​Investment criteria

When evaluating investment proposals, we use the following criteria:

  1. How realistic is the pitchdeck? Do we believe the premises, conclusions, solutions, sales forecast and company valuation?

  2. Confidence in the technical solution.

    • Will it work outside the lab, and quickly scale up? 

    • Won’t it be bypassed by other technical solutions that are cheaper/better in a few years time?

    • What is the expected electricity/storage price?

  3. Potential impact on energy transition. How much CO2 can be prevented/captured in 5-10 years time? 

  4. Patents/IP that give the company a competitive edge

  5. Team background, track record, knowledge of technology and market. Make sure your whole team has their LinkedIn profiles up-to-date and accurate. I thoroughly investigate these, and may follow up with shared contacts.

  6. Strategy, incl. Initial focus market

  7. Progress made since founding

  8. Positive feedback from prospective clients

  9. Is a 10x return on my investment in 5-7 years time likely? This doesn't need to be an exit, but can take the form of dividends.

Eric Ries's 4 product questions

Eric Ries wrote a good book on a process to follow for a startup company in his book "The Lean Startup".

The Lean Startup methodology has as a premise that every startup is a grand experiment that attempts to answer a question. The question is not "Can this product be built?" Instead, the questions are "Should this product be built?" and "Can we build a sustainable business around this set of products and services?"

He recommends you to first answer these questions, which I also answer when evaluating investment proposals:

  1. Do consumers recognize that they have the problem you are trying to solve?

  2. If there was a solution, would they buy it?

  3. Would they buy it from us?

  4. Can we build a solution for that problem?

Pitchdeck

(Based on articles from Bplans and Slidebean and the “Lean Canvas” by Ash Maurya)
The 12 slides to include in your pitchdeck:

  1. Vision and value proposition. Punchline describing what the company aspires to do or become.

  2. The problem, addressed by the company and its products.

  3. The solution incl. IP, patents (provide links to the patents), research background/partners (university? Government research institute?)

  4. Target market and opportunity

  5. Revenue model or business model

  6. Traction and validation/roadmap incl. Letters of Interest, sales pipeline, awards in competitions incl. shortlists

  7. Marketing and sales strategy

  8. Team, including their functions, academic titles, pictures and links to their LinkedIn profiles.

  9. Financials incl.:

    • Cashflow forecast, which shows the need for the requested investment

    • Earlier investments and grants

    • Profit & Loss since company foundation

    • Balance sheet  of last 3 years

  10. Competition. Who are they, how long do they exist, how many people do they have, how much funding have they received and from whom? You can find some of this on LinkedIn, Crunchbase or Dealroom.

  11. Requested investment and use of funds. Also show if, when and why you expect future funding rounds

  12. Captable. Table of existing shareholders and the percentage of shares they own. Also add here parties that provided convertable loans, as they will become shareholders, too.

Peter Thiel's criteria

When assessing investment opportunities I also use the criteria from Peter Thiel, as he described them in his book “Zero to One”:

  1. The Engineering Question: Can you create breakthrough technology instead of incremental improvements?

  2. The Timing Question: Is now the right time to start your particular business? 

  3. The Monopoly Question: Are you starting with a big share of a small market? 

  4. The People Question: Do you have the right team? 

  5. The Distribution Question: Do you have a way to not just create but deliver your product? 

  6. The Durability Question: Will your market position be defensible 10 and 20 years into the future? 

  7. The Secret Question: Have you identified a unique opportunity that others don’t see?​
    To that, I have added some of my own criteria:

  8. The Defendability Question: Do you have IP like patents that prevent others from copying you?

  9. The Impact Question: What is the potential impact on the energy transition?

  10. The ROI question: Is there a realistic chance that I will realise a 10-fold return on my investment in 5-7 years time?

  11. The Realism question: Are the assumptions and projections realistic? Is the company valuation realistic?

  12. The Progress and Traction question: Have you made enough progress since the company start? Are there LOIs, clients, awards?

Den Haag, The Netherlands

pjotr@pvs-investments.com

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