Pod Insights The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch 20 VC 046: How VCs Evaluate Investment Opportunities with Alan Chiu, Partner @ XSeed Capital About this episode Alan Chiu is a Partner at XSeed Capital, with a strong background in enterprise software and data storage. Alan is currently Vice President for Stanford Angels & Entrepreneurs, an alumni association that seeks to strengthen Stanford’s startup community by fostering relationships among entrepreneurs and alumni investors. Prior to XSeed, Alan was previously Director of Product Management at Bycast (acquired by NetApp), and was engineering manager at Creo, which was acquired by Kodak for $1B in cash. In todays amazing discussion with Alan we discover: What the checklist is for Alan when investing in startups? Why Stanford is the amazing place it is for startups? What is the most important value add that VCs can bring to a startup? When is the right time to pivot and how important is a product roadmap? As always you can follow Harry, Alan and The Twenty Minute VC on Twitter here!
Transcript 0:00 Speaker 00 You're listening to episode forty-six of the Twenty Minute VC with your host, Harry Stebbings. And we are starting today's show with a little giveaway. So all you have to do is leave a review for the Twenty Minute VC on iTunes and the first five people to leave a review will be sent a copy of Walter Isaacson's Steve Jobs book straight to their home address. All you have to do is leave a review on iTunes and then email harry@thetwenty minute vc.com with the review that you left the name under on iTunes. But back to today's show, very excited to say we are joined today by the incredible Alan Chu. Alan is a partner at Xseed Capital, where he specialises in enterprise software and
0:44 Speaker 00 data storage. He is also currently Vice President at Stanford Angels and Entrepreneurs. And prior to Xseed, Alan was Product Manager at Bycast, acquired by NetApp, and Engineering Manager at Creo, acquired by Kodak for one billion in cash. But before we delve into today's interview with Alan, if you've ever been in charge of a recruitment process and wished you could tell the unsuccessful applicants they didn't get the job, you'll love HiringScreen's smart feedback option. Send a personalised message to your entire applicant pool, or create a customised message for your shortlisted candidates. Nobody likes their CV to disappear into cyberspace, so let HiringScreen help you.
1:27 Speaker 00 Boost your company's brand image by keeping candidate updates with the application process. But without further ado, ladies and gentlemen, it's Alan Chu.
1:43 Speaker 01 You have now arrived at your destination.
1:46 Speaker 00 Alan, thank you so much for coming on the show. I'm so excited to have you here. Can you kick us off by hearing a little about yourself and your background and how you made your move into the venture industry?
1:57 Speaker 02 Sure, happy to. It's my absolute pleasure to be here. Thank you, Harry. So I'm currently a partner at Xseed Capital, a seed-stage, enterprise-focused venture firm that invests in enterprise software companies that are built on unique technologies. We're currently managing a sixty million dollar fund, it's our second fund, and our investment approach is to build a focused portfolio, spend quality time with each company to help them succeed and get to Series A and Series B. In terms of my personal background, I was trained as a analytical and computer engineer in Vancouver at the University of British Columbia. And after graduation, I was a, I became a software developer
2:42 Speaker 02 at a commercial printing technology company called Creo, which digitized the whole commercial printing industry and went public in the late nineties. After that, I joined a very early stage network security startup as their first engineering manager, shipped our first product, moved into product marketing, but unfortunately the business didn't take off. So we closed down after two years. And then the third startup was called Bycast, um, which was a private storage cloud software company. When I joined, we had one customer. I started in professional services, deploying our solutions in the field, spending a lot of time with customers and with our salespeople. And about a year and a half later, moved into product management,
3:25 Speaker 02 helped scale the company to about two hundred clouds around the world.
3:29 Speaker 00 Wow.
3:29 Speaker 02 Uh, selling through IBM, HP, as well as directly through our own sales force. And in twenty ten, the company got acquired by NetApp. Uh, after that, I, uh, and by the way, these are all Canadian companies. And after that acquisition, I moved my family down to the Bay Area. I went to the Stanford Graduate School of Business and then joined X seed after graduation.
3:49 Speaker 00 And what attracted you to the venture industry?
3:52 Speaker 02 It was a little bit serendipitous, actually. I wasn't, uh, it wasn't as if I had a strategic plan to become a venture capitalist. Uh, I actually was going to start a company, uh, graduating from Stanford. But after experimenting and, uh, with four different ideas during school and doing a lot of customer development work, I still hadn't found one that was so compelling that I wanted to spend the next five to ten years of my life building. And so I started looking for product leadership roles in startups instead. And during that process, I was speaking with a number of venture firms, including X seed, to see if there's any fit in the portfolio.
4:33 Speaker 02 And one of the general partners at X seed, Rob Siegel, is also a lecturer at the Stanford GSB. And I had taken some of his classes while I was a student there. Uh, so we had a very, very open conversation. And it turns out X seed was actually raising a new fund at that time. And the investment focus was going to be on uh in the enterprise space, which is my background. Uh, so I kind of showed up at the right place, right time and uh joined X seed as a result.
5:02 Speaker 00 And as a Stanford alum then, and as vice president for the Stanford Angels and Entrepreneurs, what would you say it is about Stanford that seems to be this incredible ecosystem for creating such incredible companies? Is it the talent, the people? What do you think it is?
5:19 Speaker 02 Well, cer- certainly the talent, the people, the access to resources are all critical elements. One of the the key factors that sets Stanford apart is is proximity to Silicon Valley and San Francisco Bay area in general, and the density of of successful technology companies as well as startups that are that have been built or and being built in the area, as well as the density of risk capital, venture capitalists, angel investors who are willing to take a bet on unproven, unknown, young talent.
6:01 Speaker 00 Would you say that's different from other areas? Do you think venture industries in other countries aren't so willing to take that risk?
6:08 Speaker 02 I would say there are certainly other startup ecosystems in which investors are willing to take a risk on startups, but not at the same level of um.
6:22 Speaker 02 Intensity, I would say, and it's certainly not nearly the same, uh, nearly the same level of concentration of investors.
6:30 Speaker 00 So what can founders do then to mitigate that risk for you? What can they do to reassure you that they're a safer bet?
6:37 Speaker 02 If they are not located in the Bay Area here, one of the best things they can do is to make sure that they're building a viable business. And have strong growth in terms of customer attraction, in terms of revenue, to prove to potential investors that they. Their idea is more than just a hypothesis, that the business that they've built is actually the very beginning of a multi-billion dollar venture.
7:05 Speaker 00 And discussing your investment strategy a little further, a company comes in to pitch to you, you say. Is there a checklist in your head? And if so, what's at the top of it? Is it revenue? Is it product? Is it team? What's your checklist?
7:21 Speaker 02 Given our stage of investment at the seed stage, oftentimes we invest in companies before they have a product or before they have. Any meaningful revenue. At the highest level, we evaluate each investment opportunity. Uh, along three types of risks. One is technical risk. Would the technology work? Would the product deliver on its promise? Right, so that's risk number one. We actually like companies that have a high level of technical risk. Because we believe strong engineering talent can overcome technical risks. And if it's actually a difficult technical problem to solve. It means there is a higher barrier to entry for this market, which helps the company to.
8:04 Speaker 02 Um, protect this margin and build other types of mold around this business. So technical risk is number one. The second risk is execution risk. And what do we mean by that? One, are the founders, the right founders for the opportunity? Is there a fit between founders and opportunities? And the second risk is. Have they got a complete team to go execute against this opportunity? And on this second one, we're actually willing to be flexible because we're C-stage investors. And oftentimes, at this stage, you don't have a complete team yet. And we have a very strong network from which we could recruit and help these teams fill out the management team.
8:45 Speaker 02 The third risk is market risk, and this is the biggest risk that we are concerned about. Will there be customers at the end of the day? If it is a space that we believe we know a lot about, we've spent a lot of time with the customers, or it's a space in which we have built companies before, we're probably more comfortable taking an earlier risk. Because we feel like we have a sense of what the customers want and where the market is going. But if it is an opportunity in a space that we are less knowledgeable about, it would take us more time to get to the same level of comfort. Now that the entrepreneur could mitigate that by coming to us, having raised a little bit of angel funding,
9:30 Speaker 02 and having built a product, launched it, and generated a meaningful level of revenue, thirty K a month, fifty K a month, with strong growth, that would help get us over the fence as well to believe that there is a real market here.
9:44 Speaker 00 And then, once over the fence, Xseed's portfolio companies have access to any member of the Xseed team, I believe, based on their different needs.
9:53 Speaker 02 Right.
9:54 Speaker 00 Is this standard procedure for venture firms?
9:57 Speaker 02 I think really it varies from firm to firm. It depends on the culture of the firm. There are firms where it's really a broad, the firm acts as a broad umbrella for partners that pretty much operate independently. There are other firms that have built up a large support team to help the portfolio companies.
10:20 Speaker 00 Absolutely. And then what do you think founders should look for in VCs? Is there any way that they can tell that the VC is the right VC for them?
10:28 Speaker 02 Certainly, there is a level of personal compatibility that needs to be there. Once you've signed, once an investor has invested in your company, you can't get rid of them. You are really committed. It's almost like getting married. So you want to look for someone with personal compatibility with you. But in in addition to that, you also want someone who could help you in areas where you need help. So for example, let's say you're a technical co-founder. You know a lot about the space you're tackling from a technical standpoint. But you've never run revenue before, you've never managed a sales team before, um or you need help on the commercial side.
11:08 Speaker 02 Well, you probably want to look for an investor who either has operating experience in that space. Uh a commercial operating experience or who has who knows people who could act as your advisor and potential hire. To help shore up that part of your company.
11:24 Speaker 00 And talking about technical and non-technical founders, do you, would you ever invest, would you invest in non-technical founders? I mean, do you think that's a big red flag or or is it okay?
11:36 Speaker 02 Well, in a general sense, I I I do not believe non-technical co-founders are um are a big red flag at all. There are a lot of uh amazing companies founded by non- tech, non-technical co-founders. It's just when it comes to X's investment focus, we have a preference for companies that are built on unique technologies. So that biases us towards companies that are founded by technical co-founders. But the the best founding teams actually are teams that that bring together a very strong technical co-founder. As well as a very strong and experienced uh non-technical commercial co-founder. And between the two of them, you've got uh the product and the business size of the of the company covered.
12:18 Speaker 02 And in the in the early stages of the company, there are really two things that you that you're doing. You're building a product and you're selling it.
12:25 Speaker 00 And you wouldn't be off, put put off by a company that's had their product built outsourced?
12:32 Speaker 02 Um, in our specific case, we would uh prefer prefer the company to own the technology. Because we believe, we we invest in companies that have a technical advantage. But if the companies, uh if the way they leverage outsourcing is to he- build an early prototype. Right to to figure out if they have product market fit before they spend serious engineering time to build a full-blown product.
13:03 Speaker 02 That's okay. So it really depends on how heavily dependent, how dependent they are on the uh on the outsourced. Uh, resources.
13:12 Speaker 00 And moving back a little to your time at Bycast, you were instrumental in driving the product roadmap. How important do you believe a product roadmap is for a startup? And how long do you feel a startup should maybe wait before potentially pivoting to a slightly different idea?
13:29 Speaker 02 Uh, two very good and challenging questions. So how important it is to have a product roadmap, I think is critical. Because you uh in in the technology space, it it it your competitive landscape is extremely dynamic. If you only have enough ideas for the initial version of the product and then you don't have, you have no idea what the subsequent versions are gonna be. Chances are you'll be overtaken by your competition very quickly. Now, that's not to say. That once you've got a product roadmap, you're stuck with it, right? You are going, we understand that you're gonna adapt. And change your product roadmap along the way, based on what you learn from the customers and from the market.
14:10 Speaker 02 But we believe you need to go in with a vision, with a very strong vision about how the world eventually is gonna be different and better because of you. And and what's the path to get there, understanding that this path will necessarily change along the way. So that's quest, uh your question number one. Question number two, how long do you wait to pivot? That's a very, very hard call. And the best pivots I've seen are the ones where the founders. Have noticed that something on the side, outside of their core business is actually thriving. Or might even be growing, getting more traction more quickly than their core product. And they then they noticed something interesting going on.
14:54 Speaker 02 And they start testing that out to see if if the signals are real. And if that's real, they go all in. So they already, there's alre- already strong signals in place of what's to do next. Those are usually the best pivots. The worst pivots are the ones where the team has come to a, uh, run into a wall in a core product. They have, they have no idea what to do next. So they start testing randomly. And those pivots rarely pan out because there's the in, uh, uh, an infinite universe of possibilities to test, but very limited cap, time and capital.
15:28 Speaker 00 So what would you advise a founder who is running a startup that potentially isn't going as well as it is planned to be going? What would you advise them in terms of pivoting? How would they go about it?
15:42 Speaker 02 If things are not going well, as, as well as you expected, go back to your key assumptions, underlying your business model. Right? Some of the key, one or more of those key assumptions have not been proven out, and that's why things are not going well. So go back to those key assumptions and really ask yourself, are they true? And if you don't know, then, then come up with experiments that you could run with your customers or users to either validate or invalidate those assumptions and, and go from there.
16:13 Speaker 00 And you recently wrote an article on the five key characteristics of successful product managers. So let's, let's switch this up a little and ask, what are the three main characteristics required to be a good VC or even a great VC?
16:27 Speaker 02 Well, great V, we've seen a lot of great VCs come from varied backgrounds. So first of all, I don't think you have to have done certain things in your life to become a great VC. But, um, one of the things I've observed with great VCs is they, they are very good at reading entrepreneurs.
16:47 Speaker 02 In picking the entrepreneurs that have the perseverance and the right balance of strong conviction and adaptability to both pursue the vision with relentless grit, but also be able to adapt to market changes and and customer learnings. One of the the very experienced and successful VCs that I met with early on in my in in my VC time once gave me this analogy, being a VC is like a talent scout. The entrepreneurs are the stars, are the talent that you're looking for. You are the scout, you are acting in the background. The the the stars are gonna become famous, you're not gonna become famous. But if you're doing a job right, you're gonna be finding a lot of these future rock stars.
17:30 Speaker 00 And who's the VC, if you don't mind me asking?
17:33 Speaker 02 John Fiverr.
17:34 Speaker 00 Okay, absolutely. Um, so so that's, and then the final characteristic.
17:42 Speaker 02 Of a great VC?
17:43 Speaker 00 Yeah, absolutely.
17:45 Speaker 02 Is actually knowing how long to hang on to an investment, when to sell. Sometimes VCs sell too soon, or investors in general for that matter, sell too soon. Uh, especially in today's funding environment, where later stage rounds are often pretty substantial and they offer opportunities for early stage investors to sell to these later stage investors. But some of the best companies will have, will still have a a very exciting growth curve ahead of them, even after these late stage uh investors have come in. And the greatest VCs know to identify which companies still have a lot of potential and hang on to their ownership in the company,
18:29 Speaker 02 despite having made twenty X, thirty X or fifty X in the investment, because they know that this could be a thousand X return. And that's, and that takes experience and and and takes a lot of discipline to resist that temptation.
18:43 Speaker 00 And if it's okay with you, we're gonna move on to a lightning round now.
18:47 Speaker 02 Sure.
18:47 Speaker 00 So the next industry to be disrupted and why?
18:50 Speaker 02 Long haul transportation. Because there are a lot of inefficiencies, technology hasn't really deeply penetrated in that industry, but with the combination of to net the devices and mobile, I think the time is right.
19:03 Speaker 00 And the the state of seed, say, seed stage funding?
19:07 Speaker 02 It is hyper competitive and challenging.
19:13 Speaker 00 The Apple Watch, success or failure and why?
19:17 Speaker 02 Success. I recently spoke with a Realtor who has just bought an Apple Watch and she was singing his praises on how it's changed her life. And and making her less dependent on her phone and and leading to to much better client interactions.
19:31 Speaker 00 And then finally, the most recent investment and why you said yes.
19:36 Speaker 02 So we recently invested in a fintech company in the personal credit space. There's not a lot more I can talk about that because the company is is still in stealth stealth mode. But the entrepreneurs, uh the the perfect entrepreneurs for this problem space. And the and the two co-founders are very complimentary of each other, covering both the product side and business side of of the venture.
19:57 Speaker 00 Well, Alan, thank you so much coming on the show. It's been an absolute pleasure chatting to you.
20:02 Speaker 02 Likewise.
20:04 Speaker 00 Now, if you enjoyed today's interview with Alan, don't forget to win your Steve Jobs book by leaving your review on iTunes and then sending the name that you left a review under to harry at the twenty minute V C dot com. And as always, all the show notes can be found on the blog at W W W dot the twenty minute V C dot com. And finally, if you're thinking recruitment, think HiringScreen. I use them to find my brilliant assistant Jackie and I simply couldn't have done it without them. So if you have any questions about the process or how they assess their candidates and judge the best candidates for you. Feel free to send me an email at harry at the twenty minute V C dot com. Thank you so much for listening to today's episode and we can't wait to see you in the next episode.
Previous 20 VC 045: From Idea to Pitch with Alan Jones, Founding Investor @ Startmate Next 20 VC 047: 4 Ways Investors Find Great Startups with Rob Moffat, Principal @ Balderton Capital Page updated October 25, 2026 · transcript and summary are machine-generated
