Business Angel Tips: How to Invest Effectively Without the Help of Costly Consultants
On December 17, “Megamind” wrote that in the first nine months of 2015, 241 venture transactions in the amount of 33.9 billion rubles were conducted in Russia. In sum, this result is almost a quarter less than the same period of 2014, and seven percent less than the previous year in terms of the number of transactions. In 2014, for the first nine months, 258 transactions worth 45.4 billion rubles were made.
“Venture” literally means “risk”, and in order to protect their investments, novice investors sometimes convene almost all familiar lawyers and financiers. But, first, such a retinue easily absorbs the entire expected income from the transaction, simultaneously scaring startups. And secondly, personal immersion in projects helped to increase profits more than once, argues Konstantin Shabalin, general director of StartTrack, a crowdfunding platform.
Roem.ru has published seven investor tips on how to effectively invest business angel in projects without the help of numerous and expensive consultants.
')
In venture investments come in very different ways. But almost all [investors], coming to the venture, try to acquire additional specific competencies. If you want to get all the bonuses from the explosive growth of startups, you will have to evaluate not so much the current state of the business, as the potential of the idea and competence of its authors. And this is not the same thing as operating with securities or launching companies in traditional industries.
From the "promising" projects in the market diverge eyes. And in order not to scatter attention and money, at the “zero” stage it is worthwhile, first of all, to determine your investment strategy. Namely, how much money is planned to be invested, and which projects are generally interested in what topics. Usually, even experienced players choose what is closer to them personally, then what they are well-versed in. And if you have never been interested in, and have not been involved in, for example, developing games, you should not invest in such projects so easily. If the project really caused a lively interest, it is better to join a more experienced investor, following his logic. He will protect his money, and at the same time he will help you.
Pre-selection of projects - the task is not so much difficult as time-consuming. The “funnel”, through which the investor will receive applications, must be properly organized and systematized its work. You can view project teasers and make primary screenings yourself.
Where is it better to look for projects? To do this, it makes sense to use their old business contacts and continuously expand the list of contacts participating in specialized events, forums and conferences, there are quite a lot of them today, including online. But it is worth being prepared for the fact that 99% of applications will go to the basket at different stages, and 1% will come to the conclusion of a deal in the best case. And, most likely, you will find the most interesting projects with the help of other investors.
The investor is simply obliged to be able to count, otherwise someone will consider him. Elementary skills in financial modeling and market assessment are necessary for any venture capital market participant. But, since it is often about fundamentally new products and niches, you need to be ready to move in a certain sense by touch. And if necessary, assess not only the usual, basic financial indicators, but literally everything that can be calculated in the project at the current time, and at the same time it is better to simulate the future variants of this project, and positive and negative scenarios.
In the venture, the "human factor" is much more important than in any corporation. The more experienced a player is, the more meticulous he is to personalities. Some, for example, will refuse to give a loan if they learn that the funder is regularly fined for speeding. Standard due dill in venture is a fairly global check for integrity.
There is not just an analysis of management and financial reporting. It is necessary to understand what kind of background the founder has, whether he has any inclinations to hide or misquote, and the project has uncomfortable investors.
At the stage of structuring a transaction, the investor and the founder fix their relationship system for several years at a time. And in conditions of quite high uncertainty. Therefore, the rights and obligations of the parties are written down to the smallest detail: how the current budget is agreed and the state of the account is monitored, where the proceeds go, and, most importantly, what powers the investor receives in managing the project, in what form and when it receives reports.
Here, on the one hand, one cannot do without a strong lawyer. On the other hand, it is better to build a set of rules based on one’s own common sense and an idea of how and in what investor and funder can help each other.
There are several possible situations. Since most projects do not turn into big business, you need to think in advance how and in what format you write down this investment. Just give up the share, or take part in the sale of furniture and equipment, "technology" or customer base, trying to return at least something. Take care of your nerves, decide this beforehand.
In practice, you can count on several options for a successful exit. The most common and probable, when a major investor of the next round buys you, - which is possible with a confident and significant growth of the project, - or when the founder himself offers you to buy your share. Perhaps, this is also not rare, including on the Russian market, the project will be bought by the strategist - a large company interested in purchasing technologies or competencies.
This has already been done by Qiwi , Yandex , Rostelecom , Sistema, and large insurance companies. Today it is becoming a very popular idea in big business.
“Venture” literally means “risk”, and in order to protect their investments, novice investors sometimes convene almost all familiar lawyers and financiers. But, first, such a retinue easily absorbs the entire expected income from the transaction, simultaneously scaring startups. And secondly, personal immersion in projects helped to increase profits more than once, argues Konstantin Shabalin, general director of StartTrack, a crowdfunding platform.
Roem.ru has published seven investor tips on how to effectively invest business angel in projects without the help of numerous and expensive consultants.
')
Venture investors are not born
In venture investments come in very different ways. But almost all [investors], coming to the venture, try to acquire additional specific competencies. If you want to get all the bonuses from the explosive growth of startups, you will have to evaluate not so much the current state of the business, as the potential of the idea and competence of its authors. And this is not the same thing as operating with securities or launching companies in traditional industries.
Individual investment strategy must be deeply personal
From the "promising" projects in the market diverge eyes. And in order not to scatter attention and money, at the “zero” stage it is worthwhile, first of all, to determine your investment strategy. Namely, how much money is planned to be invested, and which projects are generally interested in what topics. Usually, even experienced players choose what is closer to them personally, then what they are well-versed in. And if you have never been interested in, and have not been involved in, for example, developing games, you should not invest in such projects so easily. If the project really caused a lively interest, it is better to join a more experienced investor, following his logic. He will protect his money, and at the same time he will help you.
"All to see," you can, and even need to
Pre-selection of projects - the task is not so much difficult as time-consuming. The “funnel”, through which the investor will receive applications, must be properly organized and systematized its work. You can view project teasers and make primary screenings yourself.
Where is it better to look for projects? To do this, it makes sense to use their old business contacts and continuously expand the list of contacts participating in specialized events, forums and conferences, there are quite a lot of them today, including online. But it is worth being prepared for the fact that 99% of applications will go to the basket at different stages, and 1% will come to the conclusion of a deal in the best case. And, most likely, you will find the most interesting projects with the help of other investors.
Develop skills in financial modeling, hand and card divination
The investor is simply obliged to be able to count, otherwise someone will consider him. Elementary skills in financial modeling and market assessment are necessary for any venture capital market participant. But, since it is often about fundamentally new products and niches, you need to be ready to move in a certain sense by touch. And if necessary, assess not only the usual, basic financial indicators, but literally everything that can be calculated in the project at the current time, and at the same time it is better to simulate the future variants of this project, and positive and negative scenarios.
Become a lie detector for the founder
In the venture, the "human factor" is much more important than in any corporation. The more experienced a player is, the more meticulous he is to personalities. Some, for example, will refuse to give a loan if they learn that the funder is regularly fined for speeding. Standard due dill in venture is a fairly global check for integrity.
There is not just an analysis of management and financial reporting. It is necessary to understand what kind of background the founder has, whether he has any inclinations to hide or misquote, and the project has uncomfortable investors.
Visualize
At the stage of structuring a transaction, the investor and the founder fix their relationship system for several years at a time. And in conditions of quite high uncertainty. Therefore, the rights and obligations of the parties are written down to the smallest detail: how the current budget is agreed and the state of the account is monitored, where the proceeds go, and, most importantly, what powers the investor receives in managing the project, in what form and when it receives reports.
Here, on the one hand, one cannot do without a strong lawyer. On the other hand, it is better to build a set of rules based on one’s own common sense and an idea of how and in what investor and funder can help each other.
All good things come to an end
There are several possible situations. Since most projects do not turn into big business, you need to think in advance how and in what format you write down this investment. Just give up the share, or take part in the sale of furniture and equipment, "technology" or customer base, trying to return at least something. Take care of your nerves, decide this beforehand.
In practice, you can count on several options for a successful exit. The most common and probable, when a major investor of the next round buys you, - which is possible with a confident and significant growth of the project, - or when the founder himself offers you to buy your share. Perhaps, this is also not rare, including on the Russian market, the project will be bought by the strategist - a large company interested in purchasing technologies or competencies.
This has already been done by Qiwi , Yandex , Rostelecom , Sistema, and large insurance companies. Today it is becoming a very popular idea in big business.
Source: https://habr.com/ru/post/297416/
All Articles