We invest primarily in companies in the following fields:
- Digital wallets & payments
- Online financial services
- Local deals, social gifting & electronic commerce
- VoIP communications
- Digital & user generated content
In essence, we look for teams that are committed to solving a real problem with a novel approach, so even if your startup does not fit any of the above focus areas, we would like to hear from you. The criteria listed in this section are the key to our evaluation of any opportunity because, in our experience, they have proven to be the essential ingredients of successful companies. We invest across all stages of new ventures, with particular emphasis on seed and early-stage financing.
At Smartex, we believe in your idea and we buy into your optimism. Our seed investments empower entrepreneurs to create new businesses by coupling initial capital with access to our proven team of company builders. Smartex seed investments typically range from US$1.5K to US$50K.
With our early-stage investments, we recognise a great new company in the making. We support your vision and passion with resources and personal focus you may not otherwise find available. Investments at this stage typically range from US$50K to US$100K to help your business grow and achieve its goals.
Our growth-stage investments provide ramp-up funding for innovators who have executed well and demonstrated solid market potential. We look to partner with breakout companies on the fast track to success, typically investing between US$100K to US$300K to help accelerate business momentum.
A great plan is one which can be distilled in several sentences to a very simple proposition without losing its attractiveness. If a company's plan is not simple enough to be described in two or three sentences, it probably is too complex to be communicated effectively to customers, employees and shareholders.
- What business is the company in?
- What is the company’s mission?
- Is the idea powerful enough to be the solid foundation of a big business or could it simply end up as a feature of someone else’s product?
- Is the path to market plausible for a new entrant?
- How will the company be financed, not only initially but all the way to self-sufficiency?
- What are the key milestones that must be achieved on the company’s path to success?
- How will the company be valued if it is successful?
- What is the likely exit strategy for investors?
We like companies focused on markets that are already large and profitable or that are expected to experience explosive growth. We seek to invest in the companies that will be market leaders in well-identified market segments.
- How long will it take for the business to generate US$250K in annual sales?
- What market share will it have to obtain to achieve those levels of sales?
- What size organisation will have to be built to achieve these sales levels?
- At what stage does the business become profitable?
- Who are the key competitors? Also see Advantage below
- How is the new company going to effectively compete with incumbents and new entrants?
We always find ourselves asking the entrepreneurs the following questions. What is the problem your company is trying to solve? If a company is addressing a problem that is not significant enough, it may be betting on a solution looking for a problem. And if the problem is significant, why is it not being addressed by existing players?
- What evidence is there to suggest that there is a pressing need for the solution?
- What cost would customers attribute to this problem and what value to the proposed solution?
- How is this need being addressed currently and why is this not sufficient?
- Has this need been recognised by existing players? Why or why not?
- How significant and costly is the change required to embrace the proposed solution?
We also want to know specifically who is feeling the pain caused by this problem and how many such people are out there. For products sold to businesses we prefer management teams that are able to talk about specific people in specific roles at specific companies that have decision-making power and would pay for the solution provided by the company. For products sold directly to consumers, we prefer teams who can talk about who specifically will be a customer and why. Where appropriate, we also like to see strong evidence from market research, testing or ideally a prototype or beta release that potential customers will really value the proposed solution.
- What value do customers place on a solution to the problem the company is addressing?
- For consumer propositions, what evidence do you have that this product or service will meet real customer demand?
- What are the customer’s key criteria in making a purchase decision?
- How long is the sales cycle?
How is your approach to solving a problem different from other ones out there? Are these differences important? Do they bring you a sustainable competitive advantage?
- If the need the company is addressing is so significant, why is no one else offering a compelling solution?
- Are the product’s advantages compelling enough to outweigh the customers’ preference for continuing to deal with the existing, established solutions?
- What is the source of the company’s differentiation?
- How can this source of differentiation be protected and enhanced over a long period of time?
We look for entrepreneurs who are aware of the challenges they are facing and who do not seek to conceal them. On the contrary, they know what they are good at and they are looking for partners who can make up for their shortcomings and help them to address and overcome these challenges. This type of self-awareness and realism usually comes from years of experience and lessons learned.
- What are the key risks facing the business?
- Which of these risks could be fatal to the business?
- What partnerships could help the company mitigate and address these risks?
- What alternative paths are available to the company if a major risk materialises?
We want the funds we invest in companies to be spent on realising the potential we see in them by growing the business. In our opinion, company founders and CEOs should set the example for their employees by drawing modest salaries and by saving money in all areas that are not critical to the company's mission.
- How will the company conserve cash and get all of its employees to think like owners of the business?
- How will the headcount grow over the next 12-24 months?
- Which companies are likely to be the best sources of talent to recruit?
- What compensation packages does the company intend to offer employees at various levels?
- Are the incentives of key executives, founders and investors aligned?
An essential ingredient to any startup is drive. The founders must have sufficient energy and conviction to carry them through the ups and downs they will inevitably face. They must also be able to communicate this enthusiasm to their employees in such a way that it becomes contagious and part of the company's culture.
- What essential elements define the company’s culture?
- Which objectives are shared by the entire team?
Is the company vision clearly communicated to and understood by all employees?