What do venture investors expect from your startup?
C on November 19, I launched my stand-alone blog about venture investments, venture investors and startups IdeaBlog.ru , and I will publish here some posts from it with a slight delay. I still don’t have enough karma to post to the Startups collective blog, so for now I’ll post to a personal blog . Thanks to those who raised my karma.
If you look at startups' blogs, at the communities where they communicate, you can often hear that venture capital investments for startups (no matter what - in the field of internet business or creating a high-tech product) are almost impossible to find in Russia. This opinion was also picked up by journalists of various (including business) publications, who were not accustomed to delve deeply into the topic they are writing about. At the same time, Russian venture capital investors are saying in chorus that they are sorely lacking good projects, and that huge amounts of money in their venture funds, prepared for investing in start-ups, are without any use. I didn’t take it “from the ceiling” - in the process of preparing my article on the state of venture investment for the Dengi magazine of the Kommersant Publishing House, I talked to a large number of business angels, venture capital managers and investment consultants who help startups to attract venture financing ( usually for a share in a project). Is there any venture money in Russia or not?
In my conversations with venture capital investors, I constantly asked them this question, and their answers can be expressed by the phrase of E-Trust Group partner Maxim Karimov:
')
Maxim Karimov: When startups say that there is no venture capital money in Russia, they are incorrectly expressed - there is money, only they are not given it. Because they have such projects.
Maxim Karimov knows what he is talking about: he, the former top manager of Norilsk Nickel and Basic Element, together with several other top managers of large companies, in 2003 decided to start a business angel, organized an E-Trust Group , and prepared for angel investment of 10 million dollars. At the beginning of October 2007, when I met with Makim Karimov, he found only 3 projects in which he decided to invest money, and the amount of investment in these companies amounted to a little more than 1 million. That is about 9 million dollars prepared for venture capital investments, 4 years can not find an application. This is despite the fact that, according to him, he considers an average of 5 Executive Summary per day. Of course, not all the projects that he decided not to finance are bad - there are also preferences of venture investors in one or another industry, as well as project-specific project selection criteria for each investor. As Karimov says, “the project should fit the venture investor as a well-tailored suit suits a person, the investor in the project should be comfortable.” Certainly, a number of truly worthwhile projects did not fit Karimov and his partners for some subjective reasons, however, according to him, he eliminates 70% of the projects immediately after reading the first page of the Executive Summary, since this, according to him, “ garbage".
Similar stories with all other venture capital investors - they really lack good projects. The key word here is good . And what do venture investors mean by the words “good project”?
Dmitry Rodionov, Project Manager (Venture Investments) of the High Technologies Investment Center at Finam Investment Company : There are many ideas - there are few entrepreneurs. People often come to us with patents for excellent things, they offer to make a product , but they have absolutely no idea how to do business . We are a venture fund, we invest in startups and help in key moments, but we cannot manage the company's business ourselves - this is what the startup founders team should do, and we should see that they have thought out and dealt with everything in terms of business organization. Recently, one inventor came to us with a very interesting patent. I asked him: what exactly do you need money for? He was surprised: how we would rent an office, buy a car, hire employees, and they will work. However, he absolutely could not imagine how he would do BUSINESS. How to make a product represented well, but how to make a business - I had no idea. Literally half the ideas that we bring, I want to "incite" a normal entrepreneur who could monetize them. That inventor, about which I spoke, was already at the age - the typical commander of some scientific research institute of the Soviet era. But young startups, coming to us with good ideas, do not know how to make a business out of it. We have an acute shortage of good projects that would be competent businessmen . And we have to not only wait for businessmen to come to us with their projects, but also actively look for projects themselves.
Investors are not interested in investing in “cool sites” - they want to invest in a business . And business means making money. If an investor sees where money is in your project, how you will earn it, who your target customers are, how you will attract first customers (and even better if the investor could see at least some potential customers in real interest in purchasing your services) money you will surely get.
Some may object to me that some projects like MoiKrug.ru or Odnoklassniki.ru, or the same YouTube are still unprofitable, and the monetization of such services has not yet been worked out on the stream. And what - such projects do not get investment? Get - but never at the initial stage . For example, I imagine how to monetize social networks. I also understand why Google bought YouTube. Perhaps, if my company were worth more than 160 billion dollars, I would also allocate 1% of its cost to buy YouTube - with this purchase, by the way, Google shares went up by more than the total amount. I also sincerely believe that Yandex made a successful purchase, having bought MoiKrug.ru relatively inexpensively. However, all investments in such non-profit projects so far occurred already when these projects were already unwound and had hundreds of thousands and millions of users. If you are able, without attracting foreign investments, to unwind to such a stable attendance, then, naturally, you will be able to attract investments. However, if you want to attract investments earlier - at the pre-startup or startup stages - in such potentially visited projects, but where you cannot show the investor how you will be monetized, then I rate your chances as minimal.
As for the non-profit ones, with vague and unworked options for monetization, but the projects you visit should say one more thing: as a rule, such projects are bought by strategic, rather than portfolio investors. This is due to the fact that if the founding team does not know how to monetize the project, then the buyer will have to deal with this. Venture funds invest in many projects, and they simply do not have enough qualified personnel to manage all invested projects, but strategic investors buy projects for synergy with their core business, so they certainly have people involved in monetizing similar projects. Well, what do you say? What is the difference where to get the money? There’s really no difference. There is a difference in how much money to get. The more willing to invest in your project, the more money you can sell a smaller share in your project. Strategic investors who would need your project are relatively few in the market - there are much more portfolio investors. And therefore, by cutting off portfolio investors from the need to buy a stake in your business, you drastically reduce the value of your business. Yes, and for negotiations on the sale of a project it is much better if your project makes a profit - by receiving losses from your business and not having a financial pillow to compensate them, you will strive to complete the negotiations as soon as possible, because losses are accumulating ... And getting from the project at least a little but profit, you can negotiate a longer price with a much larger number of investors for a longer time.
The original article is here .
If you look at startups' blogs, at the communities where they communicate, you can often hear that venture capital investments for startups (no matter what - in the field of internet business or creating a high-tech product) are almost impossible to find in Russia. This opinion was also picked up by journalists of various (including business) publications, who were not accustomed to delve deeply into the topic they are writing about. At the same time, Russian venture capital investors are saying in chorus that they are sorely lacking good projects, and that huge amounts of money in their venture funds, prepared for investing in start-ups, are without any use. I didn’t take it “from the ceiling” - in the process of preparing my article on the state of venture investment for the Dengi magazine of the Kommersant Publishing House, I talked to a large number of business angels, venture capital managers and investment consultants who help startups to attract venture financing ( usually for a share in a project). Is there any venture money in Russia or not?
In my conversations with venture capital investors, I constantly asked them this question, and their answers can be expressed by the phrase of E-Trust Group partner Maxim Karimov:
')
Maxim Karimov: When startups say that there is no venture capital money in Russia, they are incorrectly expressed - there is money, only they are not given it. Because they have such projects.
Maxim Karimov knows what he is talking about: he, the former top manager of Norilsk Nickel and Basic Element, together with several other top managers of large companies, in 2003 decided to start a business angel, organized an E-Trust Group , and prepared for angel investment of 10 million dollars. At the beginning of October 2007, when I met with Makim Karimov, he found only 3 projects in which he decided to invest money, and the amount of investment in these companies amounted to a little more than 1 million. That is about 9 million dollars prepared for venture capital investments, 4 years can not find an application. This is despite the fact that, according to him, he considers an average of 5 Executive Summary per day. Of course, not all the projects that he decided not to finance are bad - there are also preferences of venture investors in one or another industry, as well as project-specific project selection criteria for each investor. As Karimov says, “the project should fit the venture investor as a well-tailored suit suits a person, the investor in the project should be comfortable.” Certainly, a number of truly worthwhile projects did not fit Karimov and his partners for some subjective reasons, however, according to him, he eliminates 70% of the projects immediately after reading the first page of the Executive Summary, since this, according to him, “ garbage".
Similar stories with all other venture capital investors - they really lack good projects. The key word here is good . And what do venture investors mean by the words “good project”?
Dmitry Rodionov, Project Manager (Venture Investments) of the High Technologies Investment Center at Finam Investment Company : There are many ideas - there are few entrepreneurs. People often come to us with patents for excellent things, they offer to make a product , but they have absolutely no idea how to do business . We are a venture fund, we invest in startups and help in key moments, but we cannot manage the company's business ourselves - this is what the startup founders team should do, and we should see that they have thought out and dealt with everything in terms of business organization. Recently, one inventor came to us with a very interesting patent. I asked him: what exactly do you need money for? He was surprised: how we would rent an office, buy a car, hire employees, and they will work. However, he absolutely could not imagine how he would do BUSINESS. How to make a product represented well, but how to make a business - I had no idea. Literally half the ideas that we bring, I want to "incite" a normal entrepreneur who could monetize them. That inventor, about which I spoke, was already at the age - the typical commander of some scientific research institute of the Soviet era. But young startups, coming to us with good ideas, do not know how to make a business out of it. We have an acute shortage of good projects that would be competent businessmen . And we have to not only wait for businessmen to come to us with their projects, but also actively look for projects themselves.
Investors are not interested in investing in “cool sites” - they want to invest in a business . And business means making money. If an investor sees where money is in your project, how you will earn it, who your target customers are, how you will attract first customers (and even better if the investor could see at least some potential customers in real interest in purchasing your services) money you will surely get.
Some may object to me that some projects like MoiKrug.ru or Odnoklassniki.ru, or the same YouTube are still unprofitable, and the monetization of such services has not yet been worked out on the stream. And what - such projects do not get investment? Get - but never at the initial stage . For example, I imagine how to monetize social networks. I also understand why Google bought YouTube. Perhaps, if my company were worth more than 160 billion dollars, I would also allocate 1% of its cost to buy YouTube - with this purchase, by the way, Google shares went up by more than the total amount. I also sincerely believe that Yandex made a successful purchase, having bought MoiKrug.ru relatively inexpensively. However, all investments in such non-profit projects so far occurred already when these projects were already unwound and had hundreds of thousands and millions of users. If you are able, without attracting foreign investments, to unwind to such a stable attendance, then, naturally, you will be able to attract investments. However, if you want to attract investments earlier - at the pre-startup or startup stages - in such potentially visited projects, but where you cannot show the investor how you will be monetized, then I rate your chances as minimal.
As for the non-profit ones, with vague and unworked options for monetization, but the projects you visit should say one more thing: as a rule, such projects are bought by strategic, rather than portfolio investors. This is due to the fact that if the founding team does not know how to monetize the project, then the buyer will have to deal with this. Venture funds invest in many projects, and they simply do not have enough qualified personnel to manage all invested projects, but strategic investors buy projects for synergy with their core business, so they certainly have people involved in monetizing similar projects. Well, what do you say? What is the difference where to get the money? There’s really no difference. There is a difference in how much money to get. The more willing to invest in your project, the more money you can sell a smaller share in your project. Strategic investors who would need your project are relatively few in the market - there are much more portfolio investors. And therefore, by cutting off portfolio investors from the need to buy a stake in your business, you drastically reduce the value of your business. Yes, and for negotiations on the sale of a project it is much better if your project makes a profit - by receiving losses from your business and not having a financial pillow to compensate them, you will strive to complete the negotiations as soon as possible, because losses are accumulating ... And getting from the project at least a little but profit, you can negotiate a longer price with a much larger number of investors for a longer time.
The original article is here .
Source: https://habr.com/ru/post/16711/
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