Konsultori Resource on Financing: The best evergreen knowledge pieces from the web. The archive has been growing since 2016 and collects analyses and frameworks, but it also showcases our key topics. We present the most interesting articles here so you can read them and delve deeper.
Access to investor funds in Germany increasingly sought but difficult
74% of German startups want to raise new capital from investors within the next 12 months. The proportion has increased in recent years. However, access to investor funds is becoming increasingly difficult. Startups have an increasing need for financing, which often cannot be met in their own country. For more details, read the German article, here.
Some thoughts on the level of burn rates
In addition to high investments in newly founded companies, startups often face high fixed costs, with only small revenues. A key KPI that investors closely examine is the burn rate, as an indicator of the cash needed per month because costs are not covered by internal financing (revenues). Fred Wilson, one of the most important thinkers in the venture capitalist scene, shares his analysis of burn rates by reinterpreting the 40% Rule for SaaS for other business models.
What SMEs need to consider when looking for investors
Einer der frisch aktualisierten Artikel im Magazin Markt und Mittelstand, der sich mit der Geschäftsbeziehung zwischen KMU und Investoren beschäftigt, beantwortet ebenfalls wichtige Fragen. Von der Suche nach einem geeigneten Investor über effektive Verhandlungstechniken bis hin zu erfolgreichen und langfristigen Geschäftsbeziehungen bietet uns dieser hilfreiche Beitrag verschiedene Tipps und Ratschläge. Besonders erwähnenswert ist die detaillierte Beschreibung der verschiedenen Arten von Investoren – wer sich für den Unterschied zwischen einem Business-Angel und einer „Business-Heuschrecke“ interessiert, kann sich diese Onlineseiten ansehen: Investor finden: Was Mittelständler bei der Investorensuche beachten müssen.
A newly updated article in the magazine Markt und Mittelstand, which deals with the business relationship between SMEs and investors, also answers important questions. This helpful article offers various tips and advice, from finding a suitable investor to effective negotiation techniques and building successful, long-term business relationships. Particularly noteworthy is the detailed description of the different types of investors—those interested in the difference between a business angel and a “corporate raider” can find out more here: Investor finden: Was Mittelständler bei der Investorensuche beachten müssen.
… and who checks the Investors?
When startups are looking for investors, they are thoroughly vetted by potential funders. However, very few startups properly check the investors themselves. Rob Go provides some simple tips that can help find the right investor. Find them here.
Raising Capital: Plan 6 months for startup financing
Giovanni Bruno, Mitgründer von Crowdsell, erzählt von seiner Suche nach Venture Capital und Business Angels in Deutschland. Als besonders mühsam empfand er „[…] all die Bürokratie, die uns während der Auseinandersetzung mit Stipendien und Mezzanin-Finanzierungen begegneten“. Aber so anstrengend die Suche nach Kapital auch ist – laut Giovanni Bruno findet sich früher oder später der passende Unterstützer. Außerdem empfiehlt er für das Netzwerken und Kennenlernen den Besuch von Messen, „da dort sowohl Kunden als auch Partner schnell und in großer Anzahl gefunden werden“. Zeitlich spricht er von 3-6 Monaten, die als Minimum für den Prozess einzuplanen sind. Mehr Informationen von dem „Gründer, der auszog Geld einzusammeln“ finden Sie hier.
Giovanni Bruno, co-founder of Crowdsell, talks about his search for venture capital and business angels in Germany. He found the bureaucracy involved in dealing with grants and mezzanine financing particularly tedious. But as exhausting as the search for capital may be—according to Giovanni Bruno, the right supporter will eventually be found. He also recommends attending trade fairs for networking and meeting potential customers and partners quickly and in large numbers. He suggests planning for 3-6 months as a minimum for the process. More information from the “founder who set out to raise funds” can be found here (the article is in German).
A successful pitch in 10 slides
For a successful presentation, presentation guru Guy Kawasaki recommends no more and no less than exactly ten slides. These include:
- Title
- Problem/Opportunity
- Value Proposition
- Unique Selling Position
- Business Model
- Go-to-Market Plan
- Market Analysis (competitors, etc.)
- Management Team
- Financial Plan
- Current Status and Timeline
- More information on each point can be found here.
Inspiring talk on US technology funding
Non-traditional investors are fueling technology investments to drive growth. However, the amounts are becoming smaller due to the increasing number of startups. Author Andreessen Horowitz provides a fascinating overview of what’s happening in the American startup financing world. Watch it here on Slideshare.
Investors should also be vetted carefully
In an essay on Medium, Miriam Grut Norrby, Investment Manager at schibstedgrowth, shares her career path and search for the right investors. A key takeaway for all founders: “Raising money for the wrong reasons or from the wrong people will cost you more than the alternative.” Thorough vetting and reference checks are essential when looking for a suitable business angel. She also offers valuable tips for the day-to-day work of startups, like her statement: “The day you stop growing is the day you start dying.” Those seeking business angels in Vienna can learn something here.
More About Miriam Grut Norrby and Her World
“What does it feel like to invest in a startup?”
This question was posed to Markus Wagner, founder of i5invest. His answer can be seen in this video.
Business Breakfast: Hansi Hansmann on strategies and challenges for investors in Austria
Hansi Hansmann, President of the Austrian Angel Investors Association (aaia), spoke at a business breakfast hosted by the American Chamber of Commerce about strategies and challenges for investors in Vienna. Providing capital is not the only thing that makes a good business angel—experience is crucial, something that young entrepreneurs often lack. His concept, in short: “I invest in teams of two to four young people who convince me with their ideas. I avoid one-man shows and believe that more than four founders is too many. Personal chemistry is also important. In the life of a startup, there are inevitably tough, even existentially threatening phases. It’s just easier to get through them together when you like each other.”
Find out more about the business breakfast and Hansi Hausmann’s approaches here.
European startup valuations more profitable than in the US
There’s much talk about high startup valuations, but what interests founders and investors much more in the context of a company sale, or exit, is whether it has paid off. The return on investment (ROI) for European startups is significantly higher than for their US counterparts. In Europe, we have less access to capital and get by with about a quarter of the capital needs compared to US startups. For investors, this is a favorable situation in Europe, with higher leverage on startup valuations and exits.
Looking for investors? There’s now a venture capital map…
The startup accelerator Techstars Berlin has developed a digital map listing a remarkable number of venture capital funds and investors across Europe. The great thing about this map: it is continually updated. You can take a look at it here for more details.
Startup Pitch-Deck simplification
An essential part of a pitch deck for investors is traction. If it can be measured online, why not make it available to investors through various online channels? That’s the idea behind VentureFund.io, which now offers this service. It will be interesting to see how widely it’s adopted and whether it truly improves the process of reaching out to investors. More details here.
Successful startup Pitch Decks
If you need inspiration from successful startups and what their pitch decks looked like in the early rounds, a good collection from companies like Airbnb, LinkedIn, Foursquare, Tinder, and Xing is available here. It shows that while content is key, so is the person presenting it.
How investors select startups and how to approach them
What do investors look for in founders before potentially investing? Product Hunt Live has compiled a collection of investor statements that make this clear. Once again, the theme of “warm contacts” emerges: warm contacts, warm contacts, warm contacts. More on that here.
Business angel network for local investors
The new business angel network startup300 aims to connect all business angels in Austria. Bernhard Lehner and Michael Eisler started the network, which already includes 85 financiers. They aim to provide Austrian startups with a structured path to capital and know-how.
Read the Der Standard Article here.
Austrian startups mainly financed from abroad
Without investors from the EU, Austria would have a significant problem: the share of international investments is rising, while that of domestic investors has been declining in recent times. The Private Equity and Venture Capital firms based here have invested as little money in the past three years as they did in 1997 or 1999, according to AVCO. This makes it increasingly difficult for startups to secure enough capital. Johann Hansmann, President of the Austrian Angel Investors Association, also gives a grim assessment: “In the venture capital sector, the situation is terrible. There isn’t enough money to support existing startups.” The search for capital is starting earlier and becoming more international. Learn more about the situation in Austria in a report by Merlin Bierekofen here.
Oliver Holle on international startup investors and the anti-globalization trend
“The anti-globalization wave is hurting our business,” says the founder of the venture fund Speedinvest in a conversation with Trending Topics. The current anti-globalization trends are affecting follow-on investments from abroad, on which the Austrian startup scene is currently heavily dependent. The negative consequences of this development also hinder the expansion efforts of rapidly growing companies—especially from a small country like Austria. Read the full interview here.
Hansi Hansmann on startups in existential crises
“Two-thirds of my startups have had existential crises,” notes business angel Hansi Hansmann in an interview with Trending Topics. But that’s part of the journey; it’s just part of founding a company: “The idea that everything is rosy as a startup annoys me immensely.” Startups work on innovative ideas, and hitting a wall sometimes is entirely normal. Many can’t handle it. That’s why Hansmann advocates for more funding, starting in childhood and youth. “Flexibility, entrepreneurship, and self-employment would be valuable assets after graduation.” Read the full interview here.
Caution with the Letter of Intent with investors
The Letter of Intent (LoI) is a crucial part of the relationship between a startup and an investor. But it also harbours many risks, according to Rob Go: “The minute you sign a Letter of Intent, you have lost all negotiating leverage with the other party.” Therefore: be patient, be cautious, and negotiate carefully. The LoI should not be underestimated tactically. Learn more about the Letter of Intent and what to watch out for here.
More direct co-investments
A market outlook from Mark Suster for the years 2017 to 2020, based on a 2017 survey of LPs (Limited Partners, where VC money originates), looks promising: “If the mood of LPs we surveyed reflects how VCs will be financed in the coming years, entrepreneurs should continue to find a strong venture market with capital available for great ideas and businesses with early traction.” Additionally, direct co-investments are increasing, not just risk diversification through funds. Infographics and background information are available here.
American investors for European startups
A typical conversation with a German VC often involves negotiating lower valuations and investments, while a US investor might ask, “What milestones could you achieve faster with an additional ten million? How will you become a billion-dollar company?” This difference in mindset between US and European investors reflects more than just the smaller markets in Europe; it also reveals their varying risk profiles. Learn more in Brutkasten.
Series A fundraising changes
David Beisel of NextView Ventures has observed significant changes in how startups approach Series A fundraising. Previously, this was a well-structured process that began a few months before funding was needed. Now, however, it is shifting towards continuous and ongoing fundraising. Startups must maintain constant contact with potential investors, and it’s not uncommon for investors to be ready to invest when the startup isn’t—yet Beisel advises startups to seize these opportunities. This development deserves a critical look, as founders need time to focus on their products and customers. Read more in the original article here.
Masayoshi Son and his tech investments as a negative example
Masayoshi Son, founder and CEO of SoftBank Capital and SoftBank Mobile, has been a dominant force in the tech world in recent years. However, his deal-making style has garnered both admiration and criticism. In a recent case, a Chinese startup declined Son’s investment, and in response, he allegedly threatened to invest in their competitor instead. Learn more about Son’s projects and his often aggressive investment tactics here.
A well-intended tip from a serial founder for VCs
While it’s common for VCs to offer advice to startups, it’s refreshing to see a series of tips from a serial founder for venture capitalists. These are not only worth a chuckle but also insightful. Read them here.
Highly specialized corporate venturing initiatives on the rise
In June, the Austrian Chamber of Commerce (WKO) recognized three large companies for their successful collaborations with startups. Notably, all three ventures are highly specialized, such as Agro Innovation Lab, Factory1, and Primetals partnerships. More on this topic at trendingtopics.