Every investor, be it a novice or seasoned specialist, wants to “saddle” a unicorn and find a startup that will bring them a fortune. However, there are many obstacles on the way. Sergey Kartashov, the Senior Partner at technology company Roosh, shares his experience and thoughts about the most possible mistakes investors make when choosing a project to invest in.
According to Kartashov, the investment market keeps on changing, and it is on the rise. Investing becomes more and more popular among entrepreneurs, yet they are moving away from the idea of getting an immediate profit. Instead, they prefer to invest in worthy ideas that can turn into a large and long-term profitable business.
Whenever you choose a startup to invest in, Kartashov offers to start with analyzing the whole project and the market. The best choice would be to use the market you know a lot about. But if you lack information, pay attention to such giant investors as Sequoia Capital or Andreessen Horowitz: if any giant foundation invests in a project, it is a good sign that the project is worth your attention.
“There are thousands of failures hidden behind hundreds of success stories. According to PwC, only one in ten projects on the market was successful in 2017. The trend has not changed in four years,” the partner at technology company Roosh explains.
When it comes to analyzing the team, an investor, according to Sergey Kartashov, should look at not only whether there are enthusiastic technical talents, but also whether anyone in the team knows how to monetize their idea and make a solid business plan. It is also important for the team to understand they may face legal challenges.
As an example, Sergey Kartashov describes the Titanovo case. It was a promising Ukrainian startup that conducted DNA analysis and reached $1 million in sales when a large American competitor sued the startup and “sank” the whole project down.
Another important aspect is whether the startup team has prepared scenarios to deal with a crisis. Young specialists often lack this experience, and if the investor decides to fund the project, it may be his responsibility to help them deal with critical situations.
Another important aspect the investor should pay attention to is the way the startup team functions: whether they have a manager that knows how to delegate authority and motivate people, whether the specialists can work together and help each other. Once a team member meets a challenge, it is important the whole team can help him overcome the obstacle.
“It happens quite often that a team of talented engineers focuses exclusively on developing a high-tech product and forgets about the business rules. This is especially true for novice marketplaces. The founders simply fail to connect the buyers of the services with their sellers.”
The last tip Sergey Kartashov shares is to choose rather experienced startup founders. When working with newbies, it is easier for an investor to tell them his rules and strategy, therefore, the experienced team may require the investor to make compromises more often. “However, in relation to the latter, the project efficiency will be thousands of times higher,” Kartashov explains.