Five things I’ve learned
Explain complex technology simply
Tech start-ups tend to deal with innovative technologies that are complicated. Dealing with them on a daily basis, you run the risk of forgetting how difficult it is for outsiders to understand these solutions. But when talking to investors, it pays to keep it simple. Otherwise, they don’t have a fair chance of understanding their investment. That’s bad for both sides: the investors have a hard time assessing the business, and we lose the chance to get meaningful input from them.
Keep valuations steady
You can’t rely on cash flow analysis with small startups. Instead, we use other valuation models such as peer group analysis. But different valuation models can lead to massive changes in value, and investors find it difficult to deal with that – their shares can’t be worth €10m one day and €27m the next. So we try to make sure that valuations stay stable and consistent, even if methodologies change. If investors use different valuation models, we talk to them and find a compromise that satisfies both sides.
Report often – it’s less work
It sounds counterintuitive, but it’s true. The more often all sides report to each other, the quicker and easier the workflow is organized, and everyone becomes familiar with the companies and their technologies. As the understanding grows, investors can give advice and contribute ideas. It’s also a good exercise for startup CEOs. They get used to reporting standards, and preparing for meetings with investors eats up less of their time. They learn to explain themselves better and to focus on the important steps their business needs to take. With our portfolio companies, we sometimes talk on a daily basis, and we have board meetings once a month.
Article from: Reporting
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