Executive summary for startups raising capital

I find the executive summary to be the single most important piece for investor-material for startups.

That’s because most investors  (business angels, VCs etc.) receive several hounded investment-proposals from startups per year, but on average invest in less than 1 % of the startups. The ability to say no  to startups- very fast –  therefore becomes a core competence of early-stage investors.

This no/maybe decision will be taken within a few minutes, and no-one reads an entire business plan or even a 15-page investor-deck. The startup needs to be able to explain why it has potential much faster. This is where the executive summary comes in, since it explains the whole story on a single page.

You can find my notes on how to write an effective Executive Summary in my presentation: Executive summary for startups seeking funding

 

 

Startup funding in Norway: LAVO app

Case Study: LAVO app – Know your customers and get the right people on board.

LAVO is a mobile app in the social media domain. Users set, follow and respond to video ‘challenges’, where they capture exciting moments and add music to bring their footage alive. Founded in 2015, the Norwegian company bootstrapped until the first angel investment round in 2016.

Founder and CEO Tom Roger Sokki explains:

“I had an idea around live streaming for a younger target group, where the consumer behaviour was constantly changing and the content needed to be cool. The product evolved into a challenge app, where publishers and the audience can interact, share, stay up to date and have fun together.

We bootstrapped initially, and the first investors came from the Bergen Angel Network in September 2016. The network consists of 40-50 early investors and five of them wanted to join the team, investing a total of NOK 2 million in that round. Since then things have moved fast.

The second seed round was done with help from a small advisor team in Oslo, Eikeland & Ravnaas, who put us in contact with Tom Erik Kjeseth, an award-winning film producer. He wanted to join the company because he liked the way we were working with floating media, film effects and music. Kjeseth also invested NOK 2 million and is now very involved helping us build our creative strategy.

The last seed round was closed with top-notch investors – big real estate owners in Oslo. Brothers Øystein and Torstein Tvenge are among the most successful investors in Norway, investing mainly on the Oslo Stock Exchange but also investing in startups where they see a huge potential, as they do in Lavo.  They were so bullish in the first meeting, I thought they wanted to buy the whole company! However, we secured the cash needed, NOK 8 million (approximately $1 million).

I think a lot of our success comes down to understanding our customer. I talked with two important organisations who represent LAVO’s target group. We conducted workshops to learn about their behaviour, needs, trends, what´s cool, what topics are important, and other patterns and I learned a lot about the type of product LAVO could be. We also spoke with a Norwegian TV channel who wanted a product that gave their audience more interaction, which gave me more drive and motivation to fine-tune LAVO.

As the product evolved, I questioned just about everyone: producers, content creators, talent, and musicians, until LAVO had a perfect place in the middle of the matrix.  We challenge content producers to interact with their audience and at the same time the audience is more involved than ever before. We are adapting to changes in user behaviour, and the investors see this as the way forward.

I would say that the most important thing we’ve learned is to work with good and smart people who believe in you and what you are doing.  This also means getting the right investors.  Our investors have delivered both hard capital and intellectual capital, as we expected.  As a startup you are often good at the product or service the company provides, but growing the company constantly, raising funds, is beyond your full control. So getting on board investors that know that part of the game, and that can also participate in many rounds of early fundraising, is important.

In Norway, we have few environments that specialise in startup-funding. It’s too early for the investment banks and most of the venture funds so you rely on rich angel investors. Luckily, I managed to get advisors on board who knew many of them, and who liked Lavo. Now they have all been taken on one hell of a ride!”

Startup Funding in Norway: WeClean – Drag investors into your universe

Norwegian startup WeClean provides on-demand home cleaning services via a convenient app. After bootstrapping for two years, WeClean received five rounds of Angel funding in 2016. Founder Kim Haagensen explains:

I have been an entrepreneur my whole life – a high school dropout, a hustler, dreamer and a rebel. So when I found myself driving Uber after a public and ugly divorce, it didn’t take much for my brother Sindre to talk me into starting a new venture, providing home cleaning the ‘Uber way’.

In Norway, there are maybe five to ten thousand people cleaning on the black market. This intrigued me because it shows a group of people who want to work and deliver their services in a legal way, and it also verified a market which we now suspect to be worth €500 million.

We’ve been pretty laid back about funding, so when we won the Angel Challenge in May 2016, we’d already been through absolute hell. It’s not easy to find hippie investors! It was actually an Uber passenger who introduced us to our first investor, Emil Pete, who shared our values and became a good friend.

Emil’s investment gave us our first 300,000 NOK in January 2016 and we received a further 250,000 NOK investment from his father, Frank Pete, the following month. By March 2016, we were pitching on a 15 million NOK pre-money valuation and were at the final stage with many of our bids. We were still bootstrapping but we were confident in the market and watching the business grow every day.

The Angel Challenge was a great achievement. WeClean beat 19 other strong startups to win 1.3 million NOK in the form of a convertible loan. It felt fantastic and also incredibly scary that someone believed enough in us to give us their savings; there was a real feeling we had to prove ourselves. We did, winning 100,000 NOK in the Telenor Digital Challenge the following month.

Throughout all of this, we’ve stuck to our values of Peace, Love and Good Times. We wanted to change the world and shamelessly claim that we’ve already made a start. Our weapon is our service (cleaning) and our altruistic mindset – our cleaners receive a portion of our profits and not one of us is above cleaning ourselves. Our big goal is sustainability which means we avoid huge administration costs. We say if you’re too cool to clean, you’re too cool for us!

We did look for funding from a corporate partner and this didn’t go well. As we entered into discussions with Lilleborg, who had their own range of cleaning products and could train our cleaners, it looked like an exciting collaboration. But after some talks about partnership and possible investment, their parent company Orkla launched a concept very similar to WeClean. According to them, this project had been active for over a year, long before we entered discussions with them!

This kind of behaviour does happen, but Orkla won’t succeed because they don’t know how to live our values, even if they copy our ideas. My advice to entrepreneurs would be that no matter who you are pitching to, you have to drag them into your own universe. Never let anyone drag you into theirs. It’s important to have faith in your product and not accept funding from just anybody.

Our first investors believed in us and our values. Since Orkla, we’ve received a further investment of 500,000 NOK from Frank Pete, who will soon convert the loan on a ten million NOK valuation because of the good faith he showed early on.

Startup Funding in Denmark

Where do I find Danish investors for my startup?

I am often asked by both Danish entrepreneurs and foreigners moving to Denmark about the different options for startup financing locally. Below is therefore a very brief introduction to that subject.

Business angels

Many business angels prefer to invest together in consortia. Denmark is no exception and there are four regional business angels networks with which entrepreneurs can get in contact and in front of which pitch to their members:

Many business angels are for all sorts of reasons not a member of any of the above formal networks, in many cases because they already have large personal networks and therefore do not need the exposure/deals arising from the BA networks. Finding these is a bit trickier, but try:

However there are also many angels who are not even member of the DVCA. This goes for example for a lot of the successful IT entrepreneurs who are now investing part of their fortunes in new startups:

The best way to find these is to look into who funded previous startups within the same segment/industry you are in. This you can find via news articles but also via company databases like www.proff.dk.

Public innovation centres

To bridge the Valley of Death for startup financing the Danish Government has decided to run public innovation centres. These act and think almost like venture funds, but invest much earlier than a regular VC. The normal initial investment round is typically around 3–4 million DKK. Until 2014 there were six centres spread across Denmark who invested mostly regionally, but these were merged this year to just four centres. These are still located around Denmark, but invest across the country:

Venture Funds

Of course Denmark has real venture funds. Below are listed some of the most active:

Accelerators

A startup accelerator typically does not invest huge sums directly, but participation in a startup accelerator has for many startups been pivotal in their future fundraising via access/exposure to business angels and venture funds. There has been an explosion in the number of active accelerators – also in Denmark , but the two leading accelerators in Denmark are:

Debt financing

As any entrepreneur will confirm, banks in general don’t like to lend money to startups with an unproven business model. Vækstfonden (the Danish growth fund) has two options that can help bridge this gap and are therefore relevant for startups:

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I know the above list is brief and therefore not comprehensive, but hopefully a good starting point for entrepreneurs looking for funding in Denmark.

Feel free to e-mail me (nicolaj@startupfundingbook.com) if you think something is missing.

Best regards,

Nicolaj Højer Nielsen