Investors usually have a very clear idea of what kind of projects they want to put their money into. But not all phases look the same. Borja Santos, responsible for Stripe for Spain and Portugal, explains how some phases differ from others.
a solid team
in phase seed The decision to invest in them usually depends almost entirely on their human capital: who they are, what their background is and their ability to build an impact project. There are no numbers at this point, so all the attention is on the team; A qualitative rather than quantitative assessment is made.
“If you want to get investors interested, don’t forget to highlight the hardest or most impressive thing you’ve ever done, work-related or not. Mention that you are willing to work hard for a long time. Complete this idea by showing that you are also capable of getting results quickly. Startup founders, like music groups, often break up, so explain how your team met. Close relationships reduce the risk of breakup, so emphasize how your skills complement each other. If your team is very strong in one area but weak in another, explain your plan to close that gap,” says Santos.
What is innovative about your product?
If there is already a prototype or first proposal, the decision is based on the team and the market viability of the product. Is there any reason to believe that this product will take off in this particular market? This should help us to reflect on the project and be strategic in terms of its usefulness and value as an innovative company for a given segment.
In addition, “It is very important to know how to precisely define and specify who would benefit from your product. Investors think you can’t pull it off successfully if you can’t explain it. You should make it particularly clear what the end-user experience will be like. It helps the review board imagine themselves using the product or service. Clarity is especially important when addressing popular ideas. You need to show quickly that you’re not just another entrepreneur chasing a fad.”
Rely on attractive markets
If the startup is already in a market and is building sales or marketing forces to promote itself, the decision to invest in it will depend on the company’s financial characteristics: Can this company sell its product profitably? Many investors want to invest in companies that dominate their respective markets. How do you plan to compete with current actors? How does your product or market strategy protect itself from those who want to compete with you?
“Investors can’t just invest in good companies; they want to bet on the ones that are going to be gigantic. The market you are targeting must be able to accommodate such scale. Some markets are obviously billion dollar markets without further explanation. If not, add well-crafted stats that support your idea, a consistent argument as to why winning that niche can be the doorway to a larger adjacent market,” warns the Stripe exec.
Rule the network
Of the thousands of projects evaluated every year, it is essential for the start-up to have a good ecosystem of contacts, as it reflects the potential of its team and one of the essential skills of the business environment, networking.
“Most venture capitalists don’t consider companies that don’t have endorsements from other funds, business angels or other players in the community. Unless the founders of a start-up know how to navigate the networks of their own venture capital, they likely will not have the skills to mobilize other networks of contacts needed for the growth and success of their business. That may sound a lot like inbreeding at first, why does venture capital only invest in people it already knows? Venture capitalists happen to be some of the easiest people in the world to reach through their networks. And the skills needed to connect with a venture capital firm are the same skills needed to network with a client, a supplier, a channel partner, the press, an executive search firm, and so on be able to run a business and increase its potential”.