"Without a clear investment thesis, you are prone to making emotional decisions. I also learned that preemptive rights are critical because they allow you to double invest in companies that have a higher probability of success."
Alexandru Lupascu is co-founder and CTO of Omnia Protocol, a tech startup that provides secure access to blockchain infrastructure. His technical background is in IT security and applied cryptography, and he has more than 6 years of experience as a security expert and manager, in previous positions.
What does it mean for you 'to invest'?
Investing for me is to contribute to founders' vision & efforts to create value for their customers while putting capital to work.
How long have you been investing in startups and how many companies do you have in your portfolio?
I have started investing in startups almost two years ago and currently have 5 companies in my portfolio.
What lessons have you learned from your early investing experiences?
Without a clear investment thesis, you are prone to making emotional decisions.
I also learned that preemptive rights are critical because they allow you to double invest in companies that have a higher probability of success. Once a company starts showing early signs of success, it's very hard to get in the cap table and bet on the winning horse, unless you have these preemptive rights.
What motivates you to invest in startups?
Both capital gains but also being part of a success story.
What kind of startups are you particularly interested in?
In general, I look for companies that address known and (yet) unrecognized needs in large markets, with technology that does not yet exist – they create it.
I am interested in B2B startups that are transforming existing processes or services by focusing on a cost leadership strategy, backed by strong technology and intellectual property.
I also look for B2C companies that excel undeniably at product differentiation, by transforming what has historically been an expensive and complicated product into a more affordable and accessible product, making it reachable by a much larger demographic.
What do you look for when evaluating a startup - what are the most important aspects to you?
First and foremost I pay attention to what I consider critical: whether the team has a clean track record of ethical behavior, relevant experience in the industry, complementary skills, and if they have their "skin in the game." I also pay attention to equity ownership; I believe that at least 50% of the shares should be held by the team members doing the hard work.
Then I make sure that there is a reasonable valuation and a round size that does not discourage future investors from participating in the next financing stages. I usually prefer startups to already know who will be the investors of the next round, what metrics need to be achieved to secure the next investment, etc. I also make sure that the current investment is aligned to the growth plan towards achieving those metrics.
Last but not least, I pay attention to any form of relevant progress.
Do you think it's important to have a diversified investment portfolio?
A well-known statistical success rate of startups already gives us an indication of whether we should diversify or not. How much diversification we need depends on the risks we are willing to take. I do not rule out a strategy in which strong due diligence compensates for a less diversified portfolio.
Do you have any advice for a startup investor who is still at the beginning of their journey?
Define your own investment thesis that fits your area of expertise and stick to it. This will help you avoid emotional decisions.
What about for a founder applying for funding?
Make sure you have yourself on board and that you have identified potential future / next investors.
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By Bianca Iulia Simion
PublishedOctober 27, 2021
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