How to understand if your project is good for an investor: checklist of a standard start-up rake

^{Business angel often looks at startups with bewilderment}

Suppose you come up with some kind of iron, and now you want to start producing it. You already have a prototype: here it is, in your hand, it looks clumsy, 4 times the normal size and the wire sticks out of it. But it works. Your eyes are burning: it remains only to "finish" it and start producing all over the world. From the marketing plan, you only have to “post about a piece of iron on Habr - and everything will turn out”.

At this stage, it does not even occur to you that the investor may not appreciate the idea itself . The investor knows exactly what he pays for: and he pays for you, your work on the project, your team, your enthusiasm, burning eyes and the ability to move a new project. And only then - for the idea.
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So, I am committed to selecting startups for large and really large investments. Below, I want to tell you about how the evaluation of the project looks “from the other side” for companies that do not expect to “cut the dough in a quick way”, but are ready to invest in long projects.

The very first thing: many do not understand the start-up market itself . Imagine you want to colonize Mars. There are three types of companies that can finance you: the first "fast" will look at a two-year perspective, where you only have costs, and refuse. The second will decide that the project of the colony can be sold to someone and will look at you with interest. And there are companies that are ready to wait for the end of colonization, will be able to withdraw all the profits. They know that when everything goes right, it will be a sum covering all the long years of waiting with interest.

But back to the Russian reality. When it comes to serious money (say, more than 10 million rubles), you need to register a joint stock company and issue shares.

There are two reasons:

• Competent division of shares in the project.
• In general, the possibility of trading these shares (in the LLC it is implemented quite crookedly).

The registration quest for a joint stock company takes several months and is costly, so no investment fund will go to it in their right mind without understanding that the project is really serious. So when it comes to a large project, the first thing we do is check the seriousness of the candidate himself.

How it looks from the investor

It is implied that a person knows exactly what he is going to do, found out in nuances possible scenarios for events, collected at least a minimum of preliminary information possible for him, and generally prepared in detail. Plus - I am ready to make a detailed business plan, spend time on a bunch of formalities and do other boring things that you definitely have to go through during the implementation of the project. That is, his eyes are not only burning, but he is ready to really work.

In general, the process of searching for chapters and teams for projects is something that most often rests on its own development within large companies. Therefore, when a person comes from the side and says “I can do it” - if the chances are high, then the company-investor gets not only an idea, but also, importantly, people who in actual fact are often more expensive than this idea.

In the second stage, we continue to check people . Considering that my company is from the banking sector, the next step is a very thorough check by the security service of the main contact (that is, the startup person and the team), as well as the legal entity from which the work is going. If you ask for a million dollars, then as part of the “security package”, files will be dug up for free (though you will not see it). But seriously - at this stage, those who embellished their achievements are cut off, trying to cheat, and so on. Safes do not like when someone is lying at the stage of presentation: everything pops up very quickly. Therefore, if you want to go through this stage calmly - tell the truth. The investor knows better than you that there are no perfect people, so do not be afraid.

What if the project is at an early stage?

The above actions are usually taken when you have evidence that the project will take off, and only money is needed. When the project is at the “germ” stage, you will still have to explain what you want from the investor in general and why.

For this you need to personally answer a whole bunch of questions for yourself. For starters - frequent errors:

• You should be able to formulate an idea very quickly . Any thing should be explained in 60 seconds. If more is needed for the investor to understand you in general, something is wrong. Yes, then people will sit for hours listening to you, but first you need to know the DNA of the project, laid out in 2-3 sentences. This is extremely important for introducing a startup.
• You must understand the order of expenses . Startups are sorted already at the first stage by the price of implementation, so it is important to clearly understand what amount and when needed. It is clear that if we are talking about the production of a piece of iron, everything is more or less clear, but even if we are talking about something more abstract and incomprehensible, you need to know the order of the amount. A common case is not to take into account in the business plan the costs of marketing, retail network markup, taxes - in general, anything in the price formation chain. You need to know your price chain by heart.
• The first project document is a business plan, including parts of financial, operational and marketing plans . It is clear that the developer of iron is not able to write any of this, but the desire to learn (and this is really fast) is part of the assessment by experts. If a person comes up with a bare idea and says “I will not prescribe it,” it is easier not to work with him than to step on the rake that suddenly arises everywhere. This is the reality: if you want to become a CEO, you will have to think like a CEO, not a developer.
• Contrary to popular belief, the basis of a good startup is not an idea, but the possibility of its implementation . This is an idea plus a team: that is, one of the strongest factors influencing the decision to finance will be the presence of a team that is worked out and is ready to strike. It is very rare for a team to get together after financing - about 90% of the projects - this is a contribution to the work of specific key people, and not to abstraction. The investor does not believe in the images in your head: he believes in you and won the guy in the sweater who just proved that he understands the topic better than his specialist.
• A lot of marketing mistakes . The main ones are the lack of understanding of the market volume and unwillingness to consider the main barriers to entry to the market. About competitors separately: many simply do not understand that even a completely new product will always have competitors at least in terms of audience. That is, roughly speaking, virtual reality glasses can easily compete not with contact lenses with a display, but with banal tablets.
• For a business plan it is important to understand what is important to you in the implementation of tasks . That is, we need a set of principles that will help to approach any question and give an answer what to do and how. For example, if you have a dissatisfied customer, will you spend money on it or just “send”? This is a matter of company value: is the relationship with the client more important to you than the profit? These values ​​are one of the points that are given little value, but which is really important for the investor. You need to know your strategy for solving all issues from small to global - and the investor must understand that you have thought this through.
• It is good to immediately understand what you are working for: for the development of a company as a separate project or for the future sale of a large corporation (and, accordingly, integration into its ecosystem). The second case immediately gives an understanding of permissible development strategies.
• Many people forget about working with existing customers . For example, developers of iron often think that everything ends up with the party going to retail stores. No, there will be at least a guarantee and post-warranty service, which is not so easy to organize “on the knee”.
• Be sure to make two sales forecasts : optimistic and pessimistic. The latter should be extremely honest, and, if possible, supported by some kind of practice. For example, by collecting emal addresses before launching a project on a stub page. In general, at least some research based on concrete facts is simply obligatory.
• It is good to have some presentation materials at the beginning of the search for investors . The most accessible format is a 2-3 page site that can be used instead of a presentation. The presence of a normal site - this is confirmation of the seriousness of intent.

Let's go over the checklist now. So, for starters, your project is in its infancy, and you have nothing but a small team, an idea, and some minimally working product.

General

• What are you doing and for whom? - A short description of the project to figure out whether to deal with it further.
• Who are the project participants are standard resumes and passport data. Previous jobs will be used by security guards to check: most likely someone will contact your former supervisor, for example.
• What is the role of everyone in the project and how the shares are distributed - you need to understand who is doing what to evaluate the experience of the team and the possibilities of its amplification by the company's resources.
• Will the project be the main place of work? How many hours a week can be given to the project? The correct answers at the beginner stage - yes, all the time. And this must be true.
• How much money do you need and in what time frame?
• Who in the project is indispensable? What is the plan in case this person leaves? - the most important question of the first part. Think very well how to respond to it.
• What does the project already have today? What technologies, documents and achievements? What is done? What needs protection, for example, by patenting? What is the agreement and with whom?

Then there are questions that will be asked if you are interested in an investor, or something that you must answer to if you are planning a large project:

• Facts about your industry : industry / market size (by money / audience), how much market you can take, your analysis of market demand and supply, well-known market trends: rise / fall, customer preference, product development, barriers to entry to market how you overcome them.
• Consumers : your target audience, its most important groups, as well as their parameters: age, gender, income level, social level, education, etc. For business consumers: industry, location, firm size, price preferences.
• Competitors : which products and companies will compete with you, a list of main competitors. In which segments they will compete with you (products, territory, audience). Do you have indirect competitors? (For example: television and the Internet against Amazon.com: each of them is trying to divert the attention of the client from reading books during leisure hours). The advantages and disadvantages of your competitors.
• Analogs : we need examples of similar foreign projects or unsuccessful (too early, incorrect, etc.) attempts to implement your idea.

Business part

• What is your business? What will you do? What problem does your project address? Business philosophy: What is important to you in business, what is your mission?
• What is the business for? For profit from the activities of the company / For further sale of the company to a large buyer.
• The goals and objectives of the company. The goal is: what kind of company do you see in the future (for example, it occupies 15% of the market, the audience is more than 10 million people), while the tasks are how you will achieve your goal (for example, developing a new product, expanding the geography ).
• Short for whom are you creating a product, a target audience? What is the geography of the project? Describe the industry. Is it growing? What changes do you foresee in the short / long term? How will this affect your project? What is the future of your project and the industry as a whole?
• Describe the strengths / weaknesses of the business project. Who are your competitors? What factors will make your company successful?
• What will be the main sources of income for your business project?

And only after that you need to describe your product in great detail. Specifically - what factors will be an advantage or a disadvantage? What is the uniqueness of the product? What is the price of your product? How does this compare with your competitors and the market as a whole? Here we also need characteristics and advantages from the point of view of the consumer (note that not “a tablet with a high-resolution screen”, but “you can read books without problems”, not “high service at the bank”, but “no queues” and so on). The main thing is to understand what the product helps the consumer.

The next part is the after sales job . It's about service and warranty, additional sales and generally speaking with those who will already be your customers or users.

Practical activities

The next question is how you will move your product. What media will you use for advertising, how often? What additional promotion methods will you use (promotions, networking)? What image do you want to convey to the consumer? How will you work with the loyalty of your customers? Determine your pricing strategy. Please note that the idea “our prices will be lower” is almost always a failure from a business point of view: the benefits should lie on a different plane, and, if necessary, be enhanced by the availability of prices.

At this stage, you need to predict sales for a minimum and realistic option. Often there is a desire to exaggerate, but categorically it is not worth doing this - the data will be checked at least three more times.

A sore spot for many is an operational plan . In the sense that everything sounds cool, until it comes to specifics: what equipment do you need? Manufacturers, prices, terms of shipment and delivery? How much does it cost to run? What room is needed? What should be there for electricity? And what about parking? What hours will you work? What are the construction costs (yes-yes, it happens), rent, utility costs, insurance, and so on? Do you need licenses, work permits, how to regulate your business, what are patents and so on? How many people will there be except for the core team? Who will do what? How to find them and where? How can everyone develop in the company?

Counterparties

• List of suppliers: contacts, reliability, credit policy, price policy.
• Do you plan to sell on credit? Is it really necessary, common in your industry? To whom and in what amount will you provide a deferment of payments?
• How will you check customer creditworthiness?

Investments

• How much investment has already been attracted?
• Who has already invested and from whom what shares?
• What share of shares can be sold?
• Is there an accurate list of expenses until the break-even point? (there is another peculiarity - often an investor can get the main resources cheaper, for example, if he has a plant or a data center you need - this will significantly affect the budget review). Another tip - you need to reserve AFTER all calculations another 20% for unforeseen expenses and designate them as a reserve. Exceeding the plan by 10-20% is the norm, when you do not know exactly up to a second what to do and how.
• How to raise funds for the distribution of company shares?
• Forecast income and expenses for 3-5 years. According to this document, the investor will evaluate the effectiveness of investment, if everything soars up (this is a comparison point with other projects, if the final goal is profit, and not, for example, audience hours).

The task is boring in some places, but useful. By the way, if you spend less than 10 hours to find the answer to all questions (especially in the financial part), most likely, this is an indication that you are missing some details. Even if it seems very long, you need to do everything.

Again, if by the way you realize that there is something wrong with the project, it is very useful. Otherwise, you would find out after weeks or months of work and lose a lot of time, nerves and resources. It's like programming: first architecture, then implementation. Checklist allows you to quickly understand whether everything is in order with the architecture of the project and are you ready for its implementation.