By Abdullah Hidayat, Managing Partner of Ficus Capital,
There’s a paradox at the heart of venture capital (VC) that often goes unspoken. On one hand, we as investors are painstakingly careful. We spend months scrutinising every pitch, every founder, every number, and dive deep into frameworks, psychometric tests, reference checks – the works.
Yet despite all this care, the truth remains: a significant portion of investments will fail. Depending on whom you ask, between 25% to 30% of VC-backed startups fail outright. If you look at returns, as many as 75% do not generate positive gains. That means only one or two out of every ten investments deliver substantial returns. It’s a sobering reality – but one every investor learns to live with.
Our Mission and the Challenge of Shariah-Compliant Investing
At Ficus Capital, since we began investing in 2021, this truth has been central to our decision-making. Our mission remains simple yet challenging: to back strong companies led by capable founders – all within a Shariah-compliant framework. That means no financial hedging or risk-shifting tricks that conventional VCs might use. This approach forces us to focus even more on the people behind the business.
Theory vs. Reality: The Messiness of People
Our framework is solid. But the reality has proven far messier than any checklist could capture. We believed we could identify the right founder – someone honest, resilient, trustworthy – and assumed long-standing associations would offer deeper insight. That belief, perhaps somewhat naïve, was tested. Pressure can reveal aspects of character that friendship and familiarity simply don’t.
Revelations: The Good, the Bad, and the Unexpected
Despite all our careful vetting, we ended up backing some founders who turned out not to be who we thought they were – each for different reasons.
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Case 1: One founder, primarily motivated by extracting money from investors, completely ignored our requests post-investment and failed to follow through on commitments. The company was ultimately liquidated. Interestingly, one partner had expressed discomfort from the outset, but the majority view prevailed. While we lost money, we recouped some through equity in other startups involving the same founder.
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Case 2: Another founder had passed a rigorous 18-month due diligence process led by a major overseas VC, including psychometrics, reference checks, and stress tests – all positive. Yet just before disbursing funds, inconsistencies in the founder’s communication raised red flags. Trusting our instincts, we disbursed only two-thirds of the investment. It seemed like a partial loss, but that gut feeling saved us from a bigger one.
These experiences reinforced a crucial lesson: while data and assessments are invaluable, gut instinct and red flag awareness are essential. The art lies in balancing that intuition with legal and financial responsibilities. Sometimes, your inner voice is the best safeguard – even if it carries its own risks.
Bright Spots: When Potential Reveals Itself
On the brighter side, some startups surprised us in the best possible way. Initially, their vision seemed too narrow or their storytelling underwhelming. Yet with encouragement and a few pivots, they uncovered their true potential.
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One investee evolved from a basic 3D design tool into a robust education platform.
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Another grew from a Wi-Fi sharing concept into a hardware-enabled router business, opening up new markets.
These remind us that potential doesn’t always shout – sometimes, it just mumbles.
Operational Realities: Due Diligence and Documentation
Operationally, many of our early-stage portfolio companies lacked experience in institutional fundraising. Due diligence often took longer than expected. Documentation was patchy. Negotiations over agreements stretched for months. Frustrating? Yes. But ultimately, we came to see this as part of our role – not just as investors, but as partners helping startups grow up.
The Biggest Lesson: Founder Character Is Everything
If I had to distil one key realisation, it’s this: founder character is everything.
Not just intelligence or charm – but honesty and grit. I used to think these could be measured objectively. Now, if something feels off, even if I can’t explain it, I pay attention. This led us to implement a final confirmation step before releasing funds, ensuring nothing has changed since due diligence wrapped up. It’s not foolproof, but it’s safer.
Managing Uncertainty: Balancing Science and Art
Venture capital, at its core, is about managing uncertainty. The frameworks and numbers matter – but people matter more. And people are unpredictable.
Sometimes, you do everything right and still lose. Other times, a long shot surprises you. That unpredictability is what makes this work so challenging – and so compelling.
Looking ahead, we’re doubling down on founder integrity and trusting our instincts alongside the data. Failure is part of the journey, but by focusing on character and resilience, we hope to improve our odds.
Embracing Risk and the Human Element
Ultimately, success in venture capital isn’t about eliminating risk – it’s about learning to live with it. And perhaps, on some days, even embracing it.
In a world where most bets don’t pay off, it’s the few that do – and the people behind them – that make it all worthwhile.
Key Lessons Learned from Ficus Capital’s Investment Journey
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Failure is expected: Roughly 25–30% of VC-backed startups fail outright; up to 75% may not yield positive returns. This is part of venture investing.
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Founder character prevails over metrics: Honesty, resilience, and trustworthiness outweigh intelligence or eloquence – though they’re harder to measure.
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Gut instinct matters: Even with extensive due diligence, intuition often catches risks that data misses.
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Potential can be hidden: Some startups may struggle to articulate their vision early on but can pivot and succeed with support.
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Operational support is crucial: Early-stage startups often need guidance through due diligence and legal processes.
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Risk management needs process and flexibility: Safeguards like final pre-disbursement checks help – but don’t eliminate – risk.
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VC is both science and art: Balancing analytical rigour with human judgment is essential.
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Failure is part of the journey: Managing failure is key to finding the few investments that succeed.
This reflection looks beyond frameworks and numbers. It’s about the messy, unpredictable reality of backing founders and their visions. For us at Ficus Capital, it’s a journey of continuous learning – balancing science with art, data with instinct, and theory with the unpredictability of people.
And at the end of the day – that’s what keeps it interesting.