Investment Criteria: Enisa vs Private Investors. What sets them apart?

When a startup seeks funding, it can choose different ways: public entities, such as ENISA, or private investors, such as Venture Capital or business angels. Although both options seek to support the growth of innovative companies, their evaluation criteria and expectations are very different. Today we are going to explain how the investment criteria of ENISA and other public entities differ from those of private investors, and how this can impact the way in which a project is presented.

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ENISA, as a public entity, has a different approach than that of private investors. To approve a loan, ENISA uses an algorithm that assigns a risk rating to each startup, based on a combination of qualitative and quantitative analysis.

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ENISA places great emphasis on the economic and financial ratios of startups. For companies with more than two years of life, 90% of their evaluation focuses on this analysis. Some of the most important metrics are:

- Sales growth: Sustained growth is seen as a positive indicator.

- EBITDA on Sales: Ratios close to 20% suggest efficient management.

- Net margins and asset turnover: Both must show efficiency and stability.

- Financial ratios: Liquidity, solvency and indebtedness are also key, looking for companies with the capacity to manage their debts and maintain their financial stability.

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ENISA is looking for startups that show good financial management and the capacity to generate income. In addition, future projections are evaluated, demonstrating a long-term vision.

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The remaining 10% of the ENISA evaluation is based on qualitative aspects such as:

- Market attractiveness: If the startup operates in a high-growth market with significant barriers to entry, this is a good indicator.

- Management team: The experience and commitment of the entrepreneurial team is key for ENISA.

- Value proposition and competitive advantages: Differentiated products or proprietary technologies are highly valued.

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ENISA is willing to take on more risk than a traditional bank, since it does not require guarantees or personal guarantees. The interest rate is variable, adjusted to the company's profits, allowing greater flexibility for startups in the early stages.

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On the other hand, private investors, such as VCs and business angels, tend to have a more focused approach to obtaining fast and high returns. Its main areas of evaluation are:

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1. Entrepreneurial team:

For private investors, equipment is one of the most determining factors. A team with experience, international experience and success in other projects is seen as a guarantee that they will be able to execute the idea successfully. These investors are looking for leaders who can attract talent and scale the project.

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2. Market and scalability: Venture capitals tend to look for startups in markets that can quickly reach large volumes, with the potential to grow in double digits and reach $1 billion in a few years. They are looking for models that can expand efficiently and quickly, and that are capable of generating significant returns. Proprietary technology or robust barriers to entry are crucial to ensure that competition cannot erode margins.

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3. Profitability and return on investment:

Private investors are often focused on the startup's ability to generate attractive returns in the shortest possible time. They usually look for:

- Clear exits: The ability to sell the stake in the startup through subsequent acquisitions or rounds is essential.

A market with high mergers and acquisitions activity, such as fintech, is especially attractive.

- MVP and sales traction: Unlike ENISA, which can finance earlier stages, Venture Capital prefer to see products that are already working in the market and generating income.

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4. Risk Assessment:

- Private investors are more risk-averse than ENISA. Although they are looking for innovative projects, they prefer those that already have a certain level of validation in the market.

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In short, the criteria of ENISA and public entities focus more on long-term potential and good economic-financial management, without requiring personal guarantees. This, and the fact that they don't dilute the equity of entrepreneurs and investors, makes them an ideal option for early-stage startups or looking to scale more quickly. Private investors, on the other hand, are looking for faster returns, prioritizing team experience and the market's potential for accelerated growth.

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Choosing the most appropriate combination of funding and the timing to achieve it will depend on the characteristics and needs of each startup at any given time. Intelectium has been supporting innovative startups and SMEs for more than 20 years.

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