Investment is a big part of the startup ecosystem. All companies need it to operate and grow. Today I talk with Francisco Ferreira Pinto, Partner & Executive Director of Busy Angels, a Portuguese venture investment firm.
What’s the best way an investor can help a new company?
We believe investors can help new companies both pre and post investment.
In the pre-investment stage, we try to evaluate the current stage of the company and share with the team if we believe they are or not prepared to receive an investment. As investors, it’s important to align expectations from day one, trying to be as efficient as possible and not spend time exploring opportunities that we believe don’t have a future from the beginning.
After closing the investment, at Busy Angels we value the hands-on approach, which simply means putting our tools, knowledge and network at the service of the teams. The way we help the new companies varies strongly throughout our portfolio and also according to their current stage, but it can go from giving strategic advice, to generate lead in clients, to share the project with other investors, to help recruiting, to negotiate contracts, among many others.
What are the three main traits you look for in a startup?
The first criteria will not be a surprise and if you do a survey probably 99% of early stage investors will put in the top-3. The team. This is not only the most common criteria but also probably the hardest one to evaluate since it’s very hard to quantify / measure and depends heavily on the experience and know-how of the investors. Aspects like having more than one founder, looking for complimentary skills (more technical vs more business oriented) or showing commitment with the project, are some of the traits we look for in an investable team.
In second place, we would select business potential, the ability to scale and become a global project in a global market. As venture capital investors we assume very high levels of risk and therefore look for very high potential businesses to offset those risks.
Finally, we would highlight strategy and short/medium term plans. In a startup plans are always changing and evolving, but founders and investors need to be aligned in their objectives for the company, at least in the short/medium term when they will be working together to achieve them.
Do the founders need special traits as well?
Yes, no doubt regarding this one. Running a startup is an incredible challenge, and founders are always trying to beat all the odds that are going against them. We get really impressed with some of the teams that we meet every day.
The top traits would be:
• Resilience to solve all types of problems something that not everyone has or really wants to have in their life,
• Passion and drive for their project, in some cases too strong to even be questioned or criticized
• Willingness to take risks and in some (too many) cases to leave behind successful careers in top companies with a lot of responsibilities at home.
Do founders make good CEOs?
We would say a founder can be a very strong CEO but usually for a limited period of the company’s life. In the pre-seed and seed stages, when we normally invest in, one of the founders actually needs to be the CEO, there is no alternative and they usually learn it the hard way. But as the company grows (after 3/5 years), the skills needed for the CEO vary strongly and in some cases it’s in the interest of the founders (and current CEO) to evaluate if they have what it takes to bring the company to the next level.
This might be a tough one, but how do you know “how much” to invest?
When we close a deal, we are committing two types of investment – money and time. The first one is easy to reach, it normally depends on the financial needs of the project and our ability to support those needs.
Time unfortunately is impossible to estimate and depends on too many uncontrollable variables. Over the journey together we tend to “overfund” some of our companies in this area.
Can you name your most successful investment to date?
It’s very hard to measure success in a portfolio that has 2/3 years average lifetime. Is it pure investors returns? Current valuation? Size of investment? Breakeven? Value or jobs created?
In this answer, we will have to be politically correct and say that we have several companies in the road to success both in the IT/Digital and in the Life Sciences sectors.
How can startups based in Portugal compete with London, Berlin or Silicon Valley?
When comparing to these ecosystems – Silicon Valley, London, Berlin, Israel – we need to consider that the Portuguese startup scene as we see it today, is very recent (less than 5/6 years), and that investment capabilities and the size of the internal market are not comparable.
Having this in perspective, to be able to thrive globally, we believe Portuguese companies need to have unique and innovative products, a clear and focused strategy (usually including internationalization from day 1) and execute it perfectly.
Combining these 3 factors, companies might be able to reach levels of traction (in IT companies) or de-risk the technology in such a level (in Life Sciences companies), that it will attract international investors or partners from those top markets.
To find out more about Busy Angels visit http://busyangels.co/