How I take the decision to invest in a startup

25.02.2019   |  Startup

An investor receives far more funding requests than the ones he can actually get involved in. Even the proposals that include a good pitch and business plan have to go through a screening procedure in which the potential investor obtains his necessary clarifications. We do have such procedures in our companies and they’re not secret – but, instead, they are highly relevant about any investor’s expectations and steps that entrepreneurs have to follow through. This is the reason I’ve chosen to present our procedure in brief.

1. Opportunity Assessment

The first step involves analyzing the opportunity based on four simple criteria:

  1. The idea: A unique selling proposition/ the issue it addresses and solves. Is the business scalable or, on the contrary, does it target a finite market
  2. Experience – the entrepreneur’s / team’s track record.The background and knowledge that they have on the chosen business sector, as seen in the pitch deck, the business plan and the further clarification requests.
  3. Alignment with our goals. Refers to our previous engagement in the respective business segment and the way the startup aligns with our overall strategy.
  4. Timeline of the Return of Investment.No, I’m not expecting to get a return the next day. But I’m interested in the timeline being realistic.

Based on the answers to the above questions, every financing request gets a score. If that score is big, then the startup is qualified for the next stage.

2. SWOT Analysis

Every entrepreneur knows what a SWOT analysis means. If I must mention this again, the analysis contains four chapters: Strengths, Weaknesses, Opportunities and Threats. In general, the difference between the first and the latter is that the former refers to the present, while the others refer to the future.

Depending on the SWOT results, the business proposal can be promoted at a later stage.

3. Financial Projections

In this stage, the business is examined with our analysis methods:

  • DCF (Discounted Cash Flows): Calculating the cash flow at a later stage in accordance with the current cash flow. Obviously, this method is better suited for businesses with a certain level of maturity, which have started to have their own cash flow.
  • Multiples: In the case of a startup that’s just launching, it will be evaluated based on similar businesses that already exist in the market.
  • Yield: A cashflow model which the investor can receive, depending on the evolution the business has after a specific period.
  • TAM (Total Available Market): The total market that the business products will be able to access.

Besides the yield, during this stage we also refer to the so-called VAR (Value at Risk), an indicator that quantifies the investment’s financial risk level.

4. Due Diligence

This is the last step before the actual decision, where we actually get to the startup’s intimacy, through a series of financial, legal and other forms of audits. The aim of the due diligence implies mostly verifying the perspectives obtained in the first stages and it is the last step before the final investment decision.

Of course, our procedure isn’t the only existing one, and some investors take decisions that are mostly based on the so-called “gut feeling”. However, getting familiar with the terms and methods mentioned above is useful for any entrepreneur that is searching for financing, as it will help him better understand the stages that follow after a startup has been brought to life and to better comprehend the interaction with different types of investors.

Octavian Pătrașcu  |   25.02.2019   |  Startup

Three things to test and maintain in HR: hard skills, soft skills, and motivation

25.04.2019   |  News  |  Startup
The quality and efficiency of an employee mainly depend on their professional qualifications, but the modern human resources theory refers to this only through a partial term, namely "hard skills". In terms of evaluations and professional management, these “hard skills” are supplemented by a range of different qualities defined as "soft skills", such as the motivation that an individual demonstrates or chooses to develop.

Hard Skills: Easy to identify, necessary, but not enough

The term "hard skills" applies especially to fundamental professional knowledge, skills, and abilities, but not only. For example, if a programmer has to write code in Java, he will obviously have to know the programming language. In the field of hard skills, however, complementary skills such as foreign languages ​​or driving licenses also come into play. If the job description is not IT-related, the computer skills - quasi-generalized today - are also in the same complementary category. Upon hiring, hard skills can be easily tested or proven. Basically, all the skills in this category can be certified through a diploma or a certificate of qualification. These skills are the basis for the future work of the employee, but in the vast majority of cases, they are not enough to ensure good performance at the workplace.

Soft Skills: harder to test, especially required for higher positions

These are somewhat social qualities, relating especially to people-interacting abilities. Soft skills include teamwork skills, communication skills, leadership qualities, and the ability to solve problems as they come. From simple politeness to a nonconflictual attitude, a whole range of attributes can be added here, including good time management or the desire to conform to strict professional ethics. If hard skills are easy to identify, in the case of soft skills, the stereotype enumerations present in CVs are never enough proof of their existence. They can somehow be felt when hiring, during their interview or, possibly, through psychological tests set up by human resources specialists. As they mostly focus on human interaction, soft skills are increasingly needed as the position of the employee in the hierarchy is higher, but the situation differs from one job description to another. If the programmer we had as an example earlier does not necessarily need soft skills when writing code, a sales or marketing specialist will interact with the top management and thus cannot work without them.

Motivation: differs from case to case

Motivation is a problem that concerned psychologists way before Maslow's Human Pyramid of Needs. There are many hypotheses and models that relate to this theory. I will just state that a first classification refers to financial and extra-financial motivations. The former refers to material compensation and are accepted unanimously. However, since the beginning of the 20th century, it has become clear that there is no direct link between payment and the efficiency of a person. 100 years ago, however, besides the famous $5-a-day salary, Henry Ford offered land lots, kindergartens for their children and, in the case of immigrants, English courses to help them integrate into the mass production processes. Today, large companies provide health insurance, relaxation areas, various educational classes, physical activity facilities. All of these include career plans and contract terms that offer job security and much more. Perhaps, the first thing to remember is that motivation differs greatly from one employee to another. Effective management should be as flexible as possible, in accordance with the needs and incentives of employees, beyond the standard packages.

The Employer’s Perspective

From what we described above it seems that that the employer will consider the three components as we’ve structured them. Hard skills are easy to identify and absolutely necessary to ensure performance in a particular position, so these are the first ones that will be tested. Soft skills can be identified to a certain extent in the midst of the employment process, but initial perceptions can be confirmed or denied later on. What’s more important is sustaining them at the workplace, often as a necessity for promotion on a higher hierarchy level. As final words, motivation has qualitative rather than quantitative aspects. Employers should be less concerned about the answer to the question "how motivated is an employee?", but rather show concern towards the type of motivation that employees are most responsive to. Schematically speaking, if hard skills are mainly the employee's concern, soft skills relate to a process that takes place between the employee and the company, and in the case of motivation, it should meet the needs of the employee. Only by paying attention to all the three components, the employer and the employee can have a mutually satisfactory and productive relationship.
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How I take the decision to invest in a startup

25.02.2019   |  Startup
An investor receives far more funding requests than the ones he can actually get involved in. Even the proposals that include a good pitch and business plan have to go through a screening procedure in which the potential investor obtains his necessary clarifications. We do have such procedures in our companies and they’re not secret – but, instead, they are highly relevant about any investor’s expectations and steps that entrepreneurs have to follow through. This is the reason I’ve chosen to present our procedure in brief. (more…)
Read full article

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