What do these investors want?
They say that investors are constantly discussing this topic among themselves, but they never write about it. We asked Olya Turzhanskaya (MAVI QIWI), one of the curators of the project, to talk about the selection criteria for the QIWI Universe accelerator .
As soon as we began to maintain a column on Habré, many had a fairly fair question, what criteria were we guided by when selecting projects for the QIWI Universe accelerator.
At the request of the workers in this post, I will reveal all the cards. At the same time, I will not limit myself to describing the formal criteria for selecting projects that most of the teams filling out questionnaires for funds already know by heart, and I will reveal really important but very simple things.
I really hope that this post will help project teams better understand what “arrogant and greedy” venture funds want from them, and, ultimately, attract really comfortable investors who will become not only a “bag of money” for your team but also partners and mentors.
In order to have a complete picture in my head, I will refresh the process of selecting projects in QIWI Universe a bit.
When selecting projects for the QIWI Universe accelerator, we, first of all, looked at data analysis projects (big data), financial services, projects in the field of remote user identification and information security, e-commerce and m-commerce, loyalty programs, various logistics services and aggregators. But at the same time, we did not limit ourselves only to these areas, but watched all the IT projects that “knocked” on our accelerator (there were about 500 on all channels for selecting such projects).
The process of selecting projects for the QIWI Universe accelerator went through two channels. Channel One is a series of 24-hour hackathons. During the month, we held 4 hackathons - in Minsk, Novosibirsk, Moscow and Kazan, where we collected about 200 ideas, most of which were brought to the level of a working prototype (the so-called MVP). One could come to the QIWI Universe hackathon with an already established team or assemble a team right on the spot. At each hackathon, an expert jury selected 3 winning projects, and another 1 project received a prize of audience sympathy (a total of 16 teams were selected). The winners received the right to finalize their prototypes within 1 month and present them at the final of the selection.
The second channel was direct selection through applications on the QIWI Universe website. Teams filled out applications on the siteQIWI Universe. Unfortunately, already at this stage about 20% of projects fell off immediately, since we did not want to waste time on teams that decided not to waste our time on a quality application. In fact, the application is the first impression that the investor receives from the project, and if you do not want to spoil this impression, then approach the filling of the application responsibly (believe me, few investors will appreciate jokes in the style of: I will not tell you anything, because that you are stealing my idea, or my goal is to conquer the Universe).
Then the applications were evaluated by QIWI Universe experts (I will tell you how) and the most powerful projects were invited to the selection semifinal in the form of hourly interviews (in total we received about 300 applications and conducted interviews with approximately 100 teams).
The winners of the hackathons (16 teams) and the teams that successfully passed the interview with the QIWI Universe team (30 teams) were invited to the finals.
What do investors want?
Team is the most important element of the system. I definitely will not discover America when I say that it is the team that is the key asset of any startup. If problems begin in a team, then no ingenious idea will save the project from failure. And vice versa - a strong team can make an excellent product even out of a “mediocre” idea, changing it beyond recognition (making more than one pivot) in the process of developing a business.
When selecting QIWI Universe projects, we looked at the team first, and, unfortunately, often the problems in the team were the main reason for our refusal. Therefore, in this post I will talk about key selection criteria through the prism of the project team.
Rule # 1. Team should be
At the selection, we often had to see single founders who proudly declared that they did not need anyone to implement the project, and they would cope on their own. Unfortunately, this does not work. If you are aimed at building a big business (and other projects are not interesting for venture funds), then you will not be able to code yourself, and beautifully pack and sell your product (there are no miracles). And it’s better to look for allies at the very beginning of the path, and not when it’s completely closed. And you don’t have to regret sharing a share in the project with the team (to be honest, at the initial stage, the share doesn’t really cost much and it is the team that can make this “nothing” a multi-million dollar business. In general, greed is bad :)
Rule # 2. "Fire, water and copper pipes"
Doing your business is always a test of strength, it doesn’t happen that the first time you get a product with a huge audience and excellent monetization. As a rule, a team makes more than one change in a business model before it finds its market, its audience and thinks out how to make money on a product. And a very typical situation for a startup is when investor money has already run out, and the steady monetization of the project has not yet begun.
And it is better to pass all the tests together with trusted people who will not run away at the first failure. Therefore, we always ask teams to talk about how long they know each other and whether they worked together.
Rule # 3. Comfortable relations of the team with the investor
I will not dissemble and say that we evaluate project teams only in terms of a set of formal criteria, such as experience, education, etc. Comfortable relations with the project team are extremely important for us, a part of which, in fact, we become when the project gets into the QIWI Universe accelerator. That is why a mandatory step in each of the selection channels was the personal communication of the project team with QIWI Universe experts.
As a rule, after the first 20-30 minutes of personal communication with the project team, it becomes fundamentally clear whether it will develop or not.
Relationships with teams that are trying to lie to the investor and embellish the current state of affairs in the project from the very beginning (if the investor is interested in the topic of your project, then, most likely, before meeting with you he has already studied at least a few of your competitors and has good idea of industry metrics). In addition, do not forget that the venture market is small, everyone knows and communicates with each other, so with your lies you can close your path to venture financing. So be honest.
Relations with teams that cannot adequately respond to criticism of their project / do not listen to investor advice will definitely not work out. For a team, a project is often the first (there are very few serial entrepreneurs in Russia), more than a dozen projects go through an investor, so his advice can save the team from meaningless actions and save a lot of time and resources.
If you are still sure that you are right, but the investor is not, prove it! Constructively, with numbers and facts. Believe me, investors know how to admit their mistakes and really appreciate when teams can teach them something new.
And, finally, relations with teams that come to the investor for financing and immediately begin to say that they need n-million dollars to develop the project, most of which will go to the salaries of the team (the founders of the company), will definitely not work out. The salaries of the project team at the top management level of large companies are usually justified by the steep experience and qualifications of the team (and often this is true), but this logic misses one significant point. Top managers of companies are hired employees who work for salaries and bonuses, and do not directly participate in the distribution of profits. The project team (founders), in fact, works for itself and its key motivation should be the profit of the project, and not a high salary.
If the project team is not ready to work for a small salary, this is an obvious and alarming signal that it is not ready to share the risks of the project with the investor and does not consider the investor as a full-fledged partner.
Rule # 4. You - me, I - you
Very often teams come to us that say something like this: we have a very cool idea, give us investments and your user base and a bunch of resources, we will do business, and then you will buy it 10 times more expensive from us. Why we need such projects is understandable, but why we need them is a big question. Agree that in this situation it is much more reasonable on our part to make the product on our own (either internally or by attracting an outsourcing team). In order for the partnership to work out, we need a win-win strategy, i.e. providing the project with resources, the investor must understand what he will receive in return.
In general, although QIWI Universe is a corporate accelerator, we are opposed to the project making the product for only one client. This strategy is obviously losing, as it immediately narrows the project market by dozens of times and makes it completely dependent on one client (an investor-customer conflict arises, a breakdown in partnership immediately kills the project both in operational and financial terms). If the project makes the product for different customers / customers / different audiences, then this enables the team to test various business models and methods of monetization.
Rule # 5. Think Strategically
In the early stages of development, project teams often think in horizons for 1-2 months, for a maximum of six months. And they are very surprised when we ask them to talk about how they see their business on the horizon for 1-2 years. The main argument of the team is that we are still at a very early stage of development, everything changes every week (if not more often), why should we spend time on a long-term strategy. The problem is that when a team does not know its long-term goals, it does a lot of unnecessary operational actions and as a result it can just drown in routine (constant emergency is the normal state of a startup). Still thinking about long-term plans is very useful, because in parallel you will study the market, competitors and your audience, and ultimately you will better understand in which direction you should run.
Rule # 6. Be ambitious, but realistic.
When selecting projects, we encountered two extremes. There are teams that vigorously draw figures for the global market and modestly allocate 10-15% to their project, and by means of simple mathematics they receive multi-million ($) income on their projects. The reality is that it is rare for any project to capture and hold at least 1-2% of the market for a long time.
The other extreme is when teams say that their goal is to reach revenues of 1 million rubles / month during the year. For an individual person or even a team of several people - an income of 1 million rubles. a month is quite a normal story, but this is not a venture project. If you really are aimed at this level of income, then you better take a loan from a bank or borrow money from friends, but not go to a venture fund.
The advice is very simple - when planning, try to evaluate as accurately as possible at least the order of the market volume and adequately assess the share that your project can win.
Rule # 7. There are competitors, they cannot be
missing About one third of all applications received in the “competitors” section contain the following phrase: our product is unique, there are no analogues on the market. It is important to remember that if the problem that your product / service solves exists, then there are certainly competitors. If you did not find them, then it means you were looking badly.
Another important point when describing competitors is that you should not scold them and say that they are so worthless and do everything poorly, and we are such good fellows - now we’ll quickly cut down on a cool product and tear everyone apart. The main argument against this is that your competitors are already on the market, have a product, users / customers, and so far you are only going to enter this market and you have only a set of hypotheses in your arsenal that you have to test.
Rule # 8. Do not make a project if there is no proven value
Very often, when asked why you are doing this project, we hear: I am doing this project for myself, it’s fun for me. At the same time, the teams do not say a word about the confirmed value that their product / service gives to the consumer. If there is no value, then there will be no monetization, which means that the project will not become a business, but simply a hobby for its founders. To avoid this, do not be too lazy to find out from your potential audience whether they need your product / service and whether they are willing to pay for it. It is very simple to do this - now there are a large number of free services on the Internet that allow you to do surveys. And by the way, the positive results of such a survey (covering at least 50-100 people) can be a good argument when you prove to the investor that your product / service will be in demand.
In conclusion, I want to say the following: if you decide to do your business and want to do it together with the fund, you should not choose an investor on the principle of who will give the most money / who will value the project higher. It’s better to look for the “right investor” for your project who can help your team with the necessary contacts, resources (this is not just about money) and mentoring support.
And remember one simple rule - not only the investor chooses you, but you choose the investor.