The art of investing

Lecture by the head of the Mangrove company David Varokyuera for students of the specialization "Management in the field of Internet technologies . "

At a certain stage of development, most Internet projects require material investments from the outside. Attracting such investments is not easy at all: for this, the project organizers need to make investors believe in the success of this project. The company Mangrove Capital Partners (Mangrove) , among successful projects which includes such a successful service as Skype, is one of the investment companies that invest in online projects at the earliest stages of their development. Mangrove manager David Waroquier talked about the art of online investing and the point of view of investors on the development of startup projects.

Mr. Varokyuyer is of particular interest to Russia. Therefore, in his presentation he paid a lot of attention to the discussion of the features of investing in Russian Internet projects.

“Why are we interested in Russian projects? When we first invested in one of the Russian projects, we realized that in your country there are very few companies in the market that are professionally involved in investing in high-tech projects in the initial stages of development. Therefore, we decided that for us, investment in this country will be profitable. Moreover, our decision was also influenced by the territorial and cultural proximity of Russia to Europe. When we analyze Russian Internet companies, we understand that there is a huge Russian-speaking audience, a huge market for Russian Internet projects. And we believe that in the next 10 years a number of large-scale successful projects will be launched in Russia. Of course, Russia has its own specifics. Therefore, we work with our Russian partner - ABRT Venture Fund, образ мышления руководства которого близок к нашему образу мышления, и в котором хорошо понимают особенности российского рынка.

Every month we review a large number of projects and organize a meeting with startups. Personally, I go to Russia for this reason every month. Therefore, if you have a good offer for us, send me a business plan, and we will analyze it. ”

“Now I would like to discuss with the audience several topics related to the development and investment of projects,” Mr. Varokyuyer went on to discuss general issues of managing Internet projects. - “How is a startup created? For each startup organizer, there are many motives and at the same time many obstacles to creating and developing your project. In any case, in this situation your fate is in your hands. You either win or not. The main thing is that you create something that does not exist yet, change the world around you. For example, one of our latest projects is the American company Zink, which produces special paper that allows printing without ink. This project started in June, but every day more and more electronic devices are manufactured for the market that support Zink technology - mobile printers, cameras, cell phones. You, owning a startup project, can also create your own company and have the opportunity to earn a lot of money on this. But on the way you will find many obstacles that may interfere with you. You need to understand that the organization of startups is a very emotional kind of activity: on one day you are on a horse, on the other - in a deep depression. Beginner startups are surrounded by many "no" that will accompany you everywhere, at every turn.

Unlike a large company, startups usually do not have a clear structure. My opinion is that it is very important to create clear rules for the company from the first day of its existence. One of the biggest hurdles is team recruitment. When you recruit your first project team, experience suggests that 25 to 50 percent of all the employees you recruit will be unsuitable for work. And in order to optimize productivity, you will have to dismiss part of the specialists you hired - this is also the responsibility of the project organizer. Otherwise, even one such employee will negatively affect the entire team. If you are planning to organize your startup, you should be aware that it will take a lot of your personal time, your evenings, your weekends. ”

Further, Mr. Varokyuyer went on to describe the vision of startup projects on the part of investors evaluating them.

“We consider many plans in similar subject areas and practically do not see the difference between them. But in your hands to do something that distinguishes your project from other, similar projects.

I would like to tell you how we, investors, see projects on our part. Firstly, I want to tell you, if you heard “no” from the investor once, it does not mean anything. You can begin to doubt the fifth "no." Although it is always important to understand whether this “no” was real, and what it really meant. Many investors will not explain the reasons for the refusal. According to our policy, we always try to explain why we refuse to invest in projects.

We consider the business plan as an onion with which to peel. When you remove this peel called “risks” yourself, you increase the chances that investors will like your project. Of course, we understand that it is impossible to do without risks. In your power only to reduce them. What is included in the “husk” of risks? In the early stages of investment, 60 percent of projects are rejected by us due to the composition of the project team. We look at those who will be involved in the project, evaluate them. Sometimes we can make it a condition to exclude someone from the team. For example, to exclude a wife or husband from a family business if he or she does not have an appropriate professional level position. After we evaluate the market conditions and the strategy of promoting the company on the market. We determine whether the market is able to accept this product. It is very important to choose the right time to enter the market. Here you can both be late and rush. For example, for the Skype project, the time was chosen almost perfectly, since just at that time there was a significant increase in IP-telephony users due to the widespread penetration of computers, the Internet and broadband access. At the same time, the founders of Skype were the main engines: they had a clear vision that they realized every day, analyzed the situation and made the necessary changes to the product. ”

“What is more important for a startup: a team, product or market? What carries the greatest danger: a weak team, a weak product, or a weak market? ” Mr. Warokyuer addressed the audience. After listening to all the options of the audience, he said: “I would answer - the market. If you have the best team and a wonderful product, but the market is not developed, then you will suffer for a long time, trying to develop, but, in the end, your company is doomed. ”

Separately, Mr. Varokyuyer touched on the topic of interaction of startups with large companies.

“Large companies do not want someone new to start occupying significant market shares, and they are buying up successful companies. For statisticians, the opportunity to work and enter into partnership agreements with a large company sometimes seems very attractive. We say: “Never make your company’s success depend on large companies, you must attract your first users and customers yourself ... Do not lose all your energy in dealing with large players and do not forget about the initial priorities of your company.” Of course, I have nothing against big companies, but you should be careful in dealing with them. ”

Further, Mr. Warokyuyer illustrated his idea on the example of Skype, the organizers of which came to them with only a piece of paper and were able to develop in a few years into the largest player in their market. Tips for discussing projects with investors, of course, were useful to the audience.

“How much investment should I ask the investor? In general, this is the question of the middle ground: you can ask for too little or too much. Therefore, before you go to the investor, you must clearly understand how much money you need to implement your project. If you ask a little, you have to ask again. This will not only take away your time and effort that you could spend on developing your business, but may be unsuccessful - the window for issuing money will already be closed. My advice: when you ask us for investment, ask for a little more than what you estimate. However, remember, if you ask for much more than necessary, you may be left without shares of your own company. In the general case, the more you require investments, the less will be your share in the profit from the implemented project if it is successful.

People often ask what a business plan should be like so that we like it. Should it be a huge document of 100 pages of text? I recommend drawing up a business plan so that its volume does not exceed 15-20 pages. Every year we process a huge number of business plans, so you can be rejected only because your business plan is too verbose. But at the same time, of course, you must include in it all the most important things about your project, your vision of the project. ”

In conclusion, Mr. Varokyuyer spoke about the Mangrove company and the experience of the company in Russia.

“Mangrove has been investing in projects in Europe, the USA and Russia. Although the company’s staff consists of only 8 experts, we analyze about 1,000 projects annually. We have been working in the Russian Federation for about 4 years and have learned many lessons about working in the local market. There are a lot of good ideas and ideas. However, in the field of Internet technologies, we see many projects that duplicate Western ones. Therefore, it is important for us to understand what kind of innovation is offered in your project. Often in the business plans of Russian companies there is no description of a specific marketing promotion policy, requirements for the project team, consideration of ways to monetize projects. Another feature of the Russian Internet project market is that companies are sold here too early. For us, projects whose owners want to sell them as quickly as possible are not interested. ”

Mr. Warokyuer also answered a number of questions from the audience.

- What guarantees do you provide to startups in the sense that the idea that they describe in the business plan submitted to you will not be used by you without their knowledge?

“Nothing but our reputation.” We are physically unable to enter into a confidentiality agreement for each business plan received.

- What type of startups are you interested in in Russia?

- We are interested in revolutionary technological projects in the field of software development, the Internet, online media or applications for mobile devices. We are not inclined to make investments in projects in crowded market segments (like social networks) if they do not prove that they have real differences from analogues and innovative potential. In the sphere of our interests, projects related to e-commerce, technologies and applications for the Internet.

- How does the fund interact with a startup after signing a contract?

- We are a company that keeps abreast of what is happening. We are constantly present in the affairs of the company and can discuss the strategy at least every day. At the earlier stages of development, we spend more time than at the stages when the company has already developed enough.