Lesson 4: How to Create Momentum While Fundraising? (Part 2/2)
If you have just arrived on part 2 of this article summarizing the baby vc interview of Raphaël Vullierme, CEO and co-founder of Luko, I advise you to come and read the first part here:
How to Create Momentum While Fundraising? Part 1/2
Okay, now, let’s pick up where we left off.
Takeaway #6: How to Create Momentum While Fundraising?
First, a professional network can be built, but having a network doesn’t mean much. It is the legitimacy of your subject that is important and it is built by meeting experts. Raphaël knew nothing about insurance four years ago, then he decided to meet 200 actuaries, lots of people at AXA, Generali, and in the classical industry.
VCs are in the business of finding great startups, 80% of the analysts’ time is spent identifying promising startups. If you have a good business with a good opportunity the VCs will come to you.
If they don’t, maybe you don’t have the right numbers yet, not the right model on the right industry, ask for very raw feedback on why they are not more excited.
For the series A and the future series B, Luko has a list of VC’s they want to have and they asked SpeedInvest, Accel, all the people who are already in the captable to get people to contact them.
Typically, before the series A, there was only one fund that hadn’t contacted Luko while he was on the wishlist, Raphaël asked the whole board to get this fund in the race for the series A within 10 days to increase the moment.
“It’s the role of seed investments to help you create momentum for the series A.”
It’s quite interesting and it’s important as an entrepreneur to get that mayonnaise and momentum going because you create incredible value at that time. As an entrepreneur, 50% of the value is created in your ability to execute, to recruit at least in early-stage, and 50% in your ability to raise.
Understanding this competition between VCs, playing as much of it as you can is extremely important because VCs are looking for that as they know you will be able to create momentum again in the next round.
Takeaway #7: How To Find Your Co-founder?
That’s the most important thing! Raphaël teamed up with Benoit, who is the younger brother of one of his school friends, mainly because they had the same values they had absolute trust in each other and moreover they were technically complementary. Raphël had some experience with the business and execution side and technically Benoit was very good after he went to Polytechnique. Luko has had the same vision since day one even though the business has changed a lot. Entrepreneurship is hard, it’s full of uncertainties and walls.
“What is essential is to have someone with whom you want to build the same thing and with whom you know you are doing it for the same reasons.”
To find that person, you have to meet a lot of people and work with them. Raphaël and Benoit took two months to try a project and see how it would go. They gave each other very honest feedback and it worked. Raphaël had tested with other people before and it didn’t work.
You have to do crash tests, be honest about the values, and what kind of companies you want to build. An off-site for several days to talk about everything, what you want to do with this company, where you want to be in several years is a good idea to start with.
Takeaway #8: Why You Should Become a B Corp.
B Corp is a certification of your social and environmental virtuosity.
“The great strength of the B Corp label is the process to obtain it.”
With Luko, the remaining and unused contributions are paid to associations of the insured’s choice, making Luko’s business virtuous.
Luko also aims to help households to consume less energy.
When you do the B corp certification, you have to ask yourself a lot of questions. You have to check the quality of the suppliers, do a 360-degree check-up to maintain it, set up processes to make sure you keep this commitment.
It’s a great value, above all internally, it speaks to startup employees, it’s useful to attract talent who want to be part of an adventure that works economically but makes sense. In France, clients don’t know B corp at the moment so there is no positive impact on attracting clients.
Takeaway #9: Why Insurance Alone is a Very Bad Consumer Product?
The problem with insurance is neither how it’s sold, nor the fact that the traditional insurers’ websites aren’t beautiful. Obviously, there are things to improve. Yet, the problem with insurance is that it’s only half a solution to a problem.
“The problem with insurance is that it’s only half a solution to a problem.”
The problem is that homes have water damage, fire, theft, and Luko wants to answer the question “how can you make sure that you don’t have a problem at home and when there is a problem you can have a solution as soon as possible”. Making a nice application where you can buy several insurance contracts, car, health, travel is not the goal of Luko because this kind of generalist insurer who knows nothing about the system, who only sells risk, it doesn’t make sense for the customer.
At Luko, the aim is not to make a super nice application with lots of insurance products.
If you look at what Alan is doing, their goal is not to go into a lot of verticals, it’s to reinvent care pathways and health.
Insurance is part of a larger value chain but it cannot be the central brick of a business. It’s a very good business model, it’s a terrible consumer product. Nobody is excited about insurance. At Luko the business model is transparent, 30% of the premiums directly finance the best customer service, the best claims management, and one day will allow Luko to make a little profit.
All the rest, 70% of the premiums are used only to reimburse people for claims, and when there is money left over at the end of the year it goes to the association chosen by the user.
Takeaway #10: How To Choose Between Entrepreneurship and Venture Capital?
If you hesitate between becoming an entrepreneur or a VC, you should meet a lot of entrepreneurs and VCs.
“There is no decision without a return, you can be a good junior VC, and then a good entrepreneur or vice versa.”
There is often an intellectual attraction to understand the tech models, but then you have to choose between building one, which is not a highway, or becoming a VC to analyze them, which is not a highway either because a VC also has its challenges.
Thank you Raphaël for your time !
Feel free to connect on LinkedIn and do not hesitate to give me a feedback about my article.
And here we go. An hour live is much more than just a few tips but I hope you get the most out of it. If you feel like it you can find the replay here.
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