Ivan Nechaev is an Angel Investor and Mediatech Advisor with 60+ deals and 15+ successful exits. He invests in early-stage MediaTech, AI, Telecom, BioTech, EdTech, and SaaS startups and serves on the boards of Brainify.ai and TrueClick.ai. Nechaev is also VP at the American industrial group Access Industries with over $35B+ value and investments in 30+ countries.
You initially started out as a developer; how did you then transition to becoming an investor?
After acquiring enough experience as a developer, I was assigned to manage projects, which helped me move up the corporate ladder. Becoming a manager helped me see that something I did well was helping people realize their full potential, which is also what I do as an investor. The tipping point, for me, was that I did not want to feel confined to only one area or field of work, and if I stayed as a manager, that’s exactly what would happen. On the other hand, through investing, I can explore different industries and ideas and apply the same principles that made me thrive as a manager. At the end of the day, for a business to be successful and generate a healthy ROI for my portfolio, it needs to follow a clear strategy and operate well with a predetermined set of resources, considering budgetary constraints. By embracing these same fundamentals that guided my managerial career, I was able to enter a field that was much more exciting.
For most investors, when reviewing investment opportunities, the team is often the most important element, what do you personally look for in a team?
Yes, I agree that the team is the most important element. Just as the team can make a startup wildly successful, it can also break it. Therefore, I always ensure that I have a candid conversation with a company’s founding team before I even consider an investment proposition. More than simply understanding their business, I want to understand them as humans, and see why they believe they are the right person to guide this project to success.
A conversation like that is very useful, because it helps me understand their motivations and their agenda with the business and learn where the idea comes from. I consider their previous experience, and whether they are honest about it. This shows me whether they are ready to grow with the company or not.
Last, but not least, a very important point that many investors miss is that, carried away by the hype, they forget to take a look at the entrepreneur’s exit strategy and whether it aligns with theirs or not. For me, it is very clear. There is a type of personality that is needed to start a business, and there is a different type of personality that is required to lead it once the business grows. This means that the founder needs to understand that there will be a point in which they can no longer be the CEO. And if they are not ready to accept this truth, then investing in them is not a good fit for me.
How can a team best differentiate itself from competitors?
For a team to be successful and be able to outsmart its competition, first and foremost, they need to have a vision, which is a detailed description of how they see themselves in the long run. This vision, of course, needs to be backed by an unwavering belief that they can get there. Running a startup is not for the faint-hearted, and if the team members do not believe in themselves, who will?
At the same time, everyone must be clear about what their roles are. If there is no clarity, a lot of problems can ensue, like role duplication and blind spots in those areas that are not being covered. I prefer teams that already have experience in the field, and that can clearly articulate their competitive advantage and know how to transform it into a moat that protects them against new entrants.
AI is currently taking over the investing world, what do you specifically look for when it comes to AI investments?
For me, AI is more of a technology that can be awe-inspiring but still, ultimately, a technology. Therefore, I evaluate AI primarily as a technology. The integrity of the product holds greater importance than AI itself since AI is a technology. I also focus on the applicability and feasibility of an AI-powered product. Right now, many founders are pitching ideas of “AI for this” and “AI for that” because they believe this will increase their appeal to investors in the market. With me, however, this doesn’t work. I look at what AI is helping accomplish, and ultimately, seek to understand why this AI-powered product is better than what already exists. It might sound easy, but in reality, it is not. Many companies that are blindly integrating AI without evaluating whether their product really solves a problem will fail.
Can you discuss some of the other industries and technologies that you invest in?
The approach remains the same regardless of the industry. I may have more expertise in some areas and less in others, making it challenging to assess projects initially. However, the approach remains consistent, regardless of the industry or direction.
There are five pillars that guide my investment decision-making process. As discussed, I focus on the team first. Without a good team, there is no startup. Then, I focus on whether there is a market for what the startup is selling. I prefer companies with big ambitions and that feel comfortable growing at 10x multiples.
Other aspects I consider are the company’s product, and whether it has enough of a competitive advantage to make the ride worthwhile, and the risks that the project entails. In today’s constrained venture market, a potential risk is that the startup is not able to secure follow-up funding. If I believe that raising future rounds is not likely, I will not invest in the company.
You have 15+ successful exits in your portfolio, what would you say are some of the biggest commonalities between these companies?
They succeeded in achieving what they had planned, because they had a solid team and effective leadership that helped them weather any storms they faced. Especially in the startup stages, as we know, companies need to be resilient and adaptable, and have a deeper sense of purpose. Without it, it is easy to give up.
What do you look for when studying the scalability of a company?
Scalability is key, because without scalability, the venture capital model is not sustainable. Also, if you take away the prospect of growing at 10-20x multiples, investing in startups will not be as enticing for angel investors. Therefore, what I look at is, again, at the team, and whether they have goals that are ambitious enough while staying grounded in reality. What are they aiming for, and do they have the drive to get there? If the answer is no, then the investment opportunity is not attractive for me.
What industry and what unique approach would you suggest that entrepreneurs focus on if they are looking at launching a new company that could potentially scale?
I've always thought this story goes the other way around. Hardly anyone can go and advise someone to start a successful company in any industry. But before you launch a business or even think about it, you have to look at the size of the market, the environment, and generally follow the standard approach. If you want a large successful company, the market has to be big enough, the product has to fit that market. Many entrepreneurs have failed because they did not research whether there was a product-market fit and wasted enormous amounts of money building something that nobody wanted. So, before going big, validate your model, as the feedback you receive will help you adapt and change your trajectory, when necessary, without exhausting your resources.
What are you currently most bullish on at the moment?
I am bullish about identifying AI-powered products that have what it takes to succeed. As I said, many entrepreneurs are aiming to ride the wave of AI and capitalize on its hype, and this will lead many investors to make wrong decisions. My intention is to invest in those ventures that can deliver sustainable value in the long run and transform industries by efficiently leveraging AI.
Furthermore, if the projects fit the requirements I outlined above, I am more interested in technological projects, ideally with a service as the end product.
Thank you for also of your wisdom. entrepreneurs and investors alike can learn from these answers.