The IT market continues to expand and condense. As a result, the competition within niches is growing. And those startups promising to create new ones are not immune to failure. Sergey Tokarev, an investor with more than ten years of experience and the founder of the Roosh technology company, told how to determine a promising investment project in such difficult conditions during the Cyprus IT Forum.
More than 100 cases under his belt
Sergey Tokarev’s portfolio contains more than a hundred investments. One of the most famous is Reface, a globally recognized face swapping app for photos and videos. Also, other well-known investment cases of Tokarev and his Roosh venture fund are Oura Ring smart ring and the contribution to the 3D avatar creation company Facemoji in cooperation with Twitter.
“This is the Metaverse that everyone is talking about. Every social network is now trying to become something more than just a social network and become a whole world. Actually, this is one of these attempts, which looks quite interesting,” said Sergey Tokarev.
In addition to projects that generate metauniverses, the investor considers no-code games one of the ongoing trend areas—game applications in messengers Viber, Telegram, Messenger, etc. Recently, Tokarev invested in Playco, a developer of such games. The American venture capital fund Sequoia Capital has become the leading investor of the round.
Your fails are your success
Not all projects invested pay off. Especially newcomers in investment often make mistakes. Sergey Tokarev says that he also has had failed projects in his investment history. However, it is not a reason to despair and give up, he notices. Failure provides valuable experience and perseverance to move forward, despite the difficulties. This is what becomes a harbinger of success.
“Your failures will determine your further actions. What wealth of knowledge and expertise you will use in solving new problems. It is pure mathematics: more fails—more new attempts with improved expertise—more success,” Tokarev noted.
High-quality audit is multi-stage expertise
Tokarev has learned many valuable lessons from his own experience, which he shares with other investors. First of all, Sergey believes it is worth paying attention to the human factor.
“99% of the failures happen due to the human factor. [It refers to] Not when people really wanted to do something and failed but when they wanted to make money ‘here and now.’ Therefore, we have a question for the founders: ‘How do you see the next 10 years of your life within the framework of this project?’ If you get an answer, ‘I’ll do everything quickly in 2 years, and that is all,’ this is definitely a reason to run away. Real success comes to companies only at the age of 6-8,” Tokarev shared.
Next, the idea should be tested. It is necessary to understand if it solves any relevant problem.
“Even if the product has not been developed yet, you start advertising it to your close surrounding. If you see that people’s eyes light up and they understand your idea, this is a sure signal that you are moving in the right direction. If there is puzzling in the eyes, this is a reason to reconsider the idea or the product,” said Sergey Tokarev.
The next stage is analytics. A reliable team of experts from various fields is its basis. It must include a service station, a product manager, and a marketing team.
“It’s not a secret for anyone that the main expertise now is marketing. Most of the companies that come to us are often doing well in terms of technology. But 99% of them have a complete lack of understanding with marketing,” the investor shared.
In parallel, a risk management team should carefully consider the project. These people keep track of everything that happens in the market and the chosen niche. Work in this direction continues after the investment.
“For each company, we always select benchmark companies from the same area and monitor their performance, comparing with ours. When we find significant deviations, we start exploring the reason. We put questions and form a knowledge base. We have a dossier for every investment. Line by line, important parameters are added to it, which then allow us to make appropriate decisions,” Sergey Tokarev said.
Advising and mentoring
Sergey Tokarev is confident that the success of a portfolio company, especially for angel investors, is directly related to advising and mentoring in these projects.
“For example, I’m not an actual co-founder of Reface but I was doing a job as a co-founder. Every day, I was looking for networking needed for this project to be successful. I was looking for all the necessary technical specialists. I did much more than just an investor. To my mind, it is possible to get success only by adhering to such an approach,” Tokarev believes.
Summarizing all of the above-mentioned, Sergey Tokarev emphasized an important rule worked out from his own experience: “Founders need help, certainly not additional pressure from above.”