Tricks or tips for fundraising your startup
One of the biggest challenges for a startup in Europe is to raise money. Why? Because nobody in EU is rich enough to put money in series A and above and it is also a cultural issue: People in Europe are more risk advert and cautious than in the US for instance.
In Europe we are lacking money to accelerate. Seed money to start business is available but growth series A is lacking.
Barcelona was recently hosting a session on fundraising organised by The Family, a French company dedicated to supporting startups in their growth and who has been raising more than 120 million dollars in the past 2 years. They have chosen Barcelona to open their next office, after Paris and London.
Oussama Ammar, partner and cofounder of The Family gave a very inspiring talk and great tips on raising money. Here are my 8 take aways:
- Traction is king to raise money
What is traction? Exponential increase; having one single metric inside your business that is exceptional. Does your numbers positively surprise you? That’s traction! Continuous hiring growth within a company is a great sign of traction.
The more traction you have, the more talents you will attract and the less arguments you will get while negotiating for fund. People may not understand your product, but traction convinces them!
- Exceptional team attracts money
How do you define an exceptional team? A team that did it once before, that had at least one exit. Such a team can be enough to fundraise, without doing anything else. Investors know that the money they put on that team is smaller than the money they will loose not betting on it. Never underestimate the power of the team you are building.
- Don’t raise money unless you really need it.
In Europe, you have one single shot to fundraise. Make sure you do it at the right moment.
There are 2 types of fundraising: One that helps you survive and one that helps you grow. If you need money to survive, go and get a side job to support yourself.
Remember that the less you need money, the more you will raise.
- Good entrepreneur is good at storytelling his own story
Don’t tell your story, tell A story. No need to share all the failures you went through till now, just focus on what is important and what people want to hear.
- The more you are good at pitching, the more money you will raise, the higher your valuation.
Pitch pitch pitch, again and again and again. In front of your mirror, with friends etc… get feedbacks. Again, make sure you are pitching what the investor wants to hear.
- Focus 1st on your customer, then on your employees, then on investors.
Make sure you understand who your potential customers are and what they want, as they will be the one buying your solution. Then look after your team. As we said before exceptional team is key to success. Make sure to retain your actual employees and attract new talents. After that, focus on investors. But be careful of the advice you get from VCs: They know numbers but not your product.
- Good entrepreneurs negotiate terms, bad entrepreneurs negotiate valuation
Negotiate the price 1st (negotiate hard), then negotiate the terms by decreasing the price. Better terms with better investors are better than higher valuation with incompetent people.
Terms include valuation, controls within the company, plus other clauses.
Make sure you hire a good lawyer to help you with the terms, as it’s quite technical but the one thing your lawyer won’t be able to do is to negotiate for you. Be obsessed by who controls your company and to keep control of your company versus the price you get.
One golden rule: don’t let anybody negotiate your salary!
- Bad entrepreneurs take decision listening to others instead of using information from others
Final note to conclude: Never compare yourself with successful entrepreneurs because you are meeting them at the end of the learning curve. They had their own issues at the beginning too.