The strength of the team

The team - diverse and dynamic - sat down with a potential investor recently.

It went better than any of us expected it to go.

We didn't walk out of the meeting with a fat check and series A investment, but we did walk out with a feeling of success, confirmation that our idea is good, that our team works well, and that there is a market for what we are doing.

TPWNN and O insisted on a full day of practice ahead of time, the day before, which was a bit much for this Crazy Chicken. But it was a productive and energetic day.

And it helped on the day of the pitch when the potential investment angel said, no, he didn't want to do this in English. We had gotten to know the pitch and each other so well, that a last-minute change of language didn't throw us.

Apparently, our ideas are things they (the angel and his company) have been thinking of already, we already have developers on our idea, we have started the research. We have a date for a proof of concept at a high profile business.

The angel praised the team and gave us several points to think about, critic and suggestions. Things we all had been thinking of and want to address.

All in all, wow. A promising meeting that gave us a boost to our confidence that we needed. A new shot of energy.

Now we need to decide if, as he said, we want to get into bed with him. And what it would cost us initially for a "sweat" investment before any pre-seeding investment.

Take-aways for Funding for Startups online seminar

 Yesterday I watched an online seminar on this subject - it's focus was doing this in Europe.

Here are my takeaways (with some names remove but - for co-founders - in our samepage site).

• Seedcamp - good way to progress your startup
• It is now easier to find funding in Europe
• Crowd funding here is alive and well - I've heard this elsewhere, it's difficult to do this in the US due to their overbearing regulations. It's also a great way to involve your customer. It is most definitely not Kickstarter which they called a demand generator. Notable platforms include Seders and Crowdcube.
• Angels - seed funding up to €1.5m. They may not, however, be so involved as before. Some names will be in our samepage version of this:
• Keep going to events to meet potential angels.
• Also, get to London and Berlin to get into the startup ecosystem there
• "Timing is important" in terms of product 
• Investors are now spoilt for choice
• Quality of founders has improved.
• Have a comprehensive team
• Make sure you can differentiate against similar ideas from competitors
• Be global - you can no longer build a one-country-only business and expect funding
• "Once Delaware can't go back" - meaning if you register there you are stuck
• UK registration is still recommended - despite all that Brexit nonsense - because of transparency and respect for the rule of law.
• There are several government grants (Honey 2020, Marco Polo 2, London Investment Fund, Enterprise Capital Fund, Angel Co fund) although they may be costly in terms of preparation of the materials (need lawyers etc.)
• "Capital in King" - approach funders before you need the funding
• Investors are looking for:
• Team
• Proper incorporation
• Thorough understanding of the business area you are in
• Traction
• Engagement - understand the value to, and use by, users
• The solution should be
• big
• needed
• and talk about it, get feedback

Take away from the PAN investment seminar

Another excellent seminar, the third and last in this series.

A pitch deck was given out but here are my additional take aways:

• This talk was focused on VCs and seemed to have a slight German edge
• Get financing for 15 to 18 months, not fewer 
• VC ownership can range from 20 to 30%
• The initial pitch deck should be no more than 20 to 30 slides
• It takes six to eight months to close
• You must have questions for the VC
• Lawyer up
• Angel investment ranges from very small to 10m(!)
• Next stage investors will ask them to compare your previous round's pitch deck with what you are now presenting
• So you should allow your seed round to have a decent amount of time to show achievements  and traction 
• Guaranteed catalog is hard to negotiate 
• By series A show there is at least a plan to eventually get a CFO

Worthwhile

It's nearly always worthwhile, if not immediately obvious.

This evening I battled through a storm (which never was) and went to an AWS user group.

The talks didn't really do it for me but at the end I talked to the organiser (who I know) and he reminded me of AWS Activate - VCs partnered with AWS Activate can have their businesses use AWS at a reduced price. But it is also a great source of potential VCs. He also said he'd put me in contact with the head of Activate.

Take-aways from the investment 101 part 2

Another great event even though only three people turned up (12 said they would).

But that was two more than I expected, looking at the event on meetup.com

Turns out others had booked directly on Eventbrite.

Now I have used Eventbrite before but mainly go to meetup.com

So, on my return home I made sure the app was loaded on my iPhone (my main phone now, ladies) and had a butcher's (= look).

There is a lot of stuff on there.

The VC speaking was from a clean tech VC firm but his points were still pertinent. Here are the takeaways  (omitting any ones that have been mentioned by others before):

Things VCs like:

• fast market entry
• early adopters
• short sales cycles
• fast feedback
• steady growth (they love them some steady growth)
• coffee kitchen culture
• kiss

also:

• don't follow every opportunity
• when communicating with key or potential stakeholders, CC the others who should (but maybe aren't) aware that you are in contact with their colleagues

• revenue x up to 10 as valuation

• Munich Venture Partners invest 1 -5m€, then 3- 5m€ often with other investors.

• Expected 3 to 5 times investment as return, ideally 10x

• Accept a lower valuation rather than impossible milestones, crappier liquidation preferences and persuade your exiting investors likewise. Also a valuation which is too high leads to a down round at the next funding series.

• Talk with VCs before you need investment, keep it informal

• Growth expectation is officially 10x but lower growth acceptable

• Aim for 50 - 100m€ to arouse the VCs interest

VC equity:

• 10 - 50%
• 15 -25% is healthy
• call the ball park 20%

To read and to watch

Last night finished reading Venture Deals: Be Smarter than your Lawyer and Venture Capitalist.

A really good book but I will have to read it again. A few times.

It certainly opened my eyes to the complexities around getting a deal.

This morning I watched a video from one on the authors Venture Capital Crash Course with Jason Mendelson. This needs to be watched a few times as well.

This was found from the Ask A VC blog. There are lots of great VC blogs. You know, some people think the internet is for a communicating post-nuclear holocaust. Some think it is for Singaporean women to post pictures of their teddy bears. Some people think it is to show the, um, more fun aspects of human behaviours - when naked. But actually it is for VCs to write about their views and activities. So I am starting a blog roll, initially as a label (tag).

Investors' seminar

Yesterday I went to an "Investment 101 Part 1 - Post Accelerator - A Three Part Series", a two hour meetup event whose guest was Kevin Czok (who totally deserves this name check, as did the organiser Jewell Sparks. As you know, when you are named checked in the ultimate startup blog you are living large).

Unlike some other startup meetings this was a tight two hours, around a conference centre in a law firm, with a slightly older, less hipster-ish, but still relaxed (the organising partner was also dressed down) attendance.

Here are my take-aways:

• a lot of VCs don't advertise, you have to seek them out and if you do, get an introduction rather than cold call.
• VCs tend to look for seven to 10 years of involvement in the business, well at least German ones do
• read Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist by Brad Feld - I've already downloaded it to my Kindle.
• also check out Brad Feld's blog 
• if you have to incorporate in the US, it will probably be best in Delaware or California

When you approach VCs you have to:

• have a real business which has a solid, scalable model
• be respectful to everyone, some VCs are quite small and you may be lucky just to talk to a junior
• show traction and how you would use the money
• disclose anything (e.g. dormant co-founders) before you are found out
• take projections seriously - don't be glib
• don't forget to include legal costs
• have scenarios on what would you do if you raised more/less/none/exactly what you wanted
• some VCs will do convertible loans before series A round
• VCs might take 5 to 25% of equity depending on investment
• ultimately the deciding factor for VCs to invest is the team (including are they fun to work with - answer: yes we are)
• beware of liquidation preferences - better for a co-founds to have less equity 
• documents can be in English (yay!)
• business plans are less required by VCs (than by, for example, banks).
• a pitch desk can be 10 - 15 slides (with even ca 60 backup slides) and take 45 minutes of a 1.5 hour meeting with VCs - though the initial meeting may just 15 minutes. 

Meetups

Yesterday I went to a pitch event.

I had a few take-aways but the only one I can remember (because I wrote it down) was that there are about 1000 apps  produced per minute in the world.

Actually there were some others such as:

• need to have a very solid business model
• (once again) if your business can be global say so
• (once again) it's the solution not the technology
• have a robust capitalisation plan - don't take more than is needed as that will dilute your ownership more than needed ...
• ... and don't be too blase about dilution because if you no longer have ownership of the business your investor may panic one day and tell you to take a course of action which you don't believe in. 
• It can take 5 or 7 years for investors to get a decent return (via IPO or whatever) and some of the mainstream hi tech companies that are around (e.g. Facebook, Twitter, Google etc.) were started 10 or more years ago.
• Once established companies, which are successful, don't really pivot.

This morning I went to a startup event covering the legals around data protection. The main takeaway was:

• learn more German.

This evening I want to a lean startup event about Concierge MVP and "don't think about scaling when starting".

No real takeaways - it was thought provoking not that I necessarily agreed with everything, oh wait, there was one:

• develop lean and incrementally (I won't say Agile because that is hipster bull shit) but don't spend 10 months getting a system implemented and then immediately realise that it is hopelessly wrong.

Listen to this now

This being a TechCrunch podcast with Fred Destin.

The Register nails it, as usual

with an article about the current craziness of venture investments.

Take-aways from GABA (and the P word)

GABA is  the German American Business Association which is distinct from the American German Business Club although not too distinct.

Tonight they had a panel discussion about funding options including VCs and crowdfunding.

I made a few good contacts and ....

• Crowdfunding like Kickstarter could be used as a side-investment for a specific project (though with care over formulation).
• The US market now has a lot of controls over this now which is making it less attractive as an investment.
• Although it may be more attractive in Germany - there are over 60 platforms and some are used by established companies to fund certain initiatives (for example, savings in energy reduction).
• Could also perhaps be used is VC funding is not possible - kinda a plan B
• Valuations are high and we are possibly heading for a tech bubble (when people say "it isn't a bubble then it's a bubble")
• There are about 40 unicorns in Europe but apparently the creator of the term "unicorn" has a new term: "unicorpse".
• It seems VCs value on likely future valuation rather than actual profit and right now few companies (at least in Europe) are heading towards IPO ...
• this led me to ask if this valuation things wasn't just a "Ponzi scheme". Seems I asked an obvious question.

Takeaways from entrepreneur's meet up

Another evening, another startup/tech/entrepreneur type meet up. This time (yesterday evening) in a rather cool cafe.

Some takeaways:

• there are other mobile app prototyping tools than PhoneGap - Titanium for instance
• Approaching investors ...

... in answer to my question "what's a good way to make the initial approach to a potential investor/angel ...

The advice started off with 

1. write a simple email (which we have already drafted) to 
2. suggest a quick 10 minute meeting in a cafe near their office - people like to help people
3. actually try first to connect with them via someone you know ....

... this became a big thing. The investor community is small and you may get "burnt out" if you are making cold approaches.

The last bit of advice has changed my thinking on approach and I will hold off sending the email we drafted yesterday and see who we could contact using our networks.

AGBC takeaways

Despite being neither American or German I am a member of the local American German Business Club.

The Crazy Chicken does, however, possess one of those nationalities.

Yesterday there was a meeting which we both attended and we talked to a couple of angels/PE investors whilst we were there.

Some takeaways:

• During the talk on cyber security a tale was related of a German venture which was turned down by a PE investor as being too expensive. Then the venture was badly hacked resulting in the price dropping significantly. Imagine their surprise when the PE came back with a lower offer - which they accepted. But one of the founders had engaged a cyber forensic review which eventually discovered that the attack had come from Israel and seemed - it was alleged - to have been commissioned by the PE investor. Very naughty.
• Whilst quite a few people have been saying, recently, that it is easy, even beneficial, to get financing from Munich rather than the USA, one guy, with venture experience, to whom we spoke felt that the contrary was true. This was partly down to the tax situation in Germany for shareholders (losses can't be transferred into subsequent years) and the general approach to investment risk in the US.
• This guy also said he takes about a 3% to 13% cut in the companies which he is supporting (as an angel) with around 7% being the usual case.
• Also, he never invests when there are just two founders. One is ok, three is great but not two. And he strongly recommended dealing with this - either get someone else on board or find an arbitrator before there are problems - something we agree with. Incidentally another startup investor said, a few weeks ago, that he never, ever invests in a single-founder startup.
• Another angel investor told us that normally seeding happens after the app has at least been prototyped. Wireframes are not enough.