Introduction to startup funding (webinar)

Webinar: Introduction to startup funding by Nicolaj H Nielsen (author of The Startup Funding Book)

Join me for this 1-hour webinar, where I will go through the fundamentals on how to get your startup funded. The webinar will cover:

  1. Overview – investors in the different phases of a startup
  2. Walk-through of the different investors (FFF, Angels, VC, public funds, crowdfunding, banks)
  3. How to contact investors and investor material needed
  4. Case: business angel funding for Recon Instruments
  5. Q&A

Fill in the form below to receive the link to the recording of the webinar.

    How to contact investors and build trust

    A common mistake is for entrepreneurs to send their 50-page business plan to 30-something
    investors and then sit back waiting for them to call and invite them to pitch.

    But before you send out any material, you need to get the trust of a potential investor. They get hundreds, if not thousands, of contact requests a year. Every entrepreneur thinks they have the best idea
    or they wouldn’t be doing it. But why should a busy, time-strapped investor speak to you? What’s in it for them?

    So what SHOULD you do?

    This I’ve written a 10-page post on, which is the chapter on how to contact investors in the Startup Funding Book.  In this post I explain how to:

    • How do you get investors to trust you
    • Build relationships with investors ahead of time
    • Get introduced by mutual contacts
    • Do your research and contact the right investors

    I’ve decided to share this 10-page post on how to contact investors for free.

    You can download it as a PDF-file via this link.

    Happy reading!

    Best regards,

    Nicolaj Højer Nielsen

    How to convince a business angel to invest in my startup?

    Download the Business Angels chapter

    Many founders are for good reasons going to business angels for startup funding. Most have however very limited knowledge about business angels and how to convince angels to invest in their startup.

    That’s why I in the Startup Funding book dedicated a 17-page chapter to business angel funding.

    I have decided to give away the chapter for free (PDF). You can download the business angel chapter via this link: Business Angels – Startup Funding Book

    The key take-away points from the business angel chapter:

    1. Most business angels are driven by more than money. If the only reward you offer is financial, you’ll lose a lot of potential business angels. You need to understand what drives an angel and what you have to offer against what they’re looking for. Look at what they’ve invested in the past.
    2. Not even business angels invest in business ideas. You need to show you can do it and you’ve got what it takes to keep on doing it. So before you knock on the door, you need to get going yourself. Get a team and get working on converting your idea into a business.
    3. Personal trust is one of the most important factors determining whether a business angel wants to invest.
    4. Look for angels who know you already, or who know the industry, because they’ll be more comfortable analysing the risk/reward of your startup, even if they don’t know who you are.
    5. Do your homework and your due diligence. Call companies the angel has invested in. Did they get what was promised? Get all your agreements down on paper – including those not about money

    Happy reading!

    Nicolaj Højer Nielsen

     

     

    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!”

    Investor material for early-stage startups

    Yesterday (May 10 2017) I held a workshop at the PODIM conference in Maribor, Slovenia. Topic of the workshop was which type of investor material do you need to attract investors for a early-stage startup.

    My main points regarding investor material are:

    • Investing in early stage startups is all about personal trust. Your startup don’t have that many data to show, so investors are mainly betting on the team/you. This means that the most important thing to convey in the investor material is that your team is world-class!
    • The three most important things when reaching out to potential investors: 1. Get introduced by mutual contacts, 2. Do your research and contact the relevant investors and 3. Be specific when contacting them (don’t just ask for coffee).
    • Regarding the need for introductions: All well-connected early-stage investors are getting a lot of requests per year – up to +1000 a year, but invest maybe in less than 10. This honestly mean that it’s really hard to get their attending if you are just cold emailing them. To stand out you need to get introduced via mutual contacts. This increased the chance that the investors are taking you seriously a lot!
    • Who are the investors relevant for YOUR startup: 1. Investors that invest in the same risk/reward matrix your startup is current in, 2. Investors that are interested in your industry (and understands it) and 3. Investors that invest in startups that are in the stage your company is currently in.
    • Do you really need a business plan ? I (and many other seasoned investors) don’t like business plans, because they are too long and often outdated. But this is really culture-dependent: Investors in some countries/regions still prefer along business plan. Check out what’s the status in your country before wasting too much time writing one.
    • What you for sure need in your dialogue with potential investors are: 1. An intro email (as explained above), 2. An executive summary (the 1-2 page “teaser” describing your startup very briefly) 3. The pitch deck (the typically 15-slide PowerPoint presentation that replaces the long business plan) and 4. The budget.
    • And please, don’t ask the potential investor to sign a Non Disclosure Agreement (NDA) before even meeting them. You first need to get them interested in your case (by disclosing non-confidential information), and most professional investors (business angels and VCs) will not even sign NDAs later in the process.
    • Ps. do you really need money from investors to grow your startup? And if you do, do you need them now or can it wait until you have more traction? The first money you take from investors are very expensive (due to a low valuation of your company)!

    Feel free to download the presentation here.

    Best regards,

    Nicolaj Højer Nielsen

     

     

     

    Spoiler: Dragon’s Den isn’t real!

    Many first-time entrepreneurs base at least some of their knowledge of business angels on the popular TV show Dragon’s Den (Shark Tank in the US and Australia). Here, a few entrepreneurs pitch their business ideas in front of a group of business angels (typically, famous super angels) who then – based on the pitch – decide if they want to invest or not.

    It never works like this in the real world. Ever. Business angels need to evaluate not only the idea but also the people behind it and the traction (how far they’ve come); in other words, all that’s needed to build the necessary trust in the business and founders, on which all angels build their investment decision. This can’t be covered in 15 minutes. It makes great TV, but it’s not real!

    I am not suggesting the deals made on TV are fake – they are real, and it makes sense for the angels to do the deals on stage, given the huge publicity it gives them which more than pays for the additional risk of investing in unknown companies. But in the real world you can’t get funding after a 15-minute meeting with the business angel!

    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.