From Idea to Start-Up: The Secret

Mackinac Bridge – Mackinac Bridge History and Facts (Photo credit: Odalaigh)

Speaking with one of my best colleagues and friend Marco Iusi, about the “startup ecosystem“, I had the pleasure to understand some important concepts to keep in mind if we want to do something in this direction. The results of this kind of discussion are summarized into the following enlightening interview.

1) As Business Development Coordinator for Bridges to Italy, what are the most common errors and weaknesses of wannabe Entrepreneur while submitting their idea to investor?

One of the most common mistakes entrepreneurs make when presenting their idea to potential investors has to do with the ”psychological” component of the “idea packaging”. Often, they get so taken by their “creation” that they forget one of the basic rules of the game: objectivity. Inexperienced young entrepreneurs, within the context of a start-up, tend to believe that their product or service is the “best”, and by doing so, they loose sight of what it really count when dealing with a potential investor: does the product (or service) have everything it takes to be successful in the market of reference, at this point in time?… and above all, what would it be the real return to the investor and for how long ? Lack of objectivity (psychological factor) and lack of understanding of the investors’ decision making process leads the inexperienced entrepreneur to “package” the message in a very subjective and inefficient way (quite often their business plans are inadequate). At BTI, we provide direction to these entrepreneurs first on how to determine the real value of their proposition, and then on what type of investor (Angel, private equity, venture capital, strategic buyer, etc) may be interested in their product or service. Along this process, we help them to figure out the best way to present the idea so that it may get the genuine attention of the potential investor. Bridging the gap between perceived value of the seller (in this case the entrepreneur) and the buyer (the potential investor), this is what we do.

2) What are the key features that must have a project to be funded?

It depends on the “value world” of reference….in other words, it depends on what is being funded and by whom. Let me explain. In the private capital market the expected rate of return vary from an average of 6% if funded by a bank loan to a 30% if funded by financial buyers (angels, private equities, venture capital, etc…). Within this range there are a variety of other funding opportunities such as mezzanine funding and strategic buyers. The key features of a project that will enhance the possibility to be funded depends on both the motivation on which is based the decision to look for funding and the type of investor it will be more likely interested. For example, financial buyers expect consistent and sizeable cash-flow, solid management, and tremendous short term growth prospects, whereas a strategic buyer may look for new technology, scaling of overheads, new market access, and higher value in the long run. So, depending on these factors, the ranking of the key features may vary, even though, generally speaking, a reliable team, future cash flow, growth prospects, and adequate return on investment (according to the type of potential investors), are the principal key features.

3) From idea to start-up, what is the secret?

A lot of hard work. Do not expect anyone to do the job for you. Having a good idea is not even 10% of the process. The world is FULL of good ideas. Bringing them to fruition requires time, commitment, good advice and money. In order to get good advice and money, the entrepreneur needs to put a LOT of time and commitment into the project. Investors and advisors will not touch an idea, even if it is great, if they do not believe the entrepreneur has the qualities to make it succeed. Usually investors will tell you: “We bet on the jockey not on the horse”.

Therefore more than a secret is a known fact: entrepreneurship and hard work. Many ideas don’t make it to the market because often who comes out with the “idea” does not have those skills to take it to the next step. You need to be a risk taker and you need to surround yourself with people who know what it takes to be successful in the market place, where the mechanisms are very different from those of a “lab”. Careful and adequate planning and commitment are essential elements to make sure the product (or service) may have a chance in the market place, and consequently, a chance to be funded by potential investors.

4) Would you like to tell us about a “Bridges to Italy” successful case?

As a first and very important step, we organize one or more meetings with the startup where we assess their current product and strategy. Once the strategy is assessed we advise a course of action and we monitor and assist its performance. Bridges to Italy has facilitated market entry, strategic partnerships and investments in several companies. I remember our first big challenge which turned into a success story: a startup came to us almost bankrupt, they had a very interesting and innovative product for water treatment, however, their strategy was failing and they were running out of money. It seemed like a lost cause but, because we believed the product had value and they were willing to make changes to improve their team and strategic approach, we accepted to help. During the first year we work closely with them to redesign their selling strategy, pricing, operations and image. After only two years they had a brand new sales team, their sales were booming and eventually they got acquired by a larger US company.

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