Fundraising for your startup? First determine
your strategy

The first step is to get in touch with us. If we feel we can work together, we schedule an orientation meeting. After signing a mutual NDA, we like to receive further information about your company and its plans for growth. Once we have received the documents, we will develop an initial analysis into a specific proposal within two weeks, unless RBF is not an option for whatever reason. This means the initial stage of the process can be completed in virtually no time at all. If you accept our proposal, we will conduct a brief due diligence investigation and start preparing the draft proposals. The entire process – from introduction to money on your bank – can be completed within just 4 to 6 weeks.

While we will not be a shareholder in your business (and your reporting requirements will be relatively limited), we support you with the knowhow and experience of our investment team. We provide advice on the basis of the lessons we learnt after investing in tech companies for more than 10 yeas. Furthermore, on request, we can give you access to the network and expertise of the 60+ individual investors from our network. Our goal is to act like partners on your growth journey – not as account managers.

In recent years, loss-making startups that continue to make losses well into their development phase have become the rule rather than the exception. That is a big difference from twenty years ago and the question is a) whether this will remain the case and b) whether this is desirable for your company.

Anyone who wants to execute a market dominance strategy and opt for growth over profit, has to rely on venture capital. This type of capital is ideally suited to provide startups with growth capital to grow exponentially and become the new Facebook, Spotify or Adyen. It may be that your company qualifies for this.

However, there is also a good chance that your company will ultimately not be the one who wins the main prize. After all, whatever idea you have, assume that at least twenty startups worldwide are doing exactly the same thing.

Venture capital can only be used if the company has a chance to increase in value enormously. The venture capital investor takes this into account. It invests in twenty companies, one of which ultimately has to make an extraordinarily high return.

But is this the best strategy for your company? Or is it better to grow a little less fast and go faster to break-even and profitable growth?

I am convinced that for the vast majority of startups the answer to this is yes. Rather a new sales executive every quarter than 6 at a time.

Does that make you less interesting for an investor? Yes, for high profile venture capital. But there are alternatives and more tastes for investors.

The costs of other forms of growth capital are also substantially lower than those of venture capital. The venture capital investor wants to earn back 10 times his money (with shares that are still yours – :).

Structuring a round and negotiations can easily cost € 20,000 or more. Those are serious numbers. Raising less capital and financing, faster to profit: it used to be the norm and seems to me a somewhat undervalued choice at the moment.

The first term sheet on your desk with a high rating will of course flatter your vanity. Suddenly you are a millionaire. On paper then …. But don’t let a high rated term sheet blind you. A high valuation also means an obligation to deliver solid performance in the future. And nothing is more annoying than having issued shares at a too high valuation: the relationship with your investors does not improve and if you have to issue shares at a lower valuation in the next round (a down round), you will often be extra. punished by a disproportionately low valuation.

If you raise capital at a low valuation in a first round, you can run into problems later because you as founders are too diluted. Not desirable either.

And that is only the appreciation. Liquidation preference, reserved matters: the term sheet often contains many provisions that are not only there for decoration. It doesn’t have to be bad, but you do have to think about it. Fortunately, there are excellent books explaining venture capital and the term sheet.

If you have thought carefully about the term sheet, you will also better understand that there are also disadvantages to venture capital rounds. And you also have to take those advantages and disadvantages into account when weighing the costs of the growth capital against the risks and the opportunities.

For internet and Saas companies that have progressed a little further in their growth strategy, it is important to have the right balance between growth and profitability. The 20/20 rule stipulates that the sum of growth percentage and profitability must be able to lead to a 20% growth year on year with a 20% profitability. Faster growth means lower profit or loss and vice versa.

If you compare that 20% with the hockey sticks that are often presented in the first pitch decks, you will realize that in the end everyone is very happy with a company that makes € 5,000,000 in turnover with a profitability of € 1,000,000 a year!

If, as founders, you still have 70% of the shares, then you really have a considerably larger share of the pie than if you were diluted to 25% shares through expensive investment rounds. It is therefore important to make a fair cost comparison before you start investing rounds.

If your products are well priced and contribute positively to the cash flow fairly quickly, then it is much easier to manage the costs of acquisition and organizational development, as well as the working capital. All this requires is that you have the confidence that you have marketed a good product, that it is worth something and that you don’t have to let yourself be fooled.

A one-time bank balance of millions just after an investment round also gives a calming feeling, but often this is short-lived. 

As far as we are concerned, you should be thinking about the amount and costs of the growth capital that you collect. The earlier the better.