It can be difficult to find the right investor for what you know is a solid idea. But if the meetings with an investor drag on, you may wonder 'what am I doing wrong?’
Fadi Bizri might have some answers. He has been working with startups for seven years. A partner at B&Y Venture Partners, a new Beirut-based VC fund focused on investing in early stage tech startups, he is also program manager at SE ('Software Engineering') Factory, a three-month intensive coding bootcamp.
Bizri cofounded two of Lebanon’s startup accelerators, Speed@BDD and Seeqnce, the latter being the county’s first. He also serves as managing director at Bader Young Entrepreneurs Program, an entrepreneurship support organization providing training and advice for Lebanese youth.
For Bizri, investing in a startup is primarily about investing in the founders and their team. Here’s his take on signs of a healthy and desirable startup worthy of funding.
An investment worthy cofounder is an obsessive one - they live and breath their idea. These founders have been developing their concept for a prolonged period of time, and have discussed it with several people rather than hiding it in a treasure chest, scared of copycats. They have done their research and know all the players in their industry. When they approach the investor, their idea mature with a clear cut plan. They exude subtle, yet intelligent confidence and passion.
Founders need to be open to criticism. It's a bad sign when people get defensive at any sign of criticism. Great founders are ones whose strong conviction of their idea is matched with an eagerness to learn and improve. Their desperate desire to ace their idea means they are open to critique, and humbly welcome it.
Be an industry expert. Investors shouldn't know more about your industry than you. For example, if an engineering student works in the sewage treatment, waste management system or medical waste disposal industry and based on that experience, comes up with an idea to treat waste 10x cheaper, 10x faster, or 10x better, that will peak the interest of any investor.
If you worry together, you’ll stay together. While founders have to know, like and complement each other, they also need equal levels of worrying. Some team members or founders end up working late hours while others not. This type of imbalance can create resentment. Having a team that is both physically and mentally present, putting in the same numbers of hours is a sign of good health.
Good startups have ‘The Talk’. Are you committed? For how long? Are you going to quit your job? When? Similar to relationships, teams need to have open and honest communication on their levels of commitment. A great test is if a team of two has been through rough challenges and are able to survive the bad times. They had every reason to leave the startup behind but are still there, believing in the partnership and their idea.
Have a vesting schedule. A vesting schedule is a table of time periods determining the percent value a member in a potential startup would receive upon leaving. The process entails a founder or employee earning their shares or stock options in the company over time, or after achieving certain milestones. Having this in place before approaching investors is a sign of maturity and pragmatism.
Be fast and lean. The fundamental characteristic of a startup is speed, without it, you’re dead. Good entrepreneurs have a beta product within months. You have to move fast, iterate, and adapt to the market. And repeat.
Think big. When approaching investors, your potential should be to become at least MENA dominant, if not globally dominant. If the goal is to exit, only the first or second startups in that industry will do so, said Bizri. If your idea does not have that hockey stick growth, consider this: are you sure you need VC funding?
You don’t always need VC money. You may be a small to medium enterprise, making $20,000 a month and your profit is growing slowly. You may not need investment from outside parties, besides friends and family. For founders, the latter is a healthier approach than living with the looming VC expectation of exiting at a billion dollars.
Seek clean terms. Good funds walk away from good startups because they have bad VC terms. Keep it simple, lean, clean and tight. It’s tempting for investors to try and get the best deal out of a startup and get as many conditions in the contract. Each time a more complex investor term is added, the complexity doesn’t grow linearly, it grows exponentially. A simple contract will also help in second or third round investment.
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