For our first Investor Spotlight series, we chat with Piero Grieco, a finance professional who started qualifying as an ACA with Deloitte and then built a 20-year career at an investment bank.
Piero is also a specialist in solving complex problems, financial planning and portfolio and risk management. Since leaving the City last year, he has been learning to use those skills in investing in and advising startup businesses.
Before we dive in, our readers would love to get to know you better. So, can you tell us a bit about your background on how you started investing?
An Investment Bank is a great place to hone a wide range of skills but rarely gives you a feeling of achieving something tangible, which is something I have always wanted to do eventually. Banks are also highly restrictive in terms of personal investment, so leaving that world was a great opportunity to invest in a different space and get to know the startup landscape.
Since starting, I have found it a very exciting space to work in, and I am trying to build a portfolio career that enables plenty of opportunities for investing in and helping founders.
What startups do you invest in, and at what stage? Why do you choose to invest in these types of startups?
I invest in companies at the pre-seed and seed stages. Not only does this offer high potential rewards (albeit with significant risk), but it also provides the opportunity for Angels to make a positive difference in how the company grows and overcomes challenges.
I also believe that startups can play a pivotal role in addressing the environmental crisis we face, which is an important consideration for my decision-making. There is a lot of lip service paid to these critical issues by big companies and politicians, but it is the inventors and founders in the green tech world who are making a difference and need the backing of the investor community.
When choosing investment opportunities, which one do you go with the most: your head, your heart, your gut, or a combination of the three? Why?
I think you need to have a reaction from your head or your gut before you bring your head into it. I want to be excited by why people are doing something and the potential of the opportunity they are showing you. If you are looking for a founder to disrupt a market, they need to be able to make investors and customers sit up and notice one thing, and it is also a more enjoyable process as an investor if you believe strongly in what they are doing. Once you have that part, you then need your head to start asking some sensible questions:
- Is the market opportunity large enough?
- Do they have an unfair advantage in terms of IP/market access, and can they continue to protect that?
- Does the team have the right skills and personalities, and are they committed?
- Does the go-to-market model they have make sense?
- Does the business have proven traction of some kind?
- Does the valuation make sense?
- Do they have enough runway to get to the next milestone?
How often do you invest in a year, and do you have a typical investment ticket size?
I have made several investments this year in the £5-30k range (depending on the situation).
What was the most rewarding startup you’ve invested in so far? Why?
The most rewarding startup I have been involved with has been Water-filled Glass, who is solving the problem of the colossal energy usage in the heating and cooling of buildings by revolutionizing windows and glass facades. Not only am I excited by the project’s massive potential, but I have also been able to help the founders with strategy and planning and have recently become their part-time CFO.
Making mistakes is part of the “growing pains” every successful investor needs to go through. Can you share with us one investment mistake you’ve made and the valuable lesson(s) the experience taught you?
The way I made my first investment was probably the mistake I look back on.
Although it is doing fine, it doesn’t meet the criteria I have focused on over time, in that it is a B2C business with a good brand but not a lot of other defensibility. They were at a point where the valuation also didn’t offer significant upside, and they had a broad investor base, including VCs and crowdfunding, which didn’t leave room for significant angel involvement. Looking back now, I didn’t do enough DD and didn’t know the team well enough.
The first lesson it taught me was to have patience. Take time to find the companies with great potential, not just good and take the time to get to know the founders and get the answers to your “hurdle” questions.
The second lesson it taught me was that when you don’t know a sector or can’t understand it, then try to find someone who does, and you can invest alongside.
What are some “myths” or misconceptions people have when investing in startups, particularly on crowdfunding platforms, that you’ve debunked throughout your journey?
Some potential investors have the misconception that you need to be like one of the Dragons on Dragons Den to be an Angel Investor, but the reality is that there are all kinds of support you can offer, ranging from the provision of capital to Board advice, sales channel contacts and funding introductions.
There has been much talk about the need for investors to support startup founders from minority groups. This may be obvious to you, but can you share with our readers why it’s so crucial for investors to support startups with diverse and inclusive teams?
It can be a daunting experience seeking investment from groups that, in my experience, are mostly made up of middle-aged white men, so investors need to keep open minds and provide encouragement.
The best startups dare to think differently, so diversity of founder background and experience can provide the best launchpad for challenging existing ways of doing things.
Great! Now, let’s go to the main focus of this interview. What are the critical red flags you watch out for when choosing startups to invest in and why?
Here are some of the red flags that I have seen during pitches or decks:
- If a founder cannot tell an engaging story about what they are doing and why in the first couple of minutes, this is an immediate red flag. I have sat through some ten-minute pitches where I still didn’t understand what the company was trying to do, so conveying passion and clarity is key.
- A startup operating in a crowded market without a compelling advantage they can protect.
- Lack of commitment or skin in the game from the founder.
- Lack of obvious traction either in revenue, LOI or partnerships.
- Lack of self-awareness. If a founder can’t react well to challenges or questions and doesn’t understand the risks and challenges to their business, this does not bode well.
- Significantly over-optimistic valuations or projections call the founders’ judgement and experience into question.
What would make a startup stand out and get you interested to learn more about them? Can you share with us examples to show this?
- The ability to tell a great story of why you are doing what you are doing can intrigue investors, and listening to what you are saying and using humour can also help.
- Show that you have a great team with relevant experience for what you are building, and financial backers from the industry help you stand out. If you don’t have that, try to get advisors on board before you pitch. A recent company I invested in had CEOs of companies in their sector advising them and financially backing them, which gave me real confidence in their proposition.
- Having an “unfair” advantage in a large existing or potential market.
- Having a new technology in a tired or failing industry.
What are the top three traits startup founders need to have to be able to launch their startups successfully? Can you expand on why you chose these traits?
I would say determination, positivity and adaptability. From what I have seen from inside and outside a startup, there are frequent highs and lows. You need determination and positivity to get through the tough moments and believe in your vision.
On the flip side, you also need adaptability to see early when things are not working and make the changes necessary. This includes being able to listen to outside advice.
In your opinion, what are the critical elements of an excellent investor-investee relationship? What tips can you give startup founders to ensure they consistently provide this with you and other investors?
The critical elements are trust and communication.
Typically, investees will at some point be asking their investors for follow-on investment, and good communication around how the investment has been spent and an honest analysis of how the company is doing helps build trust. The communication should also be two-way so investors can offer their support, network and experience.
How often should startup founders update their investors on their progress? What method is, in your opinion, the best way for startup founders to use when updating their investors?
I find email updates every 1-3 months very useful. I think there should also be a regular (every 3-6 months) forum for interactive exchange. If there are major strategic decisions or changes to be made, then an interactive call is best and allows investors to offer advice and get on board with where the company is going.
Let’s flip things around. What three things can cause an investor NOT to invest in a startup, and why?
- Complicated company structures/ share schemes
- Completely unrealistic financial projections and valuation
- Lack of honesty and openness. If an investor finds out that you have materially exaggerated or left out key facts, this can be an immediate “No.”
As a parting gift to our readers, what are the top three pieces of advice you can give them about investing in startups?
- Be patient and wait for opportunities that excite you.
- Come up with your own framework for making investment decisions (whether that be a sector you understand, ESG considerations, proven revenue, quality of founding team etc.) and stick to it.
- Try to team up with other investors to share knowledge and experience when evaluating a company and conducting due diligence (especially if you don’t know the sector well yourself). It won’t guarantee success but may help you avoid pitfalls you didn’t even know to look for.
Thank you for these fantastic insights and for your time. We truly appreciate it and wish you all the best in your investing journey.