Lesson 4: How to Create Momentum While Fundraising? (Part 1/2)
On Wednesday, June 24th, the baby vc team had the pleasure to host one of its “meet & greet” session. The concept: to welcome a VC or an entrepreneur every week during lunchtime for a one hour live to ask any questions you may have about VC, fundraising, the latest technological trends, and much more.
That day, you were listening to Raphaël Vullierme, co-founder and CEO at Luko, an online insurance that aims to revolutionize the home insurance industry by making it simple, transparent, and truly useful while making a positive impact.
Here are a few key points to remember from this session, but first let’s get to know Raphaël Vullierme and Luko better.
Who is Luko’s Co-Founder, Raphaël Vullierme ?
Raphael is a serial tech entrepreneur. He studied at INSA Lyon and HEC where he created his first startup called Goodfood — Frichti before Frichti. -. He replicated the model with Eatfirst alongside Rocket Internet. The company is currently thriving in the UK. Following this success, he launched OpenJet — Uber for private jets — and raised 2.5m€ to expand in Paris, New-York and Luxembourg.
In 2016, he joined forces with Benoît Bourdel, an engineer from Polytechnique, to create Luko with the ambition to protect millions of homes in Europe.
What is Luko?
Luko’s ambition is to create new services for the sustainable home. The company’s mission goes way behind insurance and uses technology (IoT and AI) in order to fulfill it.
Luko provides everyone with peace of mind with its loss-prevention product. It also helps to have a safer, greener home without having to worry about it.
Luko’s rationale is that life is far too exciting to waste time on insurance, water damage, energy use, Luko does it for its users. In a very caricatured way, it is an Amazon of boring household services.
At the end of 2019, Luko raised €20 million led by the VC investment funds Accel, Founders Fund and Speedinvest. Some of the best VC funds out there.
Takeaway #1: Why Thinking Like a VC Can Help an Entrepreneur, Sometimes. 🧐
Having frameworks of thinking, business analysis and industry like a VC is extremely valuable for an entrepreneur. No need to spend 5 or 10 years in a venture capital fund, because it’s going to be too hard to get into entrepreneurship after that. Indeed the VC will have a tendency to over-analyze everything, will never take the step because he will always see a downside. The entrepreneur has to see the opportunity but also all the crap that needs to be solved. He thinks “now I’m going, I’m taking this risk, there are no perfect opportunities, I have to execute and we’ll see what happens”. This risk-taking part is actually very different from what VC does. Of course, the VC will back some entrepreneurs, but he reduces his risk by backing several entrepreneurs.
“Why did we launch Luko on insurance? We saw a big problem but also big opportunities, a very large market. In the end, a VC is going to make the same analysis.”
Takeaway #2: Entrepreneurship is The New Adventure Of Our Time. 🤠
Raphaël believes that the life of an entrepreneur has a richness in the intensity of each day lived, in the diversity of things tackled. By being an entrepreneur, you become a relevant expert for your industry.
Raphaël’s first industry was food delivery, he can now talk to restaurant owners in their kitchens about their potato stir-fry machines, about designing kitchens that are capable of producing 20,000 meals a day. As an entrepreneur, he was able to hire drivers in Germany even though he didn’t speak a word of German.
As an entrepreneur, he was able to understand what flying is all about, and what the rules are, to understand the job of a pilot, what he does, what he likes. To be able to keep up the conversation with a director of the airline industry for an hour without looking completely absurd.
Insurance is seen as an opaque industry, and Raphaël didn’t know about it 4 years ago. Yet, today, there are only a few people who have a global but detailed point of view about home insurance, and he is one of them.
“Entrepreneurship provides the ability to be able to juggle between incredibly varied industries, challenges, and professions.”
Entrepreneurship remains the true adventure of our generation. Thirty years ago, people would have gone into politics, today they go into entrepreneurship because it’s a way to build something very tangible and to align with your values, your dreams that you can fight for every day without politics. It’s a very intense and raw adventure, but that’s the joy of being an entrepreneur.
Takeaway #3: How To Be a Good VC. 👼
A good VC for fundraising entrepreneur is a person with whom you will have a relatively quick and interesting call where you will explain what you are doing but where ideally he knows your industry and understands what you are doing.
He will be able to challenge you to analyze your perspectives differently and above all, he will inspire you. You can talk about competition, similar models, and in fact, it’s an exchange**.**
A good VC is not someone you try to convince, it’s someone who will enrich you by understanding what you do.
There is a strong competition among venture capitalists.
“You can see directly which are the good funds and which are the bad ones. Entrepreneurs talk to each other, reputations are made and broken extremely quickly.”
An entrepreneur can kill his company by choosing the wrong VC.
You have good thermometers like Jean de La Rochebrochard from Kima Ventures who makes hundreds of deals a year, he has a real-time view of the market, practices, good and bad players. When a VC drops a term sheet during the COVID it spreads like wildfire, every VC, every entrepreneur knows that X investor has dropped a term sheet during the COVID. The reputation of this fund is going to take time to rebuild, both with the entrepreneurs and with the other VCs.
Takeaway #4: The Qualities Of a Good CEO
A question every CEO asks himself every morning. It changes a lot depending on the stage of your startup.
There’s no magic formula. First of all, it means understanding the industry, setting a direction, a vision, selling it to investors and the best potential new employees, selling an extremely strong conviction, overwhelmingly execute, it doesn’t mean to do it but to give a context and a clear framework to each employee.
It’s about putting the right people in the right place, giving them as much latitude as possible to execute.
A CEO is more about pulling the strings, giving context and visibility.
If the CEO is executing things, he’s probably slowing down the company and being a bottle neck.
The balance between micromanagement and just giving context and direction is not easy to find.
A good CEO is someone who finds this balance and simplifies the life of his team in execution.
He must drastically help his team to execute well.
Takeaway #5: Notorious Differences Between The Seed and Series A.
Day and night.
“The seed took us four months to close. The series A, complete opposite, only a few days.”
Seed
For the seed, Luko had a good, credible team in a big industry like insurance. On the other hand, the VCs were not convinced by their approach, the product. They were doing hardware and they had no knowledge of the insurance market!
They managed to create a momentum, all the VCs in Paris got interested, Index Ventures too but they ended up saying no and then the momentum went away. Luckily, Kima Ventures had committed, and an insurance professional, Bruno Rousset.
When momentum disappears during a fundraiser, there is no secret except to go and raise additional funds business angel by business angel with intensity and to have worked its pitch.
Series A
All summer long, Luko had good metrics, 40% growth per month, economics unit with a LTV/CAC between 7 and 8 on a large industry lacking innovation for a long time where investors thought a lot could be done.
Luko had all the biggest US and European VCs interested. Raphaël had a relationship with them, he went to see them and was in contact at least every 3 months.
The team felt at one point that it was accelerating, that Luko had the perfect momentum, a huge level of competition between VCs. It is at this moment that the entrepreneur takes over and it’s radically different from what you see in seed.
Raphaël told all the VCs that he was in London for a week to meet them, that they could see him as much as they wanted from 7 am to midnight, that the data room was available, well structured with all the questions answered, that the team was in Paris, available for meetings. Luko starts the roadshow Monday, Friday night they don’t take term sheets anymore.
He got 4 term sheets from the top funds he wanted, 2 term sheets on Thursday, 2 term sheets on Friday, they almost didn’t negotiate the valuation.
Learn how to create momentum in the second part of this article.
>> How to Create Momentum While Fundraising? Part 2/2
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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