The concept of FUNDRAISING seems to raise both question marks and exclamation points in the mind of those interested in raising capital. Women in tech Cluj decided to “demystify” the concept of fundraising in technology with the support of the guest speaker, Andreea Saia, the co-founder of Elle Tech. Her business aims to make Romanian Tech and its engineers more visible to foreign investors.
The concepts covered in this event were: fundraising, challenges associated with it, the main types of players, the different stages of fundraising and process associated, as well as the high-level perspective over valuation of tech intangible assets.
MAIN QUESTIONS AND LEARNING POINTS:
Why learn about fundraising?
Fundraising, in business and like in many other things in life, is essential, being “the stepping stone to having the resources for the next development stage of the startup”.
How does fundraising work for tech startups?
For tech startups the game has different rules. A tech startup has it’s value in intangible assets and they can not apply the traditional evaluation methods. Hence analyzing the assets of a tech startup is a tricky part.
Usually startups have some stages of valuation for each funding round. The experience of the team counts a lot, the market growth, the depth of the technological product count a lot. Investors also look at valuations in similar startups in the same industry.
Who are the main investors and why choose one against the other?
- INDIVIDUALS (friends and family or angel investors who usually invest their personal savings
- They are the accessible and can be the fastest deal you can get
- The investment budget is lower (usually investing at pre-seed stage)
- PRIVATE INSTITUTIONS for pre-seed and seed stages like crowdfunding platforms, accelerators, venture capital firms or investment boutiques (usually tickets start at €100K)
- Investments are larger and can be scaled; they are resourceful and able to offer support; the ownership of the company is maintained.
- They are less accessible, being hunted by many startups.
- PRIVATE INSTITUTIONS for later stages (Series A, B, C, D) like venture capital firms (minimum ticket €1M) or private equity firms.
- The investments are significantly bigger with aim to ensure growth exponentially
- The stakes are a lot higher and so the return of investment grows.
- PUBLIC INSTITUTIONS like local or state grants, incubators, usually for pre-seed and seed.
- Startups maintain the decision process, the money is usually used for research purpose or some specific directions agreed with the financier
- Usually there is high competition on this type of grants
How does the start-up financing cycle look like?
What are the milestones and responsibilities in early investment stages?
- Set goals for fundraising: establish your financial figures and identify potential investors.
- Market the business: create a presentation deck, schedule presentations for investors.
- Pitch your business and evaluate investment offers.
- Manage the due diligence process and the documentation
- Seal the deal: final agreement on legal terms, close the transaction.
What about women in tech?
Statistics say that overall, there are huge gaps in funding between women-lead startups and men-led startups. For example only 2% of the money goes to female startup founders and only 6% of the venture capital firms have women in their executive boards (Eurostat, 2018).
Words to live by, from Andreea Saia:
- Fundraising: it’s a question of money and support.
- Dare to dream and act on it, there is a whole ecosystem ready to support you.
- Become an angel investor! Let’s offer to Female Tech founders the help we would like to receive.
“Today, in my opinion, investors and founders are not ready to outline the huge value that tech has and there are a lot of things to do here. Also there are a lot of things to do in the financing part in Romania.”