Getting funding isn’t easy. Here are some tips & tricks to help you out
Funding is always a hot topic, the Founder Institute Amsterdam found out during their funding event in The Thinking Hut.
With four speakers on diverse funding topics, there was something for every aspiring founder. Topics like angel funding, the business model of VC’s, female focused funding and crowdfunding were heavily discussed for the more than 80 people attending.
The thing about angel funding
Wisse Koedam from Brenger has raised over 2 million euro from informal investors in 4 rounds.
Here are his thoughts on what you should and what you shouldn’t do:
- Do talk to as many people about your wish to get funding — you never know who might have the money or the connections
- Do focus on more than 2 potential investors — if one agrees, others will follow
- Avoid investments from family & friends — that might give you trouble in later stages
- Avoid angels who don’t have enough money — it’s a high risk investment and they should be ok if they lose it
Once you raised angel funding: keep them updated, preferably every month. Be totally honest with them, because they can help you as well. Use their advice and use their network!
Angel funding has both its advantages and disadvantages: “With angel money, you have more freedom, and less immediate urge to grow. You also have more time to experiment. On the other hand you get smaller investments of course — and less frequent help compared to VC money.”
Wisse ends with something that is often overlooked when getting your first funds. “My experience is that investors don’t have to believe in the initial company. Most importantly, they have to believe in you. It’s about people, not the idea.”
Female founder focused funding
There is a problem with diversity in the financial world, as it is dominated by men. As a result, the female founder world is struggling getting investor money. Rixt Herklots, managing director The Next Women, delivered the bad news: 2,2% US VC funding is going towards female founders, while only 1,6 % of Dutch VC money is going to those companies.
Next to that, in investor talks, women entrepreneurs often find themselves asked what could go wrong — i.e. they get the ’prevention’ questions. While men mostly get questions about how great it will be — i.e. ’promotion’ questions. And then there’s the fact that the interest of VC’s lies in sectors where females aren’t in.
According to Rixt, there are several ways of solving this funding problem for female founders:
- Create awareness
One thing to promote is by asking VC’s to do something very simple, yet effective. A proven trick from the field: let hem have special ’office hours’ for female founder focused funding. Also address the unconscious bias there is towards women in the startup ecosystem. Even your own bias as a woman! - Look for alternative ways of funding
Change won’t happen overnight though. That’s why you shouldn’t stop looking in your quest for funding. You can still get the money you need through crowdfunding, angel investors, bank loans and/or subsidies. - Educate others and yourself
When you know there is a bias, you can prepare for it. That’s why you should come fully prepared, get the numbers straight and your story. The most important thing Rixt told the audience: “Know your own worth, don’t go too small.”
What VC’s are looking for
When you have had a seed round, or an angel investment, after a while maybe comes the need to grow even more. That’s where venture capital comes in. Thomas Mensink, startup analyst at Golden Egg Check, gave us all insights in the Dutch funding market, and, most importantly, insights in how VC’s look at your company.
Some golden rules:
- VC’s in The Netherlands tend to invest in “potential x feasibility”, i.e. in “how big can this get x what is the probability of succeeding”. So it isn’t about having a new idea! Thomas explained this with his Startup Matrix.
- Focus on traction over your funding need, this will impress VC’s more.
- Always ask yourself if you really need that VC money right now.
This last one is important, because of the business model of a VC. Thomas: “Be aware that you give away a part of your company. Also you must grow continuously, and you must prepare for an exit: you must be willing to sell your company in 5 to 10 years.”
Cheering for crowdfunding
Daan Weddepohl, CEO of Peerby and Entrepreneur in Residence at the Founder Institute, shared his experiences with crowdfunding. He managed to raise more than 2 million euros through crowdfunding platform Oneplanetcrowd in just 4 days. Here’s how he did it:
- Preparation is key
Test the pitch, test the message, test the landing page — with the Peerby community! - Ask the active community to invest (early Peerby users)
Early Peerby users and the sharing economy community where asked beforehand to invest. Without an existing community, crowdfunding is pretty hard! - Prepare for best and worst scenario’s
Crowdfunding seems easy, but can be very stressful, Daan recalled. It’s best to know what to do in a worst case scenario if the funding fails. But also if it’s a success. Decide how much more you need if it turns out a success as well.
These 4 examples of funding are just the tip of the iceberg on how to get investments for your startup. The Founder Institute helps you get investor ready. Rixt Herklots is also in the organization, Thomas Mensink is a mentor, and Daan Weddepohl and Entrepreneur in Residence. Get into the programme now!
