1. Investment is the materialization of faith.
No one knows the future, no matter how experienced they are. An investor either believes or does not.
Therefore, every square centimeter of a startup’s presentation and every second of the pitch should stimulate the production of faith in the investor.
Thus, on each slide, one must ask oneself: does this information strengthen belief in me?
2. Early-stage investments are investments in people: in the founders and the team.
The idea and the market are reasons to consider the attractiveness of the niche. But the trigger to give or not give money is the human qualities of the founder and the team.
Almost every first pitch deck of startups I’ve seen does not "sell" either the team or the founders.
Essentially, at this stage, the investor answers the question, "Do I believe these people can do something cool or not?" Yes, the market is also important, but a growing market strengthens faith, it does not create it.
3. A professional investor is a calculator.
Not the person, but their role, of course. A calculator is a gadget that knows nothing of "mother," "yesterday," "apple," or "love." It knows only numbers and operations with them.
Tell your business to a calculator and you will have a successful pitch, provided that they believe in you and your team.
If a slide has no numbers, it is unnecessary.If a slide has numbers, but they do not grow faith, it is unnecessary.
A financial model is needed not only because it shows your ambitions (which influence faith in you) but also how detailed you see your own business (and this grows faith).
4. When speaking with an investor, keep in mind the picture of "Unequal Marriage."
No matter how charming and polite the investor is, keep it in mind.
It’s good when you understand which of the two you are. There is more money in the world than worthy ideas. There are more worthy ideas than people capable of realizing them.
If you are one of those, then you choose whose money to take. If not... then you will have an unhappy marriage of convenience.
The question that puzzled Russian funds: "why should we take money specifically from you?".
5. The qualities of a founder, I repeat, are more important than the idea, but the idea is also important, of course.
Because a strong idea generates a strong challenge. And without a challenge, you won’t gather strong people around you. And without strong people, there’s no faith in you.
6. If something bothers you during the "candy-bouquet" period with an investor, run.
Investment is a marriage of convenience. It will not be easy to escape from it. You will have to communicate with this person/people for many years during hard times. And if you don’t like them from the start, it will only get worse.
Any deal is good until you can exit it. Trust your intuition and don’t convince yourself that all will be well. Anxiety is your friend.
7. Valuation is not an important parameter.
If you received a good offer in terms of valuation, it means nothing at all. There are a dozen minor and inconspicuous conditions from the fund that can make any deal fantastically disadvantageous. I took a lawyer from the fund who helped us understand each point on how we could be "screwed" with their help.
8. Smart money is a myth.
You can benefit from an investor if you know how to ask questions about their business. We made great use of the expertise of funds for evaluating new internal directions.
9. Most investors do not understand how to build their own businesses.
I do not know exactly how many, but the exceptions are active or former entrepreneurs. They are definitely not the majority.
If it is more profitable for people to invest in others rather than in their own projects, it usually means they have no projects of their own.
They have good visibility and rich experience in this sense. But this is not the same as building a business.
10. For a fund, it’s often more profitable to earn 1 million than 10 million. It’s absurd, but it’s true.
If there’s a choice between buying for 1 million and selling for 5 million, or buying for 10 million and selling for 20 million, the fund will often choose the first, even though the net gain is 4 million in the first scenario and 10 million in the second.
You think that 10 is more than 4? But the fund sells its LPs on how many times the investments have grown. This is their KPI, which, for some reason, often matters to them more than absolute indicators.
"Kids, this can’t be explained, it can only be remembered."