"Diversification is critical as a method of spreading risk. Success is the exception rather than the norm."
Sabin Gîlceavă is Business Angel and a negotiation consultant, with over 25 years of experience in the entrepreneurial field. A founder or co-founder of several companies in the learning sector, Sabin is actively involved in the development of Romanian start-ups as a Business Angel and is a member of TechAngels Romania and EBAN (European Business Angels Network).
What was one of the best or most influential investments you have made so far?
Perhaps surprisingly, I consider the best investment so far not a financial one, but one of time and energy. I am referring here to the ongoing training on how to evaluate startups. The Entrepreneurial Finance course at the Amsterdam Institute of Finance is one such example, or constantly attending TechAngels meetups. Here you can analyze pitches from different startups, learn from others Business Angels and refine your methods of valuing a company.
What do you look for when evaluating a startup - what are the most important aspects for you?
First and foremost, the team; 80% of my decision is influenced by this criterion. I evaluate the drive of the founders, the existing chemistry in the team and with the backers, and the flexibility they show in accepting new ideas and constructive feedback to improve the product/service or business model.
Another important criterion for me is the possibility to replicate the product or service and the degree of internationalization. I do not invest in companies that do not have the potential for rapid replication or that remain in a regional market.
Do you think it is important to have a diversified investment portfolio?
Statistically, 10% of startups (maybe, if the planets align, 20%) manage to prove themselves over the long term. At the opposite pole, about 50% of them fail. the rest are considered "walking deads" - neither do they produce nor can you close them. From here, it seems to me that diversification is critical as a method of spreading risk. Success is the exception rather than the norm.
Do you have any advice for a startup investor who is at the beginning of their journey?
Do not rush into anything and invest heavily and constantly in your own education. This world is very dynamic; it's constantly evolving - you have to keep up with it. The investment is not short-term - it may take ten years to see the results. If you can not afford to wait, look for other ways to diversify your investment.
Opt to invest with others first, either partnered with Business Angels (e.g. TechAngels, TAN, Growceanu) or as investment platforms (e.g. SeedBlink). You can learn a lot from more experienced investors, and they can guide you in the investment process.
But what about for a founder backing a pitch to get funding?
Do not just look for money and don't get greedy.
As a startup, you need much more (besides money): expertise, people who have had similar experiences, an MVP, flexibility and the ability to pivot, as well as a calibration of optimism and patience. Look for a way to cover these needs as well.
Getting funding is important, but that's just the beginning of the journey - this is where the hard work really begins. A high valuation of a startup can comfort the founder, but it does not automatically help the company. Instead, they can make things harder by adding more pressure to produce better results and with the more difficult subsequent re-evaluations the company must undergo.
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By Bianca Iulia Simion
PublishedAugust 30, 2021
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