Justin Ziegler, Business Angel and successful entrepreneur, Olivier Rameil, investment director at Bpifrance and Olivier Trabucato, co-founder and CFO at DataDome were invited by 50 Partners to share their experience in fundraising.
The structure of a fundraising and the entry of experienced, recognised, and relevant Business Angels can change a company’s future. Raising capital from qualified people is a game-changer, particularly for an early-stage startup. It was the case for Datadome. Here are a few tips to achieve a successful seed round.
1. An investor sees A LOT of start-ups
An investor (be it a seed-stage VC or a well-implanted business angel) typically receives several hundred applications from start-ups and only invests in a few of them each year.
Here is what he looks at when choosing the start-ups in which he will invest in :
What the investor looks at
2. The pitch deck
The pitch deck is a lot more important than many founders think. This ~15-slides document must be very clear about what the start-up does and should contain a few key metrics. The investor should (and wants to) understand what your company is doing in less than 3 slides.
3. The team
The team is obviously very important for very early-stage investments : their previous experiences, the synergies between team members, their focus and their vision are particularly important.
4. The business plan
The business plan is important too. Actually, it is not that important in itself (the startup won’t follow the initial BP anyways), but a good business plan highlights some qualities of the founding team : Is the BP consistent ? Are their numbers realistic ? How did they evaluate their future growth ? and so on.
5. The market
The market must be reasonably important.
6. The human fit
This part may be the most important one, particularly for Business Angels. A business angel generally invests in a start-up because he wants to help the founders and wants to work with them. So the human fit is key.
“The most important thing is the human part: the relationship of trust between the investor and the entrepreneurs to whom he entrusts his funds.” Justin Ziegler
How to raise funds
7. You have to be prepared
It may be obvious to some, but raising funds is a long and complex process so you should be prepared before starting it.
8. Perfectly know your company
If you’re not able to clearly explain what your company is doing in 2 sentences, then you don’t really know what your company is doing. It either reveals a lack of focus in your strategy or a lack of preparation. Both are bad.
9. You are selling shares of your company
This part may not be obvious for non-business founders : when you are raising funds, you are selling something, so you should act as a salesman.
10. Your best sales should manage the fundraising
This tip results from the previous one. The CEO almost always manages the raising, but it is not always a good idea. The person who meets potential future investors should be the one who will be the best at selling your company.
11. It is easier to raise funds from a VC if some BAs already invested in your company
If your company is pre-revenue or has a relatively low revenue, then having experienced BAs at the board — ideally BAs who have some experience in your field — will help you a lot to convince VCs to invest.
12. Choose your investors wisely
Investors do not only bring money. They can also bring expertise, a good network etc. So choose them wisely. Plus, it is important for founders to listen to their investors’ advices (even if they end up choosing not to follow that advice), so founders should choose investors they respect and will listen to.
13. Try to raise 18 months of runway
It takes a lot of time to raise funds. One co-founder (often the ceo) will spend most of his time on the raising for around 3 months. You don’t want to spend 3 months every 12 months.
14. Negotiate the clauses
Bad leaver clauses are generally unpleasant for founders, but you have little (or no) negotiating room about those clauses. The clauses you should really care about are the liquidation preferences clauses, which can become very problematic — and those ones are easier to negotiate.
50 Partners is a leading startup accelerator in France. Cofounded by 50 successful Tech entrepreneurs (BlaBlaCar, Showroomprivee, Le Bon Coin…), the program provides a few selected startups with high quality mentoring, financing, international connections, networking and office space in central Paris.