We’ve learned a lot about investing in startups from doing just that in more than 200 early stage tech companies across the globe over nearly a decade.
Seedcamp has backed a UK fintech leader (Transferwise), now-familiar companies (eMoov and BorrowMyDoggy) and, potentially, the next Uber (our latest intake – find out more here).
Whether you’re an angel, working in venture capital, or actively looking at where to invest your own money through newer platforms such as equity crowdfunding, these are just a few of the lessons we can share that might help other investors when looking at deals.
Firstly, one of the most important factors to consider when looking at a company, is the team. This is something that continues to be a major factor when we consider an investment.
Does the founder or founding team have expertise in the industry they’re looking to disrupt? If you’re considering a founding team, do they have complimentary skill sets? If they are a solo founder, how are they building the tech? Is this being outsourced? Is there a plan to bring this in-house?
We look to answer all these questions when looking at prospective companies. At an early-stage you’re backing the team more than a finished product, it’s on them to build the company you want to back.
But, if we can’t see the size of the market they are disrupting being big from the start (or capable of being expanded through the company’s innovation), we don’t invest. For us the company should have the potential to take a slice of a large market. Or we should be able to conceive how that product could enable the market to expand. So a $50m market could become a billion dollar market because of that company’s disruption.
Lastly, one of the key learnings we’ve had in our journey, is that you shouldn’t over analyse at the pre-seed or seed stage of investing. There is no marked differentiation between two similar companies with great Founders and which one could be made redundant by a competitor. There is a lot that can go wrong between seed stage and when a company comes into its own. As an investor, you could sit there, worrying, over-analysing, but all you can really do is provide the founders with the right context in which to develop. Help create a condition that’s sufficient for the founders to have a chance to achieve their goals and dreams.
Whether you’re an angel, or a VC, you should find a way to support that company aside from capital. Your expertise can be more important than the funding you provide, so find a way to create an environment that can support the company as it scales. This is something we continue to build upon at Seedcamp for each of our startups.