What factors need to be taken into account when choosing the right investment fund?

What factors need to be taken into account when choosing the right investment fund?

You’re an entrepreneur and you’re thinking of raising funds to support the growth of your start-up.

There are several options open to you. The first step is “Family & Friends”. Another step could be crowdfunding or bringing in business angels.

Once you have demonstrated market traction and are growing rapidly, you turn to investment funds.

Here are the strengths of the ideal fund.

A clear manifesto from the Fund.

In an ever-changing world, their commitment to their mission must be clear.

It could be based on a profound desire to transform or set new standards. This would involve meeting the needs of the founders and bringing out their as yet limited potential.

A fund could also provide support during the loneliest and most difficult periods of the entrepreneurial journey.

It could have a clear objective, to help individuals realise their potential. To show them how to believe in themselves, even when the path seems strewn with pitfalls.

A fund must have depth and clarity of conviction and support.

Tolerance and resilience, recognising that each entrepreneur follows his or her own path in life. Making sure that different paths come together to form a greater collective mission. It is in this frame of mind that actions could be directed

A commitment to a vision must remain constant, even if agility is needed to keep things moving.

An investment fund can present itself as a pioneer of positive change, inspiring others to believe in themselves and aim higher.

 

The quality of an investment fund team is paramount

A team on a human scale is an element to be favoured, especially when raising funds for the first time.

Generally made up of former “successful” entrepreneurs, they open up their network and provide advice, while the fund provides “Smart Money”.

The team needs to be made up of a diverse group of people who are curious, passionate and keen to change the way things are.

Everyone should have their own “superpowers” so that together you can build on strong values to help the founders.

A close-knit team with a deep understanding of its limitations. You can’t expect more than you can deliver.

Knowing how to help founders from the earliest stages, particularly when it comes to adapting the product to the market. This brings us back to the notion of Smart Money.

Seek mutual trust while respecting each other’s ideas. It also means bringing a range of perspectives and experience to bear on problem-solving, investment decisions and support for founders.

GOWeeZ - Quels sont les éléments à prendre en compte pour choisir le bon fonds d'investissements

 

A fund’s investment thesis must be studied before it launches a project

A fund’s investment thesis is based on an investment strategy. We are talking here about an approach to selecting and supporting the companies in which the fund invests.

This thesis is built around the fund’s investment beliefs, assumptions and objectives.

It guides investment decisions by determining the types of companies targeted.

For example, preferred sectors of activity, preferred stages of development, geographical regions of interest. There are also other relevant criteria in line with the vision.

A fund’s investment thesis can vary considerably from one fund to another, depending on its specialisation and expected return strategy.

It also varies according to its appetite for risk and its long-term vision.

For example, a seed fund may focus on young companies with high growth potential, while a venture capital fund may invest in companies in a more advanced growth phase with higher ticket sizes.

An investment fund’s investment thesis therefore defines its investment mandate and guides its strategic decisions. It obviously remains focused on a simple goal: returns for its investors and managing the risks associated with its investments.

Most mistakes can be made in the early stages. That’s why some funds like to be there early enough to help avoid them.

They invest at the pre-seed stage, most often at the seed stage, and sometimes at the late-seed stage.

Some invest at the Series A stage or beyond.

Avoid FOMO (Fear Of Missing Out), especially in a VUCA (Volatility, Uncertainty, Complexity, Ambiguity) World.

 

Portfolio & geography

A fund wants to deepen its relationship with each of its founding teams. The aim is to provide them with real added value. Whether they go from the seed stage to Series A and beyond.

Ticket sizes are generally clearly defined. In early or seed stage, this can range from €100,000 to €2 million. The list below is for information only and depends on the geographical area and the business.

< 250 K€ (family and friends)
250K€ – 800 K€ (Pre-seed)
800K€ – 3M€ (Seed)
3M€ – 10M€ (Series A)
> €10M (Series B)

The fund also defines the geographical area in which the company is established. In France, according to France Angels, a large proportion of investments come from the Ile de France region.

Startups financées en France en 2022

 

What are the targets ?

A fund must show that every founder is different, even if it looks for those who have special abilities and characteristics.

These are unique to them, and have the potential to be used to create an exception.

Of course, it’s difficult to assess this, but that’s where we need to refine our exchanges. An investment fund spends a lot of time in many open and frank conversations.

It’s important to look at fast-growing markets. For a fund, an important market can be between 500 million dollars and more.

An investment timetable also needs to be considered, based around six-month periods with a limited number of investments.

The best venture capital firms are those that are the most self-aware.

The approach must be based on empathy with the founders.

It fosters a constructive dynamic and guides them towards their full potential.

A fund must understand that fidelity to its own values is essential to understanding those of others.

Introspection may be necessary to organise its line and values. It is important to define a set of principles that embody an identity.

We need to keep these principles in mind in every interaction in order to be guided towards genuine and lasting partnerships with the companies we support.

At GOWeeZ, we support companies in their strategic development linked to their innovation.

Would you like us to help you with a strategic innovation project, AI-based architecture development or fund-raising?

Feel free to contact us.

Other articles that might interest you :

A guide to work on an effective pitch deck for investors

How to define a clear objective for any project based on artificial intelligence (AI)

Article written by Fabrice Clément

The bridge between your company and VCs

Are you raising funds? At this crucial stage in your entrepreneurial journey, choosing the right investment fund can make all the difference. This is where we turn our attention to the essential features that the fund should have to effectively support your vision and propel your business to new heights. Here are just a few points.

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