We want a resilient team because we want to invest in you rather than your ideas
Looking at the team is one of the most important factors to consider when determining whether or not to invest in a company and the classic sayings like “invest in people rather than ideas” is something we strongly believe still holds true today. A resilient team with the knowledge to understand legal, technical and commercial areas without constantly resorting to outsourced expensive consultants is something that can save the company money early on and bolster the strength and expertise of a team. Additionally, a team with a strong track record and a founder who has already exited a company provides assurance to investors that the team knows what they are doing and will not misuse money. Red flags include the founder not working full-time, or not knowing important financial details as this can cause us to question their commitment and devotion to the company.
For you to present a solid business model so we get what you’re about
The business model is another critical aspect in understanding the company and what exactly it plans to do with capital raised. It is a reason for concern if the start-up is not clear on where they are going to allocate the newly-acquired capital or what their burn rate is before they begin breaking-even or generating revenue.
The business model should also lay out:
- future plans as the company grows
- insight on if additional capital is ever necessary
- the largest risks and competitors in the space
- and a final exit strategy.
Oversight by founders on these key points can be an early sign that they are not ready for an investment and need to put more time into research.
We want to know you’ll grow in the market
We look for companies that are poised to take a significant role in growing and large markets, and by closely following macroeconomic and microeconomic trends we are able to position ourselves to parallel our investing with the growth of these various markets. Investing in niche, saturated or stagnant markets is not appealing.
One such example is the recent emergence of the peer-to-peer lending market. We see this as an area of enormous growth and have already seen the market grow at 70 per cent per annum. Markets like this – ones that are growing and also create high barriers to entry through technology or government regulation are appealing if companies have gained market traction or regulatory approval. This empowers companies to defend their position against future competition regardless of their size.
Reece Chowdhry is founding partner of RLC Ventures.