Time reduction series: Raising Capital

Most people think that scale-ups require less funding than startups to grow. In reality, having consistent access to funding is still an important factor for sustainable growth. By having adequate access to growth financing, a company is more equipped to scale internationally and attract high-quality talent. This second blog on time reduction is focused on how to get the necessary funding to bring your company to the next level.

Funding as a challenge

Many startups and scale-ups ask when the best time is to go fundraising. Eugene Kleiner, a top-tier VC from Silicon Valley, said it best: “The time to eat the hors d’oeuvres is when they’re being passed around.” Simply put: The best time to go fundraising is when you do not need the money at all.

Each round is meant to address a specific challenge that scale-ups need to conquer, in order to convince the investor(s) to provide capital:

·       Series A: What vision do I want to sell? Is my product/service market addressable?

·       Series B: What results have I achieved? How does my growth path look like?

·       Series C: How can I accelerate my growth path from the series B round? How can I bring my company across the ocean?

As the second round really focuses on scaling, many consider this the hardest round to raise. Companies at this stage are already marked by their proven value to the market, therefore the pressure is higher than ever to deliver real proof points. Not only are investors expecting revenues, they are also looking for concrete plans on how the company is planning to reach its milestones. When you are going for a Series B funding, it helps to come with solid references and a strong understanding of the competitive landscape to prove that you have a viable, scalable product. It is also important to demonstrate your business model, so the VC can see how the capital boost can lead to profitable growth.

A closer look into the challenge

Getting to investors is not always easy, especially if you’re aiming for the big ones that have a larger financial backing.

In our portfolio alone, our members raised approximately €250M in total, €85M of which they had raised only in 2017. The top three companies who got the largest funding are: Collibra (+€70M), NGData (+€45M) and Sparkcentral (+€37M), and they account for 62% of the total raised capital.  Additionally, Index Ventures – one of our VC partners – has invested the most in our Scale-Ups.eu members with an estimation of €25M.

We also spoke with Luc Burgelman, CEO of NGData, who just closed his series C-round of €16 M in December 2017 with Holland Private Equity (HPE). Sometimes people think that raising a big round is much harder than raising a small amount. But actually, the opposite is true. When raising a bigger amount, a company mostly has accomplished several milestones already. At that point, there is a track record and a more predictable future. That allows funds to make a better risk assessment of the opportunity and thus, makes it easier to make an investment decision for a larger ticket”.

Nevertheless, Luc states that no funding round is easy and every round has its own challenges.

One of his best time-reducing tip for scale-ups is to always keep an ongoing relationship with several investment companies outside your current investor base. If you are then at that point to raise money again, you can really speed up the process with your network. 

Tapping into the ecosystem for funding

An ecosystem that brings together VCs and scale-ups will definitely reduce time in the funding process, as there are not only plenty of opportunities to network with many VC’s at once, you also get the chance to learn about different funding types in our master classes and meetups.

The first Scale-Ups.eu Meetup will take place on March 27th where we’ll focus on the perfect pitch for Series A and B funding. In the panel, three of our selecting VCs (Fortino, Smartfin Capital and Volta Ventures) will discuss the key points that can make or break your pitch.

Scale-Ups.eu will also help speed up the funding process by organizing the first edition of SuperNova from September 27th-30th. This annual event will bring together European scale-ups and global VCs to explore mutual growth opportunities. Our VC partners will pre-select 50 hidden gems in Europe that will get the chance to pitch to a global network of VCs from Asia, Europe and United States. A pre-selections round in the Benelux will be held early 2018, where our VC partners in the region will get to select the 15 best scale-ups who will be present in the conference. There will also be a matchmaking tool that will enable scale-ups and VC connect directly at the conference, further enhancing the opportunities to explore business together.

Are you a member and looking to participate in our first Scale-Ups.eu meetup?