Speedinvest recently lead Admix’s $2.1m seed round with support from Suir Valleyand Force over Mass.
We are not “VR Investors” but I will give you some insight into the decision-making and thought processes behind our investment choices and what led us to want to invest in Admix.
In this article, I’ll cover four key areas of the investment process, from research to pitching and next steps, taking you through the process and helping you better understand what investors are looking for.
Learning the Ropes of Investment
Research startup investing
One of the most attractive qualities in a prospective investment is finding out they actually did some research on us. Many startups fail at the first hurdle – they don’t understand the investment company they are approaching or they have no idea how or why start-up investment exists.
This is also good news for you as an emerging startup in the VR space; you are competing with a lot of startups who approach us with a badly researched and scattergun approach to raising money. So if you get the basics right, you can generally get through the first door.
If you need Seed funding, there is no point approaching a Series A fund. Ask yourself, do you know what the stages of startup investment mean and what the investors will expect of you if you take their money?
The Point 9 Startup Funding Napkin is a great simple start to understanding the dynamics that investors are interested in at different funding stages.
Research the fund
What do they actually fund? If they fund fintech companies, bringing a VR game idea to them is going to fail. I personally love computer games, but I can’t fund any – that’s just not how our fund works.
How do they fund? Do you understand their process and what they look for in prospective startups and founder teams?
For example, to offer some advice for a games company trying to raise investment to build games. From an investors point of view, we see games as being very hit and miss and, as an investor, you need a deep understanding of that landscape to have a chance of picking enough potentially profitable projects. At SpeedInvest, we have chosen to build specialist funds and deep knowledge in other areas (Fintech, Industry, Deep Tech and Network Effects).
On the flip side, investors like Suir Valley and Hummingbird would be better for games & AR specific investing. An easy way to find out is to look on their website for what they have invested in before. If you see investment in games, it’s worth exploring; If you see no games investments, it’s probably not going to work.
Speedinvests’s Networks effect team have an online scorecard that you can fill in and see how close you are to what they are looking for. You can use this form to learn what is important to the team when assessing investment opportunities.
Creating a Great Pitch
Build a Killer Deck
It perplexes me how many startups are clueless here. There are so many great examples online that you can use for inspiration!
Your deck needs to:
- Tell a story
- Be backed up by evidence
- Look great stylistically
Creating a narrative and telling a genuinely interesting story are two key principles in making an eye-catching and well-crafted deck and this is imperative to successfully securing investment.
Test your deck extensively before sending it out to VCs. Test the story on people, making sure it makes sense and answers the questions they have. Once the narrative is refined, look to make sure that the information in your deck is substantiated by evidence with data and statistics.
The deck needs to look polished, give your deck to a designer to ensure the presentation matches the high-quality of your written content.
Screwing up a simple twenty page PDF is a big red flag. Spend much more time than you think you need to on getting your story right.
Ask for feedback, and ask nicely
If I reject a startup I will always try to give feedback. Sometimes founders will email me back asking for further feedback – I always try go the extra mile here and will dig deeper to give more feedback.
But remember – how much I am willing to put into helping you depends on how positive I feel about our interactions. If you reply angrily because I rejected you, I am unlikely to spend time to help you further.
You will probably get a lot of rejections and it will hurt. Try not to take it personally, but do try use each one as an opportunity to get feedback and make your pitch better.
“Think about it – if you don’t do your research, can’t tell a story, don’t know what a good project looks like and aren’t interested in feedback – I would be an idiot to invest in you!”
Next steps in Securing Investment
So assuming you got a VC interested with your deck or your pitch, the next step will be a call or a coffee. From a VC perspective this is a first check on whether we will spend more time with you – do you seem sane, can you communicate, do you seem genuine, can you explain your unique advantages to me?
I see my job as a Seed investor to help people who can build products become people who can build a business. Ultimately, we are making an investment in the individual as much as we are investing in the product itself. If you cannot lead a business as well as create great products, it becomes far more difficult to justify investing in you.
The questions we are asking at this stage are:
- Do I want to have a relationship with you for the next 10 years?
- Can you build a business and not just a product?
- When things go wrong, will you be open and trust us to help you fix it?
- Are you open to feedback and advice?
Our First Impressions of Admix
At this stage Sam from Admix did all the right things – he was nice, very knowledgeable about his area of expertise, and got me to the “WOW Moment” of Admix inside two minutes.
The “WOW Moment” is your best weapon – it combines showing your product’s Unique Selling Point with the wonderful future that your product makes possible. It’s generally the part of your product that solves the problem and makes people want to use your product right now!
“You need to understand what your product’s “WOW Moment” is and how you can convey that as quickly as possible”
What Investors Want
Investors love to invest in two things – great people and great traction (numbers or sales).
The earlier the stage (angel, pre-seed, seed), the more the investor needs to rely on the people and the later the stage (series A onwards), the more data they will have to guide their investments.
Investors also tend to avoid some sectors, guided by internal or industry tropes about sectors that are tough to invest in. Two classic examples are ad-tech and hardware.
In our investment in Admix, one of the core objectives I could achieve was to invest in fixing a fundamental problem in XR.
The VR ecosystem has a classic double-sided marketplace network effect problem – there is no reason to buy the hardware until there is enough content to view on it. And content is hard to create in the volume required until developers can make money from their content.
Brian Blau, an Analyst at Gartner, told the BBC in an recent article that much of the hype around virtual reality devices had meant that the technology sometimes failed to live up to people’s expectations – something he believes has impacted slightly sluggish sales of VR hardware.
“The one thing that will change the situation though is quality content,” added Mr Blau.
“Technology ecosystems require a massive amount of content to keep people coming back, and it has to be diverse.”
So looking at Admix, the fact that they were a VR company was not what interested me. What interested me was two founders with expertise, who can build a company as a well as a product and could solve a fundamental problem in a market that is likely to be massive.
VR investors will understand a VR pitch. With other investors, you will need a pitch based on solid principles and building a company that solves worthwhile problems for a big market.