Sean: For those who are listening in right now and maybe they're thinking, oh, there are also people who came to me and asked me to invest in their private or startups, what’s your advice? What are the first things you look at, first red flags that you check out before you even move on in the conversation?

Marvin:  I realized that you're investing in the person more. Unlike in stocks, in the stock market, there are ISO certifications, a lot of lawyers, and a lot of accountants. But when you invest in startups, there’s none of those. So it’s all in the skills and integrity of the person handling the business. There are also a lot of holes in there so it’s not just about the concept. It can be a food cart but if the entrepreneur is really good, that’s what you’re paying for, his or her ingenuity and also the risk factor which can be lost.

People always see the stock market as risky but the investments in business can be riskier because your money can go down to zero. In the stock market, your money will not even go down to zero. Especially when you buy the big ones that have dividends, your money will not be lost. So it's just that the exposure of people here in the Philippines are more in savings accounts and real estate. And then when they get introduced to the stock market, they’d be like, oh, this is risky. I guess it’s still a young concept at least in our country. We’re not mature yet compared to other countries.

JC: For me, the first thing is, because it’s true, you’re really investing in the person. So the first thing I look at is, how would I add value? And how would this person add value if I join or partner with them? Because it's always, for me, our synergy should be one plus one equals three. So I look at first, definitely, is this person going to be an entrepreneur? Can he do it? Does he have the proof of concept? Has he already led businesses now that have already grown? Has he shown that he can manage people?

So it’s like, it depends on your situation. What are your strengths as a company? And then if you're going to invest in somebody, what value will you be able to add? And then, so aside from the person, aside from the value that they can add based on their strengths or the other businesses that they own, definitely the financials. At the end of the day, it's about the return on investment. So you have to see what's the business model, how are you going to earn money, how are you going to get your money back, how long will it take. So at the end of the day, it's really about ROI.

So when you already see that the financial doesn't make sense, but also you need to double check because a lot of startups have really bad accounting processes. I mean, usually if it’s a startup, their accounting is not yet polished. So I allow my people to check the accounting information. Even me, I also have a background in business school so I study the numbers. You just have to question them about the details regarding their FS, income statement, and everything. Somehow, you will know it. So you really have to do your research. You have to ask about the business model, who are their clients, how much sales do they do per month, per day, per contract. Then somehow you will be able to break it down, you will be able to catch if the FS is right. And I would recommend joining startups with proof of concept. For me, like, it’s very risky for me if there’s no proof of concept that they have done something. And it's just an idea.

Marvin: Sometimes, for me, I look at their PowerPoint or sometimes the companies that are not making money yet, sometimes it’s like that. Or the idea is really interesting, but there’s no operations yet. There’s something like that.

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