How To Ready Your Investments For The VCs

with Alex Dunsdon

This excerpt is based on our interview with Alex Dunsdon, Investment Director at SaatchInvest.

As an angel, one of your dominant value-adds other than mere capital is your ability to prepare your investments for the upcoming VC rounds that will inevitably occur if the company is to be successful.

Therefore, you have to mould your investments to the ‘VC fit’. VCs have clearly defined metrics and KPI’s that must be met in order for an investment to be made, it is your job as an angel to ensure that your investments meet these crucial KPI’s. So what are these KPI’s that all VCs look for?

Management Team

Despite the common belief that the hiring process should be left to the CEO, an angel who has the ability to connect and assist in the hiring and recruitment process of talent, is a significant contribution.

Like most angels, VC’s look for a quality founding team. At SaatchInvest we look for “humble learning machines”. People who want to learn all the time, who will run through walls to get things done, have great instincts, but at the same time are very humble.

And there is a role to play for angel investors in helping to build up the management team. Despite the common belief that the hiring process should be left to the CEO, an angel who has the ability to connect and assist in the hiring and recruitment process of talent, is a significant contribution.

If you want to add the most serious value, make connections with extremely talented developers, they are undoubtedly the most in demand and the least in supply. A healthy contacts book of devs will position your startup and you in a good position, prior to approaching VCs.

“People who want to learn all the time, who will run through walls to get things done, have great instincts, but at the same time are very humble.”

Market Size

At the end of the day, this one is incredibly simple. All VCs care about is investing in companies in big markets.

At a minimum, VCs will look for an investment to be able to return their entire fund at least once. So as an angel investor you need to advise your teams to think big and most importantly never talk about early exits, quick flips, acquisition interests, during the meeting with VCs. This will suggest to the VCs that the investment does not meet their return criteria and is therefore not something that they are willing to invest in. Simple as that, chance gone.

So think big, think £1bn market at the very minimum, because that is what the VC will be thinking.

Momentum

How can one measure momentum? Simple. Through comparing the cycle of product development, that is why Alex stated in our interview, ‘fundraising is a full-time job’.

Ownership

This is why we are all here isn’t it? We all want ownership of a company that we believe will provide substantial returns. Well, the VCs are not different I am afraid.

Most VCs are looking to acquire 20–25% of your company at a minimum. Co-investments might reduce this to around 15%, however, you will be very hard pushed to find VCs who are content with 8%. Even if you do this is indicative that they are looking to acquire a larger portion of the company at a later date.

The key is to be upfront, confident and completely transparent. If they like your company they will want to help to grow it, if they do not, I am sure your company can locate the emergency exit!

Alex Dunsdon is an entrepreneur and investment director. He founded The Bakery London, an ad-tech accelerator that helps big brands including BMW, Panasonic and Heinz to integrate technology into their marketing strategies.


The full article can be found at www.syndicateroom.com/learn/angel-insights.