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Venture Scouting Explained: How Startups Can Work with Scouts

Tuesday, November 2, 2021

Startup Jedi

We talk to startups and investors, you get the value.

Startups are looking for good investors and investors are looking for good startups. On the one hand, communication is often the task of the CEO, and on the other hand, scouts also help with the search process. Sensible cooperation with them can give a startup serious benefits. We will tell you how to work with a scout to get the most out of it.

Who Are Scouts?

In this context, scouts are people who are looking for startups, technologies or teams to collaborate with. This cooperation can be different starting from investing, accelerating, or buying technology to much more.

Scouts can be individual employees of a fund, corporation or accelerator. Besides, the functions of searching for projects are often performed by partners of funds. In this post, we refer to everyone looking for startups to collaborate with a scout.

A good scout should look at the startup from both sides at the same time. They need to nderstand how investors evaluate projects and what a startup needs in order to develop successfully. There are just a few hundred such specialists in Russia and Ukraine and only a few in Belarus.

It is not difficult to find them on social networks, and communication with a scout can accelerate raising investments. An experienced scout will suggest a fund relevant to the project and give you a warm contact.

How Scouts Find Startups

Scouts of various funds, both early stages and those belonging to a large corporation, told us about their work. The set of available startup search tools is alomst the same, but they use them differently. 

— We usually start searching online. We are looking for information in open databases (Crunchbase, Pitchbook, Dealroom) and in our closed database. We add the projects that interested us at the demo days and pitch sessions there. We also send our request to Facebook groups and Telegram channels with many start-up founders (Startup Kotiki, for example). Then we send a message on Linkedin and Facebook, or an email to the companies we found or a personal email to the founder. We then work with those who responded, - said Polina Yunda, scout of Baza VC.

— The way we search depends on the task. If we are dealing with a specific business problem, then we use startup databases such as Crunchbase. And then we also search on the Internet. We are looking for everything related to what we need in order to form the most complete picture possible. We are also constantly looking for new projects at pitch sessions, accelerator demo days, startup contests, and communicate with colleagues from other companies. We also have an entry point for startups that want to directly offer us their solutions: «Severstal» Open Innovations website. This is the most convenient and fastest way to cooperate with our company, - said Dmitry Chisnikov, scout of PAO Severstal. 

For the classic seed stage, there are few search tools. When a startup only has an MVP and a somewhat confirmed demand, it is usually poorly represented in public project databases, does not make deals and does not give media interviews. So the best way to find startups at an early stage is conferences, demo days and other events for aspiring startups We ourselves hold many events (VC8 pitch platform and conferences) and attend major events where you can meet new projects,'' says Ilya Stepanov, a scout from Around Capital.

How To Get Noticed by a Scout?

Visibility is a competitive advantage for a startup, especially early on. If they cannot find your company, then they will find your competitor.

— Make sure you can be found. Create profiles in startup databases, take care of a website with a project description. If you are making a b2b product, look for an opportunity to make a pilot project with a potential client as early as possible. It's important to show that your solution actually works so that other companies in the industry will notice you as well. A start-up almost always needs to be visible to investors and companies, because they really help to grow and develop, '' emphasizes Dmitry Chisnikov.

— Include your current contacts everywhere (Facebook, Linkedin, work email) so it’s easy to contact you. A general email does not work. Emails often end up in spam or get lost in the stream of other messages, — adds Polina Yunda.

— Attend the main startup events in your region, tell about yourself in any format. The main thing is to communicate with representatives of funds, angels and other startups. Networking is essential. It's just that lectures rarely have the same strong effect.

You need to show your traction, talk about your potential. At speeches, in communication with investors and simply interested people, in social networks - everything goes. Show your growh and they will talk about you. And if they talk about you, then there is much more chance that the right people will hear about you.

A beautiful presentation is also important. It's does not mean some kind of super design: information and elaboration are important. When you look at the slides and see that this is a well-made product, and not just a quickly made “MVP presentation”, it develops an appropriate attitude towards the project.

When important information is easy to find and the emphasis is clear, the chances are much higher that people will read past a couple of slides. Or they can share it with partner funds and start following the project, — shares Ilya Stepanov.

How Can a Scout Help a Startup?

— The network is very important. Only startups send cold emails to funds. Most investors don't do cold email deals. They only take projects with recommendations seriously.

If a scout comes to a startup, then they are already interested and they have already made a certain selection. A scout puts a start-up on its “verification checkbox” in the eyes of an investor. Thanks to the recommendation of a specialist with a good reputation, the project will be considered much more carefully than an email offer, — Ilya believes.

— Your round = scout success. So they will help you prepare for the meeting with the funds, and ask you the right questions. Pitching to a scout is also a great idea. We will show you what to fix, highlight or remove in the presentation,- Polina adds.

Even if at some point your startup did not match the scout's request, they will add it to their database anyway and contact next time they search, as well as share information with colleagues. Project exchange is a very common practice in the venture capital market.

Conclusion

Raising investment is a necessary burden for most startups. Many wish they could just work on the product and not spend months raising rounds. Therefore, the more effective assistants you can involve in the fundraising process, the better. Fund scouts are very good helpers.

2 Nov 2021

 

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