General Dos and Don'ts
In this webinar, Franziska Stemmler, Chief Operating Officer at Hemex, shares with us what we need to take into account when we’re facing a fundraising process (the most important actions to take before, during, and after fundraising) and general dos and don’ts.
Would you advise adding the pitch deck to the targeted email or get them on a call? Isn’t it better to explain the pitch deck yourself instead of just sending it over?
It's always better to explain it from your perspective because it’s the way to sell your company. Also, the risk of sending the pitch deck is to explain something that people might not read.
They get a hundred pitch decks a week or more, and they need to decide which ones they’re going to look at in more detail, so many things that can make a difference.
In terms of outreach, yes, a personalized email with an introduction is better. This introduction many times can also be made by another startup as well.
If you don't want to send a pitch deck, you can also do one page, where you explain the key factors, just very high level: who are you, what is the problem you want to solve, and how are you gonna solve it and the stage of the company, since early investors and VC look for companies in very different stages.
And what about video? It is used more and more. Is that seen as an outreach?
It’s not so common and I’d actually love that. The risk, though, is to exceed the two minutes, because people might not watch it. It really needs to be two minutes, and also a good quality video, with a nice background. I've seen some videos from startups, made with their phones, that are counter-productive.
We also need to be fully aware of who we’re sending this to.
Sometimes in the investor field (and that's why the pre-research is important), you have elderly men who might not be so into technology.
Another thing that I heard from other companies that were doing fundraising is regarding who to connect with and how to ask for introductions. An interesting strategy would be to look at the portfolio companies of the investor in question, reach out to them first, and get on a call with them, to get some firsthand advice or information about how are they working.
It’s a good idea but there’s also a watch out. If you do it too frequently, then it becomes an issue.
I actually had such a case. For example, every two weeks we had a company asking for an investment because it was introduced by the same startup in which we had invested, and it got too much. It ends up becoming a pattern. So, it’s a good idea but always think about the person on the other side. If a company does it once, that’s ok, but I wouldn’t recommend having it as a recurrent strategy.
What is a “data room”? What does actually do, and would you recommend it?
A data room can be any shared space where you can save confidential information that can be looked at from different places. It could be a SharePoint; it could be OneDrive… The point is, when you have highly confidential information, you need to make sure it is in a secure space.
Of course, there are very professional ones, but in the early phases where you don’t have many documents, you’ll be good with a shared drive. You’ll need a certain structure, and all documents should be in there, that also means your financial statements, so investors can check the data in more detail, and they need to be updated yearly or quarterly. The clearer the information, the better, because it’s like a business card for the investors and it helps them ask the right questions from the beginning.
What’s the difference in raising between startups and scale-ups?
A: A lot applies for both, but some areas like the Business Angels area are more focused on startups.
Regarding startups, a biotech or pharma company can still be considered a startup after 10 years. They don’t call that themselves anymore, but in fact, they could. The investors invest in the technology or clinical development without having a clear idea if that is going to work.
In a scale-up, you already have something, and the investment is usually used for geographical expansion and for growing the team.
What should I do when an investor rejects me?
You will be rejected a lot because that's what the fundraising process implies. You need to have a very high frustration tolerance. It's like being a salesperson. You’ll get a hundred times a “No” and then a “Yes”.
First of all, always be very thankful for the time they take, don't be upset because there are many reasons for rejection: it can be that they're not convinced, or it can also be that you're just not exactly in the right stage, you might not fit in the portfolio strategy… There are many reasons why you receive a “No” and that doesn’t mean your technology is not good or they don't like you. Many times, they’ll even have a second look at you at a later stage, so don’t take it personally.
It’s also important to ask the reason, to ask them for a debrief. If the feedback is critical, take it as positive because it will help you for the next step. Ask them if you can keep them updated on further development for a later stage because you often get a second chance.
How do you identify the lead investors?
It’s a very important question because you should definitely check if they require a lead investor, and you don’t have one. If that happens, you can leave them for later.
But how can I identify a lead investor? Check press releases, also the website to see their portfolio. In these press releases, it is mentioned who leads the round and that can give you insightful information. Sometimes, the lead investor is not the one who invests the highest amount, but someone who encourages other investors to join because he/she sees potential.