STATION F Guide to Startup Fundraising

According to our study gathering data from our 1,000 startups, Funding is the #1 concern of entrepreneurs.

Therefore, we decided to gather all the knowledge we have about fundraising, from our community of investors based at STATION F. We know you are busy people, so without further ado, here’s what you need to know about fundraising.

TL;DR - Don’t hesitate to look for a particular paragraph. Here is a summary of the content of this article:

Pre-fundraising startup checklist:

  • Why should a startup raise funds?
  • Is it the right time to raise funds?
  • What is my startup valuation?

Ways to get funded:

  • Crowdfunding and debt
  • Love money, Bootstrapping, Subsidies
  • Business Angels: What’s the difference between Business Angels and Seed VC funds? What’s a good dilution / investment pact? How to pick the right BA?
  • Venture Capital investing: VC funding: for which startups? What does VC funding mean for a startup’s ownership? What’s a term sheet? Investment pact? How to pick the right VC?
  • How to find investors?
  • How to negotiate with investors?
  • The Perfect Pitch Deck
  • Timeline and milestones in fundraising

After your fundraising:

  • Celebrating your fundraising
  • Leveraging your investors
  • Board meetings

Pre-fundraising startup checklist

Why should a startup raise funds?

by Rodolphe Menegaux, Partner at Alven Capital.

“In a nutshell, fundraising is used to finance operational losses with capital.

This means fundraising can be done in order to:

  • grab market share faster than if you would do it organically. This is particularly true if your startup falls into the scope of a “market creation”, so that you can take advantage of being the “first mover”.
  • hire talents that you wouldn’t be able to pay otherwise: fundraising brings money and credibility, enables you to attract senior talent, and to offer an equity plan for new employees.
  • invest in marketing efforts and outpace the competition. Watch out though: sometimes too much cash can entail an exaggerated investment in online acquisition which can unbalance the whole business. If you’re careful, it can be useful to invest in marketing to create awareness in the minds of consumers (especially if you’re B2C).
  • invest in R&D to be ahead of the competition or to answer a market need. This is one of the major reasons to raise funds. It enables a company to increase barriers to entry and business defensibility, as well as to create a significant asset.
  • finance change in working capital, but again: be careful. Financing a change in working capital with equity is not healthy on the long term. It can be done for a while but ultimately, a business needs to be able to find financing methods that are not dilutive (debt, Venture Debt…) Some companies choose to do it nevertheless, like Rocket Internet companies, where return and dilution are less of a priority.
  • duplicate a model that’s working on your domestic market to another market. A lot of French companies try to achieve that: reproduce their success in the US. It’s tough, the US market is much more competitive!
  • make a strategic acquisition (this one is more rare).

For startups, it’s important to keep in mind that investors are looking to make profit on their investment, and that raising funds also means creating value for existing and future investors.

Is it the right time to raise funds?

It’s the right time if:

  • both the amount that you are raising and the dilution offered is acceptable and bearable by the shareholders.
  • your startup has enough to convince an investor: growing figures, a full team, an obvious market opportunity…
  • your startup has come up with a clear and solid positioning, and can sell a long-term vision to investors.”

What is my startup valuation?

By Pia d’Iribarne, investor at Accel Partners

What is the methodology to assess a startup’s valuation? Pre / post money?

Valuing a startup as an early-stage investor is never an exact science, but there are several key determinants to look at. Some of these include the believed exit potential for a company, and what this would need to be in order to get a good return on investment; the current landscape in the relevant sector, including recent rounds in startups operating in a similar space, the sector’s overall growth rate, and geographical footprint; competitive dynamics, as in how much other investors are willing to pay to be involved in the deal; and just as importantly, the bargaining power of the founder, and the current state of the company in question in terms of run rate and available cash.

Here is a useful blog post I often refer to when explaining this

How can a startup founder take into account the acceptable dilution of the founders when assessing their valuation?

This is also an arbitrage question, and founders should be thinking about the different outcomes in both the long and short term. How much dilution are you willing to give now? How much money will you need in order to get to the next step? Will you need to raise again soon after this, or will you look to raise a much bigger round at a much bigger valuation?

For founders, benchmarking is key. Talk to other founders in your space and network, and compare the levels of dilution in companies at the same stage as you — at Series A, for instance, it’s typically around 20–30%.

It’s in everyone’s best interests — VCs and founders alike — to do a deal which keeps founders motivated and spurred on.

What are the risks at stake if a startup under/over estimates its valuation?

If you overestimate your valuation, you might come across a lot of closed doors. VCs might not take your meeting, or be more likely to pass earlier on in the process; what’s more, if you then return to an investor with a lower valuation later, this changes the bargaining situation significantly.

Under-estimating your valuation comes with less risk, as founders will find themselves more welcome by investors. If a competitive dynamic is added to a deal, and multiple investors are taking part, the valuation will be adjusted from the top.

My advice would be to work some movement into your pitch. Give a ranged amount of what you are looking to raise — for example, “I am looking to raise $10–15 million for x% dilution” — in order to engage discussions, and then let the market play.


Ways to get financed:

By Eleonore Crespo, investor at Index Ventures

“Startups think funding automatically means venture capital, but in fact this represents a minority of startups’ funding! Look at the numbers: in the US last year, VCs invested €84 billion in 8000 companies, but there are…. 6 million businesses in the US! Most of them being lifestyle businesses or businesses with not necessarily an explosive growth.

Crowdfunding and debt

With that said, when you know your ambition and means, you can decide how you want to get financed:

  • CROWDFUNDING: is great for early-stage, consumer-oriented companies. Crowdfunding is a great marketing tool, in addition for being a funding tool! Raising money with crowdfunding also implies a lot of freedom.
  • DEBT: is usually a good option at a later stage.. If you have a capital intensive company, opting for equity in the long run can be tricky as you will get diluted significantly. This is when debt is interesting, since it does not imply ownership.

A very common path for young companies is to:

  • First, start with an equity round (Pre-Seed), for instance with “love money” (see below), or crowdfunding.
  • Then, another round of funding with business angels or a Seed Fund. Depending on your company profile, interest can vary so always explore options.
  • After Series A/Bs when the if the company grows and if it requires capital, Debt can be an option

Love money, Bootstrapping, Subsidies

By Edouard Gaussen, White Star VC

“Love money” means the capital comes from friends and family. It usually comes hand in hand with bootstrapping and happens before a startup requires funding from VC funds.

The right time is when a startup is working on a MVP, you are trying to validate an idea or a concept. It usually takes place in the first 6 months of a company’s life.

The amount raised in “love money” depends on the topic addressed by the startup and its founders’ networks.

For hardware or deep tech products, before going to institutional funds, you might need to raise around €100k. Otherwise, for a web platform or app, if a co-founder has a technical background, you shouldn’t need funds. In any case, founders need to keep the vast majority of the capital.

Subsidies are more and more common, whether they come from the State, incubators, or elsewhere. Some will say that this is not “smart money” and it’s very heavy in terms of administrative work, but the real thing is to have the right mix: if you can get subsidies, then do! The most important factor is to build a strong network.

The startup ecosystem is highly competitive and the barriers to entry, very low. Therefore it’s about how fast you can get to test and approve you market opportunity.

A few years ago, entrepreneurs might have waited to test their market, but with this new context, they need funds to be fast enough. As a consequence, you witness a bit less bootstrapping — which is also explained by the fact that more capital is available.

In the future, it can be a very good signal for VCs to see that there are experienced entrepreneurs or influential people who have invested love money in your startup. Obviously, you need the right network for that! Also let’s not forget that love money is given to support the entrepreneurs more than to expect a return; it’s highly risky for the investors (although there are a lot of fiscal encouragements for that: in the UK, the Seed Enterprise Investment Schemes offer tax breaks for investors who come in the first amount raised).

Nowadays, we’re seeing a convergence between love money and pre-seed/angel rounds. Business angels will invest just off a deck if the combination of idea and team are strong enough.”

Business Angels

By Mounia Rkha, investor at ISAI

About the difference between Business Angels and Seed VC funds:

First off, not all companies are “VC-backed businesses”. Only those with this specific growth pattern can claim to raise funds. Therefore, companies that raised in Series A are all “VC-backed businesses”. Business angel rounds are often times preliminary to a Series A… but not always! Business angels can also invest in companies that are planning to break even after this round. A BA will not have the same vision nor the same interest as a fund: an institutional fund will want to back a ‘VC-backed’ type of venture whereas BAs tend to be more open. It’s very important to take that into account!

About your dilution / investment pact

I often hear a saying that goes like : “I’d rather have a small piece of a large cake, than a large piece of a small cake”, but as an entrepreneur, keep in mind that having a “large cake” as a target is highly risky and the larger your target, the smaller the chances of you reaching your objective. Therefore don’t give up your shares too quickly.

In general, dilution will increase from 15% to 30% (with BAs or with funds). When evaluating your valuation, you have to project yourself into the story you are building: what will your Series A,B,C… look like? It might be fictional, but it helps to write down concrete elements and metrics.

Here’s my advice for your investment pact:

  • sign one that will enable an institutional round in the future: with very simple clauses, nothing original. You shouldn’t scare your future investors.
  • “Fast and cheap”: you will get a new pact with your Series A anyway, so don’t invest too much time and money
  • Get a good lawyer, from the start: the investment pact will not take a lot of time but there are great chances that you will stay with this lawyer in the long run! Ask other entrepreneurs for advice on a trustworthy lawyer.

Need inspiration? Read the Term Sheet model built by Galion!

How to pick the right BA?

Ok, first: sometimes you don’t really have the choice and you need the money. But let’s say you are lucky enough and you can choose:

  • rely on people who have been through what you are going through
  • feel the “fit”: don’t be fooled by the fact this person is giving you money, you need to build a long-lasting trust relationship
  • do your own due diligences: ask for the BA’s portfolio of work
  • bring complementarity without being dissonant
  • don’t be idealistic: BA investment is “smart” money but it is first and foremost, money. Don’t expect them to help you spontaneously. Send them monthly emails asking for specific help.

In addition: having a lot of different BAs requires a lot of management, but I will always prefer having 30 BAs from the ecosystem who are strong assets than 3 that are just a pain!

Once you have secured your round with BAs: don’t forget to give them news! First, it’s basic politeness :) But also: they will be the ones helping you when your company is feeling under the weather.”

Venture Capital investing

VC funding: for which startups?

By Samantha Jerusalmy, Partner at Elaia Partners

VC funding for startups depends on the fund’s focus(in the case of Elaia, we invest only in early stage B2B deeptech companies). But in general, VCs tend to fund:

  • startups with a fast growth: funds usually remain in average 5 or 6 years in a company. unds have a specific timeline and an obligation to show results in terms of exits.
  • startups that have an exit potential: obviously, we are no soothsayer, but we target markets with opportunities.
  • startups that need funding to scale up and go international. It’s not that the local market is not “cool” enough, but the French market is most of the time too small (except for the transport or the agricultural sectors, for instance)
  • we are looking for “fat addressable markets”: if your company addresses a market of €100M, it looks big for an individual, but for a VC fund, it’s quite small. At best you can expect to get 15% of market share, therefore at best, you will get up to €15M.
  • Elaia is also looking for “must-haves” and not “nice-to-haves”. A new chatting service that has one new cool feature is not in our investment scope. We are looking for disruptive technologies.

What does VC funding mean for a startup’s ownership?

In terms of ownership, VC funding means… Here comes trouble!

Entrepreneurs need to keep this in mind: bringing VCs along means you are not the one one to decide anymore. Board members will participate in your company’s strategy. The more board members you have, the harder making a decision is and sometimes, founders and other board members can have diverging interests. So please make sure you feel confident with the investors we are bringing on board. Make your own due diligence on their reputation and real added value.

A fund usually gets between 10 and 30% of a company’s capital (whatever the stage of maturity). Entrepreneurs are often obsessed with their company’s valuation, but it’s not the only thing to look at! Let’s face it: when it comes to valuing an early-stage company, there’s a lot of randomness. For the last past 2 years, valuations are astronomical: when comparing companies with an equal maturity stage, investors will pay 2,5 times more than 5 years ago, but the average exit proceeds are not 2,5 times higher!The market will probably adjust itself with time.

What’s a term sheet? Investment pact?

A term sheet is a document, usually between 5 to 15 pages, in which we list all the terms and conditions of an investment round. It momentarily seals an union: the fund show its interest, at a certain valuation, under certain conditions.

A term sheet is conditioned by the due diligences that the fund will undertake (financial, legal and technological audits, etc).

A term sheet is startup commitment: ntrepreneurs are supposed to stop pitching other investors as they sign the term sheet.

In other words, a term sheet is a shorter version of an investment pact (around 40 pages).

Here are the clauses that you need to pay attention to:

  • valuation: it’s not the most important, but you don’t want to be screwed either! Funds that ask for more than 30–35% are probably not very healthy. This is important because future investors will be reluctant to invest in a shitty cap table. And if you’re left with 2% of your company after Series C, there’s a chance you will be less motivated…
  • who’s in your board: watch out, board members will have a voting right. So you better get along and share the same vision!
  • what’s the board decision process: at which majority are major decisions (related to the capital or big recruitings or any other strategic decisions) voted? At Elaia, here’s our ideal scenario: we have boards with an uneven number of members, for instance 2 co-founders, 1 VC and 2 independent administrators. We opt for the “majority minus 1” rule, and there are no veto rights. Which means that the VC cannot take any decisions without the entrepreneur, and that the entrepreneurs cannot take any decisions without convincing the other board members.
  • liquidation preference: it defines who gets what when an exit occurs. Some investors will say “I’ll get my investment back and then co-founders can get the leftovers”. But there’s a more fair point of view: you can agree on a carve-out, which can be between 10%-30%. Let’s say you sell your company for €10M and your carve out is at 20%, it means that the first €2M will be divided according to the cap table. If the co-founders own 70% of the company, they will get 70% of the first 2M and investors, 30%. Investors then reimburse the rest of their investment on the following % minus what they get on the first phase. Then, for leftovers, it’s pro rata cap table. This way, the risk is more equally spread out between founders and investors and everyone is driven by the same ambition: get the higher valuation.
  • good leaver / bad leaver: nowadays, this kind of clause is very standard but make sure there is nothing too exoctic written here.

Entrepreneurs should be advised by an experienced lawyer when signing an investment pact, but don’t forget: it’s not the lawyer who puts his signature at the bottom right! He/she is supposed to defend your interests but can also screw up. You should expect your VC to take the time to explain every terms and conditions in person.”

Need inspiration? Read the Term Sheet model built by Galion!

How to pick the right VC?

Here is Eleonore Crespo again:

“Here is my advice to pick the right VC:

  • When you’re raising a seed round, you need to go with the fund that is capable of bringing what you are mostly lacking of, for instance bringing a lot of operational help. Most of the time, the main cause for failure is not competition, it’s people’s relationships. Therefore you need to look for help in finding the right talents. Sometimes entrepreneurs will not want to have investors that are heavily involved in their business: it’s up to the founders to decide, but make a decision ahead!
  • Finding an investor is like getting married: they will be at your board for several years. Therefore, never hesitate to ask other startups in the portfolio for reference.
  • Specialized funds (for instance: focused on an industry vertical) can be a good option, once again, it depends on the profile of the company and what you are looking for.
  • You can infer a lot about a fund’s philosophy from a term sheet! For instance, clauses that are very restrictive for the entrepreneur can signal something about the future relationship you can expect.
  • A good valuation should not be the #1 factor for choosing a fund. Don’t forget: signing a term sheet is like signing a marriage contract :)”

How to find investors

By Isabelle Gallo, Principal at Breega Capital (Paris & London)

Cold-calling a VC is typically not the conversion rate you want to bet on, so you’d better be introduced. Typical introductions can come from :

  • Peer (but already funded) startups : ask around, especially startups that you feel share the same mindset as yours. Find out who they were funded with and whether or not they’re satisfied with the mentorship and operational help their current VC(s) is/are providing them. Chances are they will agree to get you introduced. (NB if you don’t know any startup that has been funded, get on the ground and go to startup meetups or incubator/accelerator events, you can even try out your school’s alumni directory to find names to have coffee with or get in the habit of working from co-working spaces — being part of the ecosystem is fundamental in understanding the tips & tricks you need to skyrocket your company)
  • Incubators / accelerators / mentors : being part of a batch not only puts you on the map for potential VC funding, but the head of your incubator / accelerator will likely have many VC interactions and a good understanding of VCs that may fit your scope. Make sure you’re the name they’ll drop to those specific VCs the next time they’re on a call — gives you a chance of being chased after
  • Other VCs / Business angels : if you eventually do get an introduction but you don’t fit in the VC’s investment strategy or scope, overpass your grief and have the guts to ask them if they can redirect you to peer VCs — VCs talk a lot to each other, and may have a better understanding of their respective scope of interest than you do
  • Professional services : those guys know all the VCs and help you structuring your deck and business plan.
  • Direct pitch at events : there are many events where VCs are asked to come as jury members to evaluate startups. If you stand from the crowd, chances are that you’ll get noticed. Yet this is a highly tricky exercise where it is very hard to make an impression, so don’t over-dilute your energy into them

And remember : it is never too early to talk to an investor. Be resilient, VCs prefer to invest in lines, not dots, so make sure you build a consistent strategy with a clear line they can follow over time.

How to negotiate with investors?

Typical tips & tricks during exploration process can be found below :

  • Don’t say you have no competition or your competitors suck — Remember : being too early is the same as being wrong. Be open & realistic, don’t bully or underestimate your competitors, and take this as an opportunity to talk about how you’re positioned in the market map. You’ll be able to explain why you’ve chosen to be strong in some areas and how you can develop other features to match competition in the remaining areas going forward.
  • Take criticisms in good faith — Negative feedback is far more useful than plain positive feedback — it makes you grow. And remember, someone who’s not interested right now might be tomorrow, so showing them that you acknowledge their opinion and have worked on abiding by them will likely give you great points in the future.
  • Maintain interest and don’t lose momentum : time kills deals — Try to give them reasons to spend more time with you and/or think about you — the more they will, the more they’ll get excited — eg. Introduce them to other key members of your team they haven’t met yet (especially those experts that can « wow » the VC in terms of vision, tech proficiency, sales automation, etc.), show demos of new features in your product, share updates on metrics (« Thought you’d like to know… ») — any information that creates a compelling next meeting is worth doing.
  • In the event that a VC « ghosts » you (i.e. you don’t have any answer to your email despite a good first meeting), do not assume it means it’s over — VCs are very busy people, and sometimes inbox just stacks up and an emergency comes along and you forget. As a founder, it is important that you (politely !) push the VC to make a decision — be it a firm no, a soft no or more engagement (i.e. another meeting). Don’t give up hope — else you’ll probably show as little resilience in pushing business development, product innovation or recruiting — and that’s not a good omen, now, is it ?
  • Don’t ask for an NDA — you’re probably not working on anything sensitive enough, and no investor will spend time signing out NDAs all day long. VC is a reputation business, too, so no one will ever risk theirs by divulging your info.
  • Be confident — you’re unlikely to convince anyone if you’re not 100% convinced yourself. Be prepared — to share financials, projections, visions, failures, success, market trends, but also fears and reasons you’re convinced this may be a big hit. You’re always pitching when you’re an entrepreneur — better make sure that you have tools to do that correctly.

But let’s assume that you’ve indeed talked to a VC and raised his/her interest in so that he/she is ready to issue a Term Sheet. Negotiating a TS is about carving each party’s protections in case it all goes bad, but on the other hand, it’s also a very good way to pick the right long-term partner and begin forging a relationship that will sustain if things go soar.

Key ingredients to remember for a properly-handled negotiation :

  • Master timing and maintain a sense of urgency during the whole process — VCs fear « missing out » on the big opportunity, so having a few of them excited about competition will get them even more engaged and keep them on a tight schedule. Typically update them on how the process is ongoing with other firms, and politely suggest deadlines for them to make a decision, to avoid losing momentum and make them all move at the same time. Don’t push it, though — but a few polite hints never hurt. And anticipate — if you’re running out of cash, you’re probably not in a good sit to negotiate, now, are you ? Time kills deals : negotiate smoothly and effectively.
  • Maximize trust : tell the truth, don’t oversell — it can be tempting to improve reality a bit, but eventually, should you partner with a VC, they’ll know all about you. You don’t want to fail a Due Diligence phase because you lied in your initial discussions. You also don’t want your investor to lose interest in you after a few Board meetings because you misled them. An entrepreneur who will pick up the phone and tell their future VC « look, just thought you should know this month’s figures aren’t as good as last month’s, and I wanted you to understand why and how even though you didn’t ask for it » will be more likely to conclude a successful partnership than a con artist that plays around with numbers and tries to hide things. It’s hard to overstate the extent to which VCs put a premium on trust, or the extent to which untrustworthy behavior can throw a deal down the toilet. It is always much easier to build trust than to rebuild it, and in this line of work, you don’t have a resume, you just have your reputation. And reputation is always at its best when you under-promise and over-deliver, right ?
  • Know where your failures are — always be prepared to recognize where your challenges are, what things you could have done better in the fast and the few things that still require fixing in your product or organization. A VC will be far more engaged with a CEO who seems to understand exactly where he/she stands vs. someone completely over the top and unaware of gaps still standing in his/her way
  • Ask to talk to their portfolio companies — best practice would be to talk to some that are performing well over expectations, but also to a few that are not doing so great or whose relationship with the VC is not as hoped. Understand what they are really doing for their portfolio companies, in good or bad times, and what was negotiable, why they made the choices they did, and what terms were the most consequential in the months and years after the deal.
  • Consult a lawyer and strive to understand the philosophy of the terms before you start negotiating them — Term Sheets can be difficult to understand, and you may need help determining what the various provisions imply. Don’t play smart ass, and ask the VC what exactly is meant by the terms that you don’t quite fully understand, the philosophy behind it all, and what happens in case scenario goes bad. This will help you create a sense of collaboration rather than conflict. Bottom-line — pick up the phone.
  • Focus on value and not just valuation — we’re not talking one-off negotiations here, it’s not about selling a house that ends the relationship : it’s about signing on terms that will start the relationship. When negotiating a job offer, for instance, chances are that many factors other than mere compensation are taken into account in your final decision, well VC negotiations are the same. Valuation often gets disproportionate focus, but such figures don’t even matter in the long run (and a higher valuation may even lead way to a down-round if you don’t deliver on the expected multiple — remember, it’s a growth industry, and it’s always easier to grow from a lower than a high valuation)
  • Always be aware that you have the edge — founders tend to negotiate hardly on terms like Bad Leaver or forced exit by their investors. Guys, this never happens ! How would a VC force you to make an exit if you decide to make the deal fail ? No M&A deal can happen unless the founder agrees to it — keep that in mind and don’t waste time negotiating terms that never happen in real life.

Bottom line — be convinced yourself. This way, you’ll be able to convince investors (chances are they are better at detecting bullshit than you are at producing it, even unknowingly) and negotiate terms in a partnership state of mind.”

The Perfect Pitch Deck

What do I need to pitch investors? What’s inside the perfect pitch deck?

By Rose Dettloff, investor at Kima Ventures

“Pitching investors is a tricky exercise but like every exercise, it requires to be worked and repeated until mastered. The pitfall is that entrepreneurs are torn between saying a maximum of things and staying clear and concise.

What’s important is to keep in mind the investors’ point of view- their job is based on uncertainty, they need to be convinced. They don’t have much time, they know less your subject than yourself (most of the time) and they’re also judging your personality in the moment.

That is why you must focus on keeping them hooked and interested while giving the right information at the right moment.

You must avoid drowning them with too much data.

This Kima Ventures post on Medium summarizes and describes precisely the organisation of a good pitch deck and what you should put in it.

No need to repeat, but let me emphasize the following points:

# 1 : Prepare

Practice it, as you practiced your elevator pitch.

Keep it moving: update metrics regularly, add information on which you often get questioned

Always keep it simple: maximum 3 ideas per slide

Make it visual — so that the investor gets the main information easily and doesn’t get lost.

Know by heart your subject: you should pitch mastering everything about your market, your product, your numbers.

One entrepreneur that we backed told me one day that he questioned 5–6 founders that raised at least a series-A for their best tips and see their deck formats. That’s a good initiative.

# 2: Tell a story

Your pitch should flow naturally. Have a narrative that sets you apart and differentiates you. Investors see many similar companies, attacking the same vertical, offering the same value proposition. How you’re going to tell them why you’re the best at it is crucial.

“I was working in such industry…

I was suffering from this pain/I spotted this opportunity that was not or badly addressed.

Besides, the market is huge/growing.

I decided to develop a product offering this solution with benefits and improvements, and feedbacks/traction got better and better.

This is how I position myself against competitors. I’m lucky to benefit from X asset to differentiate from them.

Today we are here, but to get to the next milestone we need X€

Our vision is to build the largest platform for X, the most performant SaaS for Y, the reference of Z”

# 3: Anticipate investors questions

You’re building a food delivery startup? You must expect to have plenty of questions regarding your business model and how defensible your margins are. Prepare a part on that.

It’s a very crowded space? Emphasize what differentiates you and the features that you offer but others don’t have.

Also, you may have to pitch the same investor more than once. Try to remember some grey areas they questioned and demonstrate how you’ve updated your pitch deck to answer these challenges. It’ll be appreciated.

# 4: Investors invest in people first

Entrepreneurs sometimes underestimate how important the team is for investors. The team is >80% of the decision at Kima. How team members communicate, if they complement each other well, if they are aligned are crucial criteria that investors must measure. Thus, having a slide about the team is primary.

Do not spend 10 lines describing all the schools and MBA you’ve done. Quickly review your academics/school, mention the achievements you’ve done (“I managed a team of 25 people”, “I launched this product in France”, “I grew the business from Xk€ to XM€”) and the important information to know related to your project (ex: “I have 10 years prior experience in the industry that I build my startup in”). Explain how you met with your co-founders, it’s important. Have you worked together in the past? Are you best mates since school? Did someone introduce you?

Describe precisely who is doing what in the team. Don’t hesitate to cite non-founders particularly if they have special skills.

# 5: Know your data better than anyone

There is no biggest red flag from my point of view than an entrepreneur who answers “I don’t know exactly”, “I haven’t checked that recently”, “We haven’t measured it”. You should know by heart the key metrics of your business and the data related to your market because it should be an OBSESSION for you.

Also, investors need to be able to find these data in your deck without asking for it. If you’re a SaaS company, you should show your MRR and new MRR evolution, churn, CAC vs LTV… If you’re a marketplace, you should show your GMV and revenues evolution, number of orders and basket size, contributive margin… it shows that you’re mastering your north stars, which are the metrics that you are (or should) be obsessed with.

Also, update these metrics over time. If you’ve been pitching for over 2 months, show the latest data.

And please, don’t try to “habiller la mariée” (embellish the truth). Investors are not fooled, they’ll notice if you’ve cumulated revenues, if you speak in terms of gross or net margin and so on. Be honest, and if some months show a slowdown, argue on what have been the reasons (seasonality, stock problem, internal reorganization…).

# 6: Be careful about product demo

It’s almost systematic, and I’m really not lying. We even laugh about it with entrepreneurs (also to clear the air). 9 times out of 10, when entrepreneurs show us their product in live, something goes wrong (it crashes, our request has no results, it’s not working, etc…). If you’re building a mobile app or a product using NLP, such crash doesn’t play in your favor. Be careful when offering a product demo, be sure that your product is ready and working. Otherwise, show screenshots or some mockups of your product instead.

# 7: The answer to “Why you?” should be evident

When we write our investment note to be validated by Xavier Niel, one of the most important part is the “secret sauce”, ie what makes you different and better than your competitor/what makes us think that you have the keys and assets to be the A-player in your vertical. This should be clear and evident in your deck.

First, you must state the value proposition you offer to your customers — which means the outcome that your product/service delivers to your client and how it improves or solves a situation.

Then, you must explicitly express how you’re building a competitive advantage that makes your product/service better. It can be an expertise/long experience in a sector (for example, Clément CEO of Wavy worked in a hair beauty salon and used his experience to launch a SaaS for beauty salons management), a special partnership or relationship with your sector’s stakeholder (for example, Anton CEO of Tasters used to be General Manager at Deliveroo France and now developed virtual restaurants on this platform), an asset, a rockstar employee, a solid tech that you developed… Anything that creates a gap between you, the competitor or someone who wants to launch the same thing.

# 8: Why fundraising?

At this point of the conversation, the investor has a clear idea of what you’re doing and your situation today.

Now you need to express what are your next milestones, your plans for the upcoming 12/18 months, your needs to achieve them and THUS the reason for which you are raising funds (and how much). This isn’t an unchanging data. Investors know it may evolve as discussions progress.”

Timeline and milestones in fundraising

By Audrey Soussan, General Partner at Ventech

“The timeline for a fundraising depends on the maturity of the company — the more mature, the more time it takes. A company that’s pre-product doesn’t have a lot of due diligences to make, besides audit on the founders and market.

If we had to pick an overall timeline for VC fundraising for an early stage company: 3 to 5 months. It takes longer if you are raising with 15 different Business Angels than if you have 1 fund that financed the whole round. If it takes longer than a year, time to look back on your strategy and think of other financing techniques.

Here’s an “ideal” schedule:

  • Week 1–2: prepare the whole documentation for your fundraising. A presentation of your company, your forecasts, illustrate your business with KPIs, prepare your pitch. This can be done full-time or while running your business. Obviously, this will be done faster for entrepreneurs who are more prepared, who already have a business plan, etc.

Pro tips:

Work in batches. When selecting the investors you’re going to pitch, contact your favorite ones first, then a second group, etc. You need to create a rhythm during your fundraising process: if you have several leads, you can leverage one to convince the other, put some pressure to accelerate the process.

Target the right person inside the firm: this will save you a lot of time not to go through an analyst, then an associate, then a partner…

Build a network ahead. I’ve personally invested in a startup in just a week. I knew the founders before, they had told me about their idea, introduced me to the team, etc. When they started to raise funds, I had already done the research.

  • Week 3: send your presentations to your VC and BA contacts.

Pro tips: Work on the next step: at the end of a meeting, ask the investor “What is the next step?” — they will probably tell you that they have to think about it for 2 weeks, after which you can jump back in and suggest a concrete action, for instance: meeting your CTO, see a demo, a roadmap…

Be available. At least one of the co-founders needs to make some time available to be able to attend investor meetings, write follow-up emails, etc. You need to have 1 person as the lead in the fundraising process.

  • Week 4: go to your first meetings (it takes a VC around 10 days to read all of the presentations they receive)
  • Week 6: go to your second round of meetings (in the meantime, the investors will review the presentation with their teams, study your market, etc)
  • Week 8: get a final decision (which means you go through a comity on the VC side)
  • Week 9: get one or several terms sheets.

Pro tip: Ideally: sign a detailed term sheet. Beyond the amount and valuation, it can be very useful to be aligned on more principles right from the term sheet phase. It avoids a lot of surprises when signing the pact.

  • Week 10: negotiate your term sheets, balance them.

Pro tip: Choose your investor wisely: if you are lucky enough to get several term sheets, make sure you don’t necessarily opt for the best valuation, but do your own due diligences on the investor to avoid bad surprises.”

  • Week 12: receive your final term sheet(s) and move on to the investment pact.

Pro tip: When negotiating: get a good lawyer. They will take care of all the legal issues not directly linked with the business. All co-founders will be implicated in topics that concern them, for instance the good/bad leaver clauses.”


After your fundraising: leveraging your investors

By Nicolas Debock, Investment Director at ID Invest

Celebrating your fundraising

“A quick note on celebrating your fundraising: one can say it’s like buying condoms before you go to a club. After you raise funds, you can screw up. Raising funds is a tool, it’s not an end.

But let’s be honest: raising funds is a milestone and it’s normal to celebrate. Watch out though: don’t celebrate a term sheet, celebrate once the money is in the bank! A lot can happen in between.

You will have a closing dinner, usually organized by you lawyers, and if you want to throw a party, I would advise you to be low key! I’ve been to Internet-bubble-like parties where 10% of what’s being raised is spent in the fundraising party… It sends a bad signal.

Board meetings and leveraging your investors

You need to decide on you company’s governance:

  • How many people should sit on your board? I advise it to be a uneven number. If the company is young, the board should be small so that the company remains agile. In general, you will have 2 co-founders, 1 investor, maybe 1 Business Angel who has been here since the beginning, and then 1 person who can be independent. You can start with an incomplete board and agree to fulfil it in N months.
  • How often should you have board meetings? I have a bold opinion on that: 1 board every 2 months (even every month if the company is really young) 1h / 1h30 tops. It’s a lot, but from my experience, entrepreneurs like it: you are in a sprint. The main question is: in general you will have to raise funds again in 2 years, which means start again the fundraising process in 18 months — what do you want your company to look like in 18 months? Which milestones will you reach? Will you attack new markets, hire new people?
  • What will be the format? If you have monthly board meetings, they should have a standardized format with a board pack containing the good news, bad news, key metrics and 1 topic for each month (may it be international expansion, meeting a person from the team, etc).

What board meetings should not be:

  • a way to micromanage your company. The founders remain the bosses.
  • overly critical, in a non-caring way. Benevolence will entail transparency. As a founder, you should not be afraid to announce bad news.
  • the only way to get in touch: you can reach out to your investor at any time! Board meetings are statutory, and minutes are a legal document. Feel free to discuss your issues over the phone!

To conclude: remember that you can count on your board member, but that you, the entrepreneur, should always be better than your investor on the majority of topics! A good VC will be good at cash management as he/she will have seen a ton of other companies, but the strategy is yours. Also, right from the start: be clear on the objectives for the next 18 months and agree on some metrics you will be reaching.”

WOW! You made it this far? Here’s a celebratory gif: