Most founders in Germany are inventors. You shine as a developer. This drives them to the innovations and solutions that startups thrive on.
But at the latest when capital is raised from outside for the first time, the view must become more holistic. Instead of only looking at your own product through a developer’s lens, you first have to look at the entire company and, secondly, from different perspectives. This is the only way to avoid the most serious mistakes in fundraising.
1. Spray and pray when looking for investors
Founders often leave the topic of fundraising lying around for too long. If they engage with the issue, the clock is ticking. The solution of choice is often to write to as many investors as possible in the hope that one of them will bite quickly. What is neglected is the question of which investor is the right one for exactly this company at exactly this phase. Do I have a fast-growing tech company so a venture capital fund is the right choice? Do I already have a mature business with weaker growth that would be suitable for private equity as an investor? Or is my business model more medium-sized, conservative and perhaps associated with one or two special features, so that family offices are more likely to be an option?
In addition to this rough distinction between investor groups, it is worth taking a closer look at the specific candidate. And it’s not just about the valuation and the investment volume. Whenever possible, founders should choose investors who have expertise and a network for exactly the sector in which the startup is active. In this way, they can provide real added value in terms of content – and strategy discussions and reporting run much more productively.
2. No liquidity planning
When it comes to fundraising, many founders have a sum in mind. However, it is based more on what other companies have recently collected. What is missing is clear planning of capital requirements for the next twelve to 18 months. Because you can’t get money without a convincing plan for what to do with it.
How much runway do we realistically have today? How high are the fixed costs and variable costs really? Which payment dates come when (salaries, marketing, product development, inventory, taxes)? And how does cash burn change depending on the growth scenario? Liquidity planning answers these questions.
3. No equity story
Why is your company an investment? The answer to this question lies in the equity story. It is the common thread that connects numbers, product, market, team and exit perspective into an investment case.
A fundamental part of the equity story is explaining what the company actually does. And in just a few minutes. That sounds trivial. But it’s not – I sometimes needed six to eight meetings with customers to understand which problem he was solving for which consumer. I recommend placing this position at the beginning of the equity story.
The core of the equity story is a compelling vision. What levers will the company use to grow over the next five to ten years? How does it translate growth into profitability over time? What factors on earnings before interest, taxes, depreciation and amortization (so-called Ebitda multiples) are realistic in the long term if the investor takes the company public or sells it on?
Bird’s eye view
All of these mistakes have one thing in common: they result from the founders forgetting to change their perspective. They are so deep in the company that they lack an unbiased view of the company. I would go so far as to say that founders should view their company as an investable asset from day one.
About the author
Lucas Roemer is the founder and managing director of Roemer Capital, an independent investment boutique with a focus on fundraising advice and fractional CFO services. Since founding the company in July 2023, he has helped clients raise over 500 million, with a focus on technology companies.
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