Inside a fundraising in France: a CEO point of view

You may have heard that PandaScore, our 2 years old start-up, has raised a 2.5M€ seed round led by Alven Capital and other great investors! It’s been a long and tortuous road I shared with Jonathan, 50 partners and all the past and present Pandas. From the nobody-knows-shit about e-sport to a hyped phenomenon, we’ve played hard, under the radar and we don’t want to change our ways 🐼.

I wanted to share my experience as a CEO raising money in France, mostly because I found so few raw and honest feedback on the fundraising process. So I will try to share our story with transparency. Please note that this post might be a bit long.

The first thing I thought when I wrote this was “luck” and how everything happens with serendipity, lucky timing and resilience. But this post is not about philosophy and luck in the start-up world. Instead I’ll try to tell the different steps of our fundraising with some tips I think useful.

Mapping the board. Early February ‘17

The board is the word I use to describe a snapshot of the VC world with all its components (recent funds closing, deal flow size, maturity, holiday, competition…) at the moment of your fundraising. Understanding the board was the most important step for me. First thing I did was to limit the board size geographically: France, UK and Germany - raising in the US from France is very time consuming and harder. Then the non-fun part started… I tried to find the best funds and partners in each of this country, going one by one and doing extensive research. For each I answered questions like: is there a similar deal with an e-sport start-up which is not a competitor? Which partner was in charge? Do they seem to like the field or very new risky fields? Did they raised recently? Do they have a good track record? Do I know someone there ? Could I have intros with a portfolio start-up?

There is a lot of public VC listing, I studied them and build my own VC tier list depending on my criteria. This tier list was going to be my fundraising road map with around 50 VCs. I also thought it would be helpful to list all the people I knew that have connections with the VC world and could make an intro or just drop positive comments on us.

👨‍🔬 Small tips: I kept a few top tier VC on the list but ones that never invest in pre-revenue companies or where PandaScore was clearly out of the investment thesis. That eventually helped me!

Preparing the board. February ‘17

At the beginning it was important for me to make it clear that I wasn’t fundraising: I was only looking for feedback. At this point I only had a pitch deck that explained quite poorly PandaScore’s business and ambition. The goal of this phase was to learn as fast as possible how to pitch investors and what they want to hear. So basically for one month, I went to see around 20 VCs chosen among my tier list to get rough feedback. And it was savage 🦁… I had people telling my company was crap, small, immature, gluten free and all…

“That’s an interesting company you have here. But sorry, we are only looking at the potential multi-billion dollars company and you clearly ain’t building one”, said a quite good investor 🦅.

They were right, not because PandaScore was all that but because I, as a CEO, didn’t had enough thoughts on what I wanted Panda to be in 5 years aaaaand my pitch was awful. I had to work on the big picture and how I make it shine with a sharper pitch.

Here are some insights & stuff I’ve learn here:

• I had to be known as a start-up CEO by investors and create genuine, not money-driven connections.
• I learned to pitch and being confortable pitching some investors that literally trash what we’ve built with snobbism. And it’s fine.
• I understood the strengths and weaknesses of my company. What scares investors and what pleases them.

👨‍🔬 Small tip 1: try to see unreachable VCs (tougher feedback) and also low tier VC (easier to meet) and learn from those meetings.

👨‍🔬 Small tip 2: never spend more than 45–60 min per meeting, VCs love to meet entrepreneurs: that’s their jobs. Finish by asking straight away, what are the weaknesses that could dampen the sexiness of the company.

Creating the momentum. March ‘17

The previous steps helped me prepare and create the momentum but we also had to be active indirectly by broadcasting positive signal on PandaScore. I used my network for this so we had people talking about PandaScore to investors all the time. Sometimes it was founders; sometimes it was business angels, or even other investors. We had a lot of help from 50 partners, they pinged the VCs with their connections at the right time with the proper message. As a result of such activity everyone knew we were raising and talking to many good investors, a side consequence was an urgency feeling into the investor mind, but an healthy one: by talking with a lot of investors the deal was getting hot pretty fast.

🤡 Fun fact: I put my deck on a Dropbox folder so I could easily update it. But at some point an investor in a great fund made a comment with his name on the shared dropbox… every VC in town knew that I was at least discussing with this fund. Good signal I guess :)

Momentum peak for extrinsic reasons. late March ‘17

That’s when the fun starts! Momentum starts for various reasons but you have to seize the moment it starts. For me personally it was when investors who thought I wasn’t raising told me I should. Why?:

• I had investors telling me that the french VC market was stupidly flood by money, with Iris, Alven, Daphni, and others closing rounds recently.
• E-sport had great recent news (Canal+ having a monthly show, PSG bought LoL & FIFA teams, Alibaba investments…), and validating news for the VC mindset.
• A surprisingly low amount of quality deal in the french start-up scene, I’ve heard it more often that I could expect even though I was doubtfully.

So when we saw a lot of money, low amount of deals, a booming e-sport market and a prepared board… we had momentum.

Exploiting the momentum. late March ‘17

When it started, I knew I had to take advantage of it and I decided to force a very short time frame to close. It’s not just about making investors feel the urgency, but also to show you don’t have time to waste — which is true — , that you’re determined. Also the fundraising needs to be obvious for everyone by showing your determination: you’ll raise in one month or so, the only question left unanswered is with which fund(s). I tried to take very seriously the image I sent to investors. As some might know me, I don’t have a specifically clean nor a CEO image but an honest and very PandaScore-like one. And in France we are still far away from the casual geek style 🤵🏻 …

At this point I had an okay deck but most importantly a very good knowledge of what makes investors love & and hate PandaScore. And obviously I was full time on this 🌚. Consequences were when they asked for answers, documentation or anything related to our fundraising process I tried to send them as soon as possible, even if it required crafting new slides or improving your business plan.

From this moment the process stopped being linear. I piped investors into my own deal flow and they all had different advancement pace — some were so slow that they answered me after I closed. And I tried really hard to move all the pieces at the same time and have as much investors as possible ready to shoot a termsheet in the same timing.

Mastering your business & meetings. April ‘17

I often noticed that people had a hard time fully understanding e-sport, which sounds obvious. So I forced my self to pitch a lot to people really far from millennials, understanding what’s difficult to picture. Then after hundreds of iterations my pitch became really good to make investors understand e-sport. “Hundred of iterations” isn’t a figure of speech. In April I would sometimes meet as much as 5 investors a day. I even designed deck version dedicated for specific VCs. For example slides that talk about exit strategy, could scare some investors away and interest others.

🤡 Fun story, I had an investor coming at my office for some due diligence, I had to leave so I stopped the meeting and left, but the investors managed to ask for a beer with my team… When you want to control all the information that filters out of the company during such an intense and important moment as a fundraising that’s definitely not a good idea: never let your team alone with investors. Oh and luckily it didn’t impact us negatively since we have an awesome team 🐼.

👨‍🔬 Small Tip: Prepare material for pitching and VC relationship: slidedeck, simple BP, a list of articles on the field and a Q&A with some recurrent questions you’re asked.

👨‍🔬 Small tip 2: Always take notes on what people don’t understand on the pitch, market and what they like and dislike. That gives a huge power to understand your weaknesses and take advantage of them.

Mastering the news. always

I often hear that you shouldn’t send frequent reminders to an investor without a good news, that’s true but don’t be a caricature by sending weird purposeless messages. I’ve always tried to be succinct and sharp on e-mails, plus during fundraising that goes well you don’t have time to revive relationships. If there is a momentum the VC is hot or cold.

I’ve always considered the fundraising to be an intelligence warfare and we’ve always tried to know more and to compose with new information on the fly at all time. Martin (🦍) and I spent a lot of time doing technology watch to get the fresh news as soon as they got out and prepared the speech accordingly. Mastering the news was a crucial way to create and keep the momentum going on a daily basis for two main reasons. First you show that you’re connected to the field, you know how it works and you have insights before it goes public (very important). Second because you’re never surprised of the news dug out by funds analysts and always prepared for the right, relevant answer that makes your company shine or show leads to tackle hardships.

Final stage: Boss level. 17–21 April ‘17

Then came the board meetings. During the first one I was stressed because I had this mental picture of a high school class board where I got destroyed by teachers because I hadn’t work enough 💩 - I was just working on my e-sport skills that’s all. But board meeting were way easier than I thought. It’s about having the sexiest pitch that demonstrates expertise in a trending topic, a crazy good team/achievements, a solid entry barrier, a big revenue stream or at least expectation and a big exit. Simple right?

I noticed investors had quite long process but when you rush them, they don’t feel confortable and they can shoot a term sheet faster than you -and they- think. Some investors I’ve met shot a term sheet in less than 10 days.

When we had multiple term sheets offers, we had to choose. I knew some investors wanted to rush the term sheet signature since they didn’t want to lose the deal to competition. So I agreed to follow their deadlines and then forced all the others to get on the same timeframe. At this very moment I was very stressed to lose the momentum for external reasons - for example our competitor raising 6M€ just a few days before … We had to be really clutch on our last meetings, deal negotiation and on creating the competition between investors.

Fun fact 🤡: VCs lie to each other when they want the deal :)

A VC to other VCs: “PandaScore? Naaah, definitely not looking at it”... Same VC to me: « Here is a term sheet ». True story.

Small tip: You have to be eloquent, to master all your figures (very important) and have a shitload of appendices for all the question that might arise(but don’t worry you’ll be prepared ❤).

Negotiation. 23-27 April ‘17

Having deals on the table is when you start negotiating, and that also means you have to bring your lawyer to the warfare. So Louise-Marie came in (Carmin Avocat, best lawyer in town but she’s busy with PandaScore => cya). Our way of negotiating was simple, we had a couple of deal structures in mind: two VCs or a solo VC. Then with the VCs who’d committed, we tried to create line-ups depending on their willingness to co-invest or solo invest, tendency to invest with other funds, etc.. After this small simulation, we had our rosters ready. Eventually, we tried to structure the financial deals we could have.

Financial conditions are important but probably less than most people I hear think. Having low dilution is important, but “losing” a bit more shares to have a better investor on board is a no-brainer. Also every % you give now will get diluted in subsequent rounds, so dilution will hurt way more later.

Then the amount of money matters, for instance we wanted to raise 1.5M€ at first but I knew raising 2M€ would be better. I made a tradeoff between what PandaScore needed and what we could have to face the unexpected with a safety cushion.

Finally, the conditions are basically about how the shareholder agreement will be structured. We chose with our Lawyer to spend a lot of effort to negotiate favorable conditions directly in the term sheet because back then, we had leverage. Indeed, when you sign a term sheet, leverage goes off.

Side note: When you get into negotiations with VCs it’s not about the amount of money they invest but the % of the company they get. So it was easier to rise the amount of money; still, with proper leverage you can also keep low dilution.

Side note: It’s really important to understand all the terms & conditions and which one you want to fight for. That’s mostly your lawyer jobs to teach you.

Choosing the best deal. Choosing your deal. 27 April ‘17

That’s where you have the most leverage, every one needs to make decisions fast because: « I’m signing a term sheet next Thursday. » At that point, we had 6 term sheets from top French and international VCs. I knew we were lucky to sit in such a spot with room for negotiation. I decided to have a un-biased️ discussion with the PandaScore team where I tried my best to depict exactly the offers we had, the deals structures to get their input. But in the end it was my due call.

We went with Alven (🤘 François 💪)… We made our choice using different criteria:

• Partner in charge: this was the most important one. This person will be on the board. We had to be sure he’d understand our business fast and give us valuable advice and inputs all along our future journey.
• Deal quality: there is is a subtle balance between a good financial deal and an entrepreneur friendly shareholder agreement. Winning is having both.
• Fund attributes: understanding how the fund works matters when you want to get married with one. If the fund just raised money they won’t be in a hurry to get out. Other factor that I thought interesting: If they raise a lot of money (ability to follow next rounds), if they had a focused investment thesis (expertise of the partners and deep network), track record,…
• Business angels opportunities: at first I didn’t thought it through but when you commit with some funds, they have to help you close your round with angels that could upgrade your company on specific skills you lack and form the best board possible.

If I had a conclusion, I’d say that fundraising is not only about the company you have, I think now that the CEO’s job is to sublimate the startup, with some tricks I mentioned here and others. We’ve seen for a fact the blossoming of e-sport. We had an explosive investment landscape in France (and it seems to get better and better). We had luck. We have a great team. That’s how our fundraising occurred. That’s why PandaScore will keep the hard work going.

Thanks to Jonathan (OTP Urgot), the Pandas, the alumni, to 50 Partners (Jérôme, Kamel, Olivier, Adrien, … ), to our previous investors, clients, users, friends & family (c’est votre moment Père & Mère) and the new ones ❤.

The purpose of this post is to give a glimpse of our journey and maybe there is some good to take, feedback are more than appreciated.

PS: We are recruiting more Pandas to join us -> check this out