9 mistakes start-ups when dealing with investment fund
Senior partner of one of the largest venture capital funds Runa Capital Dmitry Chikhachev before coming here seven years worked as a Director on the selection of staff in large companies Ericsson and Ritzio Entertainment.
Experience helps him today: funds ultimately invest not so much the idea of how much to the project team, performing at the talks including HR functions. Dmitry Chikhachev told that could cause the investment fund to abandon investment even after the project has passed the initial selection.
Apply for a start-up
Many aspiring entrepreneurs, says Chihaev, the aim is not to create a business that will earn money. They run projects to attract money investment funds or business angels. Such people go from investor to investor, and sooner or later someone decides to invest in their project. According to Chikhachev, they simply adjust project under the requirements of the Fund, and not under the requirements of the market.
Such distorted business model appeared recently and is associated with a large number of non-professional investors. "The Smart money is still little, but money is an overabundance, Chikhachev. According to him, if until recently lacked money, now there are not enough competent engineers. This leads to an increase in salaries in the IT sector: over the past few years they have doubled.
The threshold for entrance into projects for venture funds becomes higher: if earlier to start required, say, 000000 $500, now $1 million. Unfortunately, money clone qualified engineers and mathematicians cannot, they must prepare five years in institutions, "laments partner Runa Capital.
Shower with competitors bidding has increased
Chikhachev Fund that invests in software, developer of any serious problems. And quite often faced with reverse: people make a comfortable, working product, but it is not suitable for investment. Such developments Chikhachev calls "gadgets". "If the analogy with the world of consumption, these programs can be compared to such inventions as the ladders for little dogs that can not climb on the bed or shower with competitors bidding has increased," he laughs.
Moreover, the authors of such developments, said Chikhachev, always assess the market in some phenomenal quantities: in the world 20 million small dogs, and 10% of the owners to buy such necessarily ladder. With this kind of "gadgets" two problems. Not too many people will buy them and hardly expect 10% share. In addition, all the time there are new "gadgets", especially on, and people are quick to forget the old ones. Therefore, the funds try to invest in such projects.
One of the most flagrant mistakes start-up entrepreneurs-an attempt to hide from investors any information. Sometimes they do it without malice, suggesting that simply represent the project in the most favorable light. "They are often very vaguely answer questions. Usually we say: guys, you all talk as is, or conversation. We are talking about a possible partnership, and start it with subtleties doesn't make sense, "says Chikhachev.
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Session of simultaneous game
This is a pretty common practice to run multiple projects and propose new ideas, if funds do not like none of the previous ones. Creating multiple or several dozen different projects one and the same person says that he is not able to focus on something one believes Chikhachev. And it's hardly like it venture fund.
Castle in the sand
Very often the founders of projects do not pay attention to planning, but offer to invest in the project at once quite a large sum. "Imagine what comes to you and says: we'll build a House. But neither drawings nor the project. You ask: at least how many floors, what area? And they answer: no time, give money, and we do, "says Chikhachev.
A set of uniqueness
Startups often come and claim that they have come up with a product that has no competitors. Chikhachev sure this can not be, and the competition is always there. Therefore, he says, the thesis must be different: I did a project that will help solve the problem faster and easier than any existing on the market.
Investment funds are not happy when entrepreneur investment requests, but does not give the possibility to intervene in the project. The position of "give us money and do not interfere" not loyal, "convinces investors Chikhachev. Among other things she said about the inadequacy of the author of the project, he said. The Fund, which put many ideas and projects, there is always something to learn. "You need to be able to listen to your partner and to learn to make software products, particularly if the author of the project has not yet made any," says Chikhachev.
The founders of startups often do not understand how the investment process, says partner Runa Capital. They believe that everything is simple: they sat down and talked, got the money in an envelope. In fact, the first required to pass the preliminary talks, then consistent conditions, then starts checking company, business, financial documents.
This is a very complicated process, and in order to work with these documents, it is better to use the services of a lawyer. Few start-ups understands this, which is why the process of harmonizing conditions of prolonged claim arise around it seems to catch, said Chikhachev: "for example, is the standard condition for 99% of all venture investment contracts: the investor has the right to veto the change of General Director of the company. Acquainted with him, startaper immediately begins to suspect the Fund in some hidden intentions. And in investkontrakte points 10.
Some entrepreneurs are coming to the talks, but the meeting immediately argue that investors don't need them. "In this case is not worth coming exactly», Chikhachev.