What To Consider When Investing In Technology Start-ups

As startup initiatives increase, one of the most important issues, startup investments, comes to light. Every startup needs investment to implement its project after taking the first step toward the project it wants to develop. At this point, it is vital to receive sufficient investment and manage it correctly.

Your startup needs to receive investment to grow in the industry, make its name known, and turn its projects into reality. Since sectoral developments continue rapidly, care should be taken to make investments at the right time. To find investment and evaluate it at the right time, it is necessary to focus on how startups can find investment.

If you are curious about investing in technology start-ups projects created in the field of technology, you can access detailed information on the subject in this article and more basic information about the concept of startup.

With the guide to getting investment for startups, we will discover together all the details about start-up investment types and how to manage the planning processes suitable for your project.

What Are The Investment Types For Technology Startups?

For startup investment funds, it is first necessary to know the types of investors. Obtaining the investments necessary for the growth of the enterprise begins with the correct transfer of ideas. However, it is necessary to pay attention to transferring the ideas to the right investors.

Since investing in the right project for investors means getting more in return in the future, targeting investors directly interested in the project should be the priority. At this point, we encounter investor types.

There are two types of investors. These are called “Angel” and “Venture Capital” investors. What the two have in common is meeting the financial needs of the enterprise and then making a profit.

Angel investors use their wealth to invest. Additionally, the most important point for angel investors is that they can invest even at the idea stage of the project. Venture capital investors, also called ventures, request to see prototypes. Accordingly, the investments of venture investors are at a higher level compared to others.

Who Is A Technology Startup Investor And How To Find One?

Startup investors, also known as angel investors, are people who provide capital to startups in exchange for shares or debt converted into shares. These investors generally aim to make profits in the long term.

In addition, another goal of angel investors is to keep their knowledge up to date in a certain business field and to mentor new-generation entrepreneurs.

Angel investors greatly support startups by mentoring them, enabling entrepreneurs to benefit from their knowledge and experience, and providing important connections. There are certain criteria to reach angel investors (startup investors) who provide a budget to realize the infrastructure and applications needed by the startup. These can be listed as follows:

By determining your needs, shape your needs for financial and economic support, as well as networking and mentoring, according to future conditions. Research investors suitable for your industry.

Evaluate investors who have previously supported startups close to your target audience or startup. Describe your initiative accurately and develop a prototype where you can indicate the ROI level in your presentations.

Follow events and apps where you can network. Benefit from mentor services and ideas from business development experts by getting professional support. You should stay away from sequential items in your investment presentation.

Most investors want completeness in an investment presentation. You should explain it in paragraphs rather than separate articles. Your investment presentation should not be too long. Long presentations may cause the other person to get bored after a while. It would be ideal to prepare a presentation between 15-35 pages.

What Is The Investment Process For Startups?

To evaluate start-up projects developed in the field of technology as investment projects, it should be determined which investment model is suitable or not.

First, the Pre-Seed Investment process begins. This part, which is the first step in the process of finding a startup investor, refers to the investment made in projects at the idea stage. It is usually done by the entrepreneur’s acquaintances or close circle. This should not be preferred, especially for investors who will be called ventures.

Seed Investment corresponds to the Startup’s first official money. At this stage, it is important to establish a commercial structure for the enterprise. This investment is of great importance so that the startup can financially plan its next steps.

The Series A Investment concept is made to accelerate the growth of the Enterprise. A plan is presented to investors by the venture owners regarding the path to be followed. Based on this plan, the investment amount may increase.

However, Series B Investment aims to ensure that the startup, which has left the development phase behind, is taken to the next level. While the startup has now established its business plan and the investments to be aimed to meet the market demand, Series C Investment is the investment made for the startup to focus on new products and to produce and market them.

Based on these, the time must be determined correctly for opportunities to invest in startup projects in the field of technology. Investments can be made for each stage mentioned.

At the same time, more than one startup can be preferred for investment. One stage may be covered by a different investor and the other stage by a different investor. However, if a planned path is followed from the initial stage to the final C investment, the risk factors of the venture will be eliminated as much as possible.

How Should Startup Investment Planning Be Done?

Startup investment rounds refer to the part of the process of receiving investment for your startup from the beginning to the end. If you need investment to realize your initiative, you should follow this tour correctly and put it into practice.

The first step is to determine the amount you will need for financing. You can also use banks here. For example, if you need one-time financing for your startup, you can meet your need with a commercial credit card or consumer loan.

However, you should remember that you can use such opportunities from the bank only once. If you are receiving investment from a brand or an individual investor, it is necessary to consider that it will be a long-term cooperation, what will happen in the following stages, and how much share will be given to the investor when the project makes a profit.

For this, care should be taken to clearly define the initial phase of the business plan. To convince the investor who will invest, the business plan must be stated in a detailed, descriptive, and comprehensive manner.

Information such as the business model, how much money is needed and why, how profit will be made, and who the potential customers are should be included descriptively.

Especially in the business plan, need items should not be set high just because of the need for investment. For example, if more than the amount required by the project is requested to be used for other purposes, this will create problems for investment continuity.

Considerations In The Startup Investment Process

One of the most important points you need to know about startup investments is that investments are made in two ways. The first of these is that the investor does not want the investment amount given later, but wants a share of the income based on the percentage he determines. In other words, it becomes a partner in your initiative.

The other is to request the investment back at the given amount or higher. Startup support programs mostly involve the subsequent repayment of the investment made. If there is a possibility that the startup will not be able to repay the payment, the most important issue that the startup will pay attention to here is how the payment will be made later.

If a certain percentage of the profit is requested instead of repayment of the investment as in the first step, then a good calculation must be made by the startup before the investment.

For example, let’s assume that the amount needed by the enterprise to produce product A is 5 TL and that it agrees to receive this amount as an investment in partnership with the profit.

If the product has high sales rates after production and marketing, the investor will continue to earn profit from the profit in the following stages, without being involved in any production, marketing, or operation part, as he made his initial investment. Therefore, if an investment through profit sharing is requested, it is recommended that its duration and operational details be prepared in detail.

See you in the next post,

Anil UZUN