The 3 key criteria for investment: A large addressable market, a differentiated idea and a convincing team

There is a time when startups have to step out of bootstrapping and look for investors. Convincing them that you are the real deal is not easy. Most of the times you have a few seconds at the pitching event to make the first impression. If you are successful, more detailed talks with interested investors will follow, eventually leading to an investment.

One of your possibilities to meet and convince investors is during the SICTIC Investor Day.  The Swiss ICT Investor Club (SICTIC) is a Business Angel Club with about 45 members, who run the SICTIC Investor Day where eight start-ups get the chance for a 90 seconds pitch. The audience then chooses four startups that can pitch for eight minutes, followed by a get-together and drinks.

Last year, the startup Faveeo pitched at a SICTIC Investor Day. Faveeo applies artificial intelligence to social marketing. They were able to convince investors with their pitch and they had an investment after just a few weeks – quite unusual since investment rounds may take up to several months. What made them so successful?

I met up with Bolko Hohaus, one of the investors from Faveoo and Board Member of SICTIC, and talked about Faveeo’s success story.

FS: What made Faveeo stand out during the pitching session?

Bolko: I am a strong believer that a great CEO needs to deliver a clear and convincing pitch for her or his company. Alexis Dufresne did so for Faveeo. I very much like those 90 seconds pitches. Surprisingly many start-ups fail with that pitch. Why should I invest if the CEO can't explain what he is up to?

FS: In what stage of development has Faveeo been when you met them? In general, can there be a stage that is too early to invest for early-stage startups?

Bolko: Faveeo is still early stage, in the seed phase but they have a product and customers. This is exactly the time when SICTIC can help to expose startups to investors. Too early for VCs but still in the sweet spot to get money from business angels. Typical  investments by SICTIC members were in the range of 200'000 CHF to 1.5 mn CHF.

FS: As an investor, what were the three most important criteria for you to invest in them?

Bolko: For me, the three key criteria to invest are a large addressable market, a differentiated idea and very important, a convincing team.

FS: What are the major challenges Faveeo is facing? How do you support them?

Bolko: Faveeo needs to manage its growth properly. Catering to enterprise clients implies longer sales cycles and this changes the cash flow profile. However, I am amazed how great the customer feedback is. We had CIOs who immediately rushed to order the product once it was shown to them. Hence, the key challenge is now to let the world know that Faveeo exists. We can help startups to spread the word and open doors.

FS: How did the SICTIC event contribute to this meeting/deal?

Bolko: In the case of Faveeo, the event helped them to not only raise one third of their latest capital round of 1.2 mn CHF in a short period but also made a larger audience aware of the company. This is helpful for their next raise if they indeed deliver the growth they promised investors.

FS: If you could give one major advice to startups pitching at SICTIC, what would it be?

Bolko: Keep it simple and clear. Ask yourself why would anybody new to the story invest exactly in your company. Test your pitch again and again.

The next SICTIC event will be on June 22^nd at the Impact Zürich (Viadukt). Early-stage ICT startups can still apply online by latest May 15^th (24:00).