In the life of a developing startup, one day the moment occurs when it is required to significantly increase funding. So, in 2020, the service for the delivery of sets for cooking ElementAree has attracted the investment of Round A in the amount of $ 5 million from the Russian direct investment fund (RDI), the French company Bonduelle and an unnamed business angel - it was one of the largest transactions of the year.
The most important thing is why the whole process begins, is an understanding that the company really needs venture financing, and in specific volumes (this is not about $ 100,000, but more than $ 2 million). To come to this, Founders should be predicted for 1-2 years ahead, whether the financing model is enough, which is now, and will be comfortable to develop a company within its framework. If the answer is "no" and need a check more, it is worth reorienting in institutional investors.
If before the startup lived on business angelic financing, it will have to be rebuilt. Work with institutional investors is constructed differently: when planning the release to the transaction and its closure, it is necessary to lay time. According to statistics, 90% of young companies fail, with 7.5 out of 10 "burn" even with venture capital support. Startup financing is always a risk for investors. On the other hand, venture capital investments are the most profitable in the world. For example, invested on Google $ 100,000 back in 1998, David Checheriton was able to become one of the richest people in the world with an income of $ 6.1 billion (as of 2020).
Usually startups are calculated that the whole process will take a maximum of 4-6 months. However, in fact it turns out much longer. In our case - more than a year. That is, the expected period can be safely multiplied by 3 - this will be an approximate estimate of the period during which there will be a discussion of conditions and other points, Due Diligence, maintaining and closing the transaction.
It is precisely because the process of closing a venture deal takes more than the expected time, it is important to have in stock not only the plan in, but also with, and D. To do this, in parallel with the main negotiation process, other dialogues are worthwhile. In the course of the movement of our main transaction from the RDIP and Bonduelle, we closed a couple of small. If this work is not carried out, there is a huge risk that for the period of waiting for the company's money will end, and there will actually become nothing to live. Before the desired result in such a state, you can never get.
Investor search: patience and workNo matter how obvious it seems to be at first glance, only persistence determines whether the transaction will be closed or not. During the search for a source of financing, start-ups have to talk with different potential investors, funds, companies. Not each of them is easy to contact and quickly makes a decision: some denied, others pull. Even in the most difficult moments it is impossible to give up, you need to get up and go further - this is the key to success.
Another important point is the presence of Trex. Without him, especially in the Russian market, where there are not many participants and is able to track the path of the startup. Given that the period before the closing of the transaction is quite large, investors are looking at how much companies perform arrangements and development plans. When the phants arrive regularly and show that they managed to fulfill for a certain period according to the previously obligations, it causes confidence in investors.
If the work on attracting business angelic financing is a managed process, the closure of a large transaction in terms of pressure is a great effort. Well, when the Founder has a strong rear in the form of a team that can fully close the OS, as alone is difficult to combine the current activities of the company and institutional fundraising.
Path to Success: Communication, PR, TrustThe one who knows how to listen to and hear Fidbek Investors comes to success. Of course, no fund will say that it is specifically to improve the startup to get financing. But by what questions are asked by investors, as they talk, what they want, you need to try to understand what kind of real cans have people, and quickly close them. Moreover, the canes will differ depending on the position of the person in the organization. It is impossible to ignore it: while the sides are comfortable with each other, no movement will happen. There must be a deal with those who have similar views on strategic things, there is a positive dynamics in relationships and there is a certain "chemistry" on the human level.
After successful closing of the transaction, you must maintain communication. According to the study "Venture Barometer 2019", 38% of start-ups communicate with their investors 1 time per month, 35% - once a week and 27% - quarterly. Investors, for their part, do it much more often: 53% of them are communicating with portfolio companies. Both sides noted that their acquaintance with the large world of businesses and the right people is the most valuable help of startups in the portfolio. And this is a big chance for the further development of the company.
You should not forget about current partners: they also need to talk and build trusting relationships, then people in the case of force majeure will meet. Without support for shareholders, for example, we hardly happen to achieve such a result. In a difficult situation and suppliers reacted with understanding that somewhere the payment was postponed, adjusted when it had to explicitly reorganize the processes.
The latter, what is worth mentioning is PR or conscious management of the market reputation. We did not take advantage of this, but after the deal it became clear that the moment is quite important. The Russian market is not as large as European or American (the Russian Federation accounts for about 1% of the cumulative volume), so the startup must do everything possible so that people understand what values he carries what he wants to say. Thus, before negotiations in the minds of the investor and expert community, the "picture" of the company will be formed, and this increases the level of trust and further simplifies communication.