"Thousands of Company Profiles a Year"... Stories from a Startup Investment Analyst

[Interview] Accelerator 'SparkLabs' Team Leader Heo Jeong-ju
"Founders' Experience and Leadership Are the Basis for Investment Decisions"
"Persistent and Proactive Founders Who Execute Succeed"

"I think I tend to execute investments objectively, cool-headedly, and with a conservative perspective. In the coming years, it will be a period where survival is difficult unless the company is truly outstanding."

Heo Jeong-ju, team leader (30) at SparkLabs, a startup accelerator (AC, startup planner), has been working as an investment reviewer evaluating early-stage companies for six years. He said, "The cash available in the investment market has recently frozen." Company profiles from startups seeking investment come through various channels, from personal introductions to emails. The number of received profiles accumulates to thousands per year. When reviewing investments, he said he looks more at the traits of the company’s CEO than the business model. To prospective entrepreneurs, he advises, "Theory and practice are different. If you are thinking about starting a business, you should start something and face challenges head-on."

Founded in 2012, SparkLabs provides early-stage startups with initial investment capital, various resources, and educational programs to help them grow. It operates its own managed fund and the 'Technology Enterprise First Step Fund,' a government-backed fund-of-funds program. Since 2015, it has been selected as a TIPS (Tech Incubator Program for Startups) operator, leading the selection of 43 companies over seven years.

Below is a Q&A with investment reviewer Heo.

- What led you to become an investment reviewer?

▲ I did not study venture-related fields as a student. I studied International Relations at Johns Hopkins University in the U.S., then entered the Graduate School of Interpretation and Translation at Hankuk University of Foreign Studies. While working as a freelance interpreter and translator, I was assigned to interpret at a startup event, where I first learned about venture capital (VC). In 2017, I joined the Korean branch of the Chinese venture capital firm IDG Capital as an investment reviewer. Later, I became attracted to early-stage investment and joined SparkLabs in 2019.

- Why did you become interested in early-stage investment?

▲ Companies with a long history and some established systems are judged on investment based on numbers. The focus is on financial backing. On the other hand, early-stage startups under seven years old can proceed in various directions, and their potential is limitless. The advantage is that reviewers can operate with autonomy.

- What does an investment reviewer do?

▲ The job of an investment reviewer might seem vague, but it mainly consists of three tasks. The most important is discovering investable companies and conducting investment reviews. Post-investment management of companies is also essential. Lastly, maintaining continuous communication with LPs (Limited Partners, fund investors) and raising funds is part of the role.

- Please tell us about the investment review process.

▲ Sometimes I seek out companies directly, and other times I receive company profiles. Thousands of profiles come in annually through various channels such as personal introductions. I hold face-to-face meetings with companies that seem attractive, sometimes meeting five or six companies in a day. The review process to understand the company and decide whether to invest can take from one or two months up to a year per company.

- How is it working as a female reviewer?

▲ Since it is within the financial sector, the male ratio is high. However, recently many women have been entering the practitioner level. Early-stage investment is an area where female reviewers can have their own unique domain. For example, products like underwear and menstrual products cannot be worn by men (laughs), so male reviewers sometimes suggest, "Let's review these jointly."

- How is a single fund managed?

▲ Some funds do not have a specific main purpose and invest in various companies, while others have a defined main purpose and allocate about half of the capital to a particular sector. The average lifespan of a fund is about eight years. Half of that is the investment period, and the other half is the period for recovering the invested capital. Since the domestic venture ecosystem has been active since about ten years ago, many funds are now reaching maturity.

- The investment market is cooling due to the recent economic downturn.

▲ Yes. The cash available in the investment market has frozen. When there is abundant cash in the market, fund formation is active, and there is plenty of 'ammunition' to invest, allowing generous investments in many companies. Last year was like that. There was inflation in company valuations because of the abundant money. Now, investments are made more objectively, cool-headedly, and conservatively. In the coming years, it will be a period where survival is difficult unless the company is truly outstanding.

- What do you focus on when reviewing investments?

▲ For companies that have operated for a long time, numbers like sales and operating profit will prove their worth. However, for early-stage startups, it is impossible to judge the company solely by sales indicators. Naturally, I look more at the traits of the company’s CEO. The business model can be pivoted if it does not fit the market, but the CEO cannot be changed. I invest when I judge the CEO to have a certain competitive edge in the market.

- What aspects of the CEO do you pay close attention to?

▲ I focus more on how well they understand and have experienced the market rather than just being knowledgeable or smart. Someone who studies the market from books and someone who has faced it through real experience are inevitably different. I also pay a lot of attention to the CEO’s leadership and trustworthiness. In the early stages, the CEO can lead the company alone, but as the company grows, they must use their appeal to recruit talent and continue working with them.

- What advice do you have for companies seeking investment?

▲ I hope they show a proactive will to keep trying rather than giving up if the first meeting does not result in investment. The investment review takes at least one to three months, so I focus on the CEO’s execution ability. It would be good if they logically explain their position on any shortcomings or show ways to improve as much as possible.

- What advice would you give to prospective entrepreneurs?

▲ Theory and practice are different, so if you are thinking about starting a business, you should start something and face challenges head-on. The world changes rapidly every day, so I think it is important to challenge and start as quickly as possible. It is important to find an appropriate business model by testing hypotheses quickly and executing, then making changes.

- What are your future goals and plans?

▲ I have been in the industry for six years and still have much to learn and develop. SparkLabs, which initially made small seed investments, is now gradually increasing the scale of investments. I want to grow together by seeing the companies we invested in grow and proceed with follow-up investments. I hope to continue increasing the fund size and become a reviewer and company that stays with portfolio companies for a longer time.

This content was produced with the assistance of AI translation services.