It seems that we read a story about some new, exciting startup every single day. And many of those entities that shape the way we live our lives (Amazon, Uber, Facebook) started out in garages, dorm rooms, or studio apartments as dreams. And for the dream to become reality, sometimes all it takes is someone believing in you. I have had people believe in me, so now I want to pay that forward. And I do so by giving brilliant entrepreneurs the funding they need to make those dreams come true. However, this can be a gruesome process. As an investor, I will, at any given time, receive multiple funding requests, far more than the number of businesses that I realistically can (and want to) get involved with. It's a great position to be in when you can pick and choose from a myriad of exciting startups, but it does also entail some work on my part. Before I decide to dive in (and back that dive with a significant amount of cash), here are some steps I take to screen my potential new partners.

1. The opportunity assessment - addressing these four points:

1. The idea - What is its unique selling point (the famous “USP” you will have undoubtedly heard about before)? And what are the larger market/industry/social issues the business addresses and solves? Is it scalable or, on the contrary, does it target a finite market? A brilliant, new idea, filling an empty space in an industry has far greater potential to be funded than one that is replicating older ideas. But I won't discount the latter if their approach is novel and the market can take more players.
2. Team experience - the entrepreneur’s/team’s track record - The background and knowledge that they have or can acquire in the chosen business sector. If someone is just entering a new market, I want to see what their approach is for understanding it and how they go about understanding the subtleties that we find in every single industry. You don't have to know everything, but I do want to see that you're striving to learn.
3. Alignment with our goals - How investing in the business factors into our greater and overall development strategy. While I would love to always venture into new sectors, I have to consider my company's greater goals before I get too excited about an idea. But I have been known to try new things now and again, so do send your pitch over. I'll have a look.
4. Timeline for the Return of Investment - While everyone knows that a startup will take time to become profitable, I do want to see them laying out a realistic timeline for when that may happen. However much one likes supporting entrepreneurship, we are all in business to make money.

2. SWOT Analysis

The famous chapter in every project management or leadership book. When looking at the “Strengths, Weaknesses, Opportunities, and Threats” facing a business, you can get a snapshot of how it fits within current and future developments in its market.

3. Financial Projections

This can be a tough one, especially in the beginning, when they are not really making money, but I want to see how they approach their projections and how realistic they are about them. Here, I look at the following things:

• DCF (Discounted Cash Flows): Calculating a projected future cash flow based on the current one. Obviously, this only works if a business already has some money coming in.
• Multiples: These are used to calculate a company's valuation and they are usually applied to EBITDA. In the case of a startup that has just launched, it will be done based on those used by similar companies that already exist in the market. If there aren't such companies, then it will be an exercise in imagination based on business skills to value the new company.
• Yield: The return, as a percentage, that an investor can receive on their investment after a certain period. Another indicator to consider here is the Value at Risk, which quantifies the investment's risk level.
• TAM (Total Available Market): Essentially, the total potential audience for the company's products. The bigger, the better (but an investor will also understand that a niche business will have a different audience to a mass-market one)

4. Due Diligence

Here is where I get to know the business up, close, and personal, through a series of financial and legal (and HR) audits. What this step usually does it verify the information and conclusions drawn at earlier stages, as well as flag any other problems we were unable to see before.

5. The gut feeling

This is the last step before "putting a ring on it". After analysing all the available data, I make a decision based on my experience and my general feeling about the business. While each investor may have their own set of rules, these guidelines can help you perk up your pitch when getting ready to approach someone. It can also help you address some tough questions about your own idea and plans, and allow you to adjust in advance before you are in the room with someone that can make the difference between your company become the next unicorn or it dying in the massive bin of "never was" ideas. And by putting yourself through the wringer first, you will be that much more prepared for the third degree you are likely to get from pitching. Trust me, those questions will (and should) be hard!

Still feeling nervous about starting your own business? Here are general things you should (or already do) know about the startup scene: 1. The development cycle of a Minimum Viable Product (MVP – in simpler words, something close to a prototype) may take up to three years. You should add a few more years for the transition to a cyclical business model - and that should tell you why some companies are called startups even 10 years after launch. 2. There is a wide range of accelerators and out there, and they offer brilliant solutions to your startup needs. If your startup is based in Romania, you can find a relevant list (including other information on startup phases etc) on romanianstartups.com. An alternative is the governmental program startup-nation.ro, which offers financing of up to RON 200,000. 3. While you’re still small, access to capital may prove difficult. Be ready to reach out to smaller investors first, and work your way up the ladder as you grow. 4. You've failed in a startup before? You’re not alone. According to Forbes, 90% of startups end in failure. But think about it this way: Thomas Edison made 1,000 unsuccessful attempts at building a lightbulb. When asked about his failures, he said: “I have not failed 1,000 times. I have successfully discovered 1,000 ways to NOT make a light bulb.” Words to live by. 5. Why should you invest in marketing, when you have as little resources as you do? Here’s the thing: while you may think you can get the same results by doing it yourself, I can promise you, you won’t. You will waste a lot of money learning something someone can do faster, cheaper, and likely better than you. 6. “I have 10 years of experience in corporations. I can always start work as an entrepreneur.” Yes, but do not forget what human resources specialists say: the qualities of the business innovators are mostly different from the ones of a successful manager in a big company. The latter has to be conservative and precise considering the hierarchy of the company itself, whereas the former needs vision, leadership, and the ability to take risks. Thoroughly knowing a market is, in principle, the main asset of a founder. However, to this, you should add the qualities of an entrepreneur. 7. Do you think that a startup is a solitary battle that you will have to fight for a long time? This is not at all the case. Go out there. Network. Find partners. Find mentors. Bring in a co-founder that lives and breathes your idea. And, if you do bring in an investor, make sure they also pledge some of their time and experience, on top of their money. At the end of the day, they will profit from your success too!

In entrepreneurs' and investors' lingo, the meaning of the term startup is pretty clear. However, after several years of business in this field, I've noticed the necessity of some clarifications, both for experienced businessmen and young people who tackle business for the first time. (more…)

LinkedIn updated at the beginning of this fall the top of the most interesting startups in 2018. As expected, the top is dominated by tech companies. I’ll analyze in brief of few of them. (more…)

Octavian Pătrașcu gave an interview to "Bursa", one of the most influential business publications in Romania. Among the topics discussed there were:

• Investing in Romania: low-risk means mostly real estate, although evolutions on the market may be influenced by changes in interest rates at banks or modifications in property taxing. On the other side, startups can be characterized by an additional degree of risk, because of the political and legislative instability.
• Romanian business climate: it could benefit from political calm and simplification of procedures by means of technology.
• Cryptocurrencies: they are risky, but blockchain and ICO (Initial Coin Offering) as a startup funding strategy might be here to stay.
• The necessity of cash reserves: they are necessary for short-term opportunities, for instance. However,  in Romania interest rates are too small to encourage holding the cash in bank accounts, on the contrary.
• Entrepreneurship: young businesspersons have to avoid getting discouraged by barriers. Failure contains the opportunity to learn from one's mistakes and the most beautiful part of an entrepreneur career is precisely learning from mistakes.

You can read the complete interview, in Romanian, here.

The Profit business site published a story on Octavian Pătrașcu's investment in ConsultaClick.ro, a healthcare platform launched in Portugal that subsquently became operational in Spain and Brasil. In Romania, the project gives access to over 3,900 doctors and facilitates the optimal and transparent scheduling of an appointment. Pătrașcu told Profit he took the decision to invest because of the social component of the project, which makes it compatible with his investment objectives. You can read the entire story in Romanian on Profit.ro.