Knowing Startup – investment

by: Nibhapan Poonsatiansup CFP®, independent financial planner, writer and lecturer

At present, capital investment is widely acknowledged. Startup investment is, accordingly, interesting.  This article will give you more idea of startup investment.

Prior to startup investment we should no more about Startup investor, who are: 

  1. Angel Investor -  the independent investor, focusing for the startup value by firstly seeding investment with his/her own money.  The added “Angel” is to identify them as “Angel of Startup”.
    ส่วนใหญ่ Angel Investor จะเป็นบุคคลทั่วไปที่ใช้เงินทุนของตนเอง และมีทุนไม่สูงนัก เมื่อเทียบกับสถาบันการเงิน หรือ Venture Capital

    Mainly, an angel investor is anyone among investors who are not of high capital – comparing to the Venture Capital (VC) 

  2. Venture Capital  (VC) is the joint investment with a company, as which a person who’d like to have his/her own company, without sufficient capital – asking friends, relatives or other investors to jointly invest as shareholders who’ll be entitled for profits sharing based on certain shareholding. 

    Venture Capital is the Private Equity Capital (one of the non-registered investment in the stock market) at the beginning and growing period (outside the stock market).  Generally, it is of stock buying in cash.  Venture Capital is, thus, of rather high risk as well as of high returning. 

    Mainly, the VC investors do not stay with any one company throughout.  After 3-5 years, or 10 years for the longest period, they would then withdraw their shares, since they are expecting for registration in the stock market where share selling would yield a higher return – comparing to the other assets investment.  

We also need to understand the 4 significant round of Startup Investment 

  1. Seed Funding : Startup is firstly gathering capital among family members, or from a reward by the winning idea, as well as from Angel Investor or Vesture Capital, which is not of a big funding.  The trying investment would start in a small market, or to form a company.  There is still no income, or of a small return.  Seed Funding is mainly not over 10 million bahts. 

  2. Series –  A: Startup then tries to launch products or enter a bigger base client, as well as a new market with required improvement.  Any VC joining Startup would analyze if, in the future, good income would be yielded and with apparent company real value.  Usually investment at this step would be at least 1 million US# dollars, or 33 million baht per one project. 

  3. Series – B: Once the market is wider with more products, Startup would then require investment for border-crossing, or inter-regional tradings, as well as for acquiring certain relevant businesses. 

  4. Series – C: Similarly, to Series B, but with more intensive investment, and the success at a certain level, it is the milestone of VC to enter IPO (Internal Public Officering) for the first time.

Since we’ve known the Startup investor, we should then know… what are investors looking from Startup? 

  • Good team working is the main value focused by investors.  Only good ideas wouldn’t be sufficient for them.  Since good-team-working would lead the business to achieve the setup target.  The valuable notice is “Startup investment is the human resource investment”
  • Products (goods and services).  How they are attractive?  How do they solve client’s pain points?  Do you have real interesting customers?  Good outcomes without consumers are of devalued returns. 
  • Future opportunity The market size and growth rate identities further business growing.  Startup needs to convince that it is of a worthwhile boundary to induce more investors.   
  • Business plans being presented are reliable or not, and with actual business operation bases or not, … where are they from?  Excesses given figures wouldn’t be of positive valuation.  Instead, it might affect credibility of startup analysis, since investors could find out various figures and values from all available sources. 
  • Identity upholding Although your business is going well, but if it is easily to copy, investors might then turn away.  It is a big question for startup to initiate differences, while upholding the identity, which either competitors or other people can copy.