Hi everyone, I hope you had a couple of great weeks! I was fortunate to attend the 4YFN event in Barcelona last week and to take part in the #**GoHubDays2023 **this week, so it has been fun, exhausting and a great learning experience.
4YFN was a great opportunity to meet with other VCs from all over Europe and learn more about what is happening in the venture capital scene.
#**GoHubDays2023 **I was fully immersed in the entrepreneurial mindset and learned, discussed and debated with GoHub Ventures” portfolio entrepreneurs and advisors. These are some of the learnings discussed!
1. VC winter is coming. The companies that survive it will be very valuable. However, if you are planning to raise, start now. Don't wait until every startup in the world needs money and is raising❄️2. Sell. In the fight between sales of product, sales always wins. Go to market, find customers and create relationships with them. If you can turn your customers into champions they will help you build your product. After selling, improve the product. Without revenues there is no company 📈3. Communication is Key. Learn to communicate to increase your impact. This will help you attract the right talent, investors and clients. Work hard to have a great pitch 📡
It’s no secret that fundraising got harder in 2022 and looks especially difficult in 2023.
Covid19 created a context in which governments and central banks gave access to a lot of liquidity to keep the economy running while the lockdowns were in place, which in the moment helped a lot of founders and fund managers to raise capital easily.
We all witnessed the startups raising crazy amounts of capital at mad valuations without even having an MVP.
However, three years laters, the quantitative easing measures impulsed combined with the high energy prices caused by the war in Ukraine, China’s aging population and decrease in production and exports brought in the highest inflation rates since the 1980s.
The Federal Reserve and following it, most central banks raised interest rates, hoping to fight off inflation. This measure however has been so far ineffective to reduce inflation, although it has slowed down the economy creating the economic scenario known as staglation.
This creates a context that makes it hard for fund managers to raise capital at the moment, since most LPs are suffering from the more expensive access to capital and lower project returns due to the high energy and supply prices.
Fund managers have to pitch themselves as any entrepreneur would and I would even suggest funds behave exactly as any business does.
Therefore, when pitching to raise money, a fund manager must have created a strategy that makes his fund a solid and interesting venture. Although it’s not super common for funds, I think **Porter’s 5 forces framework can give us a good starting point to define the strategy behind our fund. **I’m not going to go through every pàrt of Porter’s 5 forces but here are some key points to help you fund raising in this period:👇
Every fund manager must differenciate itself from the rest of VCs within the space. If there are multiple B2B pre-seed Saas B2B funds within your market but not many companies are being founded, it would not make sense for you as a fund manager to try to raise a fund in that space. You can do this having a successful track record, proprietary dealflow, in field expertise and know-how and building a strong brand.
GPs must have some kind of specific competitive advantage and will work to exploit that to make smart investments.
Invest in what you know.If you are an expert in industrial B2B software it wouldn’t make sense that you try to raise a fund to invest in B2C.
If no investing track record exists:
Clear entrepreneurial vision
Impressive people who have experience either as entrepreneurs, executives or experts in the field of investment
LPs look for GPs to have experience working with each other.
People who have worked together in the past are less likely to come into conflict with each other
LPs want to know that GPs have skin in the game. If the team does not have the financial resources to collectively commit 2% of the fund size, they should be open about that and be willing to prove that what is being committed is a significant personal stake
Having access to proprietary dealflow or an established network for sourcing deals is fundamental to being able to invest. If you get access to the best companies before anyone all LPs will want to invest in you. Create a good network to do that!
Let’s face it, VCs don’t make money if they can’t sell their investments. If you have previous experience with exits you show the LPs you have the potential to make their money back!
Another tool a fund manager can use to raise funds are placement agents. Placement agents assist the GP through each stage of fundraising, from document preparation, data room set-up, relationship management, setting up meetings and aiding LPs to the final close of the fund.
So, I’ve been seeing a lot of pitches lately and most of them are lacking one of the most important things for any investor out there: growth. We want to clearly understand how much you’ve grown the last years and how much you plan to keep growing.
I have realised that top startups don’t only grow greatly, they communicate it efficiently and are very ambitious on the growth. For example, Factorial, which just raised $120M has declared that wants to keep growing at the same pace as the previous 5 years and that wants to reach the 100M ARR mark. That is crazy but calculated and demonstrated growth. Please show that.
Check here Iconiq metrics of the top quartile performance B2B Saas Companies. If you are growing something near that, you are doing great!
NEOM
At this point I guess most people know about this project but it blows my mind that someone wants to build this. Check the video that explains it better than me. Do you think this will be a a reality?
Meta’s been in everyones mind for the last couple of years and I think it’s fair to say that since Cambridge Analytica, the company’s reputation hasn’t been the same.
In 2021 Zuckerberg rebranded FB to Meta and disclosed his vision for the metaverse. This created very radical reactions from Metas investors as well as from the general public. Two years later, millions of dollars spent and no tangible results seen make us question weather FB Metaverse is becoming a reality or not.
Chat GPT opening its language model to the general public and creating a new level of hype around AI and tech might has woken up Meta, which recently communicated that is builting a team to develop AI products for its instant messaging apps.
It seems like these kind of products can again disrupt communications and be a great tools for the businesses using Meta, but the future of the Metaverse is still unknown.
What do you think?
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