Fifteen Suggestions for Finding the Right Investor

Finding the right investor for your startup conceals as many variables and hurdles as those encountered when trying to find the right business idea. In both cases, however, the mistake to be avoided is that of giving up, because, to paraphrase Thomas Edison, "You have not failed. You've just found 10,000 ways that won't work." Perseverance and dedication are in fact included in one of the 15 pieces of advice for choosing and being chosen by the right investor included in this report. The advice is from five of the 30 investors participating in the Marketplace, organized during the first Bocconi Startup Day. The 24 November event will be an opportunity for 35 selected startups to present their idea and find the financier that's right for them. Suggestions are from: Alessandro Anzani from Smartup Capital; Sandro De Luca from Mountain Partners; Paola Garibotti from Unicredit; Valeria Lazzaroli from EQUI and Fabio Lorenzo Sattin from Pivate Equity Partners SGR.

➜ Alessandro Anzani, General Partner of Smartup Capital and Vice President of Entrepreneurship at the Bocconi Alumni Association New York

An infectious vision
Founding a startup usually means working practically for free during the first year. This is why it's important for leaders to be able to constantly convey their enthusiasm. The vision needs to infect not only partners, but also investors: that means meeting with an already registered company that has invested all the money at their disposal. This is the only way to prove that you truly believe in your project and convince someone else to get on board.

Timeliness
First of all, it's important to allow consumers to try your product as soon as possible, because this is the only way to get reliable feedback and lower risks. The market often responds completely differently from what you would expect, for better or worse. In addition, it's never too early to look for an investor. Many startuppers tend to postpone initial costs, pending a more positive assessment. Doing this removes fuel from the business, because it keeps it from evolving. Raising funds from the start, however, increases the chances for survival.

Delegation is not prohibited
Quite the contrary! Of course, it's good to keep the core aspects within the company, such as product development and sales. That said, a company is about sharing resources and objectives, where you work with and for partners and other colleagues: the advantages of delegating tasks and externalize non-core aspects needs to be analyzed not with fear but with great interest, because it represents a concrete opportunity to attract talents and resources.

➜ Sandro De Luca, Business Developer at Mountain Partners and founder of Dott8

A complementary skill set
A good team can usually be recognized by the caliber of the people that perform three fundamental roles corresponding to the CEO, the COO and the CFO or the CTO based on the type of startup. It's important that the skills in these positions complement each other, because no one can hope to do everything alone. A winning combination can be achieved only if a solid business model has been developed: to do so, I would suggest using Business Model Canvas, a strategic tool that allows users to show all the pillars of a business model in one image.

Experiment constantly
Truly innovative startups call into question the paradigm of a certain sector, breaking the status quo. With these terms, it's almost impossible to make reliable long-term predictions, therefore the project's premise must be checked constantly. This needs to be done as early as possible, possibly using a prototype or what is called a minimum viable product. An initial intuition is ok, but it needs to be supported by an approach based on indisputable data and a method of continuous verification. This is one of the principles of the lean startup method.

Smart money
Money is no more than a product. What a startup really needs is knowhow and a network, and the best context for finding them are incubators. This is especially true for novice entrepreneurs, because they provide the chance to develop skills that are usually not learned in the classroom. If the initial idea is a good one, finding funding is the least of a startup's problems. Startuppers should be very selective when choosing an investor or business angel, asking themselves if that person will truly guarantee the best chance for evolving.

➜ Paola Garibotti, Head of Country Development Plans, Unicredit

Introductions first and foremost
A concise but effective pitch is needed to impress investors. How the team is composed, what the product or technology the project is based on is and what the current stage is needs to be explained right from the start. In addition to the reference market and the business model, investors also want to know what other pillars the startup is based on: have other partnerships already been formed? How much capital is needed and how will it be used? Is the final amount required in line with what was just presented?

The size of the market
Investors want to hear an innovative and defendable solution proposed, which meets a real need of the market. And this market must be large enough to meet the investor's expectations: starting with testing a product in Italy is a good first step, but the model must be scalable on the global market and the strategy for development abroad must be clear from the start. Ignoring this aspect is a mistake made by many Italian startups.

No management, no startup
A solid and complete team is an essential factor in the eyes of any investor. Though it's true that all parts of a business need to be represented in a startup, including research, finance, marketing and technology, the presence of a strong management role is absolutely essential. It's the synergy between the role of the manager and all the others that guarantees that the entire structure will function well.

➜ Valeria Lazzaroli, Chief Executive Officer of EQUI Investments and Fund Manager of EQUI Private Equity Fund

Realism
All entrepreneurs must be able to quantify the value of their project and realize that when investors finance a startup, they're making a bet. It doesn't make sense to propose unrealistic requests for shares. On the other hand, demonstrating awareness of the fact that debit and venture capital must be balanced increases the chance of success, because it instills trust in the financier and demonstrates good sense.

Credibility
This must be proven, but also sought out in an investor. It's a good idea, as a first step, to contact trade associations, such as AIFI, the Italian Association of Private Equity and Venture Capital, that filter subjects based on strict criteria of transparency and reliability. Naturally, the most innovative startups are the ones who need to pay closest attention to disclosing information about their project. In addition, structural funds are often able to support startups in terms of sales, communication and internationalization using their investee companies, and this of course lowers costs.

Not just apps
Because resources for development in a country are limited, in order to be competitive with emerging markets, traditional industrial models need to be innovative and developed to increase the quality and efficiency of production. This is why startups able to value human intervention in the old economy through avant-garde technologies are the most interesting. This principle applies especially to small manufacturing and the fashion industry as regards the Italian context.

➜ Fabio Lorenzo Sattin, President and founder of Private Equity Partners SGR Spa and Senior Professor of Private Equity and Venture Capital at Bocconi University

Preparation
The phase just before meeting an investor should be faced with the utmost professionalism. A good startupper is systematic when preparing the questions that will be asked and already knows the business model for their project, if it's patentable, what the methods and timelines of economic return are, possible representatives, the team's potentials and how competition is positioned. Investors will then be reassured if the business model has already been tested on the market.

Empathy
Naturally, it's good to identify a business angel within the sector you have decided to operate, because when contacting a financier, money is not the only thing being sought out, but also an alliance. Very often, business angels see themselves in the startupper that has contacted them and, in addition to financial support, is also able to provide consulting and contacts. Putting yourself in the shoes of investors, understanding them and anticipating their concerns increases the chance of success.

Dedication
This is a feature that is common to all entrepreneurs. Regardless of the sector in which they operate and their qualifications, they are constantly absorbed by their entrepreneurial project. This is the only way to prepare for your meeting with an investor. It's almost an obsession, and business angels recognize it miles away, since they have already gone through the same thing. Entrepreneurs take into account that many doors will be slammed in their faces, but they don't give up until they've reached their goal: this is how a true team leader can be recognized.