ExitStack Unfiltered is ExitStack's ongoing webinar series, where we host candid conversations with investors, operators, and ecosystem leaders shaping the startup landscape. Held on a weekly or bi-weekly basis, these sessions are designed to bring real-world insights and tactical advice exclusively to members of the ExitStack Founders Community. The goal is simple: cut through the noise and surface honest, experience-driven perspectives that help early-stage founders navigate the most critical phases of building a company.

ExitStack: What types of startups do you typically support in the early stages? Also, while we're discussing the concept of "zero to one," how do you define this phase when evaluating early-stage companies, and what does progress look like?

‍Hisham Ibrahim: Gobi's strategy is to be an early investor in new markets. We aim to back early entrepreneurs building solutions that have proven successful in more developed markets, like China, adapting them for local contexts in Southeast and South Asia. We also look for opportunities where countries can leapfrog traditional development stages, such as moving directly from traditional banking to e-wallets or crypto. 

I personally view Bangladesh as South Asia's most undervalued market. While India and Pakistan receive significant attention due to their larger population, Bangladesh, which also has a substantial population, has a higher GDP per capita than both. It also has a 10 to 15-year track record of nearly uninterrupted economic growth, comparable to Vietnam in ASEAN. This market is "underbanked" from a VC perspective, and its strong fundamentals present an excellent opportunity for early investors like us to capitalize on and support great early-stage founders, which ultimately benefits our LPs. 

Regarding "zero to one," it broadly signifies the initial launch of a company and its journey to a viable stage, often defined by achieving product-market fit. It also means raising the first million dollars and, in terms of revenue, achieving US$1Mn. This "zero to one" journey is universally recognized as the most challenging phase of building a startup. Many underestimate its difficulty, which is why VCs often prefer to back second or third-time founders, even if their previous ventures failed. These founders possess the rare character, skills, and grit required to navigate this critical initial stage.

ExitStack: For founders with limited capital or technical resources, which is usually the case in early stages, what are some realistic ways to validate demand or land their first customer?

‍Hisham Ibrahim: Even in Malaysia, where the VC ecosystem is still nascent, early-stage capital is difficult to raise. Unlike in the United States, where seed rounds of $200,000 to $500,000 are relatively easier to obtain, especially for second-time founders, founders from countries like Malaysia and Bangladesh often struggle to raise even $50,000 to $100,000 initially. Based on my experience in VC, founders typically raise from wealthy individuals, or family and friends. In emerging markets like ours, you have to accept lower valuations and thus higher dilution in early stages. Proving demand for your idea through initial sales or experiments is crucial. The trick isn't just raising money, but going far with it. 

In Malaysia, we joke about the cockroach, which can survive in the toughest conditions. Similarly, a company that can survive harsh times, the early, lean days until you gain enough traction to raise a larger round ($500K-$1Mn), is as important as knowing people who can provide initial capital.

ExitStack: What are some common blind spots or misconceptions that you see among founders when they're chasing their first customers? 

‍Hisham Ibrahim: One of the most common mistakes founders make is assuming they know what customers want, which often leads them to build solutions prematurely. This attachment to their own creations makes it difficult to pivot when sales falter. I’d say don't fall in love with the solution; fall in love with the problem. 

Identify a painful and frequent issue, ideally one you've experienced yourself, and that you believe shouldn't exist. This mindset allows for the psychological freedom to iterate on solutions, recognizing that the journey of a business involves numerous pivots. 

However, it’s also important to ensure that the problem is painful enough and the market is large enough to sustain a viable business. The pain should be felt frequently because this increases people's propensity to pay for your product/solution. To summarize:

• Founders often think they know what people want.
• They build something without fully understanding their customers' needs.
• They become emotionally attached to their own solution, and when it doesn’t sell, it becomes psychologically challenging, especially if they’ve invested considerable time and money into it.

ExitStack: How does it sound to a VC when a first-time founder reaches $1Mn in ARR? Does a second or third-time founder still have a better chance of gaining trust?

Hisham Ibrahim: Whether I would fund a first-time founder with $1Mn ARR or a repeat founder with no ARR depends on several factors. A million dollars in ARR does not guarantee funding because the business model must be scalable. For instance, a business model that resembles McDonald's may not be fundable due to a lack of scalability, even with $1Mn in ARR. 

It also depends on the stage of the business, how long it took to reach the current stage, how much money they burned to get there, and the product or service in question. While a repeat founder with no ARR might statistically have an edge over a first-time founder with no ARR, a first-time founder building a country’s first e-commerce platform and achieving $1Mn in ARR within six months presents a compelling case. In this scenario, they've demonstrated a viable and growing business, compared to a repeat founder who might still be at the idea stage.

ExitStack: How do you differentiate between traction that's sustainable versus traction that's artificially inflated or not repeatable?

Hisham Ibrahim: The term “traction” is often overused, and "vanity metrics" like number of sign-ups or accounts can be misleading if they’re not backed by revenue. For me, revenue is the ultimate measure of traction, as the goal is to generate and grow revenue. However, in the earliest stages, when revenue might be minimal, traction still matters. 

Even with small revenue, for example, $100,000, other metrics can justify funding, such as a 10,000-person waitlist, indicating operational bandwidth limitations. Other signs of demand include untapped markets. These non-revenue metrics can prove a business's funding potential in early stages. 

Once a company reaches Series A, revenue becomes the primary metric, with other operational metrics becoming secondary. Ultimately, traction validates future growth by showing that your small track record can continue to persist and that the market out there is much larger than what you are currently serving.

ExitStack: Will debt financing from a bank create a barrier to securing the first round of equity funding for early-stage startups?‍

Hisham Ibrahim: Debt financing itself isn't a deterrent to raising startup capital, unless the amount is disproportionately large (for example, $3Mn debt on $1Mn revenue) or used for inappropriate purposes. For working capital like raw materials, it's generally acceptable. 

It’s important to note that VC funding isn't for every business. Many successful businesses are built organically, with funding from friends and family, or by reinvesting profits, and later using debt financing for growth, albeit slower. While VC funding allows for much faster growth, it also comes with high expectations as VCs aim for 25-35% annualized returns. 

ExitStack: We often hear that targeting a large Total Addressable Market TAM is essential for building a venture-backable business. In the context of Bangladesh, what do you think is a reasonable TAM size that makes a startup attractive to global VCs?

Hisham Ibrahim: Founders often overestimate their TAM, but having a large TAM is crucial for a business to be appealing for investment. Don't limit your thinking to a single TAM; consider adjacent markets and how your business can grow there. For instance, a strong logistics network built for dry cleaning in Bangladesh could expand into grocery delivery or cross-border logistics. 

While specific TAM figures can be misleading, especially given the market's dynamic nature, a TAM of at least $2Bn is a good benchmark. This allows for significant sales even with a smaller market share. For countries like Bangladesh, Indonesia, Pakistan, India, and China, the sheer population size is a significant advantage, allowing businesses to reach unicorn status without expanding beyond their borders. When presenting your TAM, the methodology and realistic assumptions are more important than the exact dollar figure. A structured approach to calculating TAM demonstrates a founder's clear thinking, which is highly valued by VCs, especially those unfamiliar with the local market.

ExitStack: Given Bangladesh's economic fundamentals, which industries do you think are the most exciting for Gobi in terms of how you're looking at the market?‍

Hisham Ibrahim: Looking at successful businesses in other countries that are yet to exist in Bangladesh is a good starting point. However, it’s not about directly replicating models; localization is crucial due to the unique challenges of the country. It's important to identify digital-first solutions that have thrived elsewhere but are missing in Bangladesh. For example, a massive e-commerce platform like Shopee or Amazon doesn't exist here, potentially due to payment networks, logistics, trade barriers, or other issues. This discovery process may reveal that the real need is maybe a payment system, as seen with early unicorns in Indonesia. Capital controls on foreign currency exchange, like those in Bangladesh and Pakistan, can deter large international players but create space for local champions, similar to GoZayaan in Bangladesh or Sastaticket in Pakistan. These companies succeed by understanding and tailoring to their local markets. The best ideas are often not obvious. If an idea is immediately seen as "good" by everyone, 20 others are likely already pursuing it. But if an idea seems "offensive" or crazy to the average person, it might be a sign that you've identified a unique problem and insight.

‍ExitStack: Beyond traction or revenue, are there any specific founder behaviors or mindsets that signal high potential? Can you share any examples of a founder or a startup that impressed you at that stage?

‍Hisham Ibrahim: The qualities we seek in a founder are:

1. Deep sector expertise: You need unique insight into a specific problem within your industry and the ability to navigate its complexities. This provides credibility to early-stage investors.
2. Unique insight beyond sector expertise: If you're not from the industry, you must identify a significant problem and demonstrate you're the ideal person to solve it.
3. Intelligence and structured thinking: Above-average intelligence and a structured way of thinking.
4. Grit: The startup journey is incredibly challenging. We look for individuals who can persevere through painful times, innovate, and pivot repeatedly until they find a solution. Life experiences that demonstrate this resilience are highly compelling to investors in the early stages when evaluating a founder's character.

ExitStack: In your view, what role does storytelling or narrative play in convincing people or customers at the early stage? Are there any other factors that you think play a more significant role in acquiring customers?

Hisham Ibrahim: Storytelling is crucial. Take Ridwan from GoZayaan, for example; he's not just a fantastic story builder, but a fantastic storyteller. This has enabled him to consistently raise capital outside Bangladesh. He delivers on his promises and continuously paints a vision where the business tomorrow is much bigger than it is today. You must convey a grand vision, like building Bangladesh's next digital bank instead of just an e-wallet. While your vision and story may evolve, the sincerity remains.

Articulating this grand vision is critical. This message transcends fundraising; it also affects talent and customer acquisition. You must continuously "sell" to everyone—customers, VCs, and especially early employees (the first 10-20 people). These employees need to buy into the vision of building the next tech giant of South Asia, not just another business. Employees back you and your grand vision, the mission to build something meaningful.

ExitStack: Are physical product manufacturing and distribution businesses attractive to VCs?

‍Hisham Ibrahim: Physical products and distribution are generally low-margin and capital-intensive. For example, software businesses can achieve 80%-90% gross profit margins, where physical products typically yield 30-40% at best. Scaling physical products involves significant investment in factories and infrastructure, which limits growth potential due to reliance on physical assets. In contrast, software can scale more capital-efficiently across markets. While great hardware businesses exist and are possible to invest in, they are inherently harder to fund and build than asset-light businesses.