Monday, September 9, 2013

A Cinderella Story Waiting to Happen....

By Paul Chen

There are more than one way to make investments, you just need to pick the one that is right for you. Here are two of the many options.

In a previous post, I talked about ways that a startup can maintain control of its IP, ideas and the company itself. I also talked about how some investors might get a bit too hands on. In this post, I will try to turn the table and get a view from the investors' point of view.

There are many different classes of investors. Some of them are called Angel Investors . They will invest in a startup as a way to give local businesses a boost, foster some sort of industry growth but ultimately to obtain a nice return. As mentioned before, make no mistake, these „angels” are not charities, they expect some sort of compensation for their good will. Some investors will want to be more involved in the running of the business where as others will act more like a pit crew and let the driver decide how to win the race himself.

Barbara Le Mercier comes from a family who has accrued their wealth by investing in various financial instruments, a good deal of intellectual property, art, real estate, alcohol, and more recently startup companies. They also run a major transport firm here in Poland.  They have had a nice track record so far, about 50% return on investments. Barbara has herself been involved with some projects dealing with the military.  She is from the class of investors who are more hands on in their investment in startups. She believes startups are more attractive as a investment instrument currently because the local real estate isn't doing as well as it had been before the crisis. Furthermore, art and alcohol can be quite hit or miss.  Therefore, with the speed of progress that the tech sector is exhibiting, startups seemed like a natural choice.

She uses some metrics in order to decide whether to get involved in a project. She starts by becoming a pupil of the startup project by asking many questions and trying to learn as much as she can about the business. She asks herself whether she would use the product or service herself. Barbara would also need to know about the company's vision of the future and their goals. For her, it is acceptable for the startup not to have some business skills. She can provide them with mentoring and the right connections. Being more involved with projects, she avoids investing in too many projects at once.

On the other end of the spectrum, there is Richard Lucas. He is a British expat who has lived in Krakow since 1991. He ran two businesses and sometimes invests in new ventures. He has been involved with many businesses, and is active in many non-profit projects, such as Global Entrepreneurship Week, Open Coffee Krakow, TEDxKrakow, the Wojtek the Soldier Bear group and Couchsurfing.
When he invests he wants the leader to be able to run the business without him being actively involved in daily operations. As an investor he can offer to provide some coaching when needed.

Richard uses certain metrics to help him decide whether to get involved in a project. He uses many personally subjective judgments such as interpersonal, communication, and business skills of the startup owner. He also needs to know about the drive behind the startup or the motivation of the startup to succeed. He also makes investigation into the projects by assessing certain aspects: Does it make sense; is there a clear purpose; does it have an advantage over other products or services like it; the skills and qualification of the people involved; ability to achieve set goals; personal commitment  and even the personal spending habits of the owner. Basically, he just want to know that he can feel good about doing business with the startup.

Barbara and Richard might have different ways of getting involved in projects, there are many things that they do agree on. They believe that Krakow has a lot of potential to do great things. They like the collaborative atmosphere between the startups here. They are happy that there are companies like Google and Innovation Nest in Krakow providing mentoring to startups. They can see that there is a sort of reverse brain drain, where many talented people are coming into Krakow to find opportunities. They also would like to see more private capital and outside investment coming into Krakow. They believe that Krakow's best days are just ahead. 

They wanted me to tell you that Krakow is an attractive historical city with many highly educated students who are quite ambitious and have strong technical skills. Another attractive part of Krakow is the value of the dollar here. Due to the low cost of resources, both human and physical, invested dollars and euros go further here than western European and North American countries. Come to Krakow, talk to us and feel the magic! 

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