In the first session, the participants gained an insight into the founding principles and practical case studies of where to invest and why with the aim of acquiring and enhancing the capacities required to manage the process. Anindya Saha, the founder and partner at Nero Ventures, gave a lecture on these principles and where business angels are currently investing. He explained that, out of every 100 business plans that he receives, he studies 10 and eventually invests in just one.
He also made it very clear that there is a big difference between evaluating whether to launch an entrepreneurial venture and evaluating whether to invest. “First and foremost, the entrepreneur has to clarify their own personal objectives and then they have the luxury of being able to define the objective of the company. However, these objectives will be irrelevant for other people, such as the investor”, explained Anindya Saha.
The investor does not evaluate ideas and projects, but rather investments. Therefore, it is better not to give an account of the project but rather explain directly to the investors how they are going to make money. If in doubt, Anindya advised not to invest. You have to be clear about it, but you may make a mistake later. “Sometimes you have to look at a project coldly, as an investor rather than an entrepreneur. There is a fine line between the two, but the two roles have to be clearly separated when it comes to investing”.
Anindya also explained the six criteria of investors. In order of priority, he listed timing, the exit, followed by scalability, the team - “they must inspire confidence, otherwise the venture is not credible”. He finished off the list with the market and the sustainable competitive advantage. Based on these criteria, we have to ask ourselves a lot of questions. For instance, in terms of the market, does it already exist or do we have to create one? Is it identifiable? Are there sales channels in place? With respect to timing, we have to ask ourselves why now or whether it is already too late. Regarding the sustainable competitive advantage, we have to analyse “what competition there will be and, if there is none, that is a bad sign. If you can’t see any competition and there is some, that’s bad. But if you can’t see any and there isn’t any, that’s even worse, because it is probably not such a good idea then. Meanwhile, if we are successful, we have to take into account that they are going to imitate us”.
The business angel also advised investors to diversify, otherwise they are taking a risk. He also explained the ten lies that entrepreneurs tell, including “Our projections are conservative”, “a market research firm told us that our market will be worth X million euros in 2022”, “a big company is going to sign a big purchase order next week or month (which never ends up happening)”, “nobody is doing the same as us” and “we only want to achieve 1% of the market”.
The partner at Nero Ventures emphasized that Spain is an emerging market in terms of business angels, but it still has a long way to go and “comparing it to Silicon Valley is a mistake”.
This EAE program is designed to provide a platform for training and guidance, as well as to share information and experiences that enable participants make comparisons and acquire the capacities required to systemize and manage the investment process effectively. During the session, the participants looked at various case studies of companies to identify and evaluate their real investment opportunities.