Part 1: Investments in start-ups: What founders need to knowWhat convinces an investor to invest in a start-up? What homework do founders have to do to make themselves heard by investors? How can one attract the attention of one’s favourite investor? The first part of the “start the talk” series of panel discussions focused on the exciting questions about “Investments in Start-ups”. On June 25, 2020, the hosts Previon and Badertscher managed to invite five well-known top investors to the Impact Hub Viaduct in Zurich to share important tips, tricks and insights with founders. In addition to a brilliant business idea and a good team, every start-up needs these 3 things: money, advice from professionals and contacts. But under what conditions are experienced investors willing to invest time and money? Barbara Fischer (Arena Ventures), Michael Sidler (Redalpine), Roland Zeller (Innuvik Ventures), Cédric Waldburger (Tomahawk VC) and Thomas Billeter (Impact 51) shared their literally precious experiences and recommendations to help founders reach their goal with the right investor.
5 Expert tips from investors for founders:1. Crisis? No need to panic! The Corona crisis hit us in the middle of an all-time high in the start-up environment. Is the mood changing now? The experts say no. “Crises are good for creativity,” says Cédric Waldburger, venture capitalist and proponent of the minimalist lifestyle. “Now you need to adapt, pivot and change quickly – all typical start-up qualities.” Start-ups should not be put off by the media: “The media focus on the negative headlines,” says B2B fundraiser Barbara Fischer. Of the 30 tech companies she supports in Europe, 55% have grown, 25% even exponentially. Especially eCommerce pure players have reached unprecedented peaks. Her recommendation: “Focus on the Bigger Picture – and don’t listen to the media.”
“Focus on the Bigger Picture – and don’t listen to the media!”
2. Is now a good time for the next investment round? As representative of one of the largest early stage start-up funds, Michael Sidler, co-founder of the Seed Stage Venture Capital Fund, advises to seize the opportunity: “Now is a good time, especially if you can use the crisis-related tailwind of digitization with a business model that pays off in the new world”. There is no summer break in the VC environment. So have courage!
3. How to approach an investor? “The important thing is not to approach just any investor, but the right investor,” says Thomas Billeter. “Do your homework, thoroughly research which investors focus on your area.” It can also be useful to obtain a recommendation. With hundreds of proposals landing on the tables of investors, a clear message – and relationships count: “It’s never too early to talk to investors. By the next round, the relationship is already established. That makes a big difference,” adds Michael Sidler. In addition to intensive networking, it helps to keep potential investors up to date on progress and to be realistic about the time budget: it can take 6 months before the money tap opens. A tip from Cédric Waldburger: “Ask for money, get advice. Ask for advice, get money twice”.
“The important thing is not to approach just any investor, but the right investor.”
4. What does a good pitch need to get the attention of an investor? “You don’t have to explain the industry to an investor from a specific sector,” advises Roland Zeller and adds, “catch my attention in the first minute – or I won’t invest.” Founders do well not to go into too much technical detail, but to show what exactly the innovation is. The recommendation was: Video first! A short video pitch in which investors see the glow in the eyes of the founders is more promising than 1000 words. Storytelling works. “Investors have little time. Tell the story in simple words so that your teenage son or your grandmother would understand it too – and this within 45 seconds,” advises Barbara Fischer. The aim is to arouse interest.
5. What if my start-up is valued too low? A cooperation with an investor is not a transaction, but a wedding, says Roland Zeller: “As Business Angels we don’t want to cheat on you. It’s about finding a way that works for both.” Founders work hard, risk their careers, their lives, their family – in the end, this must be rewarded. “You spend a lot of time together over the next five years. So, you shouldn’t cheat each other,” says Thomas Billeter. Start-up evaluation is not magic. And another pragmatic tip: “Do the beer test! ” advises Barbara Fischer. “If you don’t like to grab a beer with the investor – better find someone else. ” At the following aperitif, the founders followed the call of Barbara Fischer. They tried the beer test and talked into the evening hours about seed financing, Series A, B, C funding, convertibles and caps and about the fact that investors are also only human.
“Do the beer test! If you don’t like to grab a beer with the investor – better find someone else.”
Did you miss the start the talk premiere? No reason to hang your head! In autumn we will continue with exciting topics. Your hosts Angela Fioroni (Previon) and Piroska Poltera (Badertscher) look forward to exciting discussions with you! Added value for the start-up scene: With the new “start the talk” format, Previon and Badertscher Attorneys at Law offer young companies the opportunity three times a year to network and exchange ideas with leading experts, investors and business angels. If you are interested in our events or want to stay up to date, follow Badertscher Attorneys at Law on LinkedIn or contact Piroska Poltéra and let’s continue the talk.