Navigating the Startup Scouting Process: A Comprehensive Guide For Scouting Teams
Greetings and welcome to our weekly post on the challenges faced by CVCs/VCs in Latin America.
As you may have noticed, we have now shifted our weekly posts to Wednesdays.
This week, we are excited to introduce Francisco Schuler, who received our invitation to talk about Scouting. Francisco is the Scouting Expert Advisor for Wayra Hispam Partners and has assisted more than 70 corporates across the region in addressing a common pain point: "Where and how do we scout startups?" This guide aims to provide a simple yet effective approach to the Scouting process.
To effectively scout for startups in Latam, CVC/VC firms, and Open Innovation teams.
To begin with, the team in charge should identify the problem they aim to address and the segment or vertical they intend to focus on. This can be accomplished by comprehending the objectives, anticipated benefits, and corporate objectives.
The Art of Finding Solutions: A Beginner's Guide to Scouting
To address the problems and challenges of companies, scouting involves collecting and examining different solutions. In addition to tackling present issues, scouting creates a portfolio of solutions and technologies to address future challenges. Following several stages is necessary to conduct successful scouting.
Mastering the Art of Startup Scouting: A Step-by-Step Approach
The initial step in a successful scouting process involves pinpointing and defining the problem as a challenge, which then allows for the identification of the specific segment or vertical that a potential solution aims to address. It is crucial to have a clear understanding and definition of the objectives and benefits that are anticipated, along with the responsible parties and areas involved in the "Fitting" process, in order to achieve the desired outcomes.
To facilitate the search process, the subsequent step is to establish particular selection criteria. These criteria may comprise factors such as corporate culture, business fit, product identification, keywords, and other pertinent aspects that may be associated with our business metrics. This may conduct a comprehensive analysis of relevant startups in the market, and that could “Fit” our challenges.
Beyond the Obvious: Discovering Innovative Startups through Scouting
To perform a thorough search for startups, it is imperative to source information and research from various channels such as:
Corporate events
Demo days of funds
Databases
Accelerator/ programs
VC Network
VC/ PEI Associations
Maximizing Your Startup Research Efforts: This involves gathering information from different online sources such as Pitchbook, CrunchBase, Thetechcrunch, and other available platforms. Additionally, market caps, investor portfolios, and industry reports can be utilized to create precise research filters. To access diverse directories and conduct exhaustive startup searches that may fit the established challenges. When searching for solutions, it is crucial to view them as potential options and keep in mind that there may be other alternative products and services that could be a better fit. Furthermore, it is essential to maintain an open and transparent approach when requesting modifications and reviewing the feasibility of the solutions under consideration.
Note: To maintain a consistent and organized record of potential solutions identified during the scouting process, the Airtable platform is utilized. This platform is integrated with a CRM system that enables the monitoring of the entire scouting process, including the stages of Discovery (Sourcing), Contact (Screening), and Evaluation (Assessing).
In addition, there are other platforms available such as Pitchbook, Pipedrive, Trello, Slack, and Streak, among others, that can assist in sourcing scouted startups.
Mastering the Art of Startup Information Acquisition
In the attached image, the 3 Airtable segments with their respective phases are shown.
Sourcing Segment: Through Airtable, the scouting teams will be adding more information about the companies that can complement the analysis and subsequent filtering process of startups.
Some of this first information can include the founding team, possible competitors, business models, press information, reviews on the Internet, or testimonials from other companies that have used the solution before.
Screening Segment: Once the Sourcing stage is completed. We jump into screening, which means that the company evaluation and validation phase begins. We will meet the founders or commercial teams. All of our sourced funneled startups must be interviewed.
To generate the required interactions, we recommend two next-step options: the first, requesting a demo of the solution, or negotiating for a freemium trial. And we also suggest asking for recommendations from other VCs, or clients.
For the use of the latter, considering that if it is a venture client scouting model, there is a ranking of profiles, that will help you evaluate the viability of synergies:
Head Commercial
Business Development
C-Level
First and foremost, connecting with commercial teams is prioritized as they are always seeking to develop new initiatives and establish potential partnerships, thereby expediting the process. Alternatively, in situations where there is no commercial personnel, C-level executives may be contacted. Although this is not a typical scenario, if it arises, it is recommended to initially engage with the CEO, followed by the CTO/COO.
When reaching out to the business development manager, it's crucial to convey a concise and accurate message to initiate communication between both parties. After establishing contact, asking strategic and targeted questions on specific topics is recommended to gather additional information about the startup that may not be readily available.
Finally, don´t forget to ask for their Commercial Pitch decks.
Assessing: To move forward in the matchmaking process, a selection day or panel, or final selection committee should be prepared and conducted. This will enable the innovation team of the companies to create a DMU ( Decision making unit).
In conclusion, by following these best practices, CVC/VC firms can overcome the challenges of scouting in Latam and increase their chances of success in finding the right startups to invest in, as well as increase the pipeline for new business opportunities.
Wayra Hispam Partners aims to create business opportunities by connecting Corporates with disruptive technology companies worldwide. They have helped over 100 companies in the region to address their Open Innovation strategy through Corporate Venturing.
Wayra operates in 7 centers across 10 countries in Europe and Latin America, with scouting offices in key innovation hubs such as Silicon Valley and Israel. Founded in 2011, Wayra started as a technological accelerator to find young entrepreneurial talent, develop a local entrepreneurship ecosystem and transform corporate culture. In 2018, Wayra was completely reimagined as the center for innovation, investment, and entrepreneurship within Telefónica, targeting more mature startups with investments up to EUR 300,000. If you're looking to strengthen your scouting strategy, reach out to Wayra for assistance in navigating Open Innovation challenges.