What investors look for in a startup when the tech already works
Two hardware startups, both with technology that did what it promised. One could transport a garage-sized printer to a site and print the parts of a building in a fraction of the usual time. The other built fighting robots up to three stories tall, each piloted by a person. Alexander Piskunov invested in both. The first went on to bring in Khosla Ventures and gave his fund a good exit. The second spent heavily on hardware for a TV deal that never came.
Alex, formerly a founding partner at KAAN Ventures and a partner at Ruvento Ventures, now advises governments on technology and investment. He joined Phil Kell on DevLab to talk about what investors look for in a startup once the tech works, a question engineers don’t often get asked.
Investors measure progress differently
Engineers track progress in story points, milestones and features. Investors are tracking something else, and Alex put it bluntly. An investor is “not a philanthropist,” and the main goal of investing “is actually to make money.”
At the earliest stage, that means judging the founding team, any early sales, the product and whether patents back it up. Later it’s contracts, pilots, letters of intent and who backed previous rounds. One signal stood out. If earlier investors aren’t putting money into the next round, it often “means something is wrong with the company.”
What the good bet looked like
The printer belonged to Mighty Buildings, which printed building components from reinforced plastic and sold into California, the Gulf and Southeast Asia. Alex doesn’t oversell it: “it was practical, it was very quick to manufacture and it was relatively cheap.”
The fund still had doubts. The team was small and would need to spend on hiring instead of R&D and permits. And it was hardware (“hardware is hard,” as the saying goes), so it needed more money and a longer wait than the AI and software deals on the table. They invested because they believed in the market and the founders, then did the commercial work the founders didn’t have time for: finding clients in Napa Valley and Southeast Asia, sourcing cheaper materials and introducing new hires.
That shapes his advice to founders choosing investors. Plenty promise smart money, but “very few investors actually do something beyond just providing the next check.” Talk to their portfolio companies before you sign.
Where the giant robots went wrong
The robot company, based in Singapore, staged human-piloted fights it hoped would draw major media attention and maybe a Netflix show. It built the robots, but the TV deal never came. This was before what Alex calls “the age of Boston Dynamics,” and people had bigger things to worry about.
“An idea by itself, I would say it’s worth nothing. It’s all about the implementation.” Founders, he says, should plan how they’ll sell and make money as carefully as they plan the MVP.
Too early, or no market at all? Alex says you can argue either way. Phil reckons the last 12 months of robotics progress suggest it could work soon.
If you’re founding a startup
Sell before anyone pays. A pilot that can scale or a few letters of intent can carry you to the next round.
Have savings. A meaningful salary often doesn’t come until growth stage, “a few years at best.”
Find a co-founder. Solo founders are less likely to succeed, and even brilliant ones only have “twenty-four hours in a day.”
Don’t be greedy with equity. “A greater equity in nothing is still going to be worth nothing.” But giving away 60 or 70% before Series B is a red flag for later investors.
Don’t chase the top valuation. If you can’t justify it, the next round may be a down round, and “for many startups it’s basically the spiral.”
If you’re thinking of joining one
Alex has seen more people leave corporate jobs for startups since COVID, and thinks many underestimate it. The hours are long, and early employees often take shares over salary, but “if the startup doesn’t succeed, their shares are worth almost nothing.” You need to believe in the founders’ vision to get through the bad stretches. Shows like Silicon Valley don’t help: “It’s not glamorous at all.”
The upside, as Phil found when he made the move himself, is wearing more hats and working on a much wider range of projects than you would at a big company.
Alex’s investor checks work from the candidate’s side, too. Ask who backed the last round and whether they’re coming back, whether anyone’s paying yet, and how the founders plan to sell, beyond building the product.
Watch the full episode
There’s more in the full conversation, including what Alex learned building and selling a wine import business, and why he thinks COVID did more damage than Brexit.