EARLY-STAGE TECH AS AN ASSET CLASS
Exiting from early-stage investments just doesn’t happen. There is a wide range of possible outcomes. It is a result of continuous knowledge and preparation and readiness that secures optimal outcomes for the angel investor. Failing to plan becomes planning to fail. An angel investor thus, must have extensive knowledge of portfolio management to secure these optimal outcomes.
In today’s world if a business idea is not tech-enabled the chances of reaching millions of people to make it a scalable venture are relatively slim. The creative arts are getting there, but there’s a digital element to creative arts that’s making them reach their success. In Africa the Internal Rate of Return of venture funding is at a fraction of where it is elsewhere in the world. Moreover, the bulk of the money being invested is at the early stages in seed and pre-seed, making Africa an immature market of venture capital.
Acquisitions remain by far – even in highly mature venture capital markets – the most common type of exit strategies, which can happen at any stage but will command the same amount of rigorous due diligence. For angel and seed investors, to realize exits we must follow, prepare, and optimize portfolios-based on what we know about the assets, the market it’s in and the particular asset class.
Y-COMBINATOR SERIES A CHECKLIST
Your series A checklist entails the requirements that Y-Combinator says you need to have to be certain that your start-up is set and prepared for the long term. The checklist provides a rigorous analysis of what every investor should check on while investing in a startup. These requirements are broken down into five categories namely corporate records and charter documents, business plan and financials, Intellectual property, security issuances and material agreements and legal.
PORTFOLIO MONITORING AND REPORTING
Reporting means asset tracking. It informs future decisions and creates good habits for start-ups, and it informs the portfolio decision making. In metrics, both quantitative and qualitative data should be tracked. However, the most important thing is that it’s done regularly and consistently. You can track trends if you don’t have the data. Context is another one of the most critical elements of portfolio monitoring. You can’t be bigger than the market as an investor, this is why market timing and stage matter. You must understand the market and stage, the expectations required at each point, and why they matter. Understand the individual assets and whole portfolio against the relevant benchmarks. By combining quantitative data with qualitative evaluation, we can begin to de-risk portfolios.
MANAGING RISK AND PROVIDING VALUE
By rating individual assets and funneling efforts and resources towards high performing startups, and prioritizing liquidity events we can de-risk portfolios. The best way to know an investment worthy start-up can be broken down with the acronym, POEM. It can take 3 minutes for an expert to solve a problem that can take a startup 3 months. Through monitoring and reporting, we can understand startups’ bottlenecks. We can connect start-ups with an expert to help them resolve challenges, saving time, money and attaining their competitive position.
