Being backed by a successful venture capital firm can make or break a FinTech startup. So, we asked Karen McCormick, chief investment officer at Beringea, what new ventures must do to pique?investors interest.
The later-stage venture capital firm is relatively agnostic in terms of the companies it invests in. It has previously backed FinTech firms like AccessPay and Dianomi as well as RegTech companies like Exonar and the LegalTech business, Aistemos.
However, no matter what industry the scaleups are catering to, one key thing will always determine if a company gets funding from Beringea or not. ?Whether it’s FinTech or otherwise, for us the most important factor is the management team,McCormick said.
Speaking with FinTech Global as part of our Women Leaders in Finance podcast, McCormick continued, ?Do you just trust these people to give them five or $10m and [think] they will figure it out? Cause the only thing we know when we invest in a business plan is that the business plan is wrong. Things are either going to be better or worse than what’s written down on the piece of paper. And it will probably be a combination of both. But you need a team you feel will be able to figure things out. We’ll be able to navigate things will safeguard your money and spend it wisely. So, I think the management team is by far the most important thing.p>
And because Beringea invests in later-stage startups, the investor also need to trust that these teams can take the business through to exit. ?We don’t do buyouts and we don’t expect to replace the management team during our watch, but we would expect to help them grow the management team,McCormick said. ?If there are people they need to augment along the way or [if there are] other resources they need, we would expect to help out with that.p>
The second thing Bergingea look for is to hear more about the market the startup is operating in. The VC firm will investigate how big it is, if it is growing or shrinking.
The third thing McCormick and her team look at is the product. ??The product is incredibly important and generally if it’s a market we understand, we generally can see the value of the product right away,she said. ?And if we can’t see the value of the product, we’d usually question how relevant it’s going to be for the consumer or the client and also how easy the sale is going to be.p>
And that is part of the reason why she hates when startups fail to actually talk about the product. ?One of the things to make sure you remember to do is show the product,McCormick advised. ?There are times where people [talk] a lot [about] the market and the opportunity and where the gaps are and theoretically how they would solve them, but forget to show us what they’re actually doing. And a lot of ways, opening up a presentation with the same sales pitch you would use for a client gets us to immediately see the business, the opportunity and why it’s valuable.p>
However, it seems that many entrepreneurs forget to showcase their products in this way. ?Sometimes we’ll ask three or four times [for a product demo], either in a pitch or after the pitch,McCormick stated. ?And if, after multiple requests, we still haven’t seen a product demo, it makes us wary.p>
A second thing that frustrates VCs is how entrepreneurs fail to do their research. ?One of the things to think about is that VCs have different histories and backgrounds,McCormick explained. ?It’s worth researching what kinds of businesses, in terms of life stage, this VC invests in and in what sectors they do invest in. Because if you’re pitching somebody cold on a market, they don’t understand, it’s a lot less likely that they’re going to be investing and especially at a good valuation.p>
Comparatively, she adds that if the investor ?understands the market, then you don’t really need to sell them, for half an hour on the market opportunity. It’s a couple minutes on the market and then get to the product.p>
This interview was part of FinTech Global new weekly podcast series called?Women Leaders in Finance.
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