“Don’t be afraid to bring up the money that you will actually need.” How to prepare for your first meeting with investors.
How does the first meeting with UP21 look from the startup’s point of view?
Our Idea Board always attends the first meeting with a startup interested in incubation or investment. Its makeup is always changing, but we always want to have a balanced mix of people with experience in marketing, finance, innovation, strategy, branding, expansion abroad, and so on. Every member of the Idea Board has experience either with founding their own startup, classic entrepreneurialism, or years of collecting know-how from big corporations. We always try to find a mix of experts for each meeting, and to make sure the Idea Board always consists of at least eight members.
Sitting across the table from eight experienced professionals might startle founders a bit. Does the composition of the Idea Board differ according to the type of startup?
No, we don’t go into that degree of detail with the composition of the Idea Board on any given day. We often meet with four startups, one after another, so we wouldn’t even be able to change seats fast enough. We occasionally meet with founders via Google Hangouts, Zoom, or other platforms, but it’s always better to meet in person.
What will the Idea Board want to know about my startup?
It depends what stage your startup is in. If you’re in the phase before the MVP and you want to go to incubation, you’ll have to have a vision and plan as to how you will fulfill it. You have to be aware of the market you are entering, know some basic numbers for your business operations, and have an overview of the legislative side of things. But of course we’re not going to want your sales results to date. If you’re going for investment, we’re going to want to know more. You will want to have verified that there is market demand for your product, and you have to have your competition mapped out to the finest details.
Nothing looks worse than when someone claims they have a groundbreaking, completely unique product, and in five minutes we find five competitors on the first page of Google. In short, you have to do your homework before you come to us. We will be interested in financial projections, but we won’t deal with the details yet. Those will come into play when the meetings progress and we will be dealing with the financial plan. The meeting with the Idea Board is mainly about whether the main budget items make sense, and to know that you’re not burning money anywhere for no reason, or on the other hand, that you’re not hindering the development of the startup.
What if some aspects of my presentation fall short? Will I get a second chance?
It depends on what the shortcomings are. Even if you don’t get investment from us or we don’t offer you incubation, we always tell you why we decided the way we did. So even if it doesn’t work out, you get feedback as to how you can improve. It also sometimes happens that certain startups are not a good match for us, even if they’re high quality. In this case we try to put the founder in touch with people who might be interested in cooperation. It’s pretty much impossible to meet with the Idea Board and not receive any comment from any of its members. If your presentation has just a few minor shortcomings, we’ll let you know and invite you for another try.
How is it with the technical side of the presentation when I come to the Idea Board? Do you expect me to bring any kind of printed materials to leave with you, or anything like that?
It’s definitely not necessary to leave anything printed, it just causes the death of a tree and the Idea Board is definitely not going to return to a printed presentation. The only way to get in touch with the Idea Board, is through our form for new startups. It’s pretty detailed, so we already have a pretty clear picture of your startup before we meet. In order for the whole presentation to run as smoothly as possible and to fit within the time limit, we always want the startups to send it a week in advance. This way we’ll have enough time to tune it up together, and the Idea Board will take a look at it before you come. Then in the meeting you’ll do the presentation yourself, and we have a rule that no one will jump in and cut you off. We always leave questions and comments till the end.
What do you do if you don’t receive a presentation a week in advance?
If I don’t get it, I remind them. But it already sends me a clear message about the founder if I have to remind them myself. If they’re not capable of sending a presentation by a set deadline according to a clearly outlined structure, why should we believe that they’ll be able to handle infinitely more complex issues related to running a startup? Practically speaking, if a person misses the deadline for sending the presentation by more than twenty four hours without any kind of apology or explanation, we stop counting on them.
I’ve heard that sometimes the founder comes to the presentation alone, and sometimes they bring the whole team with them, so they can barely fit in the conference room. Is there an ideal amount of people a startup should show up with?
There’s one simple rule: bring everyone who has something to say in the presentation, and let them speak. It doesn’t work well at all when a six-person team shows up and only one of them speaks. As I’ve already said, the Idea Board is basically a “smoke test” meeting, where we don’t go very much into depth. The founder should be able to answer the vast majority of our questions himself. Meanwhile, his team can be working on the product instead of sitting in the background at a presentation.
Before the meeting with the Idea Board, should I calculate what share of the company I will have to give up for the investment that I’m interested in? Or are all of the finances and shares dealt with later according to a more detailed business plan?
We want you to have an idea how much it will cost you to do what you want to do. Don’t be afraid to bring up the money that you will actually need. And the more realistic data you have to support it, the better. You can for example come with information that marketing will need such and such a budget, because PwC did a study that showed… As far as the percentages, it’s definitely a good idea to know how much you can give up in the first investment round. It’s happened a few times that a startup has come to the first meeting and said that they would easily give up ninety percent of the business. When someone is willing to give up almost the entire company just to get started, it’s really not a good thing.
The other extreme is not a winner either. Getting five million euros in exchange for one percent of a company which doesn’t yet exist is not realistic. I would definitely recommend studying literature about investment to startups and talking to people who have already gotten investment. It will only help you evaluate your startup to a small extent, but you will know how things work with regards to closing investment deals. It’s also important to mention that things work a bit differently in Europe than in America. In America investors throw money all over the place, investing in as many projects as possible, and wait for one of them to pay for the rest. In Europe we are a bit more picky about where we direct our money.
You mentioned it’s a good idea to read some literature. Do you have any tips in particular?
I’d personally recommend Zero to One by Peter Thiel, The Startup Game by William H. Draper, and The Hard Thing About Hard Things by Ben Horowitz.
What is the ideal way to leave the first meeting with the Idea Board? I don’t expect that startups leave with closed deals. When can both side consider the meeting a success?
From our side, we consider a meeting a success when a startup interests someone from the Idea Board so much that they want to take on the role of ambassador, help the startup through our Main Board to incubation or investment, and guide them during incubation as a copilot. That’s the most that someone can walk away from a meeting with the Idea Board with, so even the founders would consider this a success.
And what if there is no such person on the Idea Board?
Of course that also happens. As a whole we like an idea, but for various reasons no member of the Idea Board wants to personally stand behind it. In this case we help the founder, as I’ve already mentioned, with getting in touch with our own contacts who can help them for example, but we don’t go any further as far as incubation or investment. Founders should not take the meeting with the Idea Board as a trial as to whether it will happen or not – we were a startup and we understand their situation. Our role is to support new, promising projects, but it’s true we can’t do it all by ourselves and a considerable amount of the work must be done by the startupists themselves.
Viktor Nyitray má v UP21 mám na starosti nábor startupů a jejich onboarding. Také se stará o naše kopiloty a zajišťuje aby jejich let se startupy probíhal bez turbulencí. Dále pracuje na navazování partnerství napříč startupovou komunitou a jejím propojování. Mimo UP21 se věnuje zprostředkovávání středoškolského vzdělání ve Velké Británii a konzultuje customer service management.
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