In markets like Vietnam, a signed shareholder agreement is insufficient. Founders often don't fully grasp terms regarding reporting or KPIs. Investors must act as educators to onboard the company and build a true partnership, as legal clauses alone don't guarantee alignment.
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In a non-control deal, an investor cannot fire management. Therefore, the primary diligence focus must shift from the business itself to the founder's character and the potential for a strong partnership, as this relationship is the ultimate determinant of success.
In markets like Australia where tech M&A is less mature, a HoldCo's primary job during sourcing is often educational. They must patiently reset founder valuation expectations, moving them away from inflated media headlines and towards fundamentals like profitability and comps.
Founders should press VCs on how they specifically envision working together. A strong investor can articulate a nuanced plan tailored to the team's unique needs and the founder's working style, moving beyond a generic menu of services to show true alignment and understanding of the business's goals.
In emerging markets, founders are highly entrepreneurial but often lack long-term focus. A signed five-year plan is not enough. Investors must remain highly engaged to continually reinforce the strategy and prevent founders from pursuing distracting side projects that derail growth.
In Europe, the value of startup equity is not widely understood. ElevenLabs' CEO had to convince new hires and even their families that equity was a valuable part of compensation, sometimes having to "almost force" employees to accept it, a stark contrast to the US tech scene.
The most fulfilling and effective angel investments involve more than capital. Founders benefit most from investors who act as operators, offering hands-on help and staying involved in the business. This approach is more rewarding and can lead to better outcomes than passive check-writing.
Understanding a founder's real motivation for selling is crucial. Some want a partner for growth, while others are seeking an exit. A founder could take a partial earn-out and leave the day after closing, abandoning the business and becoming your biggest integration risk.
The desire to avoid awkward conversations with business partners, especially friends, leads to vague agreements. This inevitably results in costly and lengthy lawsuits later when stakes are high. Front-load the discomfort of detailed contracts to save millions and years of your life.
Unlike in mature markets where non-compliance is a deal-breaker, it is common in emerging market family businesses. The investor's role during due diligence shifts from pure vetting to actively guiding the company toward compliance, making the process the first step in building a trusting partnership.
Unlike Western PE where tasks are outsourced to bankers and lawyers, investors in markets like Vietnam must be entrepreneurial. They need to own every part of the deal process—legal, operational, financial—to navigate local nuances and manage risk effectively, rather than just coordinating experts.