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Window Into 2022: 12 for 12

Updated: Dec 19, 2022

As we reflect on the past year, I have compiled a list of 12 insights and suggestions for startups to consider. These are the result of my retrospectives on the past 12 months and are intended to provide valuable guidance for the future. I hope you will find them helpful as you continue to grow and develop your business.


As a startup founder preparing to pitch to a potential investor, you may be familiar with how to create a pitch deck and have access to various resources to help with templates, etc.. However, it's important to note that securing investment goes beyond simply having a well-crafted pitch deck.

I have been involved in angel investing on and off since 2006, with a more consistent involvement since 2018. While my initial investments were solely in the US, I have recently begun exploring opportunities in South-Eastern Europe (SEE), where I made my first investment in 2022. In total (USA & Europe), I review around 150-200 applications, with approximately 70 presentations leading to around 10 due diligence processes and ultimately 1-2 investments per year.

In the past year, I have had the opportunity to interact with numerous SEE startups through Skok123 and have noticed some common trends and challenges. Based on my experiences with angel investing in the US, I wanted to share the observations. Following is the funnel breakdown in Croatia & Serbia.

That would be a 1.5% conversion rate. I should say that we were very close to making our second investment this year, but a last minute piece of information made us change our mind.


We learn about startup companies in one of two ways: either they apply on our website or someone makes a recommendation. Recommendations typically come from other regional investment firms that are not interested in early-stage investments or from individuals we are familiar with.

A group of four members reviews all incoming opportunities and decides which ones to present at the next meeting. If the application is from a company we are not familiar with, we set up a call to learn more about the founders and their company before deciding if they are a good fit for us.

  • SEE StartUps, while limited in the scope of industries targeted, are at par with US startups in terms of the quality of ideas and presentations.

  • We are all positively surprised how good the command of the English language is.

  • We have met some really impressive founders, and while we have not invested in them for a variety or reasons, we are following their progress, and where we an we help them with introductions.

Improvement opportunities

1. Know Your Customer - The Investor.

As an entrepreneur seeking investment, it's crucial to remember that the investor is also a customer, and it's important to take the time to understand their needs and expectations. Unlike grants and venture capital funding, angel investors are putting their personal money on the line, which they have likely worked hard to earn. Many angel investors have firsthand experience in building and running businesses, or have worked in corporate environments, which gives them a deep understanding of the risks involved in the business world.

Keep in mind that as a startup based in South-Eastern Europe, you are not only competing with other regional companies for investment, but also with US-based startups seeking funding from the same investors. It's important to consider the advantages that US-based startups may have and find ways to differentiate yourself and highlight the strengths of your company. It's also essential to be aware of the higher perceived risk of investing in South-Eastern Europe compared to the US, including issues such as a legal system that may not provide the same protections and the potential for geopolitical risks.

2. Don't Take Things Personally or Be Defensive.

As an investor, it's essential to provide constructive feedback to the startups in which you are considering investing. However, it's important for entrepreneurs to remember that this feedback is not personal and to avoid being defensive when receiving it. Taking feedback personally and being defensive can be a red flag to investors, indicating that the entrepreneur may be difficult to work with. This can be a significant concern for investors, as they are putting their personal funds on the line and prefer to avoid any potential headaches.

It's essential for entrepreneurs to be open to feedback and to understand that the investor's money is personal to them as well. By taking a collaborative approach and being willing to listen and consider different perspectives, entrepreneurs can increase their chances of success in securing an investment.

3. Famous People Invested. So?

While it may be exciting to hear that a well-known individual has invested in a startup, this alone should not be the sole determining factor in the validity of the investment opportunity. An experienced investor will conduct thorough due diligence and base investment decisions on the specific merits of the opportunity rather than being swayed by external factors such as fame or reputation. It is important to remember that even those who are experienced or well-known can make mistakes in their investment decisions, as recently seen with FTX.

An experienced investor is going do their own research and consider the specific risks and potential rewards of an investment opportunity before making a decision. They are more likely to trust their own judgment and not blindly follow the investments of others, even if you have a personal relationship with them or have had positive experiences working or co-investing with them in the past.

4. Know Your Numbers

As you present your financial model to the investor, particularly if it serves as the basis for your valuation, it is essential that you are able to confidently explain and defend it. Simply stating "I don't know, an external expert handled it for us" is not a sufficient response. If you are not comfortable with financial concepts, it may be advisable to bring on a co-founder who is proficient in this area. It is imperative that the team demonstrates a thorough understanding of their financial model and valuation methodology, as a lack of knowledge in these areas can severely damage the credibility of the business in the eyes of the investor.

Instead of emphasizing the size of the market, it is more effective to focus on clearly articulating the assumptions and logic underlying your financial model. Avoid making statements such as "if we secure x% of the market, we will achieve Y in terms of size or revenue." Instead, take a bottom-up approach and provide a detailed explanation of how you arrived at your projections. For example, you could say: "We have 3 salespeople who will reach out to 100 potential customers per month. Of these, we anticipate that 30 will schedule a demo with us, and we expect 5 of them to become clients within the first 6 months. Based on an estimated annual spend of $X per client, we expect our revenues to be $Y." This approach helps to demonstrate the thoroughness and thoughtfulness of your financial planning and increases the credibility of your projections.

5. Investor Asking Many Questions is a Good Thing

It is not uncommon for entrepreneurs, even the more experienced ones, to be taken aback by the number and depth of questions asked by investors. However, this should not be viewed as an attempt to "expose" the entrepreneur. It is a sign of genuine interest and a desire to better understand the business. In fact, a lack of questions from investors may be a cause for concern.

It is important to note that investors, particularly those who have entrepreneurial experience, will often ask detailed questions about the operational execution of various aspects of the business. Some may even request frequent updates or calls to stay informed about the progress of the startup. In the United States, it is standard practice for investors to receive monthly written reports from startups, providing key information about the business.

6. Startups Are Overvalued (in 2021/22)

I recently conducted an analysis of SEE region, evaluating the performance and valuations of pre-seed, seed, and Series A stage companies. The analysis found that the valuations asked for by these companies are on average 25% higher than those of US-based companies that have received investment.

This can be a concern for investors, as the region is viewed as higher risk due to its geography, unknown legal and regulatory system, proximity to the war in Ukraine, and difficulty in accessing capital and clients. For that alone, US investors are going to expect a discount and not a premium.

As a result, US investors may be hesitant to invest in the region and may prefer to focus on US-based companies that offer more stable economies and political systems, as well as easier access to capital and clients. It's important for SEE startups to understand these perceptions and consider ways to differentiate themselves and highlight the strengths of their companies in order to increase their chances of securing investment from US investors.

7. The Cap Table May Have "Hidden Stories"

The cap table of a company can provide valuable insight into the ownership structure and can help an investor assess the potential risks and rewards of an investment. An experienced investor will carefully review the cap table and consider any red flags that may arise.

For example, if the cap table includes co-founders who are no longer working in the company but still own a significant equity percentage, it may be worth speaking with them to understand the reasons for their departure and any potential risks or concerns.

Similarly, if an investor on the cap table is not actively involved in the day-to-day operations of the company but has a significant equity stake, this may be cause for concern. It's also essential to consider the reputation of the investors on the cap table, as a questionable reputation could add additional risk to an already risky investment.

8. We Don't Like SAFEs

SAFEs, or Simple Agreements for Future Equity, have gained widespread popularity since they were introduced by Y-Combinator in late 2013. While there are many articles available online discussing the pros and cons of SAFEs, my issue with these instruments is that they essentially provide an interest-free loan to a company for an indefinite period of time, with no legal recourse for the investor in the event of losses.

In contrast, convertible notes offer investors some level of protection as debt holders. If the company fails, convertible note holders have the right to be paid before other investors, and they also receive interest on an annual basis to compensate them for the risk they are taking. Convertible notes also have a maturity date, giving investors a predictable timeline for when the company must work towards a liquidity event in which they can either convert their notes to equity or receive a payout. By contrast, SAFEs offer no compensation to the investor and may not provide the same level of incentive for the startup to pursue a liquidity event.

9. No Cap, No Go

Here and there, both in the USA and SEE, I come across SAFE notes without a cap and only the standard 20% discount. Here is a good explanation from Steve Barsh, Managing Partner at Dreamit:

Early investors want to take risk and help startups, but they need to show strong overall returns. So if the value of a startup they make an initial investment into later starts to “run away” with an extremely high valuation, that will water down their investment if there is no cap. Therefore, many, if not most, sophisticated investors won’t put themselves into a situation to take the risk on an uncapped investment. Instead, they’ll just take a “wait and see” approach until the next priced round and if things are going well, and the valuation makes sense to them, buy-in foregoing the discount.

Sophisticated investors will argue that an uncapped note or SAFE misaligns founder and investor interests. Why? Because the lack of a cap waters down their investment, therefore, penalizing early investors for helping a startup increase in value. So smart investors will almost never take a no cap deal. An elegant and relatively simple solution is to cap the valuation into which the SAFE or note convert. As long as the next round is priced higher than the cap, both founders and seed investors are aligned and want the valuation as high as possible.

10. Minimize Business Plan Competitions

While participating in business plan competitions can provide valuable validation and potentially non-dilutable funding for a startup in its early stages, it should not become a central part of the business model. These events can be time-consuming, costly, and require a significant amount of energy, which could be better spent on acquiring new customers and driving revenue through sales.

It is also worth noting that the same companies often appear in and win these competitions repeatedly, which may not be the most reliable indicator of success. When reviewing a pitch deck that highlights a company's wins in competitions but lacks strong sales numbers, an investor may be less likely to pursue the opportunity. It is ultimately more important for a business to focus on generating revenue and building a sustainable customer base.

11. Follow Basics Protocol

While this may be obvious to many, it is surprising how many people miss to follow these common sense practices.

  • Before the conference call, make sure your computer is compatible with the software (e.g. Zoom) and that your microphone and camera are functioning properly.

  • Choose a location that is quiet and conducive to a productive call.

  • Within 24 hours of the presentation, send a thank you email and address any unresolved issues or questions that investors may have. Alternatively, offer to schedule a follow-up meeting to address any additional questions.

  • If you don't receive a response from investors within 10 to 15 days, follow up with an email to inquire about their status.

  • If you were initially rejected but have made progress in the subsequent months, email the investors to let them know about it.

12. Be Honest and Respectful

When seeking an investment, it's essential to be honest and respectful with the investor and to approach the process with the goal of building a long-term relationship. This means being upfront about your needs and expectations and avoiding statements that may come across as insincere or arrogant.

For example, telling an investor that "we really like you, so we came back to give you one more chance to invest in us" may be perceived as a desperate attempt to secure funding, rather than a genuine desire to work with the investor. Similarly, saying "you will regret not investing in us" can be perceived as arrogant and may close the door to future opportunities.

Instead, it's important to be confident in your company's potential and to approach the investor with a genuine desire to build a productive, collaborative relationship. By being honest, respectful, and confident, you can increase your chances of success in securing an investment and establish a strong foundation for a long-term partnership.

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