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After reading 2000 applications for venture capital financing, I summed up the 20 elements that investors value most

2022-05-15 03:41:5536kr

The Bureau of translation is 36 Krypton's compiler team , Focus on Technology 、 business 、 In the workplace 、 Life and other fields , Focus on the introduction of foreign new technology 、 A new view 、 New wind .

Editor's note : For most startups , Whether the company can obtain financing is the key to whether the company can achieve its development goals . So startups will look for various opportunities to apply for financing . For investors , Flying like snowflakes pitch deck It's difficult , Too many materials , Your time is limited , Don't want to miss a good company , And don't want to be wasted by bad startups , What do I do ? Here is an investor who has seen 2000 Share pitch deck The experience of rapid selection summarized after . Both entrepreneurs and investors can refer to . The article comes from compiling .

introduction

I just joined Norrsken Of Impact Accelerator At that time , Almost one pitch deck I haven't seen it , Not to mention considering investing in an early start-up . But then , We received and evaluated from 119 From different countries 2000 Multiple applications . This article is my summary after two months of rough selection pitch deck The most important 20 One factor . These things listed are not MECE( No weight, no leakage ) Of , But just as the starting point of our work . But before listing these elements , Let me quickly explain the background .

We want to invest in start-ups : Companies that grow faster than ordinary companies . I believe most investors have this mentality , Is to find the flaws of start-ups —— The reason why they failed . This is an effective means to deal with many applications , And to be honest , We have to use this method many times —— But I don't think this should be the right mindset to find unicorns . contrary , You have to change your mind , Look for evidence that startups will succeed . Try to imagine optimistically , The idea is to become a billion dollar company ( dollar / influence ) The company , What needs to be done . Although due to time constraints , This method may not always be practical , But I believe , This paradigm can greatly reduce the risk of missing amazing opportunities . In practice , Think about how a startup meets the factors on this list —— Not how it lacks these factors . Okay , That's the brief introduction , Next, let's start to list and evaluate the 20 Elements .

TLDR edition

If you don't have time to read long speeches , The following is a summary of the article . But if you want to know the whole picture , Please read on .

  1. Dream team —— Is there a competitive advantage in running this start-up as a team ?

  2. influence —— If this startup succeeds , Will the world become a better place ?

  3. potential —— Whether the market is big enough to accommodate a unicorn ?

  4. Defensible —— Is it easy to resist the attack of competitors ?

  5. Extensibility —— Can the business expand easily ?

  6. Clear —— Can the founders explain what they are doing ?

  7. Told a good story —— Does the startup have a fascinating story ?

  8. Popularity —— What kind of traction does this start-up have ? Is it more and more popular in the market ?

  9. To enter the market (GTM)—— Can they bring solutions to customers in a cost-effective way ?

  10. To make money —— Can they make money in a smart way ?

  11. Winner takes all —— If you can't win , Can this startup still live well ?

  12. industry —— What industry rules exist ?

  13. competitors —— What is the competition pattern ?

  14. transparency —— Whether they are transparent to information , It allows you to make wise decisions ?

  15. Investor fit —— As an investor, do you match this startup ?

  16. Previous investments —— Whether others have invested in this start-up ?

  17. Danger signs —— Is there anything suspicious ?

  18. intuition —— What is your intuitive view of this investment opportunity ?

  19. Portfolio Management —— How investing in this start-up will affect the larger picture ?

  20. General impression —— Whether the founder is committed to his work ?

Insight

1. Dream team

Any successful entrepreneur or investor will tell you , When building a company , Team is everything . But how can we effectively determine the quality of a team ? Previous entrepreneurial and working experience 、 University and education level are good quality indicators . however , Paper grades alone are not enough . The team must be the right person to complete the task . You have to ask yourself , Does this team have a competitive advantage when starting a business . If not , Why not bet on someone else ? Unless it's involved in a very specific field , Otherwise, others may be trying to solve the same problem .

Besides , Ideally , The founding team should have at least one person with industry knowledge , Know how to put the solution into practice . Because at a certain time , Founders can't raise money anymore , He has to work out the solution . I would also like to emphasize the importance of diversity . On average, , Diversified teams perform better , More influential , And it can attract other people's attention for free .

2. influence

The word influence is interesting , Because it means having a significant impact on something .

There are countless ways to be sure , But a practical way to quickly determine influence is to think about the following questions :

  • If the solution is successful , Will the world become better ? How many? ? Think about effective altruism (effective altruism).

  • If you remove the influential part of the solution , Whether the product still exists ? If the answer is yes , Then its influence is questionable .

  • If the competitive environment is fierce , Will solving the same problem really have an impact ? My answer is often whether .

The influence of different industries and business models is difficult to compare , Because not everything can be included in financial indicators . however , I find tacit knowledge useful in this respect —— But in determining this, we should control prejudice .

3. potential

The value of each application depends on its growth potential . An upper limit on how much it can grow , Is the size of the market . Considering that everyone has the same risk of failure , Applications with a larger market size are clearly more attractive . For many accelerators and early investments , This strategy can also be said to be a bet on many companies , Then I hope one of the companies can become bigger . In order to be big , The market must be large enough .

Just Norrsken For accelerators , Unless the impact is extraordinary , Otherwise, the potential market share of annual recurring income is at least about 1 $100 million is the minimum standard . This number can usually be passed through pitch deck、 Through a simple google once , Or use the back of the napkin to get .

Example : The improvement of mine chemical monitoring requires a global market penetration of 100% To reach the size of a unicorn (> 1 Billion dollars ).

4. Defensible

Competitive advantage helps start-ups succeed . Defensibility helps them keep their business . There are many ways to build defense , Through economies of scale 、 brand effect 、 Network effect or integration —— But unless the company can make it clear how its enterprise defends , Otherwise, think twice about this start-up . Because if the other party's business is easy to copy —— It will be copied by others sooner or later ( Assuming it succeeds ). Defensiveness also varies to a large extent from industry to industry , But research patents 、 The potential of intellectual property and tools may be worth extra effort .

5. Scalability

Growth is everything —— How large can you grow ? This affects many other elements , But it is the key to the success of investment . Every dollar you make , How much effort is needed ? If the answer is decreasing costs , That means you're on the right track —— Otherwise, hurry away ! obviously , How start-ups achieve this goal depends heavily on the business model , but Take the time to It's worth knowing how startups expand .

6. Clear

Clarity is the difference between a good application and an excellent application . If one pitch Difficult to understand and requires a lot of energy to be understood , It's easy to question the potential of this startup . If I can't understand what they want to do after five minutes , The other party will probably refuse me . Because they can't convince customers 、 Future investors or talents . This is not to say that if something is complicated, it should be rejected —— But even if a topic is very complex, it can be easily explained . Pay attention to whether there are ambiguities in the application materials 、 complexity 、 Elements of mystery and neglect , Use these as potential danger signals .

Example : Which proposal do you prefer ?

a) We use the most advanced machine learning algorithm based on blockchain technology to make a new model CMS, Through it ,FooCompany Will fundamentally change the financial world . Our team has extensive experience working in top companies , By way of CMS And APP Combination , We can promise end users a great collaboration experience .

b) BarCompany Help people test their mental health , And make use of ML And biological indicators to predict recurrence .

7. Told a good story

The story is very powerful , We should not underestimate the importance of the story . In this stressful world , The story may give people a feeling of icing on the cake , But I believe that stories can lay the foundation for the success of start-ups . If the story is well told , The company may be able to stand out , If used properly , It can bring significant differentiation advantages . however , Good stories also make empathy easier , This is what investors should pay attention to .

Example : A founder suffers from social anxiety , And explains how she was forced to miss many important life events . So she is determined to help others through personalized exposure therapy .

8. Popularity

For start-ups , Popularity is not everything . But it can be a good indicator , Explain how others feel about the product you offer . No users app Far from having thousands of users app Interesting . however , People may also think about market popularity from the perspective of the need for key knowledge , The number of customers is not everything . Startups have fewer customers to deal with , The speed of product iteration will be faster , The future will bring higher value —— So just look The absolute value Be careful , Unless you know the background . It's also worth considering what the relevant popularity indicators are , This can be income 、 Number of active users , Or partnership .

9. Going to the market (GTM)

How startups approach customers ? This is not necessarily a straight road , Need to think deeply and carefully . The original startup outlined their strategy , And when it seems feasible , This can provide a good proof of the ability of start-ups . Say it again , Their approach may not be fully formed , It's not necessarily right —— But it's important to form a belief in how to solve this problem . Lack of market strategy —— perhaps GTM Unreasonable words , That's why you should be cautious .

10. To make money

Sometimes startups feel as if they have forgotten that the price of their products must be higher than the production cost . in my opinion , If startups focus on how they intend to make money , They can benefit from it . Especially when trying to persuade others to invest in their business . Of course , In some cases , The plan may not be clear —— Or not tested , No problem . As long as you can figure out why this is happening and what the current assumptions are .

Example : Our accelerator has received many novel applications , For example, education platforms in developing countries , Infrastructure construction and so on . The problem with these startups is that they are unlikely to bring satisfactory financial returns .

11. Winner takes all

For some industries and markets , Usually the winner takes all . This is determined by many factors , But it's important to know if your market can accommodate more than one company that is profitable / Enterprises that have an impact . If the market can accommodate more than one enterprise , Then the chances of success are obviously much greater . According to my experience , Some start-ups may not necessarily win the market , But it is expected to become the fourth or fifth largest , Many people underestimate the potential of such startups . It doesn't matter if you're fourth or fifth , The potential profit and influence of that position can also be great —— And often the price is much cheaper .

First example :Web browser 、 Apartment reservation 、 social media , These are markets where winners will make most of their profits .

Second example : In architecture 、 Payment and sustainable fashion , Even if startups don't get first , There is also huge profit potential .

12. industry

The active market of start-ups will bring different market characteristics and requirements . What industry related challenges must startups overcome ? If you want to make materials from recycled waste —— You have to have a factory . If you want to build a factory —— You have to spend a lot of capital . If you're setting up a platform , You need users and suppliers ( Chicken or egg first ). It's tricky to figure out what the main challenges are in different industries —— But this is a necessary prerequisite for making informed decisions , Many investors choose to focus on a few .

Besides , Because some industries will be affected by macro trends , Startups entering these industries can go with the wind and water . For example, we have received a lot of applications in the fields of mental health and women's technology . Some fashionable things may be favored by start-ups .

Example : Educational technology is plagued by low willingness to pay , Medical technology suffers from a long sales cycle , And financial technology in Africa has to do with Flutter Wave confrontation . Every industry is different .

13. competitors

All companies face some form of competition . In my submission , in the majority of cases ,pitch deck The slide above about competition always depicts a bad reality —— This is just to exaggerate a point where the startup is doing differently ( Sometimes that doesn't matter to the customer ). For all that , It is important to consider the factors of competition —— If a company is going to enter a very crowded field to innovate , Or if you want to compete with a giant company —— Their chances of success will obviously be greatly reduced . therefore , Take time to make sure that the field you intend to enter has the potential to hit home runs .

Example :Julia & CO Have a good understanding of competitors . And the most critical differentiation characteristics of their own are clearly explained .( In fact, the points listed are very vague )

Obviously it's a joke , But many pitch deck It does look like this —— So what kind of competitive advantage this startup has depends on investors' imagination .

14. transparent

You are trying to support this start-up . Make sure everyone works together . That means they have to be transparent about the status quo , This is partly related to clarity —— But it also means that they should be transparent about the problems they are facing or may face . We often ask what kind of help startups need and what they want from us —— If the founder can be open and explain his problems , Will give people a better feeling .

15. Investor fit

When considering investing in a startup , You must also ask yourself if you are the right investor for this start-up . Can you help them achieve their goals ? Or if someone else is more suitable ? For most investors , Use your strengths , And invest in projects where your toolkit has a competitive advantage , Would be a better formula for success .

16. Previous investments

Previous investments were similar to popularity , This could be a good indicator , It shows that things are getting better , You are not the only one interested in this company . But if cap table( Ownership structure table ) Too many people inside are generally bad . It depends on who the investors are , And what they represent . To some extent, the success of start-ups on their own is also one of the ways —— This can show that the founder is investing in success . however , in general , I think someone's investment is a good sign that this start-up is very interesting .

17. Danger signs

You'll find something in startups that doesn't fit any of the elements listed here , And these elements can be said to be a warning alarm with a sharp sound . This may be the choice of technology stack , Maybe they've been jumping around between different accelerators , Or maybe they are always talking about the ultimate goal without saying how to achieve it . When reviewing startups , You will inevitably find danger signs , Therefore, it is important to take corresponding action against them —— Bring it up during the interview , Or check again with someone who may know .

Example : One company used to be 7 Part of an accelerator and incubator :Biomed Business incubators 、 Eit Health、Health Founders Accelerator、Tartu Biotechnology Park 、Connected Health、EAS etc. . It's like shouting here “ Our business case doesn't work ”.

Example : Technology companies say they mainly use PHP , At the same time, he said he had a modern technology stack , Will also HTML As a programming language listed in their pitch deck Inside .

18. intuition

Use your intuition . There are a lot of data points 、 Facts and figures can be used for your reference , But many of these data are based on estimates and hopes . therefore , For investors ,“ hard ” Data are sometimes less reliable than their own experience and their own thinking patterns . Some people hear “ intuition ” The word will feel ,“ Oh , Intuition is biased ”, Or based on something arbitrary . But I believe this is a standard that can be considered , in fact , It has this reliable foundation .

19. Portfolio Management

For every new project you invest in , Portfolio management is becoming more and more important . Portfolio management is essentially the theory behind risk diversification , The purpose is to hedge against market related factors . When considering whether to invest in this start-up , You also need to consider the overall situation of your portfolio and risk management . Retaining shadow portfolios is also an interesting consideration .

Example : We are Femtech And mental health solutions —— This means that we must give priority to the best of them , To avoid a whole batch of similar solutions .

We will also give priority to geographical diversity , Make sure you have a portfolio around the world .

20. Overall impression

When a startup applies for something —— Whether it's an accelerator 、 When the incubator is still an investment , The time and effort invested in the application will affect the quality of the application , This will greatly affect the perceived value of readers . About how to do a good job pitch deck There are countless tips and guidelines , I won't waste your time on this . What I'm looking for boils down to :

  • Whether efforts have been made to convey the message clearly ?

  • Whether the material contains relevant facts , So that I can make a wise decision ?

It's crucial , You can start your pitch deck Learn what the company is doing .

Besides , If the question is filled in incorrectly or does not respect the relevant constraints , The applicant's ability to engage in other professional work may be questioned . A similar example here is : The uploaded pitch deck The format is pptx instead of pdf , Wrong numbers in multiple fields , Important questions are not filled in ( For example “ How do you make money ?”), I haven't attended the interview on time . This is not to say that we don't want arrogant founders —— Arrogant is probably the best , But what the founders make is of high quality and will leave a better impression .

Last words

This list ends here . obviously , Each of the above topics can be further explored , But I hope , This list can be used as a starting point for anyone who wants to better understand the field . And the list is long , So if you only have five minutes to audit a startup , understand a key Focus on what might be useful to you .

  • Does this team have an unfair advantage ?

  • If this startup succeeds , Will the world become a better place ?

  • If the start-up succeeds , Will be a billion dollar company / Influential business ?

If the answer to the above three questions is yes , Then you are facing a good start-up company , Maybe it's worth your further study .

translator :boxi.

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