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Company selection strategy

What is Startupxplore?

Startupxplore is an online platform that offers investment opportunities in high potential companies, where a professional investor with experience and a proven track record of investing in companies has already confirmed their participation and invests their money and where Startupxplore also invests. Investors registered at Startupxplore can invest in the same conditions as the lead investor, and share their experience and knowledge.

The main objective of Startupxplore is to make it easier and safer for its users to invest in high-potential companies through a well-balanced and diversified portfolio of investment in quality companies (https://startupxplore.com/en/investors/inverst-startups). It is a premium investment platform, where quality is the premium over quantity, and where the main metric is not the number of operations (companies) that have been financed through the platform.

Startupxplore is also the largest community of innovative companies with high growth potential in Spain and one of the most active in Europe, having become the main resource to find the best investment opportunities.

Types of companies to invest in

At Startupxplore we believe that innovative companies, lightweight in structure but with high potential, are the basis of economic changes, and that is why we have not only created an investment platform through which they can be financed, but we also actively invest in them and help them to make that change a reality.

What distinguishes the companies we are looking for?

  •  Demonstrate high growth capacity
  •  Have scalable business models.
  • Are in stages prior to consolidation.
  • Are efficient in the use of capital.
  •  Focus on creating highly scalable but solid businesses.
  •  Generate real value for your customers.
  •  Understand investment as a way of financing early-stage growth.

How our Investment Criteria have been designed?

At Startupxplore we understand that an investment platform in companies with high growth potential should not under any concept act as a mere connector between investors and project promoters assuming that the companies that the market chooses are the best ones, since it is extremely difficult to assess the potential of a company reading a business plan, watching a presentation or getting to know the promoter team through a video. From Startupxplore we consider that it is virtually impossible to identify which companies will succeed a priori... but that it is feasible to identify risk factors that can cause a company to fail early and so multiply considerably the chances of having success.

That´s why, after talking to the main innovative companies investors in the national prospect and a good part of foreign investors, we have designed detailed filtering criteria, based on their knowledge and experience, that help us to discard companies with an excessive risk level according to our criterion.

We believe that our role should be understood in the long term, and that means being very thorough in filtering companies, especially in mitigating risks, and understanding that our ultimate goal should be to help our investors build a healthy, diversified portfolio with a controlled risk level.

That´s why not only do we strive to find and filter interesting companies, but we invest our own money in each and every one of the operations that are offered to Startupxplore investors. Not only because it aligns us totally with them, but because we believe that it´s a profitable way of investing our own capital.

That is why we have decided to focus on:

  • Invest in LESS companies but of BETTER quality.
  • Increase the possibility of success by being very thorough in companies? analysis and risk mitigation.
  • Not attempting to maximize the probability of success at the cost of taking more risk.
  • Invest our own capital in all operations we launch
  • Think long term and build an investment portfolio with a diversified and premium focus.

At a market where more and more money is devoted to investing in innovative companies with high growth potential, more companies looking for capital and more tools to participate in its shareholding, we believe that it is more important than ever to be consequent with our principles and therefore be transparent sharing our investment criteria.

Startupxplore's Investment Criteria

The Startupxplore operations filtering criteria are described below. They detail the minimum conditions that a company must satisfy to be considered suitable to be launched within the Startupxplore platform.

ALL criteria must be fulfilled in order to present the transaction to Startupxplore investors, and from that moment it is up to them to analyze the information and decide whether to invest or not.

Criteria related to the company

In Startupxplore we have no preference or defined geographical criteria. We believe that the best companies can be born anywhere, from a big city to a small town away from the great epicenters of population. Even so we believe that in the phase in which we invest is necessary a minimum closeness to the company, as well as businesses that have already been validated (through clients and billing) and with a minimum age:

  • The company must have its registered office in Europe.
  • In the case of companies oriented to finale customer (B2C), they must be at least 6 months old.
  • In the case of company-oriented companies (B2B), they must be at least 9 months old.
  • The company must be less than 5 years old.
  • There must be competition in the market, as it is an indication that there is business.
  • It is essential that the company already has its product / service in the market or is close to its commercialization.

Criteria related to the sector of activity

At Startupxplore we are agnostic in terms of sectors in which to invest, we have no preference in this respect and we believe that this is the basis for a good diversification. We apply the same criteria as the European Investment Bank with respect to the sectors we automatically discard:

  • Weapons
  • Pornography
  • Human clonation
  • Tobacco
  • Prostitution
  • Gambling
  • Homeopathy

Criteria related to the Reference Investor

One of the key aspects that sets us apart is co-investment, since absolutely all of the operations we propose must have the figure of a reference investor, often a business angel or venture capital fund with proven experience that has not only analyzed and evaluated the company and considers it a good investment, but also compromises a significant part of the capital invested.

This implies that, in addition to all risk analysis and requirements imposed by Startupxplore, there must be a third party, independent and external that not only considers the company as a good investment but also invests under the same conditions as Startupxplore investors and assumes a relevant part of the round, which benefits and aligns the interests of all the investors.

  • There must be a pre-committed reference investor at the time of launching the round with Startupxplore.
  • This one accepts to lead the operation in Startupxplore, and knows and accepts the syndication format
  • It invests exactly under the same conditions as Startupxplore (there is no transfer of shares, private agreements, neither previous or subsequent payments between the company and him).
  • Invest at least 10-15% of the round in Startupxplore.
  • He has experience investing in innovative companies with high growth potential (at least 5 previous investments).

Criteria related to the Investment Operation

The idea is to invest BEFORE the company is consolidated and growing (moment at which valuations are shoot) but once it has validated its business model in the market (usually, through sales). That's why Startupxplore's filtering criteria are:

  • Companies with a PRE-MONEY valuation of at least 500K ?
  • Round size greater than 150K? (not including reference investor).
  • Cash availability (Runway) of at least 3 months before the start of the round.
  • Cash availability (Runway) of at least 12 months after successfully completing the round (including projected expenditure increase).

Criteria related to financial aspects

We want to invest in well-managed companies, which use efficiently the capital, and that focus on creating solid businesses that generate real value for their clients, with a calling to becoming profitable companies.

  • Real billing in, at least, the last 3 months (excepto for companies related with hardware or similar).
  • Destination of the round may not be debt cancellation by more than 20%.

Criteria related to the Team

At Startupxplore we believe that the basis of success of any project is a good team, and therefore one of the aspects that we pay the most attention to is how it is designed, its incentives, how it is managed and its structure.

  • At least 66% of the founders must have full dedication.
  • There must be at least ONE person with an engineer/scientific/technical profile.
  • There must be at least ONE person in the marketing/sales/business profile.
  • The percentage of the company in the hands of the founders must be higher than 30%.
  • The annual gross average annual salary of the founding team x 25 must be LESS than the current pre-money value of the company.

Criteria related to the legal and ethical aspects

One of the values that defines us as a company, both to the team that runs it and to all its partners, is a great concern for business ethics and strict compliance with its obligations incurred, so one of the key aspects which we will analyze in all our investments is the fulfillment of legal and administrative obligations.

  • The brands used by the company to perform its activity are registered at least in its origin country.
  • The company is aware of its obligations with the Public Treasury and Social Security.
  • The domains from which the activity is exercised are in the name of the company.
  • The company has not had any serious and / or very serious judicial and/or administrative sanction.
  • Neither the company nor its founders are involved in any type of insolvency sanction.

Criteria related to the Partners Agreement

In addition, for an investment operation to be successful, it must be regulated by a partnership agreement that includes a set of minimum clauses:

  • Pull (Drag along).
  • Accompaniment (Tag along).
  • Duty of information on a quarterly basis.
  • Salary of the founders requires approval from investors.
  • There is a possibility of veto before a proposed change of activity.
  • The founders with 100% executive dedication have an agreed permanence of minimum 2 years (Vesting).
  • The founders have an obligation of exclusivity with the company of at least 80% of their time once the capital increase has been carried out.