What do top investors look for when they meet a startup founder for the first time? How can you structure your pitch so that it is convincing and shows results? VC investor Anna Kazmierczak reveals how you can avoid frequent mistakes that start-ups make in their early stages.
The Startup Club: Tell us about yourself
Anna Kazmierczak: I am Anna Kazmierczak, an early-stage VC investor at Plug and Play Ventures. I specialize in FinTech and Enterprise Tech investments in the pre-seed and seed companies in the EMEA region. Since the early days, I am closely engaged with the startup community in Europe and globally, starting my career on the startup side, and quickly jumping into the VC role tempted by the other side of the coin. It’s my 3rd year in the Venture Capital industry (I previously worked for TDJ Pitango, a joint venture between an Israeli Pitango VC and a Polish TDJ), and I am definitely not moving anywhere, but rather looking ahead to working with more startups and amazing founders.
The Startup Club: Based on your experience what are some of the frequent mistakes that startups make in their first steps?
Anna Kazmierczak: Being an investor, you are in a very privileged position, talking to hundreds of startups and understanding the common traits, those leading to success stories, but also those being failures. When you are a founder, especially a first-time founder, you don’t see what is happening behind the curtains, hence this kind of question is very valid. I would say some of the most common mistakes I can see are:
- Lack of focus - a vision that is not specifically defined, focusing on multiple different products/customer segments at a time, while having very limited resources. When starting, I suggest focusing on a specific problem and solution, leaving room for scaling use cases and customer segments when you have more resources.
- Lack of market understanding - especially when entering very hermetic industries, that are hard to disrupt, and lacking previous experience, and network in the sector (e.g. banking, insurance, legal) you are jumping into deep waters and might drown. The founders I feel most confident about usually have years of experience in the industry and understand the pain points.
- Not enough market validation - interviews with the users are a good start, but those only won’t ensure you they will pay for your solution. What is essential is proper validation of the market need and justification, ideally with the design partners, ensuring that you will attract paying clients once your solution becomes live. Promise on paper means nothing. If your product is addressing a more complex niche (especially in finance), try out your consulting skills, e.g. supporting prospective clients with your know-how, and making a soft introduction to your soon-to-be-launched digital product.
The Startup Club: Which sections of the pitch deck do you pay more attention to?
Anna Kazmierczak: I will not be the first to say I am looking at the team first and foremost. Especially as an early-stage investor, when the company is very often at the pre-revenue stage, the element we are betting on is people. Prove to me you understand the industry you want to disrupt, you are surrounded by the best, most complimentary, and most reliable people. If that’s checked, I am happy to move forward and learn more about what you are building, what is your moat, and how big of a market you are addressing. I will always look for the early signs of traction, proving that the vision equals the market need, and customers are willing to pay for it, especially now when spending is going down, and companies cut costs. Ask yourself, is your product a must-have, or nice to have? If the latter, you better change the strategy to survive the current market environment.
The Startup Club: What is the most interesting aspect of your job?
Anna Kazmierczak: We always say the investment is like a marriage, we take our time to get to know each other, but if we click, it is going to be a long-lasting relationship. Building these relationships excites me the most. As a VC investor, I get to know extremely inspiring people, both on the startup side, but also within an investment network. The community might be the most diverse in terms of backgrounds and interests (unfortunately still not a fact when it comes to gender), yet what connects all of us is the shared excitement about the innovations. I value the people element of my job the most. Besides that, the thrilling part, knowing no one day at my job looks the same. I feel very lucky that I discovered the industry early on in my career, and I am surely going to stick around.
The Startup Club: Which industry do you find more successful to operate in based on the current landscape?
Anna Kazmierczak: I am a specialized investor, so from my experience, I can give more informed predictions about the FinTech and Enterprise Tech sectors, and how they have been affected. Sadly, the evergrowing FinTech industry has been hit hard, but there is still room for more success stories here. Considering the maturity of the financial market innovations, we can see the consolidations coming, especially within the sub-sectors that have been with us for some time (banking, consumer finance, BNPL etc.). Still, there are areas I am extremely excited about and looking forward to discovering. Those include digital assets innovations (blockchain-enabled solutions increasing transparency, decreasing costs and time inefficiencies in the capital markets and payments), B2B payments (B2C payments are maturing, still B2B payments digitization is far behind, while volume-wise business transactions are a few times bigger) and green finance (I am excited to see more out of the box solutions aimed at bringing a positive change).
On the Enterprise Tech side, the possibilities are unlimited. You should be fine if the solution is a must-have and enables businesses to increase efficiency, cut costs, and maximize the ROI. Cybersecurity & observability platforms are very much needed in the post-pandemic times. While the industry is dominated by big players, there are niches, which remain untapped. Developer experience is the next evolution step in building great experiences around products and services. This group of employees is tremendous and growing, so it is time they get more interest from the market. Last but not least, SMBs-focused solutions, empower those smaller businesses to manage the hard times and optimize their operations in line with the market challenges.
The Startup Club: How can startups in the Pre-Seed stage increase their chances of attracting investors’ interest?
Anna Kazmierczak: Engage, test, pivot, and don’t aim at perfection. Now more than ever investors are looking for early traction, and validation of the market need, proving the customers want to use and pay for your solution. Instead of perfecting your product and only then bringing it to the customers, build a group of design partners around your vision, and iterate the product with them. There is a high chance you will pivot multiple times based on the feedback they provide. Which is not bad. Loyalize your testers and reward them for being early adopters of your product. Once you have a loyal community and product ambassadors around, the rest will follow.
Remember, to surround yourself with the best and most complimentary people on that journey. The team is the most important success factor early on, so make sure you have both technical, and commercial know-how in-house. The right fundamental - the team is a sign you are on the right way to succeed.
The Startup Club: Do you have any advice for startups trying to navigate the current environment and present themselves?
Anna Kazmierczak: The era of blown valuations and WeWork-like vision is fading away. It is a time to be more conservative, yet without forgetting you are a startup and you need to grow faster than competitors. Prolong your financial perspective, and runway, to 12/18 months, making sure you have enough money to survive in a hard time. Give yourself more time for the fundraising process, keeping in mind the VC investors became more conservative as well. The dry powder is there, yet the willingness to distribute it has changed. The good news is that after every economic downturn, the cycle goes up. You should be good if your business fits the market's immediate needs. At the end of the day, big success stories like Uber or Airbnb emerged in those hard times, so we are expecting similar winners this time.