would investor like your project? the answer is here
TRANSCRIPT
INVESTMENT IN
STARTUPSAnalysis of Behaviour and Decision-Making Process of Investors
Startup vs.
Investor
3
What’s startup?
Competence
Demand
Idea
(startups’ vision)
SUCCESS
4
Who are startups?
*According to Harvard Business Review
Startup Fail*87%Fail within first year
Fail within second year (of those remaining)
Fail within third year (of those remaining)
25%
36%
44%
50%
Fail within fourth year (of those remaining)
(investors’ vision)
RISKS!!!
Steve Blank,
Stanford Professor
“An organization formed to
search for a repeatable and
scalable business model“
Eric Ries,
“Lean Startup”
Paul Graham,
Y Combinator
Business Dictionary
“Early stage in the life cycle of
an enterprise where the
entrepreneur moves from the
idea stage to securing financing,
laying down the basis structure
of the business, and initiating
operations or trading”
“A startup is a company
designed to grow fast.
Everything else we associate
with startups follows from
growth.”
“A startup is a human
institution designed to
deliver a new product or
service under conditions
of extreme uncertainty.”
What’s startup?5
(startups’ vision)Who is investor?
(investors’ vision)Who is investor?
Who is investor? (or where to find money
to finance your idea)
Incubators
Bootstrapping
+Family, Friends
Crowdfunding
Traditional lenders
Angel Investors
Venture Capitalists
9
Types of Investors
Crowdfunding
AMOUNT
$25k-1mln
STAGE
Seed +
GOAL
Profit
EQUITY THEY ASK
<15 %Business Angel
Venture Capitalist
<$20-30k
Up to 50%ProfitSeries A +>$1mln
Pre-Seed + Product
10
Equity share
Additional money to
develop product
Additional Expertise
Additional Network
Time consumption
Bootstrapping Business Angel Venture Capital Crowdfunding
Investors Comparison
• Bootstrapping: pros and cons
• Creating MVP doesn’t cost much
• Lean startup: Build–Measure–Learn
• Time vs. Result
Do you really need an investor?
<$1mln
Fundraising:
how investors
see it
13
Market Potential and Size85%
MARKET SIZE
UNDERSTANDING
OF THE MARKET
MARKET
POTENTIAL
TRACTION
MARKET MATCH
14
AMBITION
MOTIVATION RISKS TAKEN
COMPETENCE
Team80%
15
43
21
SIZE OF
INVESTMENT
POTENTIAL FOR
INVESTOR EXIT
COMPETITIVE
ADVANTAGE
MVP
Other important factors 1 OUT
OF 5
16
INVESTABILITY
STAGE
FITS THE FOCUS OF INVESTOR
BUSINESS MODEL
Other Factors
17
4/10
.
6/10
When asked what is more important: facts and figures
or charisma and intuition of founders, investors chose
CHARISMA
FACTS AND FIGURES*
*Some noted that partially good results (figures) are connected with charisma
Strong Listening
Skills
Effective communication
between founders
Perseverant, doesn’t take
“no” for an answer
Can support his opinion,
persuasive speakerGood organisational
skills, meets deadlines,
answers fast
Competitive
Growth Hacker, project
is a big part of his life
Ready to learn
constantly MARKETPOINT
18
Founders Assessment: positive
Weaknesses
No Facts, only words
19
Founders Assessment: negative
Combining full-time job with work on the project
Promotion of him(her)self
Weak organizational skills
One founder
Serial winners of competitions
“Distributed” team*
Not all facts are revealed
*Communication between co-founders is slow and long
20
Observing startup
over time
Gut feelingPersonal
Communication
How investors make choice
21
What documents investors request
1 out of 10 investors requests Business Plan
Presentation
One pager, executive summary
Financial Spreadsheet
22
Through partners’ network -
recommendations
5 out
of 10
Investors meet startups at
events
Investors find startups
themselves
5 out
of 10
5 out
of 10
Startups find investors
themselves (send requests,
emails)
4 out
of 10
How investors find startups
Your
communication
with investor
Pain Solution Market Size Team Financials
24
How to Make a Convincing Pitch
25
Business Evaluation Models
Calculate
cashflow
Define
multiplicator and
discount rate
Create
financial
model
Do not inflate
evaluation
26
Sell to an
individual
Make it cash
cow
M&A
IPO
Exit Strategies
Liquidation and
close down
When you
found
investor…
28
Veto rights
Type of
preferred stock
Number of
board seats
Valuation
Option Pool Size
Liquidation
Preferences
What to do when you found investor?
Partner Chemistry1
Partners‘ Operational experience
Portfolio Alignment
Successful Exits
Network
2
3
4
5
What to do when you found investor? 29
Top mistakes
made by
startups
31
01
02
03
04
05
06
No clear funding objective
Seeking funding too early
Not providing cash-flow analysis
Overestimating future revenue
Underestimating your variable expenses
Raising too much money/Raising too little
money
Top Mistakes of startups
Not using financial model to create a narrative
for your business
Figure out how to convince people to work for you for next to
nothing (in exchange for equity or deferred salary)
.
Lessons learnt: startups share their experience
Create a product or service that you can sell and Start selling
Use the revenue you are making to finance future product
improvements and development
.
.
Once you get to $20,000 per month in sales, then go look for
seed funding to improve your product
