RTC #12: The key risk of each funding stage

Why today’s issue is valuable to you 💎

1. Headlines: 3 FREE investor lists to build your shortlist, why Elon Musk is suing OpenAI, looking at ESOPs - how do you compare to your competitors, some investors only back founders with MBA, and more!

2. Today’s Deep Dive: The key risk of each funding stage. This is the ONE risk your potential investor looks at. Find out about the 5 key risks and learn how to demonstrate that they are a non-risk when pitching investors

3. Road-To-Capital Deal Tracker: Top transactions in February 2024

👉 You are a FOUNDER currently raising a round or planning to raise one in the future?

👉 You are a Fundraising Advisor or Startup Consultant helping startups to raise capital?

I am here to help you make your capital raise a success! 🏆🚀

Headlines 📢

• Explained: Why Elon Musk is suing OpenAI and Sam Altman

• Raising pre-seed/seed? Here are 3 FREE investor lists 💸💸💸

  • List of family offices investing in pre-seed

  • Active pre-seed investors

  • SaaS angel investors (globally)

• Remote is over - tech startups are bringing workers together all week, every week

• Who are the most active startups investing in startups?

• Why do some investors only back founders with MBA?

• Apple car is over - all past projects abandoned by Apple 

• Amazon aggregator Thrasio files for bankruptcy (after raising $3.4bn from investors)

• Sizing Employee Stock Option Pools (ESOP):
  How much to set aside? How do you compare to your competitors?
  Full analysis here.

🤿 Deep Dive: The key risk of each funding stage

Remember issue #1?

👉 Capital financing is a journey and connect the dots

Each startup is on a journey, its very own unique ‘Road-To-Capital’ defined by its individual circumstances and decisions by the founders.

What stays the same for all though are the dimensions and parameters setting the framework for the path each company takes.

And also remember (or look it up again in issue #1)?

The company life cycle is one of the dimensions setting a framework that determines financing choices.

• Seed funding breathes life into ideas

• The company enters the market and begins to grow, larger equity funding rounds and debt instruments provide the necessary fuel for expansion and scaling operations

• Finally, approaching more sophisticated instruments and public markets

But each funding stage not only signifies growth but also introduces its own set of challenges and risks.

What is interesting is that there is mostly ONE specific risk that applies to each funding stage - which means that this is the ONE risk your potential investor looks at in particular and needs to be comfortable with.

What does this mean for you as a founder raising capital?

👉 This specific risk is exactly what your investment story and pitch deck are (should be) about - demonstrating that it is not a risk and why.

There are five key risks depending on your stage of funding

So, let us have a deeper look at each of these risks focusing on

• What the risk actually is about

• (And more importantly) how you can demonstrate that it is a “none-risk” when pitching investors

Technical Risk 

What about: proving that you are able to build the product you envision

How to demonstrate?

👉 Focus on developing a solid MVP (Minimum Viable Product) while being prepared for pivots as you learn more about what's technically achievable.

Market Risk

What about: proving that there is somebody that wants/needs your product (!)

How to demonstrate?

👉 Product is validated beyond friends/family and your immediate network

Go-To-Market Risk

What about: scaling operations and executing a repeatable go-to-market strategy

How to demonstrate?

👉 Show the most efficient and effective way to reach your target customers and achieve significant market penetration. Focus on customer acquisition cost (CAC) and lifetime value (LTV) optimization.

Expansion / Growth Risk

What about: proving that your market is large enough for the growth capital invested

How to demonstrate?

👉 Identify and penetrate new markets, expand geographically, or target new verticals to maintain growth momentum.

Company Culture Risk

What about: scaling operations while fostering a robust company culture

How to demonstrate?

👉 Show how to preserve core values and team dynamics on the management level and across the company. Remember your company has reached a significant size with 100s/1000s of employees by then.

Concluding remarks

These different risks are often also the reason why CEOs (need to) change along the startup capital journey - each risk requires a different set of skills that not all founders have (or can gain along the way).

…and ending this deep dive with a disclaimer 🤪

Disclaimer: we are in the startup world so this can be superfluid from case to case, but still holds as a general framework.

📖 Infographic of the week

Difference between Venture Capital and Private Equity?

💸 Road-To-Capital Deal Tracker: February 2024

👉 Top transactions in USA

👉 Top transactions in Europe

Source: Pitchbook, based on transaction volume

📅 Calendar of main VC events in the upcoming weeks

👉 Networks and relationships are key: start building them

March
• PEI Nexus | Orlando, US | Mar 6-8
• SuperReturn Private Credit Europe | London, UK | March 11-23
• Mind the Tech | New York, US | Mar 4-5
• Hello Tomorrow | Paris, France | Mar 18-22
• Insurtech Insights Europe | London, UK | Mar 20-21
• Investors’ Forum 2024 | Geneva, Switzerland | Mar 20-21
• GPC Conference | New York, US | Mar 25-27

April
• Energy Tech Summit | Bilbao, Spain | Apr 10-11
• 0100 Conference Europe 2024 | Amsterdam, The Netherlands | Apr 16-18
• VC Platform- Global Summit ‘24 | New York, UK | Apr 24-26

👉 Get the full list of events in 2024 here

This was it for today.

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See you next Tuesday,
Stephan 👋

Issue #12 | 05 March 2024