Secret sauce for startups to reach unicorn status:
We looked into any possible variable:
Software vs. hardware
Financial metrics
Yes: visionary A-team, able to attract and recruit incredible talent
& Second, that goes after an attractive market (size & timing right)
That’s also why we always invite the team to present in front of our entire IC
KPIs - what key metrics do you find most indicative of a startups sucess?
Current trend: Investors have increased the bar for Series A
Timing between Seed + Series A longer
Milestones that were enough 2 years ago have now shifted
No secret KPI; no magic threshold of revenue or growth rate; INSTEAD:
We pay attention to trends:
Customer cohorts: are paybacks improving quarter after quarter?
Efficiency: capital efficiency: how much was needed to reach current stage; how close was the achievement between budget vs. actual
Being “Investor-ready” -
Be very sure that you need the funding right now, from who and for what
Why now: easiest excuse is to say that your runway is up
Investors know that only 25 -30% of seed startups will successfully raise a A
How much: when the money hits your bank account; you should be able to spend it immediately:
Knowing clearly who will hire
Knowing clearly where to put the marketing dollars to work
You should know which machines
In seed: I wanted to get: x technical validation, Y market validation, z early proof points
How we approach valuation & what impacts the valuation of oyur startup.
Technically speaking:
Average dilution figures
comparable transactions
Valuation Sensitivity based on expected venture outcome so that the risk we are underwriting makes sense financially
=> Guess what: we expect a ton of more dilution coming our way; you should do the same (we will burn through more capital than expected, it will take longer than expected)
Founder advice:
Equity: this is likely the most expensive money you are taking in (as little as necessary) – signaling post round can be massive; raise more at higher valuation
Anecdote: day of Series A announcement: 3 top-up offers
Common pitfalls & red flags that turn us off a Series A investment.
“testing” the market – failing – coming back with a follow-up months after
Need to create momentum:
Not leveraging your network – warm Intros; working with placement agents
High expectations for growth. What projections do we expect?
Overall: projections that show that you will be a category leader
Projections:
be bold (investor wants to see whether its possible to return the fund by backing you)
But also: be optimistic; we are in a pessimistic business: everyone assumes a haircut
IC Story: founders coming in: EU: 1,93m target, hit it exactly; US: 10m, will reach 1.5
Growth often comes with challenges. What are the most common growing pains you see?
A) You will burn much much more than anticipated:
Stay humble, adjust according to top-line development
B)Customer acquisition: trial & error may result in slower efficiency gains
C) Product: you will miss your timeline, everything will take lo
D) Hiring: finding that technical specialist – it will take longer than you think
What internal structures and processes are crucial for startups to establish early?
Project teams / special ops
Bcomp: C-level + ops form team to analyze: how to expand value chain, geographic extension, what markets
Early on: career model for employees
Employees: expect career progression; salary increases
Scalable financial reporting, the right advisors: lawyer, tax consultants etc.
Leadership for the transtion. What leadership qualities are essential at this stage of scaling?
Qualities:
being able to make yourself redundant
enable others and delegate
How to: you are not alone: Business coaching; 1:1 chats with peers etc; talk to your investors
Ex. Give your board homework
Company Culture. How do you evaluate a startup’s ability to preserve its culture as it scales? What are some best practices you've seen?
Don’t come up with values that are just a reflection of what investors want to hear
Instead: easy to understand; really what your team wants to stand behind
Also: if someone is not aligned with your values: make the right decision and let go fast
How critical is mentorship when seeking Series A funding outside of Series A investors? Build meaningful realtionship with potential advisors.
Who is the right advisor at the right time?
Doesn’t need to be the right mentor for always; but the right mentor to get you to A
Right mentor who gets you to build out HR, Finance function etc.
Closer Intro - What advice would you give Seed stage startups looking to build relationships with potential Series A investors?
If you do your homework, it becomes evident that only a limited amount of investors will be a good fit at the next stage
Maintain a lose contact for 12 – 18 months beforehand
They should already know what you are doing when you raise funds
Right investor for the right stage: don’t get distracted with funds that only do pre-IPO etc.
Last changed7 days ago