Workshop on startup fundraising by Herman Kienhuis (Newion VC) at Antler Amsterdam (Feb2020)

1. Startup Fundraising
Antler Amsterdam
Herman Kienhuis, February 28, 2020

2. Agenda
• Introduction
• Why raise capital
• How startup funding works
• Which sources of capital
• What investors look at
• Where to find investors
• Q&A

3. Introduction

4. About Herman
MSc Chemical Engineering and MBA
(INSEAD)
5 years Finance & Strategy (McKinsey)
8 years Product development in
Consumer Internet (Sanoma Digital)
8 years in Venture Capital
Married, father of three teenagers
Loves live music, movies, vintage design
and slow food
Supporting sustainable development,
education, research journalism and diversity
INNOVATION FUND
ABOSS
50+ (VC & angel) investments

5. About Newion
Year of establishment: 2000
Team: 11 people
Assets under management: €150 million
Portfolio companies: 21
Focus: Business software
Stage: seed & series A
Initial ticket size: €1m - €5m
Geography: BeNeLux,
Germany/Austria, Nordics

6. Who are you?

7. Why raise capital?

8. Why raise capital?
• Starting up cost
• Financing early-stage losses
• Working capital investments
• Creating cash liquidity buffer
• R&D investments
• Production/inventory investments
• Customer acquisition investments
• International expansion
• Accelerating growth

9. How startup funding works

10. How startup funding works
Idea-
stage
...more
rounds…
You
0
100% of
0
FFF
stage
€50-100k
Family
€140k
28% of
€500k
Seed round
€100k-€1m
Angel
investor
€500k
22% of
€2.3m
Series A
round
€1-€10m
VC
investor
Employee
option pool
€2.5m
13% of €20m
Series B
round
€10-20m
2nd
VC
investor
€5m
10% of €50m
IPO
€50m+
Public
investors
€50m
9% of €575m
Co-founder
stage
<€50k
Co-founder
Co-
founder
€50k
33% of €150k
Your
stake’s
value

11. Which sources of capital?

12. supplier credit
bank loans
strategic (corporate)
investors
venture capital
angel
investors
Sources of startup and scale-up fundingcapitalneed(€mln)
100
50
10
5
1
0.5
0.1
high risk low risk
stock exchange
(public equity)
private equity
start
development phase
friends & family
Pre-seed
(preparation)
Seed
(mvp)
Early-stage
(start-up)
Later-stage
(consolidation)
Growth-stage
(scale-up)
Maturity
(ICO’s)
innovation
loans
crowdfunding
subsidies

13. • family & friends: quickstart, trust-based
• crowdfunding: b2c, creative projects, pre-sales, creating ambassadors,
market validation
• supplier credit: quickwin, co-creation with partner
• seed/innovation loans: government-provided or government-guaranteed
subordinated loans for startups
• innovation subsidies: EU or Dutch government grants for specific R&D
projects or market research activities
• informal investors: cash, network, personal involvement
• strategic investor: cash, customers, expertise, network (and potential exit)
• venture capital: cash, industry network, scaling experience
• bank loan: cash (at lower cost), personal guarantees
Sources of funding

14. What investors look at

15. • drive & dedication
• diversity & complementary
• execution mindset
• expertise & track-record
• partners & advisors
1. Team

16. • solving a real problem
• sustainable competitive
advantage
• revenue & business
model
• flywheel model
2. Product / Proposition

17. • customer metrics:
conversion, retention,
growth
• customer feedback
• willingness to pay
• CAC vs CLV
3. Traction

18. • total market size & growth
• addressable market
segment(s)
• international scalability
• profit margins
4. Potential

19. • ‘Uses of funds’
• product development
roadmap
• go-to-market plan
(customer acquisition)
• hiring plan
• financial plan, with
cashflow prognosis
5. Plan

20. • realistic valuation
• staged funding
• protective rights
• governance & control
rights
• information rights
• investor value add
6. Terms

21. • Lack of ambition
• Founders not dedicated
• Not enough skin in the game, too
much founder dilution
• Not open to feedback
• Tech solution looking for a problem
• ‘We have no competition’
• Bad unit economics
• Not sharing all information
• Inconsistent financial model
• Too much money raised too early
• Messed up captable
• Non-standard terms
Red Flags

22. Finding Investors

23. Where to find investors
• Your network: Linkedin, university, former colleagues, other entrepreneurs
• Startup events: tech conferences, startup challenges, pitch events, demo days,
investor speeddates
• Startup support services: StartupDelta, university entrepreneurship support,
regional economic development organizations, chamber of commerce, financing
& subsidy advisors
• Industry associations: Nederlandse Vereniging van Participatiemaatschappijen
(NVP), Business Angel Netwerken NL, Dutch Startup Association
• Online directories: nlfunding.co, Crunchbase, Dealroom.co, Index.co,
• Online marketplaces: Angellist, FundsUp, Glassdollar, Angel Investment
Network
• Crowdfunding platforms: Symbid, Leapfunder, Oneplanetcrowd, Seedrs

24. Dutch Venture Capital funds
(source: peak.capital/nltechvcmap)

25. What could/should investors bring?
• Access to (follow-on) capital
• Advisory / supervisory boardmembers
• Advice on company strategy, governance, organization, sales & marketing,
finance, exits
• Network introductions:
• Access to industry/topical experts
• Access to customers, partners
• Access to talent (leadership, board)
• Access to peers (entrepreneurs)
• Access to potential buyers (and M&A advisors)
• Coaching on personal & leadership development
• Friendship

26. When/how to approach investors
Research investors
• Right scope, right stage, right ticket size?
• Similar investments?
• What can they bring?
• Which partner do you want to work with?
MAKE
LONGLIST
WITH
RELEVANT
INVESTORS
START
WITH
SECOND
TIER AS
TRY-OUT
Reach out
• Preferably through personal intro
• Send clear teaser deck with ask
(feedback, network connections, meeting to
explain/demo)
• Propose 30 min. video call or to meet at event or
open office hours
• gentle reminder mail/call

27. The VC perspective
• Dealflow: assessing 500+ startup to close 5 investments
• Thesis-driven: targeting investments in emerging/hot spaces, with
specific characteristics
• Founder focus: entrepreneurs should drive growth and have sufficient
skin in the game
• Unicorn focus: each investment should have €1b exit potential to
generate fund return, compensating for failed investments
• Risk averse: taking time to get more information/validation; external
urgency needed (e.g. FOMO)
• Syndication: investing alongside existing and other new investors for
additional validation, value-add and shared risk
• Horizon: all companies should be exited when fund ends 8-10 years
after start

28. Wrapping up

29. Best practices
1. Find personal intro’s to investors through your network or via other investors
2. Research investors: point out why the approached investor is a good match
3. Build up relationships with investors early; e.g. send regular updates, meet-up at events,
also when you’re not fundraising
4. Use a CRM/sales tool for your fundraising process
5. Get at the table: use simple decks and quick demo’s to get at the table and make the
personal connection; in the end investors invest in you
6. Maintain data room: keep an up to data room from the start of your company, always
ready to be opened for interested investors
7. Prepare terms: Prepare a VC-type term sheet yourself to reduce workload for investors
(and gain some control over the terms J)
8. Create urgency: use planning and FOMO to create external urgency for investors
9. Do Investor Due Diligence: ask investors for founder references, also of failed cases
10. Stack funding: combine different sources of money, for validation, less dilution, more
value add: angels + crowdfunding + VC’s + grants + innovation loan + venture debt

30. Q&A
herman@newion.com | newion.com