Archives for the month of: August, 2014

A couple of years ago there was a lot of talk about Zombies in the startup world. Everything started with a story by Danielle Morrille, who very colourfully described the importance of recognising and keeping away from the ‘zombie’ startup, that might just be sitting opposite to you in a meeting or even worse that you become one too.

So according to Danielle, a zombie startup has several recognisable features. You are probably a zombie if:

• You haven’t hit 10% week-over-week growth for any meaningful metric (revenue, active users)
• You’re working on the same idea after 12+ months and still haven’t launched
• You’ve launched a consumer service/ enterprise service and have less than 2% week-over-week growth in signups

Does it sound familiar? However, no need to panic, the treatment has been found and it’s all in that magic book, The Lean Startup by Eric Ries. This book created the now thriving lean startup movement, and suggests that zombies can recognise that they are zombies quickly and pivot fast. In other words, it shows you the metrics for zombie measurement and a step-by-step process for healing the near dead.

While startup zombie treatment has magically been found, there is also a big question about zombie VC’s! These are mainly the guys who are earning management fees from their old funds, actively managing their current portfolios, but not making any new investments.

How can you spot that a VC firm doesn’t invest yet/already/ever?  The warning signs are:

• They haven’t made any series A investments in the past 6 months
• They haven’t invested outside their existing portfolio in the past 3 months
• They haven’t made ANY investment in the past 3 months (after a more regular pace in the past)
• They constantly tell you they’re re-focusing on later stage deals, or raising a new fund

It is sad, but some VC’s will still meet with entrepreneurs, who are trying to raise money, without any intention of investing. The entrepreneur has no idea whether the VC will invest or not and it is quite difficult to check especially in the less mature European market. The good news is that new VC’s are popping up like mushrooms and we currently see plenty of firms looking for ambitious founders. Please check out the list of the active firms, that are actively investing since 2013 and good luck!

Blog by Marina Atarova – Co-Founder of Dreamstake an online network, that provides end-to-end support for entrepreneurs wishing to get a tech startup funded in the shortest possible time. The startup rating system allows entrepreneurs and investors to monitor startup progress and inject capital and support at the appropriate time.

Doing any of the following might kill your chances of getting funded. We encourage you to avoid these common mistakes, when you are raising money:

Don’t waste time with the wrong type of investor. Research your potential investors carefully to ensure they are a suitable fit – consider their preferred investment size, their sector preferences and their investment style.
Don’t mass email investors. Buying mailing lists or sending personalised spam is not the way of  getting to know your investors. So don’t be lazy. Take time to find out who will be a really good fit for your company and make an effort of personally contacting them.
Don’t be a solo founder. There is no founder in the world with the capability to do everything from product design, development, marketing, sales, operations – Get a strong team to back you up .
Don’t be too pushy. No often means no. Some investors prefer some persistence, but most of the time if they say they are not interested, they really mean it. Just remember, what doesn’t suit one investor, might suit another one.

And finally: Don’t raise funding if you don’t need it. Ownership determines outcomes. Consider whether you really need to give your equity away or whether you can ‘keep it in the family’.

Blog by Marina Atarova – Co-Founder of Dreamstake an online network for startups. Our rating system allows entrepreneurs and investors to monitor progress. I tweet about startups.

Over the last 10 years some great minds have turned their attention to the challenge of how to create tech startups in a repeatable way. Many of these have looked towards Silicon Valley for answers. Paul Graham and others in SV came up with the accelerator model which has now spread across the globe. The success of Y-combinator has lead to the proliferation of European accelerators based on the same model, but failing to deliver comparable results as in Silicon Valley.

I believe there are several issues with the current accelerator model:

- Do accelerators recruit enough quality startups into cohorts?

The cohort system seems to work against accelerators.  Recent programmes have struggled to find enough quality startups at the right stage in their development. Startups can only be accelerated effectively between the stages of problem/solution and product/market fit. Beyond this they have developed their ideas too far to help.

- Do accelerators really deliver results?

Most accelerator programmes focus on their ability to deliver quality mentoring. However, there simply are not enough experienced mentors out there. We cannot hope to emulate The Valley with its large number of internet millionaires from earlier IPO’s .  Instead our accelerator programmes fall back on bankers and other professionals who have never been involved in tech startups before. This does more harm than good.

- Why are they going niche?

Okay, to solve these problems why not go niche? Let’s all jump on the same bandwagon! Aren’t FinTech accelerators an oxymoron? They are heavily sponsored by banks and other financial institutions who can’t fail to negatively influence outcomes. Can an accelerator run by Barclays Bank really create startups capable of disrupting the banking industry?

- Whats the real value?

The reducing cost of tech has made it much easier for startups to get to product/market fit without involvement in a programme. There is also far greater access to early stage capital from other sources. Startups with strong propositions and good teams are sending out the wrong signals by signing up for second rate accelerators.  They are also throwing away equity for little or no return.

The availability of a early stage capital through accelerators, crowd-funding and the startup loans scheme is causing a problem further downstream. These initiatives are stimulating the formation of startups that can’t hope to attract later-stage investment.

- So what is the answer?

The startup market has changed. Quality startups need linking with smart investors very early on. Luckily internet platforms are able to do this.  Dreamstake in Europe and Angellist in the US are a good way to get investment from quality sources and ensure continuity. Startups benefit from a light touch. This means offering the appropriate level of funding and support exactly when it is required, on an ongoing basis.  Accelerators are unable to do this. Platforms such as Dreamstake can!

Blog by Paul Dowling – Co-Founder of Dreamstake  an online network, that provides end-to-end support for entrepreneurs wishing to get a tech startup funded in the shortest possible time. The startup rating system allows entrepreneurs and investors to monitor startup progress and inject capital and support at the appropriate time.

 

Getting your startup funded is one of the most important things you will be involved in as a founder. Here are few key tips that we have learned the hard way:

1. Do it properly or don’t do it at all.

The first and the main rule of fundraising -There is no such thing as just ‘trying’. Fundraising is a complex and time consuming process and you must have a singleminded approach, otherwise why do it at all?  Don’t say, ‘we’re trying to raise’, ‘we’re testing the waters’ or ‘exploring different options’. You simply HAVE to have an attitude of success. Of course you might fail. This is a part of the startup journey. However, in the funding process your winning attitude plays a huge role.

2. Remember what you are aiming for.

You need to get as many investment offers as you can. Unfortunately, no one can give you a definitive step-by-step guide on how to do it. Investors have different views and what can impress one, might turn off another. So make sure you research who you are dealing with and what information they want from you.

3. Don’t ask for too much or too little.

Instead of pitching complex financial models, focus on what you need to get your startup to the next level. If you need money to build the product, how long do you need? How long do you need to get a certain number of users? How long do you need to get to a specific revenue target? Give yourself a cushion and raise the monies for as long a period as possible. Remember every funding round will take up a huge amount of valuable management time.

However, asking for too much funding can also be a bad thing. Investors may think you are naive in the valuation of your company and will be worried that you will not be hungry to hit milestones.

4. Do your homework – prepare some clear fundraising materials.

The minimum you need is a short description of your business, an exec summary and a ppt pitch deck. Some investors will ask for a detailed business plan. A prototype or mockup can be really helpful, as investors would really prefer something to play with.

5. Less is more – that’s what investors want.

There are only a few key things most investors look for to get them excited about the deal:

- the problem you are solving
- the size of the opportunity
- the strength of the team
- the level of competition and competitive advantage that you have
- your plan of conquer the market
- your current status and future milestones
- a summary of financials, including how much you need and how you will use the money.

Most high growth tech startups will need external funding at some point. We hope the steps above will be useful, but can offer one-to-one advice to startups seeking funding through our programme.

Blog by Marina Atarova – Co-Founder of Dreamstake an online network for startups. Our rating system allows entrepreneurs and investors to monitor progress. I tweet about startups.