How do you select the right startup to invest in? The 5-step strategy

Ronnie Laureana (iNSQUARED): “You can also lose everything when you bet on the wrong company, but evaluating the most interesting opportunities without relying on chance greatly increases the chances of earning. We do it with a 5-step strategy”

iNSQUARED, the holding company focused on investments in high-tech and innovative startups, tells potential investors how to evaluate a project, to rationally choose the most interesting ones. In fact, among the main activities of iNSQUARED there is precisely that of scouting. The iNSQUARED team is constantly looking for promising startups to present to its Investment Committee, which weekly analyzes business plans, selecting only the best.

“Many believe that discovering the next” unicorn “, a term used to identify startups worth over a billion dollars, is just a matter of luck or instinct – says Ronnie Laureana, CEO of iNSQUARED. Consequently, these people invest heavily, focusing on quantitative statistics. We at iNSQUARED disagree. Even if there is no recipe for safe investment, since these are high-risk investments, there is however a best practice that can be followed to recognize the true potential of an innovative startup “.

Here is iNSQUARED’s 5-step strategy, to select only the most promising startups.

1. Prioritize what you know and understand

First of all, investments in sectors or market segments in which you already have some experience should always be considered. Investing in what you can understand increases the probability of selecting the right project and more: if you know the sector or the scope of a startup closely, it also becomes possible to support startuppers by providing useful advice.

«This is precisely the core of the activities we carry out with iNSQUARED. Thanks to a very large network of partners (currently we are 33) with transversal skills, we are able to intercept and better evaluate the most promising opportunities in the vast and varied startup sector – says Mario Arcella, President of the Board of iNSQUARED. Not only! We can count on some preferential channels, taking advantage of partnership agreements with certified accelerators and incubators including Startup Wise Guys, BizPlace, DigitalHub, Ventive and Fool Farm, thus being able to very often access better investment conditions ».

2. Carefully evaluate the team

When evaluating a potential investment, you focus a lot on the numbers of the project. While financial data is very important to consider when investing, the potential for business success or failure can also be estimated from the caliber and character of the team.

“I always recommend to evaluate whether the words of the founders and members of the startup team are in line or not with the results obtained up to that moment. And also to measure the cohesion of the team »underlines Laureana. Another essential element to check is the time that these people really dedicate to the startup they are promoting. Those who keep their feet in two shoes, so to speak, are promoting a startup that is not yet mature. In some cases, if the founders aren’t fully committed to their new project, it can mean they don’t have faith in it.

“To give an example, in iNSQUARED we believed in the Qodeup project, the Brescia startup that aims to improve the dining experience via QR code, optimizing a whole series of operations, from consulting menus to paying from the table – explains Arcella. In Qodeup, a cohesive, competent and international team is allowing the startup to expand rapidly, optimizing customer acquisition mechanisms and accelerating the already rapid growth ».

3. Identify the differentiating factors

The third step to take to select a truly promising investment is to identify the differentiating factors of the startup being evaluated. This is because many markets are becoming quite saturated with products and services which, while innovative, are very similar. Does a company offer nothing new for its target? The likelihood of it achieving a substantial return could decrease significantly over time.

Better then to consider only startups capable of effectively solving a critical problem for target customers thanks to something truly new, be it a process or a product. The unique attributes of a product or service can arouse great enthusiasm in potential customers, who will think they can’t do without them.

Following this principle, iNSQUARED has chosen to invest in Vita Meals (formerly Feat Food) a startup specialized in the creation and home delivery of personalized meals thanks to artificial intelligence and machine learning. These elements are in fact highly differentiating in the European foodtech panorama.

4. Study the exit strategy

Having a clear exit strategy is a requirement for any investment, but it’s especially important when investing in startups. Investors should always be clear about the startup’s exit objectives. Who chooses to believe when and how can they recover their initial investment, along with any associated revenues?

You also need to be aware of the time frame each project will develop, so that you can make sure you can get out when you want. Trusters, one of the 15 companies on which iNSQUARED has decided to focus, is a real estate crowdfunding platform that offers the possibility of financing transactions that always end in the short term, generating profits quickly. The startup has made its exit strategy one of its strengths and this allows it to have the trust of its investors and shareholders since its foundation.

5. Know what to avoid

Finally, even if it may seem obvious, the founders of iNSQUARED recommend that you have a clear idea of what to avoid when looking for an investment. Meaning what? We must flee from investments that are unlikely to produce a return. “If an opportunity seems too good to be true, that is, it promises to make us too much money or has unrealistic goals, it will probably fail. We would all like to find (or have) a unique, disruptive, scalable entrepreneurial idea to the nth degree… The “trick” is to keep our feet on the ground, evaluating the concrete feasibility of the product or service »concludes the CEO of iNSQUARED. Furthermore, it is always best to stay away from business ventures involving questionable or regulated industries, such as online gambling and cryptocurrency casinos, which have a high risk of fraud and a poor reputation.

The crowdfunding campaign

Thanks to these rules and the high skills of the team, iNSQUARED has already invested in 15 startups and aims to reach 25 thanks to the funds raised with the equity crowdfunding campaign underway on BacktoWork, the platform owned by Intesa Sanpaolo, and in overfunding after just a few hours. There are still a few days left to join the campaign and become members of iNSQUARED and all the startups in the portfolio starting from a minimum investment of 500 euros.