The company’s founder LinguaLeo shares his experience of relationships with strategic investors , business angels and funds.For three years now , we are working on the development of web servers dedicated to learning the English language. During his tenure, we ‘ve to deal with different types of investors – business angels , strategists , and venture capital funds . We managed to attract investments totaling $ 3.2 million Hopefully our history of working with investors will help other beginners do not make mistakes .

Strategist

Because of their inexperience, I wanted to avoid funding from venture capital funds and business angels and immediately enter into negotiations with the strategy . Strategists – it is the large companies that operate in the same industry, as we do, that is the object of investment, which is interested in acquiring a controlling stake .

As it turned out , the position of the investor is different from our position on several key parameters. For example, strategists do not have enough experience to work with new projects that are under development, such investors are unwilling to take risks, and their interests are usually different from the interests of the owners and crew. The main purpose of such investors – to get the project to further integrate it into your business. Not in its interest to develop the company with billion dollar market capitalization .

As a result, transaction completed unsuccessfully .

There are some distinctive features of the strategists. For example , they have unlimited amounts of funding, but their main interest is only in the development of their own business . They do not want to take risks , and the means of their only target the growth of capitalization of the company. In addition, this investor may be an expert in their field , but nothing about the development of start-ups.

Business angels

A few months later I had the opportunity to work with business angels . They are called so because they are investing in start-ups , though small, but needed the money at the stage of development of the company – as it already has a product , or its prototype. They are called ideal for several reasons. First, they give the money very quickly . For example, I received a response within a week after the start of negotiations, and after two received the first tranche . Second, these investors will never interfere implement the development strategy and fully trusted by the founder . Third, they help solve a variety of issues .

Such transactions may be even a few days. For example , as I had. I was fortunate enough to meet with Sergei Kuznetsov and Yegor Rudy , who were the co-founders of the company , “Your tutor “, during a coffee break. They are involved in the development of a large network of tutors across Russia . We quickly found a common language and get acquainted with their investor Igor Ryaben’kii and after 2 days of a deal on an investment of $ 200,000 .

Very often, business angels are entrepreneurs . They become practical partners , not only put you in the money, but also to share their experiences. Since they are investing their own money, and often guided by their own intuition.

The deal is very simple and allows you to quickly arrange the export documents to get money and get started. For example, instead of having to carry out due diligence ( analysis of all aspects of the work of the company) , it is enough to meet the owner, to ask him some questions and view the metrics Google- analytics. And that is enough to make a deal .

Which is typical for this type of investors, it is the size of investment that is always measured in thousands of dollars. In such a case, the investor can share the risks with the owner. In addition , business angels have a very high level of professionalism , they tend to not only grow your business , but also improve the pace startup. Money from such investors are often “smart” , but not in all cases.

Venture Fund

Within six months after working in the business angels our project was to make a profit . Investment enough just for those six months . Then, already with business angels , we began to look for venture capital funds “A” class , which would correspond to our investment needs.

We are looking for investors with expertise in IT, e-commerce , SaaS- projects or education. Some of us find ourselves , we are treated to some directly or through business angels . At this time, we got the win in the contest BIT – quite prestigious in CIS competition , which took part in investment projects. There we also met representatives from the fund Runa Capital.Then we turned back in the 10 funds in Russia , but all had their drawbacks. Then we went to the United States. We communicated with the Accel, Start Fund, August Capital, TMT Investments and others. But there was not less than minuses , and maybe even more. As a result, we made ​​a deal with Runa Capital.

To meet with representatives , it took us more than 10 meetings , dozens of letters and phone calls. We have prepared several versions of the presentations of our business plan , answered a lot of questions about technology, finance, marketing , strategy and team. It should be noted , this is quite a useful exercise .

Before we signed mamorandum took six months ! But in the end we still got ” smart money “, and it is not only investment, but also a learning experience , communication command , the list of which some very successful campaigns , such as , Dr.Web, Softline, Alawar, Acronis, Parallels , and other . The difference between the investor , who can only offer the money and the investor who offers ” smart money ” is huge. And at this stage of development, we have chosen the best partner .