Investors sincerely about what they are looking for
ABC Accelerator hosted an interesting round table discussion on investors’ experience with startups. Besides investors, also attending were representatives of incubators, accelerators, startups and other relevant players of the startup community. Participating at the table itself were the following angel investors: Aljoša Domijan (EnaA, ABC Accelerator), Julien Coustaury (Fil Rouge Capital), Janko Jenko (business angel), Nina Dremelj (AlpVent) and the president of Business Angels of Slovenia, Branko Drobnak.
Business angels usually invest in startups that already have a product/solution. This means that they are not the first who put funding into a specific project but follow the “triple F” money – friends, family and fools. Jenko points out that
»angel investors earn their money with their primary businesses and invest surplus into startups or other kinds of businesses, that interest them.«
Every investor has a different focus, and many decide emotionally, whereas the most significant difference can be observed between investors who accept high risk and those investors that choose more traditional and safer projects. A third group of investors are funds such as Fil Rouge Capital and AlpVent. These are based on rules and procedures but are not as complicated and long, as for example in larger funds. Investors managing funds are professionals and as Dremelj stated
»take on only so many projects that still allow them work regularly with all startups.«
When is a startup investment ready?
Investors are first inspired by the idea and after that the team dynamics is what keeps them interested. Looking for funds is a »full time job« said Dremelj and therefore a startup even before kicking off the capital seeking activities has to make sure the rest od the team will continue working even if the CEO is on the funding mission. It is important the startup has accumulated enough resources to survive several months to come, since discussions with a single investor (business angel) can take up to six months.
When a startup begins looking for investment, it must have answers on all questions about getting their product to market. They also need to have agreements with subcontractors ready, said Domijan.
»Only in this way a startup can begin work towards goals set, immediately after the funds have been received.«
And here lays the importance of the Slovenian startup ecosystem, that is incubators, accelerators and mentors helping startups to prepare business plans and guide them through time consuming collection of market data.
What do investors take away from their investments?
Drobnak emphasised that
»a startup for the founder is a free school, into which they only invest their time«.
If finally, it turns out the idea was not the best and the startup ends up closing, the founder only lost their time, whereas the investor lost their money.
From their rich experience investors explained how they observed that the kind of startups most likely to succeed are those, that are flexible and successfully adapt to changing market demands. The market is always right and if you are not making sales, you need to pivot. Coustaury stated, that sometimes you must give up even if your budget is not completely drained yet. Such failure should not be taken to emotional. Something similar said Domijan, who among many successful investments also close four unsuccessful ones.
»What changes next time you are investing is, that you simply pay more attention to red lights.«
Photo credit: Siniša Kanižaj / ABC Accelerator