What the investor wants to see in the business model startups

Deals often fall apart because the founders of the project cannot agree with investors on financial terms.

But sometimes there are other reasons. For example, the investor has a clear vision of how to implement the project technologically, and the founders it is but another.

I know a case where there was a good project, a good system that already operated and generates the cache. Goal of the project scale. And here is guys trying to raise a round of investment to $1 million.

Investor says: wonderful, but your platform to scale the project, don't take chances-I want you used my existing platform, which developed a portfolio company of my Fund. Startupers said: "we do not want to, and at the last moment, almost at the signing, the deal simply collapsed.

Investor (it was) continues to invest in other businesses. But the project has lost a lot of time and effort, raised money later in the worst conditions, and their development is slower than it could be.

Surely they were faced with a mass of problems developing its own platform. In fact, this is the fee for the realization of their own ambitions "developer technologies.

I did not hold the technological due diligence procedure (formation of objective presentation of investment object), so I have no way to judge, whose decision was correct: startups or investors.

I haven't researched platform that develops the project team, and the one they suggested use. But for reasons of common sense, I can say this: the worst evil-inventing a bike that someone already not just invented, but launched into mass production.

This often suffer from programmers in Russia: instead of doing "features", they make a "framework". This is very interesting, but the invention of the bicycle they simply do not have time and resources.

You can take a ready-made, which costs nothing, let it be for children, but it can be something bolted on and immediately go-start test business hypotheses. The invention of the bicycle is a lost business opportunity.

If you instead of "thing" first do development "framework, which then" five minutes "can do" features ", you should think about: a year or even a few months later, the market will already be different, your idea may very well become irrelevant to the market, and your project will have a completely different point was being in a competitive situation.

Such cases many people buried in technical development, which is very interesting, but is not related to the business model of their project.

A story about Dropbox

A couple of years ago, when Steve Jobs was still alive, he negotiated with the founders of the company Dropbox and offered them $700 million. They did not agree.

And he said to them: do you think Dropbox is a product, and this is actually a "feature" for my jejplovskogo clouds (iCloud). If you think that he, as a standalone product, can long survive, are wrong. You just "feature, and think who you eventually buy.

They did not agree. And I will not assess the situation-how many at that time, money was raised, and what was the situation with their existing investors.

It is possible the deal with Apple was unprofitable for them. But in any case our technological startups should learn from this history lesson. Market for their venture investor is one who eventually buy their company.

Options generally only two: complete the sale of the company to a strategic player (as it could be, for example, in the case of Dropbox and Apple) and IPO. But according to statistics, even the one that existed in America at the best of times, an IPO goes no more than 9% of successful companies.

There are, of course, and the third option-the calculation of the operating profitability, however, this story is very long-term, and not every venture investor it is ideologically.

Let's see. Dropbox is a popular service. He earns money, people keep there's documents, photos, but investors will get their money back only if you sell it to large companies which are engaged in cloud technologies.

This Apple, Amazon, Facebook and Microsoft. With the sale of the latter two is hardly possible (they have the same or similar services). There is still a second-tier company-for example, Rack Space. But they don't pay much. So there are not so many options.

Story about "Futubru"

In Russia failed projects experienced investors buried quietly-"buried" somewhere and forgotten. Within the Fund are very serious discussions, and investors are very unhappy that managers gave money project, which "flew".

But public "debriefing" nobody is involved. So it is with "Futubroj" (alternative to Twitter from Mail.ru, which was closed)-the subtleties will remain behind closed doors. This is a feature of the Russian culture with its 20-year history of entrepreneurship.

In the United States and Europe have tolerant attitude to entrepreneurial failure. The average Russian looks at the failure of startapera as the loser. And in California, for example, about this saying that he is "an experienced entrepreneur. On the contrary, it is considered that technological entrepreneur, okrylennogo success, rather high chances come to failure.

Known from Silicon Valley venture investor David Makljur (500 startups) openly says he does not like to invest in teams that implement its first project and in the project "experienced entrepreneur", other things being equal, it will go much more likely.

If you look at Startup, the Genome study reveals that for broken two nebityh give.

Venture capital investments by their nature involve high risk and likely to fail. There is a proverb: hope for the best, prepare for the worst.

Therefore it is necessary to always think about what bad can happen with the project now and in the near future, and keep in mind set of risks.

We launched the product, interviewed 10 people who said: "the coolest thing! We are grateful to thee! "and then it turns out that this is half of the users of the product, which is just 20 world-famous. You must be prepared to quickly adjust and remake the product, fit it under the market.

© One, two, start

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Автор статьи: Максим Миллер - о авторе.
Бизнесмен, инвестор, финансовый консультант Facebook
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