Ch.7- Investors for Startup Business

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● The Role of Investors

In the early stage of a startup, the fund mostly comes from their close friends or family. Nonetheless, with the R & D costs and marketing costs going up, it’s pivotal that entrepreneurs locate investors. Hence, in this chapter, we look at investors for startups from various aspects.

Venture FundAfter startups raise capitals from external sources, the managers take charge of seeking a business that shows high potential for growth and invest it. Under ideal conditions, the business can be listed on securities markets, and the startups can sell stakes which they have bought at relatively lower price in the initial period to win high returns on investment.
Angel InvestorsThe funding sources are mainly provided by startups themselves, families, friends, colleagues, and sometimes strangers. Because the funds are raised by investors themselves, for business reasons, they mostly evaluate the company in respect of its earlier profitability prospects and the entrepreneur’s personality, execution, experience, and enthusiasm to foresee the future value and the profitability of the startups in the long term.
Private EquityLimited partners (LP) and general partners (GP) manage the investment funds together and invest the money in target startups.

● The Attitude of Investors

The founder of Facebook, Mark Zuckerberg, once offered Mark Zuckerberg “definitive guide for successful entrepreneurs and founders,” which boosts entrepreneurs’ self-confidence.
Meanwhile, those suggestions are worth hearing while we’re trying to figure out the attitude of investors. Though investor mostly take future value, expected benefits, and other digitalized
commercial profits into the primary consideration, from Mark’s suggestions, we can fathom the characteristics a legit startup should possess from investors’ perspectives.

– Mark Zuckerberg

1. Explore your options
2. Done is better than perfect
3. Pinpoint the problem you’re solving
4. Be consistent on your message
5. Have conviction
6. Set a framework for innovation
7. Build a team for the long-term
8. Hire talented people than you
9. Inspire sense of Purpose
10. No Eureka moment
11. Ideas fully form with work
12. Failure allows testing of ideas

● The Relationship between Investors and Startups
It is said that the relationship between investors and startups is like the one in a couple. In fact, this analogy is accurate. Thus, we think that startups and investors should respect and comprehend the essential differences between them, just like that if a couple want to maintain a sustainable relationship, they need to understand each other in the interaction from encountering, dating, falling in love to getting married. During honeymoon, both of them will put their best foot forward and hide the bad sides of themselves, which is normal. Likewise,
startups do their best to show the advantages over others; investors demonstrate their rich resources, wide social networks, and plentiful choices. They both attempt to look their best.

● How to locate the funding resources?
In this paragraph, we mark each resource in terms of different stages such as seed, angel, Pre-A, A, B…etc for your reference. Still, this information is volatile, should you have any questions or requests, further discussions are demanded.

SeedTypically, investment amounts to 5 million NTD or less in this stage since startup teams are just about to produce prototype, carry out feasibility and reliability assessment.
AngelInvestment ranges from 5 to 25 million NTD in the stage for products are newly launched, which means market validation and capital movement are necessary.
Pre-AInvestment goes up, ranging from 25 to 50 million NTD.
AInvestment in this stage is between 50 million and 100 million NTD, which indicates a higher market share is required given that business models have been validated.
BIn this stage, products have been keeping the company in the black; therefore, developing new clients is desirable. Investment elevates above 100 million NTD.
CThe company is big-scale and prepare for IPO but investment in need depends on company valuation.
DNormally, this stage shows that companies are conducting M&A or IPO and investment needed depends on corporate objectives.
  1. Venture Fund / Angel Investors :
    Startups create pitch decks to attract investors to infuse ventures in certain series. We list the most active venture fund in Taiwan in 2018.

2. Business Incubators:
These companies provide early-stage startups with funding and services including entrepreneurial guidance, legal consultation, accounting services, office space, human resource development, and so on. The following are the most active incubators in Taiwan in 2018.

AAMA Taipei Cradle Program
DIT Startup
Ga r a g e +
H. Spectrum
Social Innovation Lab
Startup Stadium
Taiwan Incubator
TC Incu bator

3. Startup Accelerators :
Startups participate in the competitions with business plans, application forms, etc. to attract investors to invest and provide related resources, such as mentor programs, professional training, and so on. The following are the most active incubators in Taiwan in 2018.

AppWorks Accelerator
BE Accelerator
MOX Mobile Accelerator
Taiwan Accelerator
Taidah Entrepreneurship Center

  Next Chapter: Ch.8- Entrepreneurial resources for foreign entrepreneurs