Only world-class ideas appeal to investors
Investors scan start-ups for business ideas with the most potential; the best ones represent a diverse range of expertise.
In November 2015, the Slush event in Helsinki attracted close to 1,700 start-ups looking for financing for business development from investors. Profit-seeking investors set high requirements.
“To make a single investment, you need to go through approximately 100 companies,” says Oskari Kettunen, Managing Partner at Reaktor Ventures. Reaktor Ventures is the financing company of the software consulting company Reaktor.
Kettunen looks for start-ups that have the potential to become global market leaders in their field or that can create an entirely new market around their product. As Reaktor Ventures invests in very early-stage companies, exact selection criteria cannot be determined.
“The most essential aspect is whether the company is working to solve a sufficiently large problem. If so, its business operations are scalable to a sufficiently extensive degree,” says Kettunen.
Multifaceted expertise needed
Kettunen notes that the best start-up teams represent a diverse range of expertise and backgrounds. Good rapport between the team members is also essential.
“We value teams where the members have a shared history and know one another. Start-ups have a long and challenging way to go. The people must be able to work together at all times, even when there are bumps in the road.”
Kettunen is wary of making generalisations, but certain clichés still hold true about Finnish start-ups.
“We have in-depth technical expertise, yet we are too humble about selling it to the world. Fortunately, there already are good marketers on some start-up teams.”
Product development with customers
The Reaktor Ventures portfolio currently consists of 23 investments. Investments in early-stage companies vary between EUR 50,000 and EUR 1 million per company. Reaktor Ventures focuses on companies with software that offers opportunities for entirely new types of business models. Their portfolio includes companies developing games, medical applications and electronic marketplaces.
Their key interests include applications related to the Internet of Things, such as Houm, which is developing wireless lighting control systems.
Kettunen points out that, as a rule, Reaktor Ventures invests in business operations instead of individual inventions.
“Personally, I don’t believe so much in the approach where you first create an invention and then try to commercialise it.”
According to Kettunen, products that are immediately introduced to the market and developed in co-operation with users are most likely to succeed.
Tips for start-ups by Oskari Kettunen:
Forget about rehearsed pitches
Pitching and scripted presentations are popular topics in start-up circles. Be authentic at face-to-face meetings with investors.
Understand who you are talking to
Mutual respect and enthusiasm are important. Study the investor’s background, expertise and interests beforehand.
Help the investor to cut to the chase: what is it about your company that makes it a worthwhile investment?