How to Make Your Startup Attractive to Investors | Insights From Javier Caruso
Angel investor Javier Caruso breaks down what he looks for in early-stage startups: a working MVP, real traction, and a strong founding team. His pitch deck needs three things: who you are, how you'll actually capture market share, and honest financial projections. Red flags include founders who don't understand their own problem or lack expertise in their space.
Chapters
Um, this is actually a very good question. I like it. So when is the right time to raise funds and for how long of a period? Is it better to get loans before? We've been told that it's best to delay the movement— the moment we ask for funding to the last possible moment. What are your thoughts?
Well, this is a difficult question because the answer is it depends, and I will try to go through a few examples, right? So usually if you have some money and you can bootstrap your idea at the beginning and build an MVP, that is really good because that will demonstrate that you alone, you were able to build the MVP, at least something. If you have at least one or two customers, you know again with the minimum version, that's super good. So when you come to me and you say, hey Javi, you know what, I have this idea, I did something like super quick that is ugly but it works, and you know what, there are 2 or 3 customers that I already have, that demonstrates me that it's a good time just to invest because you are super early, you have an idea, you are able to execute at least something minimum. And you are showing me traction, right? So there will be a good time to start investing.
Hello everyone, welcome to today's event. This is Sanae, your host today for Ask an Investor Anything event. I'm from the marketing team at Founder Institute and I'm very happy to have you here today. Please let us know in the chat from where you're joining today. Uh, I'm— before we start, I'd like to go through some housekeeping rules. This is the Airmeet platform. I don't know if you've been here today with before with us in any of the other events. So basically, um, all your questions have to be in the chat. This is an Ask an Investor Anything, so all the, all the, the event is basically run by you, the audience. So please put all the questions you'd like to ask to our investor today in the chat so that we can put them on the screen for everybody to read. Also, make sure you use the emoji bar if you would like to react to, uh, to react to the, uh, the speaker speaking. Share your LinkedIn in the chat to network, tell us from where you're joining. Please keep talking so that the event is— this is your chance to get insight straight from the investor's perspective. So whether you're fundraising, refining your pitch, or just curious about what investors are looking for, now is your chance to ask. Uh, all right, so, uh, the, the structure is basically we'll kick things off with the few key questions, the— we'll let our investor introduce himself, then we will open for the audience participation. Participation. Feel free to drop the questions in the chat. Don't be shy. This is your opportunity to, to get answers to all your questions related to fundraising. So without any further ado, I would like to introduce our investor, Javier Caruso. Please welcome him to the screen. Hello, Javier.
Hello, everyone. How are you, Sana?
Hi. So Javier is, um, as our angel investor, that he will be happy to answer all your questions. Javier would like to do like a quick introduction about yourself?
Yeah, thank you very much. Well, it's a pleasure for me to be here. Hello everyone, I'm Javier Caruso. I'm from Argentina. Sorry for my strange accent, but you know, the language here is, uh, Spanish. So I am the founder of Webstarted. I founded the company, uh, like 5 years ago, and around 2 and a half years ago I started to also to be financial investors. I started to see companies usually from Latin America that, you know, they look good, so I like the proposals. So I started to do investment here in the region, and I have currently 7 investments into the region. I'm super happy about all of them. They are all alive, so that, that's super good. So I'm here to answer any question that you have.
Cool. Thank you, Javier. So, um, could you tell us like what, what types of startups you typically invest in? And yeah, yeah, go ahead.
Yeah, what I love to invest is companies that usually use technology behind the scenes, and I'm kind of industry agnostic. I do not have any particular industry. I invested into fintech, travel tech, a little bit of health tech, and a lot of other small things. What I like and what is my expertise is technology. So usually if it's a software as a service is what I like, and it could be B2B or B2C, I have no issue. But everything that is technology, because I do not want to only invest money, I also want to invest a bit of my time just to talk with the, with the founders and see how can I help the company, not only with the money but also with advice. So I always try to select companies that I know that I can help in any way.
Cool, thank you, thank you, Javier. Okay, we already have a couple of questions in the audience, so let's start by, I mean, like, let's start by asking questions, taking questions about the pitch decks. So Taking the first question here from Anna. What are the top 3 questions you ask yourself when you review the pitch? Or let me maybe rephrase, how do you review, what makes a good pitch? How do you review your pitch before, like, what are the questions to ask to know it's a good pitch or not?
Yeah, of course, for the pitch deck, usually, you know, it should be around 11 pages, and every one of them are important. But if you ask me for the top 3, one is the team. And this is, uh, this is something that probably on the slide itself it will not tell me anything, but when you are doing the pitch and you are on the team slide, I will try to evaluate like you and your co-founders in order to see what is the background. Because one of the things that today at least every investor will tell you is that the team is super important. It's not only the idea, but it's the execution. And the execution will be done by people, and that people is the team. So the, the first slide that I will say is the team. Again, if you send me the, the slide and I see the team, probably I will just pass it like super fast but if you are doing the pitch, I will evaluate you and maybe ask you about your background and your co-founder background. So that is the first one. The second one is an error that I saw a lot in the past, that usually people say, hey, this is the, the total addressable market, right? And this is the market that we want to, to handle. Like, let's say that the total addressable market is 1 billion, and then in the region that you want to operate is I don't know, 500 million or something like that. And people usually in that slide, they say, oh, if we can only take 1% of these. And that's the speech— if we can only take 1% of the, of these. And usually when I see that, that for me is a super red flag because I want there for you to explain me how are you going to get that 1% because Otherwise, it's just an arbitrary number that you are, you are putting into that slide. So I want to know exactly how are you going to reach to one, to that 1%. And the third one will be the probably the follow-up, that it will be like the projections, right? So you tell me that you are going to take that 1%, and so how is the cash flow that you expect, and what things should happen in order for you to get that cash flow, right? Because maybe you say, oh, we need to invest and build something, and maybe that something will take 3 months, and then after 3 months I can start taking, I don't know, my first customer. So I would like to see the future because, you know, actual investment includes a risk. So when you are reviewing that deck, you want to reduce the risk. So the team is one thing, because again I need to trust the people that I will check. And then is the how— how are you going to get that percentage of the market? Because for that you need to know your competitors and how to actually execute. And then, um, they want that it will explain the cash flow in the future because that will also be tied to the potential revenue that I as an investor can have if I put $25K today in 5 years, how much I will take, right? So that will be that. We know that there are projections, but I will be asking why and how are you going to reach that goal.
Great insights. Thank you, Javier. Uh, let's take a question. Let's take a question from— a follow-up question here from Felix, and she's asking, uh, what if the idea is great but the founders don't have a strong background in that industry? Would that affect your, your decision as an investor?
Yes, yes, that will make me hesitate, right? It's like if I want to do— for example, I do not invest in biotech. Why? Because I have no clue about biotech, and usually everything that is biotech related is super complex and it's something that I do not know and I'm not an expert. So I think of the same with a founder. Let's say that you have an idea because you hear something, so you have identified something that is for the biotech industry, but you do not have a biotech expertise. So that will make me hesitate in order to make the investments, because I will say I'm not sure that you are the only person. And in order to give you advice about that, I can be turned over if you tell me, I, I'm not an expert on this, but I have these advisors, or I have these co-founders that maybe these co-founders, they do not have like 30% of the company, they only have, I don't know, 5 or 10. But you need to have someone on the team that is an expert on that industry, because otherwise for me it's just a good idea. But as I was mentioning before I will be hesitating that you can actually execute because the, the industry— you are going to probably do and find things that, you know, if you know the industry, you will know that you should not do it that way. So it's not a no, but it's a hesitation. And I will ask, okay, which one will be your advisors or your co-founder? So you need to balance that in order to reduce the risk.
That's an interesting point. Let's go to another question from Joanna. Um, this is actually a very good question, I like it. So when is the right time to raise funds and for how long of a period? Is it better to get loans before? We've been told that it's best to delay the movement— the moment we ask for funding to the last possible moment. What are your thoughts?
Well, this is a difficult question because the answer is it depends, and I will try to go through a few examples, right? So usually if you have some money and you can bootstrap your idea at the beginning and build an MVP, that is really good because that will demonstrate that you alone you were able to build the MVP, at least something. If you have at least one or two customers, you know, again, with the minimum version, that's super good. So when you come to me and you say, hey Javi, you know what, I have this idea, I did something like super quick that is ugly but it works, and you know what, there are two or three customers that I already have, that demonstrates me that it's a good time just to invest because You are super early, you have an idea, you are able to execute at least something minimum, and, uh, you are showing me traction, right? So there will be a good time to start investing. The bad thing about that is like you need to have that money in order to build the MVP. So that is for me the ideal time. Try to save some money. Remember, every investment or when you want to build your own company, everything is a risk. So you need to use money that you can actually use for that. But if you build the MVP and then you go and show me, hey, this is what I'm thinking, you know, there is people using it, and you know, it's early, but yeah, for me that would be the, the good time. I can give you a more longer answer, but I think that with that will be the—
yeah, we still have a lot of questions. So guys, for those who are not putting their questions in the chat, uh, go through the Q&A section and upvote your favorite questions so that I can know which ones— what's the—
what are—
what the questions are most wanted by, uh, like, wanted to be answered. So there's an upvote bottom next to, uh, just on the bottom left. Okay, so, um, there's a question, good question here from Randall. So how do VCs and/or investors go about funding, uh, finding startups or entrepreneurs to invest in? Do you actively search online by a certain platform or message boards, or are there enough startup applicants directly to you?
Okay, um, for this I will separate me from the venture capital, right? Because probably they are two, just two separate processes. For me as an angel investor, is because I usually go to events where startups go And I am, you know, friend with many venture capitals here in the region, in particular from Argentina. So I go to the— when everyone, you know, does the demo day or the pitch day or whatever is the name of the venture capital for the demo day, I go there and, you know, I take a look, I hear, and maybe I will ask a few questions. So my main source for startup is showing a demo or a pitch deck or a pitch meeting from another venture capital. The second is the events that I usually attend in person, right? So there is a lot of events here in Argentina basically every month. So from time to time, I usually go and do. And another thing is people will say, hey, you know 'Hey, this person invested in me, so if you want, please contact him.' So from time to time, I will also receive, 'Hey, Javi, a friend of mine recommended you, so I want to give you the pitch.' So those are my main things. And the second one is from a few companies that I'm actually a mentor. So I'm a mentor in Founder Institute, but I'm also a mentor in, I don't know, like 6 other companies. There are a lot. So there are companies that they allow me to invest, and there are companies that they do not allow me to invest. The companies that they do allow me to invest is a good source of candidates. And I particularly, I created a web page that— please don't go because it's ugly, but it's called Web Started Ventures. Actually, I don't know if it's even online. So there I was putting some of the investment. I think that they didn't put the last, last ones. So that is my first thing. But it's different, the answer, if you are a venture capital. So usually venture capital, uh, first venture capital talk to themselves. I don't know if you knew this, but if you go to a venture capital and you do a pitch, and you do a really good pitch, and the venture capital invest in you, even if it's a super small amount, probably that venture capital will also send your pitch deck to other venture capital. Why? Because the venture capital— what's the, the main idea for the venture capital? Well, just to— other venture capital to invest. So if they really like your idea, they are going to also resend that to another venture capital. So there is something that you do not need to do anything. Basically, if you are invested, probably that venture capital will send it to another. And a lot of venture capital in their web page you have a place that you can put your pitch deck and a lot of other information. There are a few companies that they just ask you 3 questions and that's it. There are pages that they ask you like 20 questions. So there are a lot of different ways of doing it.
Those are interesting insights. Thank you, Javier.
Please.
We have a question here from @data. What type of business stage do investors value most? Will investors invest in early, early IDSH product? And how to find investors at this early stage?
Okay, um, you will have different type of investment. The most common one, I think, from my point of view, is the early stage, at least in the region that I'm in. Why? Because the early stage investment are The ones that they are more risky because, you know, they are just starting, so you do not actually know if they are going to have good traction. But if they do well, you can make a lot of money because you invested super early and probably with a lower valuation than all the other investors that they follow up, right? So the, the early stage, there are a lot of companies doing that. Just because the, the, the thing that you can earn with that is super great. So if you have a good team, you have a good idea, and you have a good traction, and you come to me and you say, hey, hey, Javi, oh, this is everything, you know, and I super like the idea, for me it would be the best time to invest. Because I will invest in your company maybe when it's valued at $3.5 million, and I know that in the next round you are going to go for 10, right? So I already more than double my investment. Of course, that is, you know, not direct, but something like that. Um, so the early stage is really good, but you will also later, you will find that there are venture capital that they do not invest in early stage. There are some venture capital firms that they only invest in Series A, for example. Why? Because they do not want to take the risk to invest super early But actually they do not want to be super late. So there are venture capitals that they only invest into, you know, Series A or only invest into pre-seed or even seed. So usually how this goes is you need to start with, with usually with, you know, family and friends just to get some money, build your MVP, go to angel investors. The angel investor will give you some money. You can just improve your MVP and then you start looking for presidency venture capital firms, you are going to find the money will not be so much usually on, on these stages. And if you do really good after that, you can go to a venture capital that is Series A. And usually the companies that invested you into the pre-seed will also put some money in the Series A.
Okay, thank you. Um, we have a question here from Kunal. Uh, most investors in recent times require to see traction. From an angel investor point of view, what is the most important? Team, traction, interest from VCs or other investors, MVP, etc.?
Um, for me, for the angel investor, as I was saying, the team is the most important one because the traction Maybe you do not have it because you have a really good idea but you haven't built your MVP. So for me, the, the team is the more important. And this is something that is not me who is saying this, there are a lot of investors saying this. But if you have a good idea but a bad team, it's about investment, right? Because the idea is great, but if the team cannot execute or you do not trust the team, usually you cannot do anything. But if the team is good and the idea maybe is not so good, you can still tweak the idea because the team will be good. So, you know, this is not my words, they're words from other people, but I really believe in those. So for me, that is more important, and that's why I started saying that the team— the team slide, the slide itself will not tell me anything. But, you know, when, when I talk with you I need to get that feeling that I trust you, that you know what you are telling me, that when I ask you a question you are going to answer super fast because you know what you are talking about. And regarding the traction itself, it's something that reduces the risk, right? If you tell me that you have a super good idea but you have zero traction, there are a lot of super good ideas that they end up in, you know, nowhere basically, right? So If you show me traction, it will make me more secure to invest. And the same, the venture capital— the venture capital will not be so hesitant because you prove that you have at least some market fit, right? That is what you will be looking at these first stages, because a lot of companies, maybe they seem to be a good idea and maybe they are a good idea, but you need to also find the people that were able to pay for that idea in order for you to generate revenue. So that's the thing with traction. Usually a lot of venture capital today, they are asking traction because there are a lot of companies. So if you need to decide from a company that has traction and another company that if they doesn't have attraction, you are going to go for the one with traction.
Yeah, correct. Uh, let's take a question from Christine. From Egypt. So with the AI space becoming increasingly competitive, how do you assess whether a startup has a sustainable competitive advantage?
Okay, interesting one. And for this, I will give you again my personal answer. I, in particular, I do not invest in AI, and let me tell you why. Because AI as a product is something that you will need a ton of money in order to do something that is really good, because you have a ton of competitors outside. And as you can see, you have like on the recent months, you have DeepThink that, you know, came and everyone is talking about DeepThink, and it's something that just spawned from nowhere, let's say. And then Everyone is talking about that. So projects that they are AI-based, I do not invest just for that, because you do not know if tomorrow one of the big competitors will do, oh, you know what, so this is really good, so I will do something about this, and they are going to probably, you know, eat your market. So that's why I do not invest in AI, but I do invest in products that they use AI. I don't know if I'm making myself clear. So If AI is your product, it's something that I usually do not invest, you know, because I, I get the feeling that your competitor will eat you. But if your product is something else that leverages some AI or uses AI, yeah, I like the idea because you are doing what you are going to do best and you are using AI as a tool, not as the product itself. So I hope that I answered the question.
Yeah, great answer. Okay, let's take a question here from Aoud from UK. Wouldn't a bad executed MVP due to lack of funds worse than selling you a good idea?
Wouldn't a bad executed MVP do the lack of funds worse than selling you a good idea? I think that it depends, because when you build the MVP in particular, you are not— sorry, I think, I think that I do not have the English word that for what I want to say. Sorry, but let's say you are not going to be born and everyone will know you for a bad product. Usually the MVP is the minimum that you can build, and you are going to probably do not invest a lot of money into publicity, right, into Google Ads or anything like that, because you have something small, and the idea is just to see if you have the market outside. So if you build it and it's not so good, let's say, you are going to lose maybe, I don't know, 10, 12, 100 clients, but probably your addressable market is far more than that. So doing the MVP for me is super important today. And, and this answer is different if you ask probably a few years ago, but in pandemic in particular, in 2020 or so, a lot of people raised a lot of money just with the idea. You presented a presentation and people were investing in your idea to build the MVP. Okay, but today, at least the last 3 or 4 years— yeah, 3 years— I think at venture capital they started to be more close and to take less risk. So they are not investing in, in, in companies that they do not have the, the MVP. And again, you should never build a bad MVP. You should do your best with the funds that you have. And maybe don't call it an MVP if you still do not feel that it's super good. Call it maybe a proof of concept or something like that, that is even earlier than the MVP. And that way you can have a little bit of both.
Okay, building on that question, there's another question about MVP here from Moro from United States. So what types of MVPs do you find interesting, like clickable apps, videos? What makes an MVP a good— a good— an MVP a good MVP?
Okay, for me, when you are going through the presentation, you are trying to pitch me a problem and a solution, right? So it's super— and this is important— but a lot of time the solution doesn't fit the problem and is even The— what I'm trying to say is like, there are times that companies are presenting a solution to a problem that doesn't exist or that they just made up, right? So you say, hey, I want to build this because I like it, and then you are trying to find a problem for the solution that you are building, right? So that's the thing that they want to get rid of. When I see the MVP, I want to see that the MVP is something that works and is the solution of the problem. If you show me a working MVP, meaning it's something that you maybe hire a full-stack developer, assuming that your solution is a technical one. You hire a full-stack developer and you have something that is on the web that I can actually browse and use, that's the best thing that you can do because Otherwise, if you show me a video or if you show me another tool, it's just, you know, not the MVP. It's probably the prototype of what you want to build. And usually that, you know, is something that, yes, but I'm not so sure. So for me, the MVP will be something that I can actually use. That is what I call the MVP. All the other things, they are kind of, you know, prototype ideas. I want to show you how this is. What will be the user experience, but it's not the, the actual MVP because people cannot actually use and consume your product, right? So for me, when you call the MVP, try to see something that is, is working, otherwise call it prototype.
Okay, interesting. Um, let's take a question here from Nick from Houston. So how would you recommend structuring the company to make it most attractive to investors? And at what stage do investors typically find it most compelling? Is it in the early traction with a couple of customers, or maybe 6 to 12 months of execution and growth?
Okay, um, this, you know, this answer is, is very broad also. Usually with the company, it will depend on what you are trying to solve, because there are some problems that they will need a really big solution. So for those ones, you need probably a, a super good team of developers. So that would be probably big companies, and in which if you want to bootstrap, you are going to use a lot of money because, you know, there is a lot of people that you will need to hire. Usually for super early stage, you are talking with a founder, uh, maybe with 2 or 3 co-founders You can be a solo founder, but usually when there are 2 or 3, people feel more comfortable because, you know, it's not only one person that I'm investing. I'm investing into this team of 3 people. So let's say that you have a team of 3 co-founders, and then you have maybe 2 or 3 developers working for you. So a team of 5, 6, that would be something that is interesting. Otherwise, you are going to be, as I was mentioned, not the MVP. You will be— I will be just investing in an idea, and you need to work a lot more to convince me for, for that idea. And another thing that you can do also regarding the team is put the advisors, right? So maybe you do not want to give some percentage of the company, but you have some people that is more well-known than you in, in, in, in the industry. And you can say, you can talk with them and see if they would like to be advisors. And maybe you can give them 0.5%, 1%, or something like that of your company. But that will also, you know, relaxes me a lot because it's not only these 3 guys, it's also advisor. And I know this person, or I can talk with this person about the idea or the execution itself.
Okay, so let's take a question here from Hall. Um, I'm starting in the US and I have been amused by how many Europe-based funds are reaching out to invest in us. How should we think about investors outside of our country? And this actually is not only a US case. I think a lot of people from other countries, they get investment reaching out from different regions. So I guess it's a good question to answer.
Oh yeah, okay. Um, I'm not a legal advisor, right? So I, I cannot speak for the legality or not of investment because that will depend on which country is invested— you invest in you and which country and the rule. So I'm not, uh, you know, an advisor about any of that. But for me, I like that because let's say that you are from US So in the US, you probably will have a super addressable market. But then if a company from Europe want to invest in you, that's good, because how do you reach to a company in Europe? Probably is because you did something good, right? So that company noticed you and wants to at least have a talk with you. And the second is, if they invest in you, you are going to probably address another market earlier than you expected, right? Because if you only receive money from the US, probably they're going to push you to open the market first in the US. But if you have another investor from Europe, the good thing is like the investors, in particular the venture capital, when they invest in you, they will not only give you money, they will give you all their contacts, right? So if they invest in you they are going to say, oh, if you want to do this, talk with this person. You have a doubt about, you know, how this should be, you know, regulated in Spain or France or whatever, talk with this lawyer because he's the expert. So I think that if you receive investment from other countries, you can have this diversity of things that it will help you to grow faster. The only issue will be like if you want to address the US market and a company from Europe is pushing you to open your market in Europe. Maybe, you know, at that point, super early, divide and conquer is not the best because probably at the beginning you need to be more focused. So I will take that call and explain my plan, right? So, hey, I'm not planning to open Europe right now because I need to finish this first in the US and maybe in, I don't know, 8 months or next year, I would like to open there. So be clear about, but at least take the call because it's really good that you are being noticed in, you know, another places. Okay.
Thanks, Javier. I just want to let everyone that I know there are a lot of good questions in the Q&A, but I'm trying to select the questions that can benefit everyone. Some of these questions are pretty niche. So maybe if, if your question doesn't get showcased in the live session, you can ask Javier later on in the networking lounge, because after the main session, we have a networking lounge. Javier will be there. You can ask him all your specific questions. Okay. Let's take, okay, let's take a question here from Christine. So what are the most common exit opportunities for fintech startups? Or let's You can answer about startups in general to not make it a specific question. And what makes a startup more likely to be acquired or go public?
Well, this depends a lot on the market that you are going after, right? So if you have a fintech, in this particular case, you are going to probably be in some kind of, you know, niche. You are going to be working with loans, you will be working with crypto, you will be working you know, with credit cards. So you're trying to, um, work on a solution for a particular problem. If your solution is already done by another company, what you will be looking is like try to make some noise in order to start acquiring, um, you know, the— your company's clients, let's say. In order to be noticed, and maybe that company will, will buy you, right? Because if another company is super big and you are just stepping into their shoes, they are going to probably buy you at that point. And I don't know what was the— sorry, the second part of the question.
What makes a startup go public or get acquired, you think?
Oh, uh, yeah, regarding the go public, in— I never transition over that. So the majority of the companies that I invest in, they keep private, or they will be brought by, you know, other venture capital. So I'm not an expert on going public, but I think that that is really good because in order to go public, you need to pass through a process that is super rigorous with all, you know, with, with every dollar, euro, or whatever that you have in your company. So that is super regulated. So if you go public, that means that you have a really good traction, that you are generating a lot of revenue, because you're not going to open up a company to the public if it's not generated. There are exceptions, but, you know, so going public, I think that is really good. But usually, if you are in a super early stage, my point will be don't think about going to public. Maybe A few investors may ask you, you know, the exit strategy, but usually an investor will be expecting for the company to be bought by another bigger company. So when I'm looking at the slide, I will be, you know, checking out your competitors. And usually the exit strategy is not something that they usually see, but, you know, um, investor might ask, yeah, what do you think, what will be your exit strategy? Because Maybe if you tell me, no, I want to work on this my whole life, I would say, okay, if you work on this your whole life and I put a lot of money today, when I'm going to receive, you know, uh, some revenue for this? Because if you are not going to sell the company or you are not going to be public, how I'm going to receive my money? So just take that into account when you speak with investors.
Interesting. Okay, we have a question here. So for a pre-seed startup, how do you approach valuation? Which valuation methodology do you trust most and why?
Oof, this is a tough one because, you know, the valuation at the beginning, it can depend in a ton of different things, but usually, usually for me, in my experience, it's an arbitrary number, right? So you say, hey Javi, I want you to invest in my company, I want from you $25,000, $50,000, and you know, I will put my valuation at $1 million. It's not that your company is valued at $1 million today because no one is going to buy you with the product that you have at $1 million. But at the same time, if you are a pre-seed company, you cannot for $25K or $50K give me 30% of, you know, the company, because that is bad for you and for me. If you give me 30%, that means that on the pre-seed round or on the seed round, you know, you do not have so much to leverage in order to percentage to give. So be super cautious about the percentage that you give to, to, to companies and investors, because, uh, yeah, that would be, you know, bad. Usually the companies appreciate— what I will say is, uh, try to make a number that is good. And this is super different company from the US, that company from Europe, of companies from Latin America. Usually companies in Latin America, they are valued like super low, like $1 million, $2, $3 million when you start. Again, it doesn't mean that you are going to sell your company for that, please. And companies in the US, usually when they have an MVP, usually the numbers that they see are, you know, bigger, like $10, $12 million or something like that. Again, depends on a ton of factors. So I'm trying to give the, the answer with the majority of the things that I, I see on the market. My, my point would be that, like, do not value your company super high and do not value your company super low, because both of them will give you problems with investors or when you are trying to go to the next round. And you can also ask for advice to some angel investors or even venture capital, because There are a few venture capitals, all this in Latin America, that they say, hey, if you apply for me, like if you want us to be your investor, we are going to value your company at $1 million and we are going to put you $100,000. And you do not have leverage on that, right? So it doesn't matter if you think that your company is valued $10 million, that venture capital I think Y Combinator actually does this, so they have like a value that I don't know if 1.5 million or something like that, and they give you a fixed amount. So they want to keep also this percentage of your company. So try to look for advice, and it will depend a lot if you have traction or not with the valuation of the company.
Interesting insights. Thank you, Javier, for your answer. Um, Uh, okay, so let's take a question here from Dara. Do you invest in solo founders, and how to overcome the hurdle if investors do not want solo founders?
Okay, I, I never invest into solo— oh no, actually I invest in, in a solo founder, but because the investment, it was super low and the risk was also super low because he already had an MVP. But yeah, if you go to a venture capital, think about this, it's like you are the only person that will receive the money and the only person that will take decision. Of course that the venture capital will want to join and to advise you, but you are going to have the majority. So if you have some idea that is super crazy idea, there is no one for you to— or no one that he will tell you no, or at least to discuss. So That is the risk with the solo owner. So, and again, you need to be an expert on the industry that you are working on because otherwise, you know, as we were explaining before, if you are not an expert, yeah, I can't invest in you. So having this variety, it helps a lot. And usually what we see is if your solution is technical, like a software as a service, Usually you will have a co-founder that is like the CEO or the one that knows the industry, but you will also have another co-founder that is the technical person, right? So probably the technical person does— is not an expert on the industry, and the people— and the founder that is an expert on the industry is not a super technical person. So that's the variety that you would like to show. If you are already a solo founder and you are thinking into, you know, do not hire, um, a co-founder, I will at least talk about that on the presentation, right? So I don't know if I'm going to put a slide, but in some part when you are talking about this, or even if you have the team slide, that it will be you on the top and maybe your developers explain that you are a solo founder and why you are a solo founder, right? Because, hey, I didn't found— because it's always a reason about why. I'm a solo founder, I have my company, and I'm a solo founder. So don't get me wrong, I love to be a solo founder. But if you go to venture capital, yeah, they are going to ask you about why, because they do not want to put all the money depending on only one person.
Okay, um, let's take a question here. Based on your experience, what KPIs are the most important, like example, community-driven business, in a community-driven business?
Oh, in the—
okay, or, or we can, we can answer in general. I mean, like, what are the KPIs that investors like to look to when they're making their decisions? What, what do they like to see as KPIs?
No, I think that the, the fees— well, depends a lot on if you have the MVP or not and if you have some traction. But if you have some traction, the most important one will be, you know, the revenue that you are having right now. But if you buy and sell product, it will be, you know, the, the, the percentage of the cut that you, you have in, in every of your sales. So for me, it depends a lot in, in the, in your particular solution, right? So I do not have a generic answer, I think. But of course, if, if you have a community behind, it would be great. Actually, one of the companies that I invested, I invested just because they have a community of 2 million people and they were building, you know, the software for that community. And when I saw the software, it was something that they super agree on what they were building. So that's why I invested, because they had a really good community, but I invested super early stage. So at that point, the KPI that I was most interested, it was not sales in particular. It was like, hey, but you have a community, and you're— and I think that your solution is good for your community. So I invested into that company. But if you tell me about, you know, if you do, let's say, I don't know, travel, or if you do fintech and you have something, yeah, I will see How much are you— your projections are going, and usually it will be money, right? So how much revenue do you think that you are going to have with the percentage that you are taking? Cool.
Um, let's take another question here from, um, Roman. Is there a point in trying to fundraise with a couple of free beta customers, or getting a few paying customers first is preferable? The context— he's giving the context here. They're a team of two first-time founders, uh, B2B SaaS product, currently developing an MVP on their own.
Okay, for me, uh, I, I don't know, the both things are good. Having a free customer, I will not— I'm not sure if I will say, you know, a free forever customer. I will say, hey, this customer will be free for the first year or the first two years. Because having a customer that likes your product will give you a ton of feedback, and that is what the MVP is for, right? So you are proving that your idea works, but also you have a really good and clear channel of communication with the one using the product, right? So if you ask me about, hey, it's good to have a free customer, my answer will be yes, it's good because you are going to have a ton of feedback, and probably that customer we'll love to give you feedback about that. And the— with the same point, be careful to do not only hear that customer, because all you will— we will be building something that is super custom for that customer. So everything that you give us feedback, try to filter and think, hey, this is just for this client, or it will be for, you know, the, the addressable market that I'm trying to find. So Always try to evaluate that. I did a software as a service and I actually opened it to the public for free, at least for, I think that it was for the first year. I love the experience because I was having talks with my customers and they were giving me feedback about the product, so it was super good. Of course, that you need to limit this, you cannot say probably everyone, Of course that you can say, hey, register and you are going to have 3 months free, but that's not the same here. I think in this case you will be talking about, hey, I have an MVP and I do not want to charge these 3 clients. So for me it's super good. You— and it would be good again if you arrange with them that, you know, they will not pay money but they will pay with feedback because that's the thing that you can take, right? So you take the feedback, you filter and then you see if you build the product or not. And probably do not take that free forever. It will be free for 1 year because you will be the founding customer or something like that, and then they need to start to pay after a year.
Okay, so, um, let's take a question here from Anna. She's asking, what is a no-go for investing for you? I mean, like, what are the biggest red flags? I know you might not mention this, like, before, like, in some of the answers, but if you could list them now, what are the— I don't know— the things that you can directly say no to when investing in startups?
Yeah, there are a lot, so I will try to be quick, but one is when you have a problem for a solution. Let me, let me repeat. When you have a problem for the solution, that means that you think of the solution first and then you find a problem, right? So if the problem that you are showing to me is like, but this is not a problem, or this is so niche that probably no one will use it, then your solution doesn't match the problem. And that is probably the third, right? So you have the presentation, the problem, the solution, At that point I can say no, I do not like you because you are showing me something that, yeah, the solution is shiny, but it has nothing to do with the problem that you are presenting. So it's try— it's like you are trying to find a reason for this product to exist, right? So that is a, a super red flag, maybe because you didn't explain the problem so good, so I can be tolerant about that. But otherwise, I will say, no, I actually do not like this because it feels false. So if you are trying to build something because you like, not because there is a need. And again, that will be the third slide of your presentation. The other one will be the team. If I ask you something and you hesitate or you do not know exactly what you are talking about, that was the team slide, that is something that it will be totally a red flag for me. Yeah, I do not feel that you have— that you are the right person or the right team in order to be this. So maybe the problem is real, the solution is super good, but the feeling that I get from you with your answers about what you say to me, I don't like it. You know, it's like something like, I, I think that you are giving me— and this is actually a really good case when you give like super generic answer to specific questions, right? So if I ask you something specific and you ask— you reply to me something generic, ah, there is some noise here because why you didn't ask me with the detail that I asked? So that is another super red flag for me. And the other one, I think I already mentioned, but yeah, the theme will be if you do not have advisors, you are not an expert on, on this industry in particular, if you do not have an exit strategy I can forgive because something we can— so we have time for that. But yeah, I think those are the two main ones.
Great. So let's take some of the specific questions, some industry-specific questions here. I don't know, Javier, if you have invested in fintech before.
Yes, I invested in fintech.
There are some questions there. So let's take the first one, the one that has like the biggest number of upvotes here. So what key market trends and indicators make a fintech startup an attractive early-stage investment?
For me, I think, yeah, I will probably— my answer will be super narrow to Latin America. And so probably, you know, this is not because I do not have a super great view about Europe or maybe even US. I work with fintech in Latin America, but in Latin America there is a lot of, um, restrictions or things that you cannot do or credit that you cannot access in particular. So in Latin America, a lot of fintech companies that they try to address that, they have been a super huge grow, like super fast, because I think that there is a really good demand for that. Right? So for those in particular, there is a super high demand. So if you do something good related with that, you have a lot of competitors. But actually, if you do something that is slightly different, it's super fast just to get more customers. Because usually the customers, for what I notice, they do not marry with one solution, right? So, oh yeah, I'm using this, but if I see that this other thing is better and shiny. And, oh no, you know, this is fintech, so there is money, so it should be trust. But if I trust or I see that, yeah, this can work, I will go there.
Okay, building on that, um, what are the revenue models in fintech— example, transaction fees, subscription, lending, SaaS— are most appealing from an investor's perspective?
I think that this will depend a lot of in the investor. The, the transaction fee, for example, is something that is super common, right? So your user will be do something and you take a cut. But for me, it will be if the percentage is right, right? Because there is a lot of companies that they are asking a, a ton of percentage fee for that transaction. And in that case, it's like me as a user— I'm sorry, as an investor, I will say, hey, if I'm a user on this platform, do I like that percentage, yes or no? So I think that you should be looking at the competitors about what they do, because in fintech in particular, the transaction fee is super common, right? So you do something that basically you will take a cut, but the subscription is also another thing that a lot of companies are doing because they are going to say, hey, but if you pay $5 a month, you will access to a lower transaction fee, right? And you will get probably 2 transactions free per month. So I think that it will depend a lot of what, what you are doing in particular. And about lending, I think that there is a lot of risk involved into lending. So when I invested into fintech, I did invest in companies doing, um, that, at least not at the time or the point that I invested in, because that is a risky business, I think. So probably when you start with that, uh, I will say, yeah, this is super difficult, at least for an angel investor. And in another, um, another part of the answer is, is you are in fintech. I see that there are a lot of companies today that they are specific, like venture capital or even lenders for lender companies. So what do I mean? If you want to do a fintech and you need to do lending, you will need money for that. And there are companies that they are not actually venture capital, they are companies that they will lend you the money to do the lending, right? So you need to also investigate that. So if you show me something, I will ask you, okay, but how much money do you need for that? You know, because I want to get a really good sense, or how are you going to get this money? Because lending in particular for me has a lot of risk involved.
Okay, so we still have like a couple of minutes. I'm just gonna end by asking you questions that are related to you, Javier, as an investor. I'm just gonna read them now because there are 3 or 4 questions that are asking about your investments. So someone is asking if you're— are you interested in investing in North African startups?
Um, right now I do not know what to tell. For me, the startup is the startup, whatever it is. So I will need to see in particular the solution, and it's not a place that I went, so I'm not an expert. So it's something that is super niche, I will say no. But it's something generic that you can expand, I would say yeah, totally open to, to that.
Okay, another one is asking what is the range of your average investments in terms of numbers?
Yeah, for me, you know, this is Latin America, so my, my numbers are not super high as you would expect in the US. For me it's $25K, so that's the number that I feel comfortable. But if you are looking for angel investors in US, Usually you are going to see like 50, 100, so that's more normal there.
Okay, so there are other questions about the check sizes. So yeah, okay, so I think we should close up with this, the main session. Thank you, Javier, so much, uh, for all the great answers and the great insights. Everyone, you will receive a recording for this event, so whether you're here or you, you attended it just in the beginning, you will receive the full recording as long as you're interested at the main link our team will share in the chat right now. Uh, so, uh, thank you everyone. Thank you, Javier. Do you have any closing sentences, any advice you'd like to give to early-stage founders?
I think, uh, you know, being a founder is a risk because you need to invest a lot of money and time, but if you can do it, I love it. Keep doing it even if you you know, see the wall, try to break it, because if you have a really good idea, you just need to find your partner. And I already put on the chat my personal LinkedIn and a post that I just did if you want to give it a like. So nothing, thank you very much everyone. Yeah, thanks to you, Sana, for the coordination.
So will you be able to stay a couple of minutes for the networking? Great. So everyone Javier will be at his table. You will find the table with his name and picture on it. Join the table if you have— I've seen like a lot of specific industry-specific— some people are asking about their companies specifically, so we, we couldn't like put that on the main sessions because some benefit. So feel free to ask Javier, feel free to connect with him, uh, and thank you for being here today. We have more, more events like this one, more AMAs like coming up every month, every week, weeks. So make sure you, you have a— you, uh, you, you're on our landing page to see all our updates there. So have a good— have a great, uh, night or day, whatever you are, and keep working.
Thank you.
