“I believe what has changed during the past years is that the investors are getting more and more critical every day in terms of data and innovation. We live in a period where innovation details and competitive advantages are one of the essential points that differentiate one business from another.”
– Caio Buchalla, Bay Angels
The Achilles Heel of Business
Many people have a dream of opening their own business. But for many innovators out there, this dream soon turns into a VC nightmare. The battle for funding is a constant one. It requires constant pitching and selling of your business, your worth, and your ability to succeed. But without the funds to get started and to build your team, it becomes more and more difficult to do so. Without proper funds, it becomes impossible to support your team financially and to see your business through. It’s a heavy weight to carry and as time goes on, the pressure grows significantly.
Presenting Your Business
Only one in ten startups succeed when looking for funding. Why? According to Caio Buchalla, Founder and Analyst Manager of Buchalla Venture Connections, there are a couple of reasons. “Early stage startups don’t know how to present their business with what we, the investors, consider basic information to move them forward,” he says. “When they apply for an angel group or a venture capital process we expect to receive a well-structured pitch deck and five years financial projections, and we expect to find a clear business in there with all the data connected to the market you are dealing with.” Seems pretty simple, but the reality is, not many businesses know how to present their business effectively.
Understanding Your Market
Early stage businesses, especially, lack clarity with respect to the market they are entering. “The idea of TAM, SAM and SOM are not essential for that stage because we already know that the market in the US is already on the millions/billions in value. We want to understand what is the size of the market that you are really starting with, it can be a specific city or a specific community, but it needs to be realistic,” Buchalla adds.
Prioritizing Your Business Model
Another common point is the business model. In his days as an investor, Caio Buchalla has seen many business models that are either unclear or not completed at all. But if you don’t know your basic business model, how can you develop the financials? And without that information locked down, how can you calculate a three to five year’s projections and end up with a realistic valuation to build the terms with which you present to investors? Without a clear business model, really nothing will become clear.
Why You Keep Hearing “NO”
The disconnect is pretty clear, however. Early stage businesses lack the information and the guidance to develop their materials and financials. This is an unfortunate gap, when so many businesses have put their heart and soul into building the future of their company. As an Investment manager at Bay Angels in Silicon Valley, Buchalla has come face to face with a number of early stage and late stage startups, many of which he has had to say “no” to throughout the years. “I started to realize that we were saying “no” to almost 90% when deciding who was going to move forward in our process, and I started to realize that the biggest issue was that startups simply don’t know how to present their business.”
Building a Better Structure
Noticing a gap in both knowledge and the market, Buchalla set out to create Buchalla Venture Connections in January of 2019. Carrying a deep knowledge of the things that hold startups back, he wished to support startups on their journey to market and provide the kind of information that has been lacking for so long. Buchalla Venture Connections now advises the seasoned and novice entrepreneur on pitching and growing their business.
Essentially, the company offers consulting services, providing the best investment strategy based on the market, the amount of money and the innovation the startup has to offer. Buchalla and his team help to shift the way startups look at funding. They also help their clients to create a basic structure for growth; Problem, Solution, Prototype structure/ back-end structure, target market, target customer, business model, go-to-market, marketing strategy, financials, team/lawyer, advisors, milestones, partnerships or potential partnerships, proof of concept, I.P. process, exit strategy, traction, terms, the ask and startup’s contact information.
A strong business is built on a strong foundation and it certainly isn’t easy to construct on your own. Buchalla’s best advice for the greatest return on investment: find a very strong, well-connected advisor or mentor that will help position you and your organization for success.