Fundraising Lessons from a Unicorn Founder (Adjust, €1.2bn exit)

Venturing into the world of start-ups is like embarking on a roller coaster ride. A successful entrepreneur's journey is filled with heart-pounding highs and gut-wrenching lows. Among the seasoned navigators of this journey is Paul Müller, the founder of unicorn Adjust and partner at EWOR.

Let's talk about Paul's best fundraising tips and early entrepreneurial success from his recent webinar with EWOR.

Fundraising Tip #1: Venture Capitalists Are Not Your Friends

In the fast-paced realm of start-ups, securing adequate funding is often the difference between sinking and swimming. However, even the most promising founders can find themselves stumbling into common fundraising pitfalls that could jeopardise their ventures.

One fundamental mistake is a misinterpretation of the role played by venture capitalists (VCs). It's crucial to recognise that while VCs may tout their smart money and invaluable relationships, reality often reveals a different story. These checks come with strings attached – and some founders, in their excitement, fail to grasp this point.

Not every start-up needs massive funds early on, especially if they're growing organically or their product is at an early stage. Yet, accepting VC money when it's not needed can lead to unwelcome pressure to sell the company, even when the founder's vision lies in a different direction.

Thus, founders must approach VC relationships with a clear understanding of expectations. The primary goal of VCs is to generate substantial returns within a defined time frame. This isn't about throwing you under the bus, as some may fear, but rather about maximising profits. Early-stage investments may expect returns of 20 or 50 times their initial capital. To avoid surprise board meetings and unsettling conversations, founders must fully comprehend what it means to take VC money. Investigating a VC's track record, their network, their control requirements, and their impact on previous investments can provide valuable insights.

While their allure may be strong, navigating this territory requires caution. Corporate VCs often seek more than financial returns, aiming for strategic partnerships that align with their core business. To avoid suffocation and misunderstanding, comprehensive due diligence and careful consideration are therefore a must.

Fundraising Tip #2: How to Find Good Angel Investors

Choosing the right angel investor is vital. Founders must resist the allure of quick cash and instead seek investors whose experience aligns with their venture. A relevant angel investor is worth their weight in gold, offering insights, connections, and guidance that can significantly impact the start-up's trajectory. Seeking out an investor who is willing and able to help you solve immediate challenges, rather than just committing funds, is a mark of a valuable partnership.

Just like with any funding source, conduct your due diligence and make reference calls before committing to an angel investor. Learn how involved they usually are in their invested companies and what their network can offer.

Fundraising Tip #3: Mastering Funding Terms

Understanding the ins and outs of funding terms and structures is as important as finding fitting investors. Entrepreneurs should acquaint themselves with the structure of VC firms, distinguishing between associates and decision-makers. Engaging in due diligence to comprehend the process, timeline, and expectations is essential for informed decision-making.

The journey of securing funding is fraught with potential missteps, but by recognising and sidestepping these common mistakes, founders can increase their chances of success. The fundraising landscape demands careful research, strategic thinking, and a keen eye for investors who can provide not only capital but also invaluable expertise and guidance. Through a mix of due diligence, self-awareness, and a clear understanding of investor expectations, founders can navigate the world of venture capital and angel investors with confidence and finesse.

Fundraising Tip #4: Cracking the Code of Effective Pitching

In the entrepreneurial arena, the ability to pitch is an essential skill. Paul distils this art into two fundamental elements: humility and precision. These qualities are crucial as you concisely communicate the opportunity and impact of your venture. Whether addressing traditional investors or corporate venture capitalists, understanding the audience and tailoring your pitch accordingly is a strategic imperative.

One common mistake is focusing solely on the product itself, overlooking the bigger picture. Potential investors care less about the intricacies of the product and more about the opportunity you're aiming to seize.

“The only two emotions that investors have are greed and fear.”

An effective pitch communicates the unique value you bring to the table in capturing a significant market opportunity. Your goal is to combine the offer of an opportunity and prove that you are the best person to execute your solution. Given the rapid pace at which investors review pitch decks, it's crucial to address these two emotions, greed and fear, within the first minute of your pitch. You will have plenty of time to discuss more details in future meetings, so a strong first impression is the key factor in securing an investment deal.

Fundraising Tip #5: The Entrepreneur's Symphony: Navigating Investor Relationships

Effective communication with investors is a cornerstone of entrepreneurial success. Paul's advice is clear: regular monthly updates with sensible key performance indicators (KPIs) that include financial data like cash flow, revenue, margins, costs, and income. These updates allow investors to stay informed about the company's trajectory and health, while also facilitating input and assistance when required.

Bottom Line

Paul Müller's journey through the start-up landscape serves as a guidebook for those who are just starting out. His insights emphasise the importance of understanding VC dynamics, mastering the art of pitching, and navigating the twists and turns of the start-up grind. With his fundraising tips as a beacon, aspiring entrepreneurs can tread their path with a touch more confidence and a wealth of hard-won knowledge.