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RTC #5: Mastering Pre-Seed to Series C

RTC #5: Mastering Pre-Seed to Series C

Plus: Being successful when NOT in AI or Blockchain in 2024

Stephan Freudl
January 16, 2024

👋 Welcome to ‘Road-To-Capital’ your weekly companion through the dynamic world of Venture Financing, Entrepreneurial Growth, Private Equity, and Debt Capital. In this newsletter, I speak about the diverse methods and opportunities available to companies across their life cycle to fund operations and growth. Follow me along and learn how it helps your company’s financing and fundraising – the Road-To-Capital is long and definitely not straightforward.

Why today’s issue is valuable to you

Mastering the ‘Road-To-Capital’

Learn how to find the right investors along the company life cycle across multiple funding rounds (and keep them happy) 💰
Understand the key (operational) success factors from early to later-stage stages 🚀
Fundraising Process: Cold outreach - yes/no? 📨
How to rock 2024 if NOT in a “sexy industry” like AI or blockchain 💥

(Sometimes) the Road-To-Capital can look straightforward 😲

Welcome to today’s issue #5!

Having NASDAQ congratulate you at the Times Square for your latest funding round means that you have done something right. 🚀🚀

This is exactly what happened to refurbed in December 2023 after successfully closing their USD 57m Series C round.

refurbed was founded in 2017 and started with a pre-seed as their first external investment round. Since then it has developed into the perfect case study on venture capital and growth financing along the company life cycle

Seed-Investment in 2019
Series A in 2020 (USD 17m)
Series B in 2021 (USD 54m)
Followed by the above-mentioned Series C in 2023 (USD 57m) - (being NOT an AI or blockchain company😊)

❓How did they manage to attract the right investors with each phase requiring very different profiles and types of investors (imagine Seed vs Series C)?

❓What are the success factors along the company life cycle to keep (increase) the investors’ interest?

❓What are the best practices for the fundraising process?

Let’s dive right in with co-founder Peter Windischhofer for hands-on dealmaker insights you don't find in any textbook 💥💥💥

👇👇👇👇

🔥💬 Let’s dive right in…with Peter Windischhofer

Peter is co-founder of the online marketplace refurbed being on the ‘Road-To-Capital’ since 2017. Since its foundation refurbed was able to raise over USD 130m with the recently closed Series C of USD 57m in November 2023 as the latest highlight.

👉 How to find the right investors and keep them happy across the journey

RTC: “When did you (usually) start thinking about / planning the next funding round and when did you start building up a relationship with potential investors for the next financing event?”

Peter: Always be raising :) I like this quote as it is quite true, you need to continuously build relationships with investors. We met some investors more than a year before they invested - while others decided to invest within a week after the first phone call. It totally depends on the investor and the dynamics of the round. So there really isn’t an average for this process.

RTC: “How did your approach to investor relations evolve from early funding to Series C in just two sentences?”

Peter: “We have always prioritized strong reporting, but worked on this even more and made it more detailed. Personal relationships have been equally as important from day one, and we have long-lasting relationships with some of the investors from our Series C.”

Key Takeaways #1

• “Cultivating Investor Relationships”: The journey doesn't end with securing initial funding. Forge and nurture ongoing relationships with current and potential investors. These bonds are your foundation for future funding rounds.

• “Take Reporting Seriously - from Day 1”: Start strong with your reporting from the get-go. As your journey progresses, refine and enrich these reports. Detailed, transparent reporting is key to building trust and credibility.

👉 Key factors to be consistently successful across the funding rounds

RTC: “What were the key metric(s) that you believe were pivotal across the funding rounds?”

Peter: From the first round onwards, the key was our focus on unit economics and growth. What changed over the last 18 months - with a changed funding climate and economy - is a stronger focus on EBIT profitability. So now it's basically about everything: growth, unit economics, and overall profitability. And we have been incredibly successful with this combination.

RTC: “What was a fundamental learning for you that you want to share?”

Peter: Believe in yourself and your story! Especially for mission-driven companies, this is a key axiom to live by. In investor meetings, don't try to say what the investor wants to hear - excite them about your dream. If they don't like it that's fine and you just move on. Ultimately, you want investors behind you that also truly support your mission and your vision for where your business should go - so even the first meetings help to clear this up and build a foundation to work on together.

Key Takeaways #2

• “Focus on the Right Metrics”: At the beginning focus on unit economics and growth, later on (and especially in the current environment rather earlier than later) stronger focus on profitability (EBIT).

• “Believe in Your Investment Case”: Trust in your vision and be authentic in your pitch. Don't tailor your story just to match investor expectations. If they don’t like it, move on until you find the one(s) that truly supports your mission.

👉 Fundraising process: Best practices

RTC: “Did you do “cold outreaches” in any of your funding rounds?”

Peter: Yes, but with limited success :) Warm intros work best, and we have been focused on networking, such as during conferences and other events - which has been working well, too.

RTC: “Who was (operationally) responsible/in the lead for the fundraising efforts and did this change across the funding rounds? And why?”

Peter: I was always in charge of fundraising. What changed over the last years is that we hired a CFO and Head of Investor Relations who then drove the fundraising process. We have a highly skilled team that changed this process for us, while all three of us founders still played a pivotal role in key meetings to build relationships with investors and also demonstrate again how passionate we are about our business model. After all, we are a mission-driven company that is here to make a difference for our environment - and so the storytelling was crucial.

Key Takeaways #3

• “Always try to get a warm intro”: If not possible, read my last issue.

• “Fundraising responsibilities”: Founders must lead the charge in fundraising. Even as your finance team expands, maintain a hands-on role. Engage personally.

👉 Being successful when NOT in AI or Blockchain in 2024

RTC: “What has been the biggest challenge you've faced in terms of capital financing or fundraising for refurbed over the years (if any 😊)?”

Peter: Fundraising has always been challenging because we've never been in one of those sexy Industries (blockchain, AI, SaaS). Our business model as a marketplace in the circular economy is gaining popularity - because sustainability is moving more and more towards the center of society and business, but we also have fierce competition. Ultimately, we always managed to convince our investors how we are creating real value and how we are better than our peers, though.

Key Takeaways #4

• "NOT in AI or blockchain": Yes, investors do commit even in (currently) “unsexy” sectors. Your task? Sharpen the focus on your unique business model. Emphasize the tangible value you're creating.

• "Rising Above the Rest": it's not just about playing the game but outplaying your competition. Demonstrate how your strategy and execution leads to superior value creation. Make it clear why you're not just another player, but the leader in your field.