At some point in a startup's journey the decision or the need to attract foreign investment will arise, to conquer the market faster, increase revenue growth, accelerate the product roadmap, bring key talents into the company or to reach a set of specific milestones, which will position the startup on a new level of challenges. Find out how startup investment analysis works here at ACE.
For a successful startup fundraising process, it is essential to define a fundraising strategy, understand what investors analyze in companies and, also, choosing which of these potential partners has more synergy with the business that you, as the founder, are looking to build.
For early-stage startups that want to get to Series A faster and more prepared, ACE can be the ideal investor option. Since 2012, ACE has accelerated more than 400 startups, with 115 investments made and 16 exits, one of the best exit rates in the world.
> Check the testimony of ACErs entrepreneurs who left
Knowing what is the investment analysis process of a VC helps entrepreneurs a lot to prepare for it, and to be able to understand if there is really a fit between startup and investor.
That is why we constantly seek to make the way we analyze startups, how we make our decisions and how founders can prepare themselves in the best possible way as crystal clear as possible for the entrepreneur.
To understand the investment flow of ACE, basically, you need to understand the following triad: thesis, preparation and the steps.
ACE specializes in developing startups during the seed stage, ranging from Problem Solution Fit to Product Market Fit, directly impacting revenue, product, marketing, sales, management, governance and fundraising.
This means that we seek to enter the company early, being the first or the second institutional investor, and accompanying it to Series A, usually with contributions ranging from R$ 100 thousand to R$ 1 million per startup.
We understand and value opportunities for co-investment with funds, angel investors and other players from the first round of funding to the subsequent rounds of follow-on.
From the point of view of the profile of the companies, we consider ourselves agnostics and we are always open to new markets with billionaire potential in different sectors, new models, with exceptional entrepreneurs. Our portfolio building strategy is based on this variety and, if you look at it, you will see this plurality in practice.
It is worth mentioning that we seek complete teams with world-class entrepreneurs, with global vision and high execution capacity. We understand that entrepreneurial experience and / or in the operating market make a positive difference.
We understand that a large company is not built alone and without much sweat. Therefore, we do not see synergy with lonely entrepreneurs (without co-founders) and / or are part-time.
More than the robust founding team, we look at the ability to recruit and retain talent as good as or better than themselves. The product must be in the air, even if it is still MVP (Minimum Viable Product), having technology at home - that is, we do not believe in the outsourcing of tech -. For us, tech is core.
We like, prioritize and work well with companies that are showing signs of traction, first customers, growth in revenue and / or in the company's main KPI.
Finally, I emphasize that the preservation of cap table it is fundamental for the analysis of any investor. As we acted at the beginning of the journey, we know that an excessive commitment of equity (ex: more than 30%) at this Seed stage can harm future rounds.
We can divide the preparation into 6 large blocks:
The objective here is, regardless of the market, the business model or the product, to be able to communicate the problem that the startup proposes to solve. Bring examples and evidence of when this problem manifests itself in the buyer's journey persona ICP (ideal client profile) is essential to ensure that you really understand the pain.
Allied to this, we want to understand what is the rationale for calculating market size, if there are sources or data that support it and what is the team's unique vision of the current and future panorama of this market. We also seek to understand market timing, being clear about why now is the best time is an important factor. In addition, we value entrepreneurs who know the competitive scenario, direct and indirect, like no one else, and are clear about the differentials they have, both now and in terms of the future.
Here it is important to arrive with the clarity of the product roadmap, how the development features were prioritized, how each of the development milestones is related to the milestones of the business to be reached, what are the metrics they monitor to improve the solution and, finally, what are the technological barriers they have.
Marketing and Sales:
We seek to stress with the entrepreneur what are the acquisition channels they have, what are the channel tests they have already carried out or can still carry out, how is the conversion by step in the sales funnel, what is the average closing cycle of a new customer , how the startup's business structure and process takes place, how the repurchase / loyalty is doing and, finally, what metrics they follow and why.
Strategy and Fundraising:
We seek to understand the rationale for funding, how it was built and mounted the size of the round, what were the premises assumed for the composition of the valuation, where does this round lead in terms of milestones, new runway, traction and crucial deliveries, and for how long, what is the vision and size of exit that he imagines and longs for, which are the main cases and benchmarks in Brazil and the world, which are mirrored.
We seek to evaluate why this team is the best among all others that may exist and be assembled to address the problem that the startup solves. That is, in the face of everything they have ever lived and built on experience because this is the best combination. Knowing and being frank about the main weaknesses of the team is also something we value. Culture, values, recruitment and retention are also important points that we believe that the founding team must be able to communicate and analyze clearly.
Here we want to understand how the team handles and works with metrics and indicators, how is the company's routine, what are the rites, the organizational design and how this organization goes from a small and beginner startup to a global business in the vision of founders. We like to see the backstage of the startup and not just what is out of the window.
The ACE analysis process has 12 macro steps, but maximum time of 45 days until approval by investment committee, start of due diligence legal and other contractual issues to materialize the contribution.
The first step is when a startup enters our dealflow pipeline. Daily we receive contacts, referrals and actively search for startups.
After a first or second conversation, they all culminate in the assessment assessment, which is carried out on here, after the initial registration. Thus, we have already been able to deliver methodology, mentors, economic benefits and access to our community, regardless of whether we have advanced or not, at this moment, in the investment analysis. We do this because, for us, the entrepreneur is at the center and we seek to provide value from day zero.
With the assessment done, an ACE proprietary algorithm reads and calculates, based on 44 variables, a score. This goes through a human curation and is validated in our Origination Committee, in which we understand if we will continue with the startup for the next steps or if we will choose to accompany it for a few months before we proceed.
The follow-up strategy is built from the feedback that we pass, so it is clear to both parties what needs to evolve, be adjusted or what would need to be different to move forward. It is a way to accompany potential entrepreneurs, but who are not yet in the ideal stage for investment
In the event that the startup is already ready to move forward, we carry out a pre-analysis, at which point an ACEr is allocated to be the focal point of the startup within the process. In addition to the approximation between ACEr and startup, this step also serves to clear up doubts, and also to align expectations of next steps in the process.
After this phase, we started a complete radiograph of the business. We started by conducting a self-assessment of the entrepreneur, followed up with calls to clients selected by the startup to assess satisfaction, collect points for improvement and understand the pain in the reality of those who feel it. In addition, we use our network of mentors and experts in the startup sector to deliver an opinion from an external perspective.
We collect the evolution of the main metrics of the business and, we carry out, an analysis of their health to understand how it has been performing until then and correlate it with our base of metrics and proprietary benchmarks.
Allied to this, we carry out the exercise of financial projection, not only for the accuracy of the numbers themselves, but also to ascertain and understand how the entrepreneur technically and pragmatically rationalizes his short, medium and long term vision.
Already moving towards the final stretch, we asked for access to the product in a test environment, used it in depth and evaluated it from the point of view of onboarding, UX, UI and jobs to be done. With all this information gathered, we conducted a deep dive, which is the final meeting for the construction of the startup case by one of the partners of ACE, for the defense in the Investment Committee, where the decision to invest or not is finally made.
In the committee we analyze the case, which contains all the information, evaluations, opinions collected, as well as the proposed deal. Four members of the committee partners and the back office of ACE Startups. We usually, although not mandatory, also invite entrepreneurs to participate in a slot from this moment, in person or remotely.
From this committee, three decisions can arise: approval of contribution, monitoring of the startup or refusal of the deal. In the case of approval, we end with due diligence legal and other negotiations to consolidate the investment.
The whole process takes around 30 to 45 days to go through. There is a share of responsibility on the part of the entrepreneur in the speed of the process. We can say that, in most cases, the more prepared the entrepreneur arrives, the faster we are able to conduct all stages. We hold origination and investment committees weekly and, daily, we talk to startups to find good opportunities.
I WANT TO BE ASSESSED BY ACE
To begin this journey with us, you must complete your register at Growthaholics for Startups - free online ACE acceleration platform - and carry out the assessment assessment. If you have any close contact with ACE, such as investors, mentors or corporations you know, ask them for a referral or warm intro as well. Contacting the ACE Startups team also works !. Any additional questions just contact us on the platform chat!