Venture capitalists, business angels, corporate ventures,… Nowadays there is plenty of choice to raise money for your ambitious business plans. But how do you know which option is best for you? And how do you go about it? According to Frank Claassen of Newion, it doesn’t require rocket science. “And no magic tricks either,” it chimes. “A good dose of patience and a different mindset about capital raising, though.”
With fifteen years of experience at Newion, managing partner Claassen is no small fish in the venture capitalists’ pond. He has seen many scale-ups pass by and grow. “Admirable,” he calls the founders of those companies. “To be able to make something out of nothing, that’s what I find punishing. I’ve accepted the fact that I’m not capable of that,” he laughs. “They’re people who can set their sights on the distant future while being engaged in the now. Handsome! But the bit in between is often a blind spot. Let that be the very thing we can see at Newion.”
As a venture capitalist, Newion focuses on B2B software companies that have already achieved a turnover, have about 10 to 15 employees and are active in the Benelux, Scandinavia or Germany. This specialisation means that Newion knows the relevant markets very well, and can therefore help scale-ups even more effectively. “By focusing so specifically on those companies, we also only get better at what we do,” says Claassen. “With each investment we learn, and those new insights can then be reapplied to the next.”
Get to know the investor
From that expertise, the Dutchman has built his own mindset around successful money raising. The clue? Founders should view a capital raise as a sales process. “If you see the parallels, then you’ll realize that you don’t have to go looking for magic tricks. You already have the knowledge, because you know how a sales process works. You know your customers – what their needs are, what they want or don’t want – and you can sell your product or service.”
“Spit out investors like they spit out you. “
Approaching an investor is no different, according to Claassen. “Instead of selling your product, you’re selling a piece of your business. And instead of getting to know your customers, you get to know the investors. For the latter, of course, you have to engage with them, multiple times and spread over several moments,” he says. “Because you know what’s so important in those conversations? That you talk about more than just how much money they’re willing to give or what’s in return. Most investors are not that transparent about things that are not about the capital itself. But ask around about how they work. Spit them out like they spit you out. For example, ask about what kind of other companies they help, what funds they invest from, how big or small they are.”
Not a sprint, but a marathon
Equally important is the support you receive during and after the money collection. “It’s good to know whether an investor is there for you in other ways. Can you go to him for advice, does he take on a coaching role – or does he just stand on the sidelines? Explain what your own needs are and ask clearly if he can meet them. These are simple questions, but few scale-ups dare to ask them. Nevertheless, based on their answers you can quickly determine whether the investor is a good match for you or not.”
“The earlier you get involved with funding, the more freedom you have to choose the right match.”
Getting to know each other well is a long process for both parties. But according to Claassen, this is the most sustainable way to tackle funding. Patience is a beautiful virtue. Or rather: it is not a sprint, but a marathon. “There are investors who can complete a funding in two weeks. At Newion it easily takes ten to twelve weeks. Why? Because we go for long-term relationships based on mutual trust. We want a real partnership with the founders of the company we invest in. Of course, you can’t achieve that in 1-2-3, you have to take time for it. That is best for them as well as for us, we believe.”
Don’t wait too long
Claassen knows all too well why some scale-ups push the throttle completely and skip the lengthy process. “If they’ve realized too late that money needs to come in, then of course it has to go fast,” it sounds like. “So it’s best not to wait too long to get your funding process started.”
Can he emphasise the latter to the founders among us? “Look, you can never start your funding file too early. You can only be too late. Really try to avoid the latter, because standing with your back against the wall is not a nice feeling. The earlier you get involved, the more freedom you have to choose the right match and the better you can stay in control of your own business.”
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