The 5 key ingredients to raise €2m and more

The truth is, VCs are flooded with an increasing amount of good/great opportunities.

Christian Hernandez of White Star Capital (a London-based VC) summarises it all in one of his last posts: “in January 2015, I received a total of 4,338 emails from 686 different people”.

But let’s focus on French VCs. They receive a minimum of 2000 serious applications a year (a lot more for the top ones), while there is room for about 200 newly funded companies.

Among these opportunities, there is your awesome company, but also a lot of unfair competition:

  • blockbusters i.e. super hype companies like Happn or Lima
  • serial entrepreneurs new projects like Marc Simoncini’s Sensee or Franck Le Ouay’s mysterious new project
  • companies started by the Criteo mafia
  • companies started by former VCs (monechelle, Dymant…)

So, in this pitiless ecosystem, when can one stand a chance and start thinking about raising serious money?

The internet has a lot to say about this topic. Most of what you will read, including my last post, will tell you that you need to combine three main factors to be able to generate VC interest:

(1) a team that rocks
(2) a great opportunity (big market + massive pain point)
(3) a cool differentiation factor (technology / brand / community…)

The hard truth is: in 2015, it’s not enough anymore.

This fact is not yet well advertised in the ecosystem, and numerous entrepreneurs start a fundraising process without being aware of what metrics are expected from them… leading to six months time wasted.

What does it really take to raise a Series A over €2m? It comes down to five key ingredients.

1. Holly Traction

If you only have one thing, let it be Traction. Growth. It can be traffic, revenue, clients, or kittens, you need to be able to produce really nice upward trending charts.

A 10% monthly growth is a minimum. 20% if you intend to meet European VCs (Index, Balderton…).
This is true for B2C as well as B2B companies.

Yes. It is big.

That’s what is expected in 2015.

It will impact directly your valuation and your chance to raise funds.

2. You need a positive contribution margin

Growth is a necessary but not a sufficient condition. Subsidised growth does not count. To check if your growth is subsidised or real, VCs will check your contribution margin.

Contribution margin = revenue - variable costs - acquisition budget

It’s a beautiful metric to validate a business model. Not flawless, but it works for most cases.

B2B businesses, although they don’t have per se a contribution margin, can be evaluated by arbitrating their cost of sale and their customer lifetime value.

Why do you need a positive contribution margin before meeting a VC? In a nutshell: nobody is going to give you money to lose money. I mean, it’s not 1999 anymore.

Know your business and make strategic choices ahead of schedule to adapt to this constraint.

3. You need proof that your clients love your service and keep using it

As high as your app downloads / subscribers / new clients numbers can be, VCs are always going to watch the metrics proving that your thing is not a fad, but has a durable value proposition. Be sure to have some of these KPIs ready to prove that you will last:

  • A super high use rate
  • A strong repeat
  • A low churn

You claim to have built a relatively strong brand? Your future investors will ask for metrics to confirm it: social network communities, Net Promoter Score, efficiency of your referral programs…

For B2B, the same principle applies. Show:

  • Proof that your clients use your software / infra / service
  • That your customers upsell (they buy more features, bigger plans…)
  • That really few leave your service

This topic won’t necessarily arise in your first meeting with a VC, and you can feel a false sense of security by hiding behind big “foreground” features.

However, be assured that they will eventually ask for your usage metrics, and that it is really deceptive for an investor when an entrepreneur who has announced loads of users actually has 1% of active/paid/repeating/… actual users.

Which leads us to the next ingredient.

4. You need patience and the ability to undersell yourself

This is maybe the hardest part, because highly counter-intuitive for an entrepreneur: you need to undersell yourself.

During the fund raising process, you are going to be asked every 10 days to give an update about the state of your business. If you have nothing new to say, you are going to have a bad time.

Here is a list of things that you can keep aside and bring up at the right time:

  • new clients
  • improved KPIs
  • new feature / app
  • hire of a great profile
  • new (AAA) advisor

However, this will only have a positive impact if you did not promise the earth to your future investors, because there is nothing more repelling for an investor than an entrepreneur who oversells his business and does not deliver.

The opposite is also true. A start-up that shows more revenue than expected, or more traction is assured to be remembered.

That’s why we always wait a few weeks or months before saying yes to a client. That’s the main point we check: that our future clients are delivering, as planned.

5. You need someone you can rely on

Fundraising is a full time job. Be sure to have someone helping you over the process so that your company does not suffer too much of your absence.

It’s a hard process. You will go on a roadshow, pitch in countless meetings (57 with my last client), get through an emotional roller-coaster, and still be expected to deliver your 20% of monthly growth.

So, learn to rely on your cofounders, board members, mentors, employees... And pick a great advisor to lighten the workload.


At Chausson Finance, that’s what we do : we match smart money with great companies. In 2014, we helped 9 carefully selected companies to raise between €1.5 and 5 millions for a total of €26m.

Our first deal of 2015 was Alkemics, a 5 millions Series A lead by Index Ventures.

You have secured 4 out of the 5 ingredients and would like to get our support for your upcoming fundraising? We’d love to hear from you.
ay hi on Linkedin or book a meeting with me at Ladurée

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