Financing for Scaling
- Befriend VCs: Build meaningful connections with the VCs and try to gain access to their networks even if they don’t actually fund you.
- Taking on Partners for Culture: Sign with people who are enthusiastic, passionate about the sector so that when the company is looking for opportunity in raising funding, they can make good recommendations.
- US VS. Europe: US investors tend to have a stronger appetite to let things go earlier but at the same time provide quicker and bigger fundings in earlier stages. On the contrary, European investors tend to be more patient and make the effort to make the business work, but provides less money.
- Know your defendable pillars: Your defendable pillars are several things that are just yours. Identify them, treasure them and make them the corner stones and invest all the way around that to make them bigger.
- Don’t focus on quarters: Make sure that you and your investors are not focusing on quarters. Instead, suggest to look at the growth of the business in 18 to 24 months. Your path to get there won’t be perfect but try to set expectations and manage them.
- Know exactly what you want: Only ever spend what money you have in your pocket. Be proactive and understand the run rate and the time when you run out of cash. When raising money, know exactly what you want and don’t take more.
- Strategic VCs as last resort: Strategic VCs are not as entrepreneur-friendly and might limit exit options. The rule of thumb is to take Strategic VCs as a last resort, as late as possible and keep your doors open. If you do choose to go with SVCs, make sure they give you a lot of money and the premium on their capital is significant enough.
- Deal with CVCs: If you would like to go down the CVC route, talk to someone who made it work and see how they did it. In addition, understand why CVCs want to invest in you; look what they are missing in their corporate puzzle; and see if they have gaps in their technology, which might be warning signs.