Wednesday, February 22, 2012

Alternative Startup Investment Guide

I probably get about 2-3 business plans a week on average. Some are huge (got a 47 page one yesterday) - thats a lot of reading. I then follow up maybe 3-4 a month to meet the founders and see if any are worth investing in. Of them I probably only go ahead with about half a dozen a year on average.

I've made a lot of mistakes along the way - but am coming to the view that however good the idea is, so much is down to the founders and the team around them. And a bit like interviewing people, you never really find out what they are like until you start working with them.

So, in continuation of my last rant 'How to Look after Investors' I provide my own alternative decision making process to making startup investments.

1. Business Plans - always too long and too much waffle. I want a 1-2 page exec summary, simple P&L and simple cash flow. Keep it simple.

2. First meet - down the pub. Alcohol has a good way of finding out what people are really like.
As a gauge -
1 pint - I will consider their idea
2-3 pints - thats the due diligence - can the founders take their drink
4-5 pints - I'm probably in
5+ pints - I will probably forget everything in the morning and retract offer.

3. Equity negotiation - best  over a game of texas hold em poker (you can go all in but be warned)

4. Don't even offer any wanky director or non exec role - not interested.

5. Once a month meet up (pref down the pub again) with one pager showing
  • summary of month (no bullshit please)
  • income, expenditure and cash position (drinks are on me and not a company expense)
  • metrics (there must be some)
  • marketing update 
  • forthcoming issues (which pub to meet in next time)

Oh I wish it was all that simple.

1 comment:

  1. I like your k.I.s.s. principle to investments, if only the whole investment sector was as k.I.s.s. huh. Out of curiosity which county are you based in?