How to Find an Investor. Bakhrim Abdukadyrov on Key Aspects of Successful Angel Investing and Startup Support

Bakhrom Abdukadyrov, city — Tashkent, business angel, Telegram

About Me

I work in a consulting company. After completing my master’s degree in China in 2017, I came to understand that information technology projects are ready to displace traditional business models, and therefore — capture a significant share of the market. Over the last 10 years, the global capital market has been almost entirely led by IT companies. Angel investing is the fastest path to wealth. Here, it is enough to make the right investment decision just once. At the end of 2021, I decided to make my first investment as a business angel, in a FinTech project.

About Investments

A successful investor must be able to identify potential winners and focus on connecting the dots between a startup’s potential and the market. Sometimes investors notice trends and opportunities that are often invisible to project founders.

An effective angel investor should combine financial resources, risk tolerance, time, connections, and experience. It is important to be prepared to:

— dedicate time: an active business angel can review 50–100 investment opportunities in a year, attend meetings and events of an angel club, meet with individuals to listen to their ideas, make decisions, and close deals. This takes from twenty to thirty hours a week — all depending on the degree of commitment of the business angel to their work. Therefore, patience is required.

— learn: since each startup offers unique products and services, you must be ready to study and understand industries, technologies, markets, and so on. This activity also requires a basic understanding of legal issues.

Angel investing is typically risky and illiquid. In this regard, a business angel must be prepared for any outcome.

Evaluating startups is not an easy task. Unlike established companies, startups often lack historical data, have no tangible assets, have undefined business models, and founders face negative profitability. Startup valuation largely depends on assumptions, market trends, and investor sentiment. The absence of comparable companies makes it difficult to validate business strategies and compare important valuation characteristics, such as fair growth rates and cost of capital. Therefore, it is important to have knowledge and experience in the sector you plan to invest in. My investments in startups are a way to learn and develop as an investor, professional, and person. I also recommend seeking advice from more experienced industry professionals.

I have invested in more than 10 local startups. For this, I had to review more than 100 business ideas and investment proposals. These projects have made significant progress compared to the stage when I invested in them. Since no one has yet bought out my stake in the projects, it is too early to call them successful investments. I also believe that one should not become a business angel solely for financial returns, as there are alternative investment options with greater certainty, higher liquidity, and lower volatility. If I were asked: “Do you need to be in Silicon Valley to become an excellent business angel?”, I would answer “Yes”.

At the same time, success should be evaluated in conjunction with acquired knowledge, experience, and connections. Angel investing provides excellent opportunities to learn about the industry and the startup world, offering real-life experience that cannot be obtained even with an MBA degree from a university.

Ideas are everywhere, but among them, few are unique. The path from idea to a real attractive product is long, and the path to profitability is even longer. In my opinion, it is a strong team that can build a business based on an idea. Skills, training, experience, and expertise of the team are important for solving the problem they have set for themselves. The task of an angel investor is to determine whether the assembled team is suitable.

Another important aspect of an investment opportunity that can influence an investor is the market size presented in the project. Business angels and venture capitalists often focus on the size of the market for a company’s product to assess potential return on investment.

The offered product or service should make the customer’s life at least a little easier or better, and its purchase by solvent customers is considered the best confirmation of a startup’s progress.

Angel investors should also ask themselves how competitive the market is and how easy it is to capture a significant market share with the proposed solutions. The presence of minor competition should be viewed optimistically, as it confirms that the market exists.

Currently, I am focused on investment opportunities in foreign projects and actively consider projects from Central Asian countries. I am ready to support projects aimed at rapid scaling. Unfortunately, attracting investments from foreign business angels into Central Asian projects is difficult, except in some cases.

I recommend using syndicated investments to pool efforts to finance a specific startup.

Business angels often help founders by providing advice on fundraising, business development, marketing, and strategy.

One of the most important challenges faced by early-stage startups is building relationships with key players in their industry. At the beginning, startup founders may not have a list of contacts that could help them access the right leaders in the relevant field. This is where a business angel can play a decisive role.

Since business angels make investments, sometimes they have to take on some fundraising functions to help startups when they lack funds during growth stages.

In the early stages, startups rarely have the resources to hire an external law firm or even an internal legal team to help them resolve some legal issues that arise as they grow. Business angels can become a valuable source of legal advice and assistance for startups they invest in.

My check size for one startup ranges from $5,000 to $25,000. The investment amount depends on the current state of the project and its needs. I can increase my investments in one project through follow-on rounds. I make investment decisions by conducting a series of procedures, but no longer than within one month.

It is reasonable for business angels to proceed from real circumstances.

Investor Tips

Startups spend surprisingly much time trying to raise investments. After accumulating their own money and friends’ investments, startups can raise the missing funds from venture studios, incubators, and accelerators. There is also a high chance of receiving non-repayable grants. Angel investments from individual investors or angel clubs are considered the first step toward external financing. After that, startups receive funds from venture capitalists and institutional investors.

Plans

I am interested in projects in the fields of FinTech and artificial intelligence.