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What do investors look for in startups?

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The Hatch
The Hatch

Mentor Talk by Ishita Agrawal, Mentor and Associate Director - The Hatch for startups on 27th September 2012 at The Hatch Incubator, Chandigarh

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What do investors look for in startups? Ishita Agrawal Mentor and Associate Director - The Hatch for startups 27th September 2012
Different stages of the venture carry different risks Scale Stage
Risks at early stage • Concept risk • Execution risk • Scale-up risk • Technology risk • Market risk
Risks at growth stage • Execution risk Risks at early stage • Scale-up risk • Concept risk • Execution risk • Scale-up risk • Technology risk • Market risk
Risks at growth stage • Execution risk Risks at early stage • Scale-up risk • Concept risk • Execution risk • Scale-up risk • Technology risk Risks at mature stage • Market risk • Scale-up risk
Scale Stage
Angel Investors
VCs
PEs
Investor Incubators and Angel Investors VCs PEs types Accelerators Concept Stage Proof of Concept Growth Stage Late Stage Stage of Stage investment • Rs. 0 – Rs. 25 lakhs • Rs.25 lacs to Rs. 2 • Rs.2 cr - Rs.50 cr • Rs.50 cr + Typical cr investment size • Typically between • Typically between Rs.25 lacs – Rs.50 Rs.2cr – Rs.10 cr lacs
So, what do investors actually invest in? 1. Business case 2. Team – competence and commitment 3. Quality of the plan 4. Is the opportunity large enough
What do investors not invest in? 1. Ideas without a plan on ‘how to’ 2. Teams with low aspirations 3. Concepts addressing small, niche markets 4. ‘Good UI’ – investors don’t invest in just the ‘what’s visible’ – they invest in ‘what’s inside’ • E.g. E-commerce
What phrases do investors hate? 1. “We have no competition” 2. "We are cheaper, hence we have a stronger value proposition” 3. "According to Gartner, the market is USD 80 billion by 2015”
What do investors want to see in your presentations? 1. Well-thought out plan on ‘how’ 2. Practical assumptions 3. Clarity of thought 4. Ability to articulate and ‘tell a story’ 5. Honesty – including things that you identify as your weaknesses
What should you include in a business plan? • Concept overview + Pain point or opportunity addressed • Team • What is the size of the opportunity • What is the value proposition/positioning • Business model • Competitive landscape • Operations plan overview • Risk factors • Funding needs and use of funds • Exit potential
Investors invest in any sector where market opportunities exist
Live Traffic Online platform for information for buying school related road commuters requirements Sales force Online Music automation platform Group buying for Date protection houses software Online grocery Physical stores for store cell phones
Rural BPO Analytics Robotics solutions Medical Devices for retail Online assessments Electronic components Sports leagues Education Programs management
Questions

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What do investors look for in startups?

  • 1. What do investors look for in startups? Ishita Agrawal Mentor and Associate Director - The Hatch for startups 27th September 2012
  • 2. Different stages of the venture carry different risks Scale Stage
  • 3. Risks at early stage • Concept risk • Execution risk • Scale-up risk • Technology risk • Market risk
  • 4. Risks at growth stage • Execution risk Risks at early stage • Scale-up risk • Concept risk • Execution risk • Scale-up risk • Technology risk • Market risk
  • 5. Risks at growth stage • Execution risk Risks at early stage • Scale-up risk • Concept risk • Execution risk • Scale-up risk • Technology risk Risks at mature stage • Market risk • Scale-up risk
  • 6. Scale Stage
  • 8. VCs
  • 9. PEs
  • 10. Investor Incubators and Angel Investors VCs PEs types Accelerators Concept Stage Proof of Concept Growth Stage Late Stage Stage of Stage investment • Rs. 0 – Rs. 25 lakhs • Rs.25 lacs to Rs. 2 • Rs.2 cr - Rs.50 cr • Rs.50 cr + Typical cr investment size • Typically between • Typically between Rs.25 lacs – Rs.50 Rs.2cr – Rs.10 cr lacs
  • 11. So, what do investors actually invest in? 1. Business case 2. Team – competence and commitment 3. Quality of the plan 4. Is the opportunity large enough
  • 12. What do investors not invest in? 1. Ideas without a plan on ‘how to’ 2. Teams with low aspirations 3. Concepts addressing small, niche markets 4. ‘Good UI’ – investors don’t invest in just the ‘what’s visible’ – they invest in ‘what’s inside’ • E.g. E-commerce
  • 13. What phrases do investors hate? 1. “We have no competition” 2. "We are cheaper, hence we have a stronger value proposition” 3. "According to Gartner, the market is USD 80 billion by 2015”
  • 14. What do investors want to see in your presentations? 1. Well-thought out plan on ‘how’ 2. Practical assumptions 3. Clarity of thought 4. Ability to articulate and ‘tell a story’ 5. Honesty – including things that you identify as your weaknesses
  • 15. What should you include in a business plan? • Concept overview + Pain point or opportunity addressed • Team • What is the size of the opportunity • What is the value proposition/positioning • Business model • Competitive landscape • Operations plan overview • Risk factors • Funding needs and use of funds • Exit potential
  • 16. Investors invest in any sector where market opportunities exist
  • 17. Live Traffic Online platform for information for buying school related road commuters requirements Sales force Online Music automation platform Group buying for Date protection houses software Online grocery Physical stores for store cell phones
  • 18. Rural BPO Analytics Robotics solutions Medical Devices for retail Online assessments Electronic components Sports leagues Education Programs management