Lessons from Investing in Early Stage Startups with iFly Founding Partner Han Shen

When deciding whether to invest in early stage startups, venture capitalists look for specific qualities in a founder and team. 

In his more than a decade working in venture capital, iFly founding partner Han Shen can spot a founder worth investing in, and, as a result, he has advice for hooking investors. Shen invested in successes like Oculus, which was founded in 2012 to create a virtual reality headset. Oculus was acquired by Facebook in 2014 for $2 billion. Shen has also served on the board of SayWeee!, the largest and fastest-growing ethnic e-grocer in North America. It closed its Series E round of funding at a valuation of $4.1 billion. 

More than six years ago, Shen launched iFly, a micro-VC firm, which prides itself in backing founders and early stage startups who “address the unglamorous, underserved, and under-appreciated demands.” On Nov. 10, Shen hosted a webinar for Founders Network  where he provided what he’s learned about investing in early-stage startups.

To learn more about how to invest in early stage startups, see if you qualify for membership and check out the webinar from November 10.

Here’s a preview of his webinar.

A VC with Startup Experience

As he wrote in a blog post commemorating the fourth anniversary of iFly, Shen understands the plight of fundraising as an early-stage startup after seeking funding for iFly. 

Between 2016 and 2019, he logged 680,000 miles and 1,500 hours of flights, most of which was for fundraising. More than 350 prospective LPs turned him down on Fund I, but despite these obstacles, Shen remained determined to get his own early stage startup off the ground. 

“Fundraising is hard but it still boils down to the process of finding the right fit in a persistent way,” Shen wrote in 2020. “In the early days, iFly encountered all sorts of setbacks but I told myself that ‘I am the captain of the ship. I am not abandoning the ship, and the ship must continue sailing forward.’”

Identifying Early Stage Startups with Grit

Before deciding whether to invest in early stage startups, venture capitalists like Shen obviously do their research. But, at iFly, they take it a step further and build expertise to identify opportunities and have the ability to assist entrepreneurs. 

With the solid foundation of extensive research, Shen’s not afraid to lead when it comes to choosing startups to invest in. Instead of investing in buzzy or fleeting ideas, iFly seeks out gritty founders who identify underserved gaps in the market. 

“We like to be independent thinkers,” Shen said. “Then when we execute, we are happy to lead. We are okay to follow. We are very comfortable being the only investor in the round.”

Take Weee!, for example. 

Founded in 2015, Weee! is an online grocer for hard-to-find ethnic groceries. Weee! promised to provide a solution to an underserved gap in the market.

Talking the Talk

Han Shen has heard a lot of pitches and can tell a good one from a bad one. One of the biggest mistakes a founder can make while pitching? Language. Drop the buzzwords, jargon and acronyms.

“Tell me the most plain English,” said Shen. “What problem are you solving and why should people pay for that”

Shen’s also seen a lot of founders come and go. For weathering the storm as an early-stage startup, self-awareness is key, he said. Founders who become successful are not only clear on their direction, they also see themselves clearly.

“Having the right self-awareness  and strengthening his own weakness by having the right co-founder. That’s something we can also appreciate and respect,” he said. “The founders are in the driver’s seat. And they have to be clear about what they are building and who they are, rather than simply trying too hard to appeal to a small set of investors.”

To learn more about how to invest in early stage startups, see if you qualify for membership and check out the webinar from November 10.