INSEADAlum Ventures is giving alumni entrepreneurs a springboard to success
Ten years ago, Tigris Capital Founder William (Will) Klippgen MBA’03D observed a pattern among INSEAD graduates who were trying to launch a business: Many entrepreneurs were struggling to raise an initial round of funding for their start-ups, even if they demonstrated strong business plans or great potential for growth.
He wasn’t the only INSEAD alumnus thinking about the problem. Deepak Shahdadpuri MBA‘98D, founder and managing director of DSG Consumer Partners, had it on his mind after serving as an angel investor to entrepreneurs who had graduated from INSEAD for years. Deepak believed that many INSEAD graduates weren’t fully leveraging the school’s alumni network to find seed funding for their ventures.
Deepak began talking with Claudia Zeisberger, senior affiliate professor of decision sciences and entrepreneurship and family enterprise at INSEAD, about the issue. Claudia explained that INSEAD students had discussed the idea of creating a seed fund in the past but hadn’t seen it through. She introduced Deepak to Will in the hopes that they would become the team to take the concept across the finish line.
That’s when “the thought of a dedicated fund for alumni started to form,” Will remembers. “As an early-stage founder, you basically need good advice and a little bit of money. Our vision was [to create a fund] which would provide both.”
In 2015, that vision officially became reality: Will and Deepak launched INSEADAlum Ventures (IAV), a Singapore-registered investment company focused on providing seed funding, value-added resources and mentorship to ventures run by INSEAD alumni entrepreneurs. It is, as Deepak explains, a “formal, thought-out way of harnessing the energy behind INSEAD alumni.”
For alumni, by alumni
Roger Egan of Redmart at the Founders Fireside Chat
IAV is the first global venture fund dedicated to INSEAD alumni and funded by alumni. To date, it has raised SGD$1 million from 17 alumni who have agreed to serve as mentors to the start-ups selected by the fund.
As a seed fund, IAV intends to invest only in early-stage start-ups. “The way we define ‘start-up’ is pre-profit, pre-revenue and most of the time, even pre-product,” explains Claudia, who serves as an IAV investor-mentor. “Sometimes they are just at the idea stage.”
While the investment committee has not yet selected any start-ups for the funding, it has reviewed approximately 100 applications to date. The committee evaluates each start-up based on a number of variables, including the quality of the company’s product or service and potential market opportunity.
“We try to meet with most of the qualifying start-ups that apply, either online or in person, and we use our network extensively in the evaluation process,” Will says. “In the end, I believe it comes down to this magical feeling when you meet a really high-potential start-up.”
Deepak adds, “Our mandate is to invest only in businesses that we feel we or one of the mentors can add something to give back.”
Chosen ventures will receive up to SGD$200,000 and mentorship to help them raise additional funding after six to 12 months. IAV will also provide the ventures with access to global senior venture professionals who have built similar businesses, serve as leaders in a relevant sector and can help take the product or service to market. Because all mentors and advisors are investors in IAV, they have a strong, vested interest in making the portfolio of companies succeed.
All alumni ventures can benefit from applying to IAV, says Claudia. “Even if your enterprise is not funded, you will get professional feedback, and that is worth more than the money you may or may not receive.”
Investing in INSEAD’s future
Aside from supporting fellow alumni, Will and Deepak founded IAV in order to give back to INSEAD — an institution that they credit for their own professional success.
“I don’t think I would be where I am without INSEAD,” Deepak shares. “A large reason why I started IAV was … to find a mechanism where I could use what I do to give back to INSEAD on an ongoing basis — something that builds a legacy.”
Approximately 25 percent of IAV’s carried interest will be donated to the INSEAD endowment fund. None of the managers will take a fixed salary, notes Will. “We want to help develop the school through letting it profit from future alumni success stories,” he says.
Although IAV operates as a fully independent entity, it is formally recognised by Dean Ilian Mihov, INSEAD’s Private Equity Centre and INSEAD Entrepreneurship faculty. As such, it intends to extend the efforts of these groups to shape the next generation of entrepreneurs that are coming out of INSEAD.
“Entrepreneurship today is about regional and global ideas that can span multiple countries, languages and professions,” explains WIll. “A lot of entrepreneurs coming out of INSEAD reflect this and impress me by being extremely knowledgeable, forward-thinking and focused.”
With IAV, those entrepreneurs have a support system to take their talents further.
In fact, Will says, having the support of a fund like IAV would have given him an enormous boost of confidence when he was launching his venture years ago.
“Starting a new business is an incredibly tough journey, and being backed by a fund associated with my business school might have made me even bolder and let me move forward even faster,” he explains. “When I did my start-up I had very few mentors around me. Having access to the INSEAD faculty and alumni base would have been incredibly powerful.”
Editor’s note:
- For more information on IAV, visit https://inseadalumventures.com
- To apply for funding, visit https://inseadalumventures.venture360.co/apply
- To register as an investor, visit https://inseadalumventures.venture360.co/apply/investor/register
- To contact the IAV team, email plans@inseadalumventures.com
- For information on INSEAD’s PE center and its research, visit insead.edu/gpei
Joanne Wilson, an angel investor, suggests that some founders may be better off not scaling, but building a business without raising capital with a price tag on it in “Not Everyone Has to Scale”. Read the article here http://bit.ly/2filzJA
Let me add some color on VC investing, especially seed funds. Investing in ‘3 guys & a powerpoint’, as I call it in class is not trivial. It requires an understanding of past investments, recent developments, trends and a clear insight on what is possible and what is not for businesses. The statistics speak for themselves less than 2 out of any 10 investments made will return the money invested. Meaning that more than 8 out of 10 investments made will be write offs. Giving INSEAD students access to a professional team which is positively inclined towards their ideas and willing to meet them (!) face to face to listen and provide input is an incredible opportunity. And it is open to all INSEAD students & alumni. Putting the ideas through a professional process is key – and helps in turn to shape/ improve the entrepreneur’s idea. I would hope that those who are turned away appreciate the lessons learned from the engagement – that is after all reality. Having due process when handing out the funds is vital – not only for the credibility of IAV, but also to encourage good and solid new startup ideas. It is a filter that hopefully will lead to the realisation of solid business ideas. I would like to thank the many alumni who made it possible to have such a vehicle for the first time at INSEAD and wish that many other similar efforts will follow in future to let entrepreneurship thrive at INSEAD.
My view was always that the IAV Fund would support with small funds various INSEAD startups in the very beginning with not much more going for them than the value of the INSEAD MBA. But what’s the point if nearly no investments have been made and all you’re doing is simply providing another “no” to the students or alums – this time a “no” coming from the family which gave a strong message of “support” so it just seems double-faced. No value for entrepreneurs and no value for the fund owners is provided in its current structure.
Hi there,
IAV was formed on a truly commercial basis, but with the aim to provide friendly financing terms and superior support for our startups. So I would disagree with calling us double-faced. Running a seed venture fund does not equate giving funding to most of the applicants, that is just not how early-stage funding works. Would be happy to talk more, please contact us at plans@inseadalumventures.com
“observed a pattern among INSEAD graduates who were trying to launch a business: Many entrepreneurs were struggling to raise an initial round of funding for their start-ups, even if they demonstrated strong business plans or great potential for growth.”
Well then, if you’re running it like every other VC fund, making it, in your words “competitive. very competitive” then you’re not really helping those INSEAD graduates with their strong business plans and great potential for growth. It’s cool that you take a fully commercial approach. But putting the INSEAD brand on it when you’re nothing else than another VC that evaluates INSEAD students in the exact same way seems very wrong to me.
You say you’re looking for “pre-profit, pre-revenue and most of the time, even pre-product”…have you SEEN your application? https://inseadalumventures.venture360.co/apply
Hi there, please let us know which question in particular you think would be inappropriate. I just removed a question that required a product to be present in some form, but otherwise, I believe the screening is OK?
We just started using Venture360.co to make running our fund more efficiently. As you know, we do not take any management fee or salary, so we hope this new platform will let us get back to applicants even faster.
100 applications and not a single investment made? How many INSEAD startups do you mentor then like you also promise? Because so far doesn’t look like the “energy” is going anywhere..
Dear Confused,
Thank you for your comment. INSEADAlum Ventures (IAV), like all other seed and VC funds, is selective. The process is competitive. Very competitive. To put things in context, and as a relevant benchmark, most VCs invest in a very small number of opportunities they review. At DSG Consumer Partners which I manage, we have invested in 27 deals over 4 years after reviewing over 1,000 opportunities.
At IAV, from the 100+ applicants, we have met 30 teams and done diligence on around 10. In most cases, we decided not to proceed after diligence. In one situation, the team decided not to pursue the opportunity after further market analysis. And in another situation, one of the founders decided to join a large bank as an associate and hire someone to run the start-up which was not something that we wanted to back.
At this stage we are at term sheet stage with two companies and we are hopeful that these investments will get closed.
Hi there “Confused”, I understand it seems a lot, but I have been an early-stage investor out of Singapore since 2004, and I typically look at 1,000 business plans a year but only 3 to 5 end up in my portfolio. At InseadAlum Ventures, we only mentor companies we invest in.
At this point, we are looking to close 2 investment in the next few weeks, so do keep a lookout for news from us.
When will IAV make their first investment? And what were some of the things that were wrong with the first 100 applicants?
We review applicants as and when received. At this stage, there are two opportunities that look very exciting. We have completed diligence and have proceeded to term sheet. Often these start-ups also have offers from other sources of capital including family, friends and other funds. The best start-ups often receive multiple offers from different investors and have the luxury of choosing who they work with. IAV hopes to be one of the preferred sources of capital for Insead entrepreneurs at the seed stage.
There are many different reasons why the applications to date did not lead to an investment. These include weak business plans, where the market opportunity is not large enough, markets that are too competitive, no clear monetization model, insufficient differentiation relative to similar products/services already available in the market and in an area where the IAV mentors lack experience and can make a contribution.
Hi “INSEAD”,
early-stage investing is challenging asset class. As mentioned above, we are looking at 2 deals closing in a short time. When it comes to what was wrong, I would say that nothing is directly “wrong”, but that we have to see a real fit and find deals where we are able to add value. We have also been ready to invest in a company where the founders suddenly decided to take up jobs instead of continuing with their startups.