As a start-up or scale-up, chances are that sooner or later you will need external funding. It is more than obvious that you should not act rashly. But which tips should you really remember when picking up an investment? Some of Birdhouse’s mentors give 3 indispensable tips!
#1. Also think about your liquidity
Cash is king, a statement that mentor Dirk Dewulf agrees with 100%. “Many start-ups forget to include liquidity planning in their business plan,” he says. “Often they are too focused on achieving a certain level of turnover quickly. But revenue is not the only thing they need to grow. Cash you simply must have because otherwise you will go bankrupt at some point.”
“Your product or idea may be rock-solid or your market penetration may look great – even something great can be killed by poor liquidity.”
But a good cash flow is also beneficial for another reason, says mentor Filip Smet. “I would advise anyone to get their cash flows as high and stable as possible before they move to the investor front,” he says. “That helps to get your rating as high as possible. It creates a kind of credibility and makes you feel strong. But most of all, make sure you’ re on the same page with your founding team about this.”
“Hence, I believe that raising capital from investors is the last option,” echoes Maarten Michielssens’ opinion. “Sometimes entrepreneurs might do better to consider whether they need capital or revenue now. Because indeed: there must be a good cash flow. And for that you should not immediately ogle at investors, but rather work on building a solid customer base.”
#2. Make sure you have a good balance between ratio and emo during your pitch
Successfully raising money stands and falls with a strong pitch. And that’s where things sometimes go wrong in practice. “I still see a lot of people who fail to bring a coherent story,” Harry Demey previously shared with Birdhouse. “Either there is a solid story missing, or the business plan is flawed. My advice? Make sure you have a good combination between ratio – 30% – and emo – 70%. So as a start-up or scale-up you need to know something about storytelling, combined with clear facts.”
Despite the small proportion of reasoning, according to Demey, there must be substantiated facts. “You have to be able to clarify why you need that exact amount,” Dewulf believes. “I still see too many companies aiming haphazardly for x number of euros. “
“I give them as much as possible to substantiate in your business plan why you need a certain amount of money at a certain point. And at least as important: why an investor should go along with that. The amount requested or sought must correspond to a value, remember that.
“You simply have to be able to present that the metrics are correct,” Smet nods. “It is often said that the composition of a good team and complementarity are key . I am convinced that this is true, but if the figures are missing, you won’t get very far either.”
#3 Get your money from the right sources
Raising money can be done at different parties in our Belgian entrepreneurial landscape. Michielssens talks more specifically about ‘smart money’. “Chances are pretty good that you won’t even have to raise money from investors. First, consider whether bank financing such as a loan might not be more useful.”
“Belgium is a paradise for young companies. Banking institutions do not ask for shares, which ensures that you as a start-up or scale-up can write a credible story without having to give up equity. “
If you do go looking for a (private) investor, you should not only join a party because of the ticket it gives. Investors must also be able to make a mental contribution to your start-up. Only then can you build a lasting relationship together.”