Coronacrisis and startup investment. Things to keep in mind

It has always been difficult to attract startup investments. Especially if it’s a startup from Ukraine. But in 2020, the “black swan” in the face of the coronavirus brought even more variables to the startup investment market. Knowing these variables may depend on whether you get an investment this year or your business closes.

Cyrilo Mazur, ex-partner of IG.VC Foundation, Head of Center42 Innovation Agency, shared with AIN.UA five tips for start-ups that were always relevant, but now – especially.

Study investor deals over the past couple of years

There are different types of funds and private investors. In view of the crisis, many of them may strengthen their investment criteria or stop investing altogether – but investors will never say this. So you will never know about it and will continue to waste time in a meeting in vain. It is important for startups, like never before, to keep a close eye on the experience of funds to increase their chances of a successful operation.

Notice how many public deals the fund has in the past year. Ask for feedback from startups where this fund has invested. Explore the profiles of the fund itself and its partners in social networks – active investors (with few exceptions) write a lot about the startup industry, boast deals, talks, attend technology conferences and closed investor events in the US, Europe, Asia.

Sometimes they are interested in some particular niches and industries and they also write a lot about them – that is, they “burn” in the sphere. Investors who are no longer investing usually write about something new – about new business, about life, about startups, and sometimes even criticize this field. In general, it is better to double-check again to save yourself ten tens of valuable time.

Find out where the fund is being funded to evaluate your chances correctly

You can save a lot of time if you consider the source of the investors’ money and communicate only with those who are really willing to invest.

For example, family offices (the type of family funds and “pocket” funds at companies) typically invest from the operating income of their core businesses. If these businesses were hit by the crisis, they would need the money themselves and then new investments in startups could be suspended. It is better to immediately ask whether this fund is ready to invest in the next month or two, or they will get acquainted with you “for the future”.

The same applies to private investors. Very often, such investors are the tops of big companies, the founders of successful businesses. Their funds are dividends and bonuses, and the investment process is their expensive hobby. If their core business is covered by a wave of crisis, the time and money on the hobby will not be at all.

VCs are typically structured to raise a certain amount of money that they invest over several years. Such funds, due to different situations, can change the amount of investment per year, but very rarely stop investing altogether. This is one of the most reliable partners among the above.

Look for alternative ways to reach investors

Many offline investor search methods are now unavailable. We were going to bring 2000+ guests and investors to Kyiv Innovation Week 2020 in Kyiv in June, but these plans are still in serious doubt. A similar situation with such European tech events as TNW (Amsterdam), Viva La Tech (Paris) or London Tech Week. The alternative is to try to reach investors more often through their portfolio companies.

Startups are often willing to support prospective colleagues in the market and get acquainted with a fund that has invested in them. But only if you have something to offer them to the investor. You can start by writing a startup short request – write what you do, what results you have already achieved, who you want to meet and why you think it may be interesting for this investor to get acquainted with you.

Protect your business from risks

From Europe, and especially from France, comes a lot of news about thousands of affected businesses whose employees have contracted a coronavirus. The governments of these countries are already promising tax breaks by the end of the year and almost interest-free loans to rebuild their businesses. But to be honest, it will be much better for your company if all your employees stay healthy, learn to work remotely and grow the company. This is what your potential investors think too.

If the key players in your team get sick, it can jeopardize the growth of your company, which means that investor money will be in jeopardy. Take care of yourself and your team to increase your chances of attracting investmentі.

Take an emphasis on revenue growth metrics are important indicators

For various reasons, the number of investors in the world will decrease slightly and competition for investor money will become more fierce. Those investors who remain in the market will be able to choose the best of the best. Therefore, your business performance will be even stronger than before.

Many offline campaigns and activities will suspend advertising and activity, resulting in a lower average cost-per-click. For someone, this will be a good opportunity to improve the most desirable metric investors – to reduce the cost of user acquisition (CAC), to increase monthly revenue (MRR, for example) and revenue per user (ARPU and LTV), to improve weekly growth (retention rate and week-to-week growth). The metric analysis is also a good reason to look at what it’s really worth concentrating on now and just stealing your resources.

Be that as it may, it is important now to maintain a positive mindset, to continue to thrive and to remember: any crisis is good because it forces you to make unconventional decisions and see opportunities instead of risks.

Source: ain.ua