What do these investors want?

It is said that investors constantly discuss this topic among themselves, but they never write about it. We asked Olya Turzhanskaya (MAVI QIWI), one of the project curators, to tell about the selection criteria for the accelerator QIWI Universe .


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Hello!
As soon as we started to lead a column on Habré, many had a completely fair question: what criteria were we guided by when selecting projects for the QIWI Universe accelerator?

At the request of the workers in this post, I will reveal all the cards. At the same time, I will not limit myself only to the description of the formal criteria for the selection of projects that most of the teams that filled out questionnaires for funds already know by heart, but will reveal the really important, but very simple things.

I really hope that this post will help the project teams to better understand what the “haughty and greedy” venture funds want from them, and, ultimately, to attract really comfortable investors who will become for your team not only a bag of money , but also partners and mentors.

In order to create a complete picture in my head, I’ll recall a little the process of project selection in QIWI Universe.

When selecting projects for the QIWI Universe accelerator, we primarily looked at data analysis (big data) projects, financial services, remote user identification and information security projects, e-commerce and m-commerce, loyalty programs, various logistics services and aggregators. But at the same time, we did not limit ourselves only to these areas, but looked at all the IT projects that “knocked” on our accelerator (there were about 500 across all channels for selecting such projects).

The process of selecting projects in the accelerator QIWI Universe went through two channels. The first channel is a series of 24-hour hackathons. During the month we spent 4 hackatons - in Minsk, Novosibirsk, Moscow and Kazan, where we collected about 200 ideas, most of which were brought to the level of a working prototype (the so-called MVP). It was possible to come to the QIWI Universe hackathon with an already established team or assemble a team right on the spot. On each hackathon, an expert jury selected 3 winning projects, and another 1 project received the audience award (a total of 16 teams were selected). The winners got the right to modify their prototypes within 1 month and present them at the final selection.

The second channel was the direct selection through requests on the QIWI Universe website. The teams filled out applications on the QIWI Universe website . Unfortunately, already at this stage, about 20% of the projects immediately fell off, as we did not want to waste time for the teams who decided not to waste their time on filling out the application. In fact, the application is the first impression that the investor receives from the project, and if you do not want to spoil this impression, then approach the filling of the application responsibly (believe me, few investors will appreciate the jokes in the style: I will not tell you anything that you steal my idea, or my goal to conquer the universe).

Then the applications were evaluated by QIWI Universe experts (hereinafter referred to as) and the strongest projects were invited to the semi-finals in the form of one-hour interviews (we received about 300 applications in total and interviewed about 100 teams).
The hackathon winners (16 teams) and teams that successfully passed an interview with the QIWI Universe team (30 teams) were invited to the final.

What do investors want?

The team is the most important element of the system. I definitely will not discover America when I say that the team is the key asset of any startup. If problems begin in a team, then no other brilliant idea will save the project from failure. And vice versa - a strong team can make an excellent product even from a “mediocre” idea, changing it beyond recognition (by making more than one pivot) in the business development process.

When selecting QIWI Universe projects, we looked at the team first of all, and, unfortunately, it was often the problems in the team that were the main reason for our refusal. Therefore, in this post I will talk about the key selection criteria through the prism of the project team.

Rule # 1. Team must be

At the selection, we often had to see single founders who proudly declared that they needed no one to implement the project, and they would cope on their own. Unfortunately, this does not work. If you are aiming at building a large business (and other projects are not interesting for venture funds), then you will not be able to create and sell your product beautifully (you don’t have any wonders). And it is better to look for allies at the very beginning of the journey, and not when it is already completely pripre. And do not be sorry to share shares in the project with the team (if at all to be honest, then at the initial stage the share is not worth anything and it is the team that can make this “nothing” a multi-million business. In general, greed is bad :)

Rule # 2. "Fire, water and copper pipes"

Doing your business is always a test of strength, it does not happen that the first time you get a product with a huge audience and excellent monetization. As a rule, the team makes more than one change in the business model, before finding its market, its audience, and coming up with how to make money on the product. And a typical situation for a startup is when the investor’s money has run out, and the sustainable monetization of the project has not yet begun.

And it is better to pass all the tests together with proven people who do not scatter at the first failure. Therefore, we always ask teams to tell how long they have known each other and whether they have worked together.

Rule # 3. Comfortable team relations with the investor

I will not be cunning and say that we evaluate project teams only in terms of a set of formal criteria, such as experience-education, etc. A comfortable relationship with the project team, of which we, in effect, become a part when the project hits the QIWI Universe accelerator is extremely important for us. That is why the personal communication of the project team with QIWI Universe experts was an obligatory stage of each of the selection channels.

As a rule, after the first 20-30 minutes of personal communication with the project team, it becomes fundamentally clear: it will work out or not.
Similarly, relations with the teams that from the very beginning try to lie to the investor and embellish the current state of affairs in the project will not work out (if the investor is interested in the subject of your project, then before meeting you, he most likely has already studied at least a few of your competitors and has good idea of ​​industry metrics). In addition, you should not forget that the venture capital market is small, everyone knows and communicates with each other, therefore you can close your way to venture financing with your lies. So be honest.
The relationship with the teams that can not adequately respond to the criticism of their project / do not listen to the advice of the investor will not work out exactly. For a team, a project is often the first (there are very few serial entrepreneurs in Russia), more than a dozen projects pass through an investor, so his advice can save the team from meaningless actions and save a lot of time and resources.

If you are still sure that you are right, and the investor is not, prove it! Structurally, with numbers and facts. Believe me, investors know how to admit their mistakes and really appreciate when teams can teach them something new.

And, finally, the relationship with the teams that come to the investor for financing immediately begin to say that they need n-million dollars to develop the project, most of which go to the salaries of the team (the company's founders). The salaries of the project team at the level of top management of large companies are usually based on abrupt experience and qualifications of the team (and often this is true), but this logic misses one significant point. Top managers of companies are hired employees who work for wages and bonuses and do not directly participate in the distribution of profits. The project team (founders), in fact, works for itself and its key motivation should be the project's profit, and not a high salary.

If the project team is not ready to work for a small salary, this is an obvious and alarming signal that it is not ready to share the risks of the project with the investor and does not consider the investor as a full-fledged partner.

Rule # 4. You - me, I - you

Very often, teams that say something like the following are knocking us: we have a very cool idea, give us investments and your user base and a lot of resources, we will make a business, and then you will redeem it 10 times more expensive from us. Why we need such projects is understandable, but why we need them is a big question. Agree that in this situation it is much more reasonable for us to make a product on our own (either internally or by attracting an outsourcing team). In order for the partnership to develop, a win-win strategy is needed, i.e. investor, providing the project resources, must understand that he will receive in return.

In general, although QIWI Universe is a corporate accelerator, we are opposed to the project making the product only for one client. This strategy is deliberately losing, as it immediately narrows the project market tenfold and makes it completely dependent on one client (an investor-customer conflict arises, breaking the partnership immediately kills the project both in operational and financial terms). If the project makes a product for different clients / customers / different audiences, then this allows the team to test different business models and ways to monetize.

Rule # 5. Think strategically

In the early stages of development, project teams often think in horizons for 1-2 months, for a maximum of six months. And they are very surprised when we ask them to tell about how they see their business on the horizon for 1-2 years. The main argument of the team is that we are still at a very early stage of development, everything changes every week (if not more often), why should we waste time on a long-term strategy. The problem is that when a team does not know its long-term goals, it does a lot of unnecessary operational actions and as a result it can simply drown in a routine (a permanent breakthrough is the normal state of a startup). It is also very useful to think about long-term plans, since in parallel you will study the market, competitors and your audience, and ultimately you will better understand which direction to run.

Rule # 6. Be ambitious but realistic

When selecting projects, we are faced with two extremes. There are teams that cheerfully draw figures on the global market volume and modestly devote 10–15% to their project, and by means of simple mathematics receive multimillion-dollar ($) revenues from their projects. The reality is that rarely does a project manage to capture and hold at least 1-2% of the market for a long time.

The other extreme is when the teams say that their goal during the year is to reach revenues of 1 million rubles / month. For an individual or even a team of several people - an income of 1 million rubles. a month is quite a normal story, but this is not a venture project. If you really aim at this level of income, then you better take a bank loan or borrow money from friends, but do not go to a venture capital fund.

The advice is very simple - when planning, try to estimate as accurately as possible at least the order of the market volume and adequately assess the share that your project can win.

Rule # 7. There are competitors, they can not be

Approximately in a third of all applications received in the “competitors” section we meet the following phrase: our product is unique, there are no analogues on the market. It is important to remember that if the problem that your product / service solves exists, then there are always competitors. If you did not find them, it means that you were looking bad.

Another important point when describing competitors is not to scold them and say that they are so useless and do not do everything well, and we are so well done - now we’ll quickly drink a cool product and tear everyone away. The main argument against this is that your competitors are already on the market, they have a product, users / customers, while you are only going to enter this market and you only have a set of hypotheses in your arsenal that you have to test.

Rule # 8. Do not make a project if there is no proven value.

Very often, when asked why you are doing this project, we hear: I am doing this project for myself, I am thrilled. At the same time, the teams do not say a word about the confirmed value that their product / service gives to the consumer. If there is no value, then there will be no monetization, which means that the project will not become a business, but will be just a hobby for its founders. To avoid this, do not be lazy to find out from your potential audience, and whether they need your product / service, and whether they are ready to pay for it. It's very easy to do this - now there are a large number of free services on the Internet that allow you to do surveys. And, by the way, the positive results of such a survey (with coverage of at least 50-100 people) can be a good argument when you prove to the investor that your product / service will be in demand.

As a conclusion, I want to say the following: if you decide to do your business and want to do it together with the fund, you should not choose an investor on the principle who will give more money / who will value the project more. It is better to look for your project “the right investor” who can help your team with the right contacts, resources (it's not just about money) and mentoring support.

And remember one simple rule - not only the investor chooses you, but you choose the investor.