The N3F Strategy & Investment Thesis
For the past couple of years, our team has seen an innumerable amount of startups, investment deals and venture teams. We’ve seen many startups rise to success but many more tapping out somewhere along the way despite having promising products and teams behind them. Having done so, we have developed our very own thesis based on what we’ve seen that works when it comes to building a startup from scratch and making it a success on the long-run.
So who are we? N3F Ventures is an investment and development firm that assists tech startups with MVP execution and venture growth. As many already know, innovation is a combination of both invention AND adoption. Coming up with a cool piece of hardware or software is not enough in today’s competitive landscape. Getting the market to adopt new solutions and technologies is a challenge as well, especially if you are a startup entering an age-old industry where everyone is used to doing things a certain way. With a clear understanding of these challenges, we work together with startup teams to make their venture a success! 🥳
We operate across 4 main areas, including: (a) Investing, (b) Venture Growth, (c) Fundraising, (d) Exit Strategies, and are mainly active throughout Europe, Asia and LATAM. We work in a distributed team across these regions but you can find us in hubs such as London and Amsterdam for the most part.
When Do We Invest? 💶
We currently invest in a limited amount of startups per year. We mainly focus on the pre-seed stage for these investments and look for Alpha startups that are either pre-prototype or at the early prototype stage. Beyond the potential of an MVP, we cannot overemphasize the need for a strong and balanced startup team. Not only do we look for this, but it is one of the key ingredients for making things work in the later stages. As a minimum we expect a founder or two-person team with some mockups, early business model and convincing indications of a real market problem that can be solved with your solution. An initial pitch deck suffices to start the conversation with us.
In addition to investing, we like to be hands-on when it comes to venture growth. As such we assist startup teams in various areas such as sales, marketing, business development and recruitment. Sales is one of our core beliefs, and here’s why:
Turnover, Revenues, Sales 🎯
Startups rise and fall because of sales (amongst other reasons). As a founder, whether you opt to raise several rounds of funding or focus on getting customer sales from day one, ultimately, your startup will need to generate revenues in order for it to be a success. Having an innovative product alone will not be enough. As such, founders need to be wary of the choices they make, and how they spend their scarce resources, both tangible (e.g. capital) and intangible (e.g. time). Obviously, depending on your chosen business model it might not be possible to sell from day one. In some other cases it may be required to improve the prototype/MVP more before reaching a commercial launch stage. Whatever the case may be, having a business/revenue model that delivers sales is always better to have as opposed to one that doesn’t.
Thus, our main focus is to assist founders in developing sustainable business models that generate recurring revenues. Sustainable in this sense refers to a revenue model that can be sustained on the long-run, ensuring a steady cash inflow for the startup (can’t pay salaries with peanuts…). In doing so, growth can be financed through sales profit instead of having to raise additional funding. Whether we are developing a new GTM-strategy or finding new partners, we always look to build a foundation for the long-term, which is based on a product supported by a sustainable business model. Together with founders, we also support the growth of startups as a means to reach critical milestones. Looking for external funding afterwards is always possible but ultimately, things rise and fall with sales in our opinion.
In addition to a business model and high-potential market, we very much believe that a startup team is the foundation for success. A strong team will be balanced and realizes that it’s ok to make mistakes with the aim of improving the solution. All too often do we find startups with great product teams that lack business savviness and/or a working/viable business model. This is why we believe in assisting early-stage teams with talent acquisition and finding co-founders that match with the current mix of things. As any early-stage vc would tell you, the team is one of the most important parts of the investment decision equation, and this is for good reason. Without a good team pushing things forward in the same direction, it is virtually impossible to make a success out of a value proposition with potential.
N3F offers pre-seed and seed-stage ventures with real support as a means to navigate through the various ups and downs of the startup journey. Our team has been on every seat of the table, and is committed to discovering and investing resources into great solutions and teams that have a vision of changing the status-quo. Our approach is always hands-on with a clear understanding that we ourselves would want dedicated assistance on each aspect of what we’re doing should the tables have been turned.
Exit Strategies 🤝
Not all founders work on their startup until the end. Motivation, interests, opportunity and progress can be reasons for opting to exit a venture early. As a founder, you may have started with a lot of motivation to put things together but a year or two into it leads you to realize that it is not what you want to do (at least not everyday) anymore. Changes in a founder’s personal situation may also lead to the end of a startup in the early-stages — this tends to occur often, although those with strong conviction find a way to “restart the engine” somewhere down the line. Then there’s always the chance of bumping into a company or investor that wants to buy the whole startup. You may have developed an early version of the product for example and the potential is certainly there. Selling at this stage might be an idea to exit early and put your next venture plans into motion right away. Finally, being able to make progress as a startup is key. If it’s been several months without any meaningful progress then it’s good to look at what the roadblocks are. A startup may not be getting any new beta users, customers, or perhaps raising funding has proven to be a much more difficult endeavour than imagined. Whatever the reason, over 90% of startups fail due to a misaligned team, wrong business model, lack of P/M fit, insufficient capital etc.
In such cases we support founders (and their teams) in devising (early) exit strategies and execute these in order to deliver the best results possible. The main idea is to generate a return in line with all the sweat equity and effort put into the venture and getting it to its current stage (e.g. MVP developed, IP secured, partnerships closed, early customer traction etc.). After determining an initial valuation, we conduct due diligence on the entirety of the case and assist founders in finding a suitable buyer. Our role is always supportive, with the founding team being in the driver’s seat.
Raising Funding? 🚀
We also assist startups in organizing funding rounds to raise much needed financing. We tend to work on rounds between EUR 150k and EUR 5M for the most part but are open to working on larger Series A rounds as well using flexible terms. As part of the process, we conduct our own due diligence and assist in preparing the investment documents needed for the round. All of this to help identify red flags early-on and improve the overall strength of the investment case. We’ve seen that as a startup it is important to not oversell yourself or make claims you can’t substantiate. Claiming to have a partnership with Apple for example sounds great. However, if it turns out that your partnership is just you submitting your app to the App Store, then that might be somewhat of a turnoff for potential investors.
With fundraising rounds taking between three to six months on average to close, we partner with startup teams to guide them throughout the entire process as well as afterwards when it comes to execution and achieving milestones.
During the past years of activity, we have influenced the journey of various innovative ventures — thus we are wary that it takes serious effort to build successful (high-tech) ventures. Our long-term vision is to help usher in a new era of technological innovation and support teams that are working on exceptional solutions in terms of venture-building and funding. Thus, we are very much interested in hearing about frontier technologies that have true market potential! 😉
So if you’re working on something great feel free to reach out to us and let us know what you’re working on and how we could help!
All images in this article were sourced from Unsplash unless otherwise stated.
This article was first published on n3fventures.com
