Seeding: how investment funds judge start-ups

by bold-lichterman

Frenchweb offers a series of views from fund managers to shed light on this stage of funding.

FrenchWeb: What do you think are the essential criteria that a project leader must have in order to finance it in seed money?

ISAI Management is a Parisian fund dedicated to Internet entrepreneurs. In 2015, it set up a specific seed fund.

Mounia-Rkha-A-credit-Olivier-EzrattyMounia Rkha, Seed Club Manager at ISAI Gestion: To be a good seed investor you have to be clear about your objectives, your strategy and stick to them. If we schematize, there are two types of seed investors. The first puts tickets in as many projects as possible and plays the statistics to have a few “homeruns”. In this case, the game consists in making as many deals as possible, being everywhere and industrializing the investment process.

The second, of which we are a part at ISAI, prefers to choose few projects that he will actively support. It is a matter of being a fine psychologist not only to detect the potential of the entrepreneurs encountered but also to help them reveal this potential by providing them with the right dose of support, dialogue and challenge.

At ISAI, our investors (or LPs) are entrepreneurs of the French Web. This ecosystem is a unique asset for our early stage startups. We involve them very actively since we are waiting to have support from their parts as business angels to invest in seed. The idea is also to match the most relevant people for each project. Start-ups thus benefit from the valuable experience of experienced entrepreneurs.

This Seed Club funding is, in our opinion, a good way to give young shoots every chance of reaching Serie A in the best conditions. The “small series A” (1 to 2 million euros) being our core target, the first question we ask ourselves is therefore “If the company delivers well, are we certain to participate in the series A?”. The answer must be affirmative and our start-ups know that by bringing ISAI into seed, they will be able to count on us for the future.

If we do not expect startups to have found their “product market fit” and their “business model” at this stage (the seed round is made for that), it is nevertheless important that the founders transmit a strong conviction and be able to define precisely the problem they wish to solve. I am going to push an open door but I would add that in priming, even more than after, the quality of the team is the main criterion. The first elements available and the way in which they were produced must corroborate our intuition on the capacity of the team to write a great story …

Based in San Francisco, Paris and Berlin, Partech