diligence into about 100 companies, write deal memos for 50, and ultimately invest in only 10 startups in a year. There is a huge funnel process." - Jeremy Au
"Across stages, VCs are collaborative with one another. However, within the same vertical, VC funds are often highly competitive because there is only a limited opportunity to make an investment at that specific point in the startup lifecycle." - Jeremy Au
"While many consider Y Combinator the 'Harvard for Startups,' from a VC fund strategy perspective, they operate much like an index portfolio. Conversely, funds like Union Square Ventures are focused on making highly concentrated bets, resulting in completely different hit rates for building unicorns." - Jeremy Au
In this episode, Jeremy Au breaks down the inner workings of the Venture Capital ecosystem, exploring how VCs balance fierce competition with strategic collaboration. He details the four core functions of every top-tier VC—sourcing, selecting, supporting, and exiting—and unpacks the distinct strategies funds use, from index portfolios like Y Combinator to venture builders and concentrated bets.
00:00 - Collaboration vs. Competition in the VC Ecosystem
00:47 - Categorizing VCs: From Pre-Seed to Growth Stage
01:23 - The Four Core Functions of Every Great VC
01:36 - Four Common VC Fund Strategies Explained
03:45 - The Spectrum of Traction and Startup Evaluation
03:52 - Minority Investments vs. Management Control
04:42 - Benchmarking VC Success: Hit Rates and Unicorns
05:45 - The Logistics of the VC Sourcing Funnel
07:00 - Proprietary Sourcing and Stealth Startups
08:23 - Reference Checks and Deal Referral Mandates
Keywords: Venture Capital Southeast Asia, VC Sourcing Funnel, Startup Investment Strategies, VC Fund Economics, Stealth Startups, Venture Builders, Y Combinator vs Union Square Ventures, Pre-seed and Seed Funding
