Start-up Funding

START-UP PROCESS

How to Present Your Start-Up to Investors

For a company seeking investments and venture capital, a day often doesn’t pass without the question: What does my company need to look like to get an Investor or a VC interested? Though there is no simple answer, a quick glance at our portfolio companies will certainly provide a few common threads.

The first trait InnoVest Group looks for is “start-up experience at the top.” Though a track record is no guarantee of future performance, it is often the best indicator that we have. Few business minds can imagine the trials and tribulations associated with a start-up company. The biggest mistakes that I have ever made in my private equity career have revolved around having the wrong leader in place for a start-up company.

First Words of Wisdom

If you are a founder and realize quickly that managing a business is not your expertise, step aside as soon as reasonably possible and hire the best CEO possible given the limited resources of a start-up.

The second trait that we look for in a company is a revenue model that not only makes theoretical sense, but also “common sense.” The financial model often reflects the experience of the management team. Though the hockey stick model seemed to wet the appetites of many investors in the past, that model has been on strike the past few years.; We search for a financial model that shows realistic projections based on what we perceive to be valid assumptions.

In addition, many investors track a company for a period of time before investing and look to see if you hit your forecasted numbers. Clearly, it is much better to present realistic, but aggressive numbers that you think you will hit rather than incredibly high numbers that you certainly will miss.

Second Words of Wisdom

Be realistic in your assumptions because potential investors are going to make every effort to uncover the flaws in the financial model.

The final common trait in our portfolio companies is a deep engrained passion among the founders and employees. These unique people are able to convey their vision in a concise, yet energetic way that gets me excited. We have to be able to see a consistent vision to invest our own precious time and money.

Third Words of Wisdom

Enable the investor to understand your story, feel the enthusiasm and see the pot at the end of the rainbow.

Successful companies over the past few years have blended these threads in an intricate way allowing them to raise capital, but more importantly to substantially grow their businesses in a challenging economic climate.

Copyright 2003, Alfa Investment Group. All rights reserved.