Investor’s Angle by Szymon Janiak

The post was originally published in Polish on Szymon’s LinkedIn profile. Szymon kindly agreed to republish what we think is of great value to our readers.

Polish startups often have great ideas, strong teams, and they don’t get funding just because they lack knowledge and experience in this area. This is one of the key conclusions that I have drawn while participating in about 100 rounds over the last few years. In addition to the fact that I actively invest personally and run a fund, I am constantly advising many startups that come to me. Why am I doing this? For me, on the one hand, it’s just an extremely pleasant way to make money, because you capitalize on your knowledge and experience. On the other hand, it presents a constant flow of new opportunities in the field of investment or involvement in businesses, of which there are already several dozen. A startup, on the other hand, solves its problems and achieves its goals faster. So, we have a win-win-win.

The most encouraging thing for me is how much one hour of meeting with founders can change. Sometimes, it is enough to show the investor’s prism so that the team can understand it, make a few changes to the opinions, – and that’s it. There have been situations where, after one meeting and a slight change in strategy, the company acquired an investor in a short period of time, which had previously been a struggle for many months.

What are the most common doubts? Is my pitch deck suitable? Why doesn’t anyone write back to me? Is my valuation too high? Does this idea have a chance to work? Is VC the right course for me? Do I have to quit my job? Is this term sheet market-based? There are, of course, more questions, but they are repetitive in nature and many of them can be answered quite easily.

Interestingly, despite numerous materials on the subject – podcasts, books, articles, posts – of which I also author – teams often need to address individual problems, consult someone about a specific situation, so as not to reinvent the wheel. This really helps, saving time and reducing the number of elementary errors.

The same role is delegated to a VC fund. At least in theory. Teams are supported so that they can develop faster, unleash their potential and achieve their goals more effectively. This is how it should look like. In practice, it varies.

I’ve always been willing to pay for the knowledge of people who beat me in a given field. To this day, I still do it and as long as I choose the right people, I see only benefits from it. It’s not always worth trying to learn from your mistakes – sometimes it’s too expensive. Not everything can be downloaded from the Internet for free – although I have a certain conviction that many people have not yet realized it.

The comment section had to add:

I think the problem is more complex. Of course, knowledge and experience have a significant impact on obtaining financing, but there is another side, I mean investors, VCs, accelerators, from this side there is often (not always) a lack of understanding. Expectations are inadequate to the status of the startup, the round, the state of the product. For example, a startup needs support to complete a product, and investors demand sales, one excludes the other, because how does one sell something that is not ready. In my opinion, everything is heading towards the disappearance of rounds at an early stage, only after the product is created and sales are launched, investors will be willing to invest. It’s a bit like with a bank, if you need money, the bank won’t give you any, because you don’t meet the requirements, and if you don’t need it, because you earn well yourself, then you get offer after offer from banks. The solution is actually simple, look for investors who understand the situation of your startup, who understand the technology, see the potential in it, then it is much easier.

– Łukasz Dudek, Co-founder and COO at PrecisionLoop

An example from my ‘backyard.’ A startup comes for a consultation to a business guru who effectively advertises with a number of successfully developed businesses. After about a year, hundreds of consultations and thousands spent, it turns out that what the guru suggested does not work at all, and the advice is very general, completely not aimed at a specific business. A waste of time, money, motivation. 

Question: How do we know that the guru doesn’t just blow our trumpet but really cares about our business instead of only counting the money from consultations?

– Krzysztof Szymanski, Full Stack/Data Engineer

Quite similar observations here. The investor’s perspective is often overlooked, and yet the investor wants to know how much capital is needed and what exactly it will be spent on to achieve a certain increase in the value of the company and enable an exit from the investment with a fixed return over a certain period of time. In addition, good risk management raises the chances of raising capital significantly. Instead, investors often receive materials promoting the idea as such and the entrepreneurs, without much information on real earnings for the investor. A slight change in perspective makes a huge difference in the effects.

– Blazej Turajczyk, Associate Director at UBS