COVID-19 and funds

There are different types of funds and private investors. Given the COVID-19 crisis or others, many of them may tighten their investment criteria or stop investing altogether – but they will never admit it. So, you will never know about it and will continue to spend your time on meetings in vain. For startups, as never before, it is important to closely monitor the experience of funds in order to increase chances of making a successful deal.

For obvious reasons anything medicine-related will be of great interest to investors. The Fintech industry can benefit as well, especially those who work with p2p payments and processing/escrow solutions for freelancers and people working remotely all over the world. Gig economy and remote working are just booming right now. You can also see a rising demand for p2p и p2b lending solutions.

Also, during this time of self-isolation, media platforms, news resources and social networks will be in a good position.

by Andrey Sergeenkov

Difficult choice?

If founders are jostling from one investor to another seeking funding for their projects there are some advices:

Seek value for the investor and pitch it
target smart money first, ask for some specific support in addition to funding
only approach investors when you’ve completed your homework on legal, business case, product development, and marketing
focus on a “big name” lead investor even for a small cheque

These are the principles that will help to stabilize a venture at the very start, and earn it a good reputation.

Once the business starts expanding, the new challenges of scale-up will come in; so it’s better to foresee everything in advance. A business is like playing chess – each of your next moves may result in a success, or failure. Only the ones who know the rules of the game, and the proven strategies they can rely on, will eventually win.

One more golden rule – cross-check the success of your business against your own gut. Then ask as many external consultants as you can. Try to form as objective an overview as possible; you should get to know all perspectives, all risks and opportunities stemming from this project. Once you do believe that it’s going to win, you will be able to persuade others in the success of your venture – which, in the course of time, will become your own success.

Basic about Industry 4.0

All definitions refer to the period from 2014 to 2017. It is important to see basics and understand the various opinions. See the four below

First, «Industry 4.0» provides pervasive digitalization of all physical assets and their integration into the digital ecosystem along with partners involved in the value chain.

The other definition: Industry digitalization through integration of sensors in the components of products and in production equipment, the use of cyberphysical systems, data analysis.

Third one is by another author formulated as: The transformation of production, based on advanced technologies and involving the connection in a single system of sensors, equipment, products and IT systems along the chain of creation, value both within a single enterprise and beyond its limits.

Last and not least. Technological evolution, that suggests transition from embedded systems to cyber-physical systems. The paradigm shift from centralized to decentralized. Interaction of real and virtual worlds. Coimecting embedded systems of production and “smart” production processes.

Maximum equity stake

Most investors go for equity in the projects they invest in, a lot of founders are quick to give out stakes in their project to get the needed funding. But what is the maximum equity stake for founders to release to investors?

They are: 10% pre-seed, 10-20% both seed and series a. Or a combination of equity and tokens (with a particular vesting period) if investments are chased in a crypto project.

Generally, any founder has to answer a question of what degree of control he/she wants to preserve in the enterprise. If he/she is ok with 50% of it, he/she can do it. If he/she is ok with letting go of 90% of it – this can be done too. However, to be in charge, or at least to be at the helm of a given company, the largest fraction of equity should be in the hands of a founder. Giving up on control for the sake of funding is not always a good strategy, since it may result in a long-term loss of ownership, or at least a voice.

It’s worthwhile if the business owner decides in advance how much control he/she wants to have in their hands, and only after that take an action. Each step in the business world has to be carefully pre-planned and calculated – otherwise, there’s a risk the enterprise will not follow the intended pathway.

by Christopher Fowler

VCs are disappointed

According to a report by Christian Kameir on Forbes, a lot of investors are often left disappointed with the approach of most founders seeking funding for their project. What are these things that people seeking funding should avoid at all costs if they hope to achieve their goal?

First of all – inadequate valuation (particularly at the early rounds). The second is no understanding of go-to-market strategy (including metrics). And third one – a lack of product development expected for the stage.

It’s important also to focus attention on the aspect of investing involving illicit funds – tax avoidance or the funds the source of which cannot be clearly certified. The frustration investors are often surrounded, because in the business world, sadly, not everyone seeks to play the game according to the rules.

What these founders underestimate, however, is that the long-term success of their venture is going to be exposed. Then the whole community will suffer and bear consequences – founders in the first place, investors in the second. Transparency should always be a priority: openness of the source of funds, combined with a solid value-generating model backed up by rigorous calculus. Otherwise, any project is just a castle made of sand.

by Christopher Fowler

What VCs want to hear

Some has heard people talk about following options: a great business model, new market idea, etc. It’s true.

In addition to that – clear exit strategy for investors, and partnerships with big brands already signed. The clarity is fundamental for investors and it’s important to prepare them for all scenarios of the business outcome. Investing in venture capital is always a risky enterprise; this fact should never be underestimated, and communicated explicitly to the investor community. The matter of responsibility in case of a negative outcome should be negotiated in advance.

What concerns big brand partnership on the list, this brings in a degree of psychological safety, which is especially important for small investors. Big enterprises can boast of a strong legal team, which runs a careful scrutiny of any project prior to giving a participation consent. To some extent, prominent brands on the list give a guarantee, in one way or the other, that the business project at least is not a fraud and is going to work out, one way or the other. However, it is important to apply a fair share of common sense when signing up for any engagement – especially long-term.

by Christopher Fowler

The major reasons for fail to get funding

All of the below contribute to getting a negative impression, due to the lack of valid calculation and proper business planning. Each entrepreneur has to sit down and think seriously about the business project, if he or she wants to have serious investors on board.

They are:

Inability to prepare a proper business case
poor legal setup
insufficient community of backers
inadequate valuation

Developing a successful business model takes time, and never comes at a low price. The breach comes in when the founder fails to evaluate their own forces realistically, gives too much reliance to a team that does not possess a proper skill-set, does not apply a rigorous approach in market evaluation and under-researches consumer needs. Not to mention the legality of the aspect – there has to be a separate team in control of that.

by Christopher Fowler

A few words about Pitch

There are many great ideas for good projects, but most founders are struggling to access funds to scale. Due to this development, venture capitalists (VCs) get pitched countless times a year. For a particular project to be selected and funded, the founders must understand the fundamentals of pitching investors. There are dos and don’ts to be followed, but most fund-seeking founders know very little about that.

While pitching investors might sound straightforward, there are some underlying technicalities most people fail to understand.

It would be good to mention that it’s now a common practice to couple the deck with a 5-7 min video pitch. The main point of the matter – to communicate the benefits of the business to the investors effectively. In the modern world, the variety of communication channels exist specifically for this purpose, but audio/video presentations have traditionally been considered the most persuasive.

by Christopher Fowler

Universal Financial Inclusion by 2020

As the world population grows and becomes more and more technological, it generates exciting new trends in the development of financial integration policies that will be debated for many years. Over the past decade, more people have joined the formal financial sector than in any other period in banking history. More recently, in 2011, half of the world’s population was not provided with banking services. Financial accessibility is the building block for both poverty reduction and economic growth opportunities, and access to digital financial services is crucial for joining the new digital economy. New developments in the field of digital financial services are constantly taking place that help drive innovation and challenge regulatory authorities, raising important issues related to security, consumer protection, financial literacy and sustainability.

In many countries, regulators are creating new vehicles and licensing processes that have helped improve the feasibility of innovative models and accelerate the pace of affordability. These changes allow new operators, often in partnership with banks, to enter the space. From Bangladesh to Kenya and from Nigeria to Mexico, financial sector business models use digital solutions to meet customer needs and transform financial affordability.

We believe that there are several key financial inclusion policy trends for 2020:

Digital unique identity solutions start to scale and achieve inclusion impact. New national identification programs have enabled the use of bio metric information to address regulatory issues that have historically been barriers to attracting new customers. The quality of digital identification systems is also crucial, in particular, consumer consent, data security, privacy and portability are needed.
Mobile money is a technology that allows people to receive, store and spend money using a mobile device. With a combination of simplicity, convenience and security, mobile money is becoming an alternative to bank accounts and payments in several emerging and border markets. Mobile money is growing rapidly, and mobile money operators and conveniently located agents are replacing traditional bank branches.
Big Tech companies today have a larger customer base and wider geographical reach than leading financial institutions, and thanks to their reliable customer behavior data, they can increasingly support customer-oriented products and experience and even become financial service providers themselves.
Virtual assets, cryptocurrency, were again in the spotlight after the announcement in June 2019 of the upcoming launch of Facebook Libra and its promise of financial inclusion, which provoked a negative reaction from many quarters, including standard developers, national governments and regulators. However, use cases of virtual assets related to financial affordability began to appear in areas such as remittances and micropayments.

These models are needed to stimulate global inclusive growth.

Why Series B Funding Round is so Important for Tech Startups

Almost every startup that reaches the market will start with a few early funding stages such as pre-seed, seed, and angel investment rounds.

In this article, we’ll explain the essential information that founders need to know about Series B investment.

What is a Series B investment?

A Series B funding round is similar to a Series A round in that it is merely the second round of funding for a business through venture capitals, angel investors, and private equity firms. It can also include crowdfunding and credit investments, though this is less common.

By definition, a Series B round of funding is invested only after a Series A round. This is because companies sometimes need time to achieve steps of expansion in order to fulfill their investor’s expectations. Series B (and Series C, D, E, and so on) rounds provide a structure to a company’s expansion. Each Series round can be dependent on achieving new milestones that eventually lead to the company fulfilling its potential at scale.

Series B rounds are typically valued much higher than Series A rounds as companies should have grown in the meantime. Equity investors are generally more prone to requesting convertible preferred stock in return for Series B investments. What truly sets a Series B round apart from a Series A round, though, is the access to public markets where they can search for further capital.

Why are these rounds important?

The early stage funding rounds that a startup goes through are crucial to the launching of a company as they provide an opportunity for outside investors to invest money in, and help grow a company.

From the outside, the exchange of investment for equity during a Series A or B round is a benchmark of recognition in a company’s potential. For the startup itself, this fundraising is a building block to realizing the ultimate goal of transforming ideas and potential into a legitimate business.