How Do An Investor Makes An Investment Decision? - Hajime Hotta

1. HOW DO I MAKE
AN INVESTMENT
DECISION?

2. Self Introduction
2
Goal
• Hajime Hotta
• President of Cinnamon
• Founder of Innovatube (Incubator)
• Ph.D Computer Science (Artificial Intelligence)
• Experienced serial entrepreneur in Japan
• Invested in total 10 Southeast Asian startups

3. 3
My Activity
LIFE OF STARTUP
Execution is
everything
Find PMF first
(Product Market Fit)
Documentation is a
waste of time

4. 4
My Activity
US Guys say Because but in SEA
Execution is
everything
Mentors are
excellent enough
for ideas
Too many
hopeless ideas
Find PMF first
(Product Market Fit)
Hypothesis are too
unique to believe
many guys try to
verify something
just obvious
Documentation is a
waste of time
US guys are very
well trained on
presentation
too many
unacceptable
documents
Circumstances are different from US

5. 5
My Activity
SME and IDE is quite different too
STEADILY
PROFITABLE
SME
EXPONENTIALLY
GROWING
IDE
lots of
Counter-intuitive
differences

6. 6
My Activity
Lecture series for my related buddies
✓Cinnamon members
✓My portfolio
✓Innovatube members
✓SeedForAction*
companies
✓Apprentice* Members
To

7. 7
My Activity
2016’s new challenge (Innovatube)
Apprentice Program
‣ Exclusively for Entrepreneurial Engineer
‣ To acquire startup-focused business skills to be CEO
‣ No excellent business idea required: deadline: 4th May

8. 8
My Activity
2016’s new challenge (Cinnamon)
Intelligence 2016 Hanoi
‣ For top tier computer science students who are also
talented at math
‣ 6-month program to learn how to apply Artificial
Intelligence technologies to real world problems

9. Pitch
Hajime, Confidential

10. To compose a pitch which is attractive to investors
10
Goal
Understand Investors
Compose a pitch

11. 11
Understand Investors
Compose a pitch

12. 12
Understand investors
Who Investors want to invest in?
Excellent teams with disruptive technology
to change the world

13. Investors are not evaluators
13
Understand investors
Who Investors want to invest in?
Excellent teams with disruptive technology
to change the world
Inaccurate

14. Example 1; hopeless conversations
14
Understand investors
I have a concern on the real user-side demands
We can do the marketing through partnership
strategies rather than directly doing marketing.
In detail, xxx
Investor
Entrepreneur

15. Example 2; hopeless conversations
15
Understand investors
I have a concern about the expandability of
EdTech businesses to regional scale
I think it is still possible in our case because ….
Investor
Entrepreneur

16. Investors just want to find business partners
16
Understand investors
I want to collaborate
but it could be too risky
Investor
Investor

17. Only two factors which can convince investors
17
Understand investors
I want to collaborate
but it could be too risky
Investor
Investor
(1) The team and the field
are my favourite
(2) I can imagine the next
round fundraise

18. Pitch will help them to understand those two
18
Understand investors
(1) The team and the field
are my favourite
(2) I can imagine the next
round fundraise
Pitch

19. Team Preference depends
19
Understand investors
Team
Preference
Common
Entrepreneurial
Tendency
Chemistry
Depends on Investors
A likes tech geeks
B likes detail-oriented guys
C likes hyper risk takers
D likes crazy visionalist…
etc.
Observable common natures
- Fact Oriented
- Hard work
- Responsive
- Ability to attract talents
- Product/UX Oriented
- Fail-first minded

20. Serial Entrepreneurs can perfectly behave as entrepreneur
20
Understand investors
Depends on Investors
A likes tech geeks
B likes detail-oriented guys
C likes hyper risk takers
D likes crazy visionalist…
etc.
Observable common natures
- Fact Oriented
- Hard work
- Responsive
- Ability to attract talents
- Product/UX Oriented
- Fail-first minded

21. Investors don’t like ambiguous broad vision
21
Understand investors
Your whole visions…
what is it???
Growth
Hack
Marketing
Product Current Product is
just a part of the vision
Know a lot about
techniques
Tagline
Product description is
a part of marketing
tactics

22. Should respect marketing message on top
22
Understand investors
Marketing Message*
Features
Concise, attractive
value proposition
(one sentence)
Operation
All the features has to be
100% consistent
Operation also has to be
consistent with the
marketing message
*Marketing message = Unique Value Proposition

23. Example of non-product-oriented communication
23
Understand investors
I have a concern on the real user-side demands
We can do the marketing through partnership
strategies rather than directly doing marketing.
In detail, xxx
Investor
Entrepreneur
Product
Concern
Doesn't
sound
product
oriented

24. Field Preference depends on Investment Thesis
24
Understand investors
Investment Thesis:
In order not to be too random, we (professional
investors) usually have our own view of the market.
only invest in companies whose strategy is along
the investment thesis

25. Example of the investment thesis (my case)
25
Understand investors
O2O (Online to Offline)
Enterprise softwares
Video
Edtech (Education Tech)
Fintech (Financial Tech)
IoT (Internet of Things)
Market Opportunity in SEA
SEA is now experiencing a dramatic increase of consumption, and
it first affects on O2O area, e.g. F&B, fashions.
Work efficiency will be dramatically improved because of huge
smartphone penetration and evolution of app technology
Smartphone video consumption will get bigger and bigger with
the establishment of broadband internet/3G environment
Big demands in Low-cost, remote education in SEA especially in
(1) Language (2) 15-18 years old (3) Under 12 years old education
Several IoT areas have been proven as market and applicable to
SEA regions; e.g. Healthcare devices, Home security,
(1) payment solutions with low credit card penetration (2) rise of
asset management demands e.g. stock markets

26. You can’t change the investment thesis
26
Understand investors
I have a concern about the expandability of
EdTech businesses to regional scale
I think it is still possible in our case because ….
Investor
Entrepreneur
This is
Investment
Thesis
Impossible
to change

27. 27
Understand investors
I want to collaborate
but it could be too risky
Investor
Investor
(1) The team and the field
are my favourite
(2) I can imagine the next
round fundraise

28. There are many types of investors
28
Understand investors
Amateur
Angel
Investors
Professional
Angel
Investors
Seed
VC
Series A+
VC

29. Final goal for professionals are successful exit
29
Understand investors
Amateur
Angel
Investors
Professional
Angel
Investors
Seed
VC
Series A+
VC
Exit
No clear
story

30. Everybody reverse-calculates from possible exit
30
Understand investors
Professional
Angel
Investors
Seed
VC
Series A+
VC
Exit
What is the
exit option?
What Series A+
VC look for?
What Seed
VC look for?
1. What is the possible scenario to convince Seed guys?
2. What evidence we can prepare for the Seed round?
3x3x

31. That mechanism reduces the diversification of ideas
31
Understand investors
Professional
Angel
Investors
Founders
Very interesting
B2C ideas here!
Very attractive

32. That mechanism reduces the diversification of ideas
32
Understand investors
Professional
Angel
Investors
Seed
VC
Founders
Very interesting
B2C ideas here!
Very attractive but
I don’t believe in B2C
in SEA yet
No way to support
unfortunately
They don’t
understand us well!

33. Communicate with them casually as early as possible
33
Understand investors
Professional
Angel
Investors
Founders
What do you think
about the market?
ah, could be hard..

34. 34
Understand Investors
Compose a pitch

35. Wrap up three key points
35
Compose a pitch
The team is my favourite
The field is my favourite
I can imagine the next
round fundraise
I have a viable
entrepreneurial mindset
having same investment
thesis as yours
which is also attractive for
later stage investors

36. Wrap up three key points
36
Compose a pitch
The team is my favourite
The field is my favourite
I can imagine the next
round fundraise
I have a viable
entrepreneurial mindset
having same investment
thesis as yours
which is also attractive for
later stage investors
Only this one can be generalised

37. Show off as if you know how to execute
37
Compose a pitch
- Fact Oriented
- Hard work
- Responsive
- Ability to attract talents
- Product/UX Oriented
- Fail-first minded

38. Use simple word directly related to product
38
Compose a pitch
…because Investors does not like abstract discussions
Cheap
Simple
Fast
Easy
Effective
Cool
Healthy
Painless
Examples of direct benefits to users

39. 39
Compose a pitch
1. Entrepreneurial mindset; Obviousness
Investors doesn’t like balancing something
because it lacks of clarity

40. Remove ambiguity from messages. It looks stupid.
40
Compose a pitch
1. Conceptual words
We are not just a service
provider, but a marketplace.
2. Ambiguous Analogy/Metaphor
Uber for human resource
3. Unmeasurable/Abstract adjective
Innovative way of
communication solves the
problem of loneliness
We provide a web service
to connect clients and
consumers
Crowdsource of recruiters
to widen the human
resource database
Fast transfer of photo data
to minimise the stress of
photo sharing

41. Pain is not a structural problem. Individual User.
41
Compose a pitch
‣ Huge mismatch
‣ Unfortunate situation because of lack of education
‣ High tax ratio
‣ People are too lazy to always take care of xxx
Example of non-user-centric pain description

42. 42
Compose a pitch
keyword
ULTIMATELY

43. 43
Compose a pitch
if I were an investor who has an investment thesis
We will have some enterprise software
startups from Vietnam
by leveraging latest technologies

44. 44
Compose a pitch
Our product ultimately simplifies
video call conferences.
No messy preparation needed.

45. 45
Compose a pitch
Our service can allow app developers to
hire QA (quality assurance) resources
within a minute