Are you a start-up founder looking to complete your first fundraising round?
The EWOR team sat down with Adrian Kapsalis, the Co-Founder of Kyon Energy, who revealed all his best advice to successfully fundraise for your business.
Adrian studied International Management and started his career in the automotive industry. He completed his childhood dream of working at Ferrari.
“But the plan since I was like 12 or 13 was to start my own thing, even though I didn’t really know what that meant at that age,” Adrian confessed. So, after three years in the industry, Adrian decided to quit his job. He launched his first start-up in the personalised nutrition space, Loewi along with his long-time friend Philipp Merk.
Adrian and Philip went from early ideation to building a founding team, finding co-founders, creating the business entities, and raising capital. After three years spent with the business, they sold it to a British health tech company and started their second venture. It was Kyon Energy, a company in the renewables space.
“Basically, it was all about applying the learnings that we gained over the last three years with Loewi in a different context, starting from scratch again,” Adrian explained.
Through his two ventures so far, Adrian has extensive experience fundraising and talking to investors. He kindly talked us through the fundraising process, dispensing valuable tips along the way.
Fundraising 101: What to Expect From the Process
Funding is a major challenge every founder faces. It is one of the first big business decisions they have to make, explained Adrian.
“I think that’s the big question every founder should ask him or herself at the beginning,” he said. “Is it a case where you can actually bootstrap? Or is it a VC case?” The answer to that question will define your strategy and priorities.
If you go down the bootstrapping route, it’s important to carefully consider how many clients you need to bootstrap in order to fund your business. However, Adrian explained that, in many cases (especially in tech), venture capital is probably the fastest way to go.
If you decide to fundraise with VCs, think about what kind of investors you want to attract. In order to reach that conclusion, consider what stage of the start-up lifecycle your venture is in. This will help your decision on whether you’d want to speak to business angels, family offices, or venture capitalists, etc.
After that, Adrian used the metaphor of a sales funnel to explain the fundraising process: “You have the different stages. Investors that you are interested in, investors who you have an intro to already, a first preliminary call. And then the funnel gets deeper and deeper. In the end, there are basically a few investors that convert.”
The aim of the fundraising process is obviously to sign a contract with an investor. Though, it starts with accumulating as many term sheets as possible from a range of investors. A term sheet is a document expressing initial interest from an investor. Here you’ll negotiate the rough terms (valuation, important clauses, etc). It’s usually a non-binding document outlining a common understanding. The baseline is used for the final contract signed with a notary.
Adrian’s Top Fundraising Tips
Adrian also revealed his top tips to complete a successful fundraising round. The key point, he insisted, is preparation: “The better your preparation is, the quicker the fundraising, and the higher your success rate.”
- Put yourself in the investor’s shoes. Investors get tons of pitch decks a day, and they skip over a large part of them. This is why condense your information down to business highlights to ensure investors get exactly the information they need, in as little time as possible. That way, they are grateful you spared their time, and you’re sure they’ve not skipped over vital information.
- Have a compelling storyline. Adrian said the pitch deck and the story behind your business are key. “Ideally, the story triggers a fear of missing out for investors,” he explained. Thus, you need a hook and personality to convince them.
- Put a roadmap together. A fundraising process can be endless. However, having a roadmap helps you keep on track and stay motivated throughout the process. Consequently, set deadlines for finalising your pitch deck, and your financial plan, determine how many weeks you want to do outreach, etc.
- Create a network. Try to get as many warm introductions as possible. When you call an investor, ask them if they know anyone who might be interested in your case. “I was really surprised how many introductions I got from investors to other investors” the entrepreneur revealed.
- Learn from your pitches. “Every time you’ve talked to an investor, ask yourself, what were the key learnings?” Adrian said. Ask yourself questions like: “What can I maybe implement in a pitch deck? How can I adjust my pitch? Where did the conversation go wrong? And what can I learn from it?”
- Have a data room. If an investor is interested in your venture, they want to see relevant information about your business. As such, it’s critical to have a “data room”. It’s a SharePoint or folder containing your business plan, financial plan, marketing strategy, pitch decks, contracts, etc.
- Ask the investor what their process is. More often than not, the fundraising processes vary from one investor to the next. It doesn’t hurt to ask the investor what the process is, so you understand the next step at all times.
Fundraising Mistakes to Avoid
“I think the typical mistake I’ve seen founders make,” confessed Adrian, “is when they get asked how much money they want to raise, they say, ‘Well, I don’t really know. It depends,'”. You have to make up your mind about what you want early on in the process. Investors frown upon founders who do not have a clear fundraising goal, as that does not bode well for the financial plan.
Adrian also revealed the biggest mistakes he has witnessed during his time as an entrepreneur, so you can avoid them.
- Focusing only on the product. Being passionate about your venture is great, but many founders fall into the trap of just raving about their product to investors. Actually, the story of your pitch should be about the opportunity you’re offering to investors. While the product is crucial, it is only one part of the full picture.
- Taking things for granted. This is a big one, according to Adrian. “As long as there is not the final signature at the notary, you cannot be sure of anything,” he emphasised. Things happen unexpectedly, so don’t assume a deal is done before anything is signed.
- Not having a Plan B. On a related note, not having a contingency plan in case your first choice goes south is a big no-no. “Have as many options as possible,” explained Adrian. “The more term sheets you have, the better your negotiating position.”
- Not planning for future rounds. While you might feel like you have too much on your plate during your first round to thinking about the future ones, this is a big mistake that could cost you in the long run. As it’s likely you’ll complete a few other fundraising rounds, calculate their impact on your share capital and valuation. This is also useful to figure out how much equity to give out in the first round.