Teemu Kaltea, Chief Value Officer at Value Group, is passionate about helping companies increase their shareholder value. Teemu was the first to give his keynote at Finance Board 2018, on how to build your funding roadmap, below are the highlights from his speech.
The essence of startups is growth. And the idea of funding is to accelerate growth. Sounds simple enough, right? However, as we all know, building a company and acquiring funding is not easy nor straightforward.
So, what should an entrepreneur do?
1. You really have to know your stuff.
This is the most crucial thing. Know your business model, market and customers inside out. You should also know how all of these elements change as you grow and scale. Often entrepreneurs assume too much and do not test. Do not rely on averages or assumptions. The investors have seen a lot and they can sense unrealistic plans from miles away.
2. Move fast and get sh*t done.
Growth equals results. Do not spend time on things that are not crucial to the company. In an early-stage startup time is literally money. Funding will last longer the faster you execute. Even when you have a great plan, it’s rarely smooth sailing. It always takes more money and time to build the company than you thought in the beginning.
3. Put the investor’s hat on.
Investors have several yard sticks for measuring the potential of a company: Is the market big? Can you make a fat margin? Is the team awesome? Can you grab market share fast? Try to look at your company from their point of view. Without fulfilling these, it is hard to find funding.
4. Raise it before you need it.
It is easier to get capital from investors when you don’t need it. When it is the last lifeline, bringing the money home gets much harder. As always when it comes to relationships, it is better to build trust before trying to get a signature on a huge check. For example, Teemu knows plenty of founders who are very active in getting speaker spots in startup events where they share their vision and get investor contacts.
5. Don’t leave it too late.
Funding is a slow process. A startup meets around 40 investors before they can close a round. For example, seed rounds take usually at least 13 weeks, excluding the time spent preparing. Some entrepreneurs come to Teemu and ask for help acquiring financing and reveal that their coffins are empty already. Don’t be this guy. No one can make miracles in a month’s time. In his experience in Finland, this happens quite often.
6. Don’t get greedy.
Be reasonable with your wishes. This applies to money raised and valuation. The best startups are built with a certain level of austerity: fix problems with creativity, not money. Valuation is like a golf handicap and shows how you’re expected to play the game. If you have inflated your valuation in the early phases, it makes it difficult to justify the sky-high valuation in the next round.
7. Choose your investors wisely.
Are you ready to have weekly meetings and phone calls with this investor for the next 7 to 10 years? Investors have different objectives and time horizons, it really matters what type of investors you take with you on your journey. When more and more investors get in, there are more people trying to get control of the company. This is why the more people share your vision, the better. Teemu’s advice to startups is to look for quality investors. If you cannot get quality investors, fix your business.
Written by Annika Sipilä, Boardman Oy