“It’s like we’re a tech VC,” says Joseph Ziegler. The newly appointed Founding Partner of NFQ Asia, a co-investment between Germany-based tech development firm NFQ and himself, was speaking to e27 about how the Singapore-based venture builder is looking to solve the ever-widening gap between venture capital firms and mid-stage startups struggling with scaling.
But instead of just money, NFQ Asia will provide technical teams to help the startup scale.
“The typical company NFQ would help with is a startup which is at the brink of true success,” says Lars Jankowfsky, Founding Partner, NFQ, who founded the company in 2001 and has recently been appointed CTO of NFQ Asia, in charge of managing the technical teams.
This startup would have already secured a seed investment from an angel investor or venture capital firm. It would have launched its minimal viable product (MVP), which gains traction. Typically, the founders will then start raising a Series A round, which is time-consuming and drives attention away from the product which their users love. Plus, the founders might struggle to find a team of top-notch engineers that can bring the product to the next level.
“These guys lack the expertise and know-how to scale their team. How to find the right engineers, train them, teach them and manage them. We’d come in not only with money but with exactly all the above,” says Jankowfsky.
Later on, once the startup reaches a certain level of maturity, NFQ Asia will help to transfer the engineers from their end into the startup if requested. Jankowfsky adds, “This is, by the way, a huge difference between us and the typical devshop out there (besides the money). We truly build teams for the startup and later on let them go — because all what counts for us is the success of the startup and not getting as much money of them as possible.”
In return, NFQ Asia takes equity from the startups they help. The amount of equity taken, according to Ziegler, depends on the valuation of the startup.
NFQ Asia also runs on other models, like one where it accelerates startups for venture capital firms. “For example, you’ve got a VC that wants to invest in it (startup), if they want us to accelerate the startup, have somebody reduce their technical risk, and have a bigger chance of having some of these guys succeeding, and they invest via our vehicle as the model. Now, we still do people outside that model… The idea is we’re investing, we’re creating a portfolio of companies that we’ve given technical enablement, enablement and money too, and we’re taking stakes in these companies,” says Ziegler.
The problem with traditional venture funding is that half the amount is often spent trying to enable technology or hire great engineers. Instead, NFQ enables startups to save time and effort by helping them with development. “Out of Vietnam, we can provide very good engineers for a fair rate,” says Jankowfsky. “So it’s like our goal is actually to make the startup successful and not earning money yet.” Of course, when the startup becomes successful — partly credited to NFQ’s involvement — the venture builder will be able to reap monetary rewards as well, with the stake in the startup.
“It’s everything we’ve always been talking about. VCs are investing blindly at half of what it takes for the startups to be successful. We want to remove that half of the risk,” says Ziegler.
NFQ isn’t the first nor will it be the last to bring the venture builder model into Asia. In the region, venture builders like Ardent Capital and others have been successful. But great venture builders also need a good amount of venture capital to attract startups. Ziegler notes that while he is still in the middle of fundraising (current backers are limited to him and NFQ), once the fund is closed, NFQ Asia will make three to five investments and work with three other venture firms to build products for their portfolio startups. He adds that the cheque size will sit anywhere between 250,000 and one million dollars.
At the moment, it has already started on its first client, Fleet, originally named Shipstr, a startup managing discovery and rating of freight forwarders.
Currently, NFQ and NFQ Asia have access to more than 260 engineers in Europe and Vietnam. Since NFQ Asia only just got started in Vietnam, Jankowfsky is still in the hiring phase. “I am trying to hire now five to 10 engineers, however, we need to watch the growth. Especially in the beginning it’s very important to hire the right people and don’t grow too fast,” he notes.
There are two types of technical talent they are trying to seek out. Firstly, there are “leaders” and “rockstars”; these people make up the “foundation” for growing NFQ Asia’s tech teams. Then, there are “normal developers”, who will receive training in becoming a “true rockstar”. However, hiring “rockstars”, “leaders” or even just “normal developers” can prove quite challenging.
“If you want to attract the right people, then you need (a) two-fold (approach),” says Jankowfsky. First, offer a competitive salary.
He adds, “This goes without saying, if you pay peanuts you’ll get monkeys.”
Second, create an attractive workplace for these engineers. This means building a workplace equipped with exciting technology, allowing sessions with tech celebrities and letting employees learn from the best, not just decorating the office space with snooker tables and beer fridges.
1) Investment Manager meets with startup and decides if NFQ Asia should invest in it.
2) “Rockstars” and “Leaders” understands the software architecture, needs and weaknesses to figure out how to improve the product or solve a problem.
3) NFQ Asia will work with the startup’s CTO or tech founder and build a team together by providing two to three engineers and seeing how they can go from there.
*If there is no CTO present and the founders are purely business guys, NFQ Asia also helps with finding and hiring a CTO.
4) NFQ Asia will educate, train and maintain the team and make sure that they can work as fast and as effective as possible.
Going forward, Jankowfsky’s plan is simple: build NFQ Asia into a well-known brand in the tech community, beyond Vietnam. “Developers need to learn that we exist, that we are a really cool place to work, nice guys and that we rock,” he says. “Instead of trying to headhunt and talk people into joining us, my goal is to make NFQ so attractive that the really cool guys apply for a job here because they’d love to be a part of the true rockstar teams.”
“So…creating, maintaining and transporting our culture into the world. That’s what I do,” concludes Jankowfsky.
Disclaimer: Ardent Capital is one of the investors in Optimatic Pte Ltd, the parent company of e27