Velvet spoke to Inga Veselova, Managing Director of Velvet Investment, and she busted some startup myths that business owners should be aware of when looking for investment opportunities for the first time.
Inga was set on becoming an international horse rider
When Inga was in high school, she had a one-track mind. She wanted to become an international horse riding star. She had invested a lot of time and money into her horse-riding career and was determined to attend international events. “Horse riding is an expensive sport,” Inga says “but it is also quite rewarding.” She had built her life around this sport and wanted nothing more from life.
When Inga entered the working environment, at an international company, she still had her dream to become a professional. She still partook in horse riding, but more at an amateur level. It was at the conferences that she attended for the international company that first introduced her to the word “innovation”.
She discovered her hidden talent
Inga has been involved in the startup sector for almost 7 years. She first attended an investment conference when her father had developed a product. He was looking for business partners to move his company to the Nordic Countries, and was in the process of getting patents for his innovation. Even though she didn’t know what the word “startup” meant or how to apply for funding, she was determined to assist her father with finding funding for his business. She took to the Internet and found an investment conference that was free of charge to attend. The only requirement was that they send a presentation, and if that was approved they would be eligible to attend the conference.
So, she made a simple PowerPoint presentation and after two weeks she and her father were told that they were eligible to attend the conference, provided that they also could pass the training session. This training session would prepare them for presenting in front of possible investors. So in two weeks, Inga went from not knowing what “startup” meant to present an innovative business in front of old school investors.
When she got the good news that she would be able to present in front of the investors, she had her work cut out for her. Firstly, she had to do a lot of homework after the training, and secondly, she had to create what almost felt like a business plan. They received a list of things that the presentation had to include and it had to be short. They were told that no one would read what was written on the presentation, but that everyone would be listening. “So, you have to include just bullet points to catch the attention of the potential investor. If the investor’s attention hasn’t been caught, they will not acknowledge you. Even if your business is amazing, groundbreaking, or promising.”
This creates a lot of pressure, she added. People who are driven usually come across as confident and should work on becoming really good at presenting themselves. It is just something that is part of owning a business if you want to pitch to investors. And if it isn’t your strong suit, you will have to learn these qualities to catch the eye of an investor.
Inga says that she discovered a hidden talent after that conference. “I was invited to join the conference team.” She says that this came after having a chat with the conference organiser around four of six months after the conference. He suggested that she join the team “because they were looking for new energy and fresh ideas”. It was quite the transition for Inga, as she went from being the one who presents in front of the investors, to being someone who decides which startup is valuable enough for investment within half a year.
One thing she learned at this time was that speaking to the startups are vital when it comes to choosing who will receive funding and who wouldn’t. Meaning that mentors should get to know startups on more of a personal level to ensure that the investment goes to the right place.
Myth busting with Inga
1. You always get an investment just because you attend a conference
This myth has been busted! Just being in a room full of investors doesn’t mean that you will capture their attention and get an investment. It doesn’t matter how you present yourself, how you talk, or how promising your presentation is. “If investors aren’t interested, they won’t approach you. When they are in the audience they are going to listen or they are not.”
“This is also true afterwards,” says Inga “during the networking.” When doing networking it is best to try and get the opinion of the room and what they thought of while listening to you. “You need to take initiative, take matters into your own hands, and go and talk to people. Don’t stand in the corner and wait for someone to approach you, also don’t go stand and talk to the people who also presented with you.”
Inga says that If you are fundraising, your tone is your friend. Go and talk to people and ask their opinion. Ask if they are interested in continuing to talk to you. And if the response seems negative, ask what was missing, what they needed to hear to find your presentation interesting.
What would be even better for you is if you can arrange a meeting with potential investors, as a presentation is usually a limited time. “You need to catch a person in a place where they feel more comfortable. Arrange for a call or meeting with them so that you can sit down for a longer time. Then they will be more relaxed, and so will you.” You will have the chance to talk more about yourself, your product, the future of your product and your business and what exactly you need.
“Don’t be passive in the process as it is for your own interest.” She says that negative comments aren’t always bad. If an investor tells you that they are not interested, you can ask them what in their opinion you did wrong or where you can improve.
“Or,” Inga adds “you can be bold and ask them if they know anyone in their network that might be interested if the investor could please share your details or presentation with them.” This can be a frightening experience when you are just starting out. The best possible thing that you can do for your startup is to step out of your comfort zone in front of an old-school business guy and say: “hey can you share my presentation with your network,” Inga says.
She says to be careful because sometimes you can come across as too strong or annoying. She suggests that reading the body language of the potential is crucial to your success. “They have a lot of contacts, so you should not create a bad impression of yourself, or your name will spread quickly amongst the investors.”
2. First impressions don’t mean much
This is totally untrue. Inga says that it is up to the investor to decide if they like your personality or not. They look at elements of your personality like how you are dressed, how you present yourself if you smell good, do you drink coffee or tea, and where you go for lunch. She says they also pay attention to how you interact with other people in the room, are you chatting to them or are you secluded scrolling through your phone. Some investors, especially industry investors, are usually fond of psychological information and can tell a lot about you from spending a few minutes with you.
“First time or new investors are not as experienced when it comes to telling the character of a person. Therefore it is important to build a friendship with these types of investors.” That way it will be easier to get to know their scope of interest and amount of money they are looking to invest, what type of startup they find interesting, what they are looking for in a startup, the network they have, how they can help you, and the exact amount of money they are looking to invest.
“Experienced investors stick more to the agenda of the companies that they want to look at, and if they don’t see anything of interest in the room, they don’t mind not making an investment because they will have another investment opportunity coming up.”
She says one way that you can also make a good impression is by finding out who will be attending these conferences ahead of time. This gives you the opportunity to connect with them even before the conference which will have a lasting impact on how they perceive you. “It also makes it less awkward to ask for money,” Inga adds.
3. A business card equals interest
Inga busts this myth instantly. If you get a business card from a venture capitalist at the conference, or they ask for your presentation or business plan, it can give you hope that they might be interested. But on the other hand, they might simply forget who you are and this happens often solely because of the sheer number of companies they see within a week. So if you didn’t hook their attention from the first moment, then you will definitely get lost amongst the other companies who are searching for funding.
However, when an investor asks for your business plan, always have it ready. “Do not show up at a conference without it,” Inga advises. She says to make sure that you have done all of your homework and research. She lends some advice and says that “you don’t need a 20-page business plan because no one is interested in 20 pages. But have at least five pages of how you plan to develop your business. Because a presentation will not give the whole overview of your business.”
There is no space for a whole business plan in your presentation. In the presentation, you will be talking about factors such as the market. You will not be talking about the revenues you are planning to make, or show all the figures you have. This will allow investors to get to know your business in a deeper way.
4. Investors will always invest what you ask them to
According to Inga, this myth is untrue as well. Startups need to think of their timing. The due diligence process might take several months to complete and they also need to consider that investors might not give them the full sum of money that they asked for. There are many reasons this might be true. For example, they might not agree with you that this is what your business needs at this stage. “Because yes, you need to calculate overhead costs as well, but investors are not always ready for the overheads,” Inga says.
Some will be trying to invest a lower amount of money with lower evaluation. These calculations are based on mechanisms that investors use to calculate how much money they can invest and whether this company will succeed or not. “They have to calculate it like that, and there is nothing wrong with this calculation as they can decide to invest more money in the future when you are looking for your second round investments.”
Inga provides some advice that you should not get upset when investors are offering to invest a smaller amount into your business, especially if you are raising your first round. It is better to start with some investments, even if it isn’t the full amount than not having an investor at all. An investor is after all someone who will support you.
5. Seeking investment is easy
“Be ready for a lot of stress,” Inga says. Seeking investment and presenting in front of investors is a stressful task. Inga compares it to professional sports events and says that “you are even more stressed than you are at sports competitions because there you have rules and structures to follow. But seeking investment has no structure or system, so you become more stressed.”
Inga always compares presenting in front of an investor to the way she felt during horse riding competitions. “As most are aware,” Inga says “horse-riding competitions are stressful and everything must be done to the tee. However, I felt more stressed presenting to investors than I ever did at one of those competitions.”
According to her what makes it such a nerve-wracking task is the unknown and variables of these presentations. Sports have rules that you need to comply with and if you follow the rules and train hard you will be able to succeed. With a presentation, you can do everything perfectly and comply with all the guidelines, but if you don’t appeal to any of the investors, you will not be able to receive funding.
“There is no system, and there are no rules”. Inga also says that seeking investment for your startup is a personal thing, it is not just a business, it is their ideas and passions that make it even harder to be patient or to deal with the rejection.
It comes as no surprise that finding and sourcing investment is not easy. It takes time, patience, and a lot of homework. It is always best to enter these conferences with an open mind and let your passion flow. As Inga says, the way you present yourself is sometimes more important than how successful your business is.