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Startup Innovation Challenge

From seed to series D: Seven tips for successful fundraising from leading investors

Article-From seed to series D: Seven tips for successful fundraising from leading investors

© AdobeStock/Yakobchuk Olena Tips for successful fundraising
Saskia Hoebée and Eléonore Lafonta from Five Seasons Ventures and Thomas van den Boezem from PeakBridge are members of the Startup Innovation Challenge’s jury panel. They share their tips on how to stand out from the crowd and get that all-important funding for your startup, at any stage.

In addition to sitting on the Fi Global Startup Innovation Challenge jury panel, both Five Seasons Ventures and PeakBridge are leading European venture capital firms, operating at the forefront of foodtech investing.

PeakBridge’s early-stage venture fund FOODSPARKS, for instance, is the only venture fund manager fully integrated with the EU innovation ecosystem, EIT Food, giving it exclusive access to EIT’s extensive network and partners. Five Seasons Ventures’ keen eye for the most disruptive food startups can be seen in its previous investments, which include game-changing startups such as Impossible Foods, Beyond Meat, Clara Foods, Perfect Day and Just.

1. Making the first contact

The best way to get a foot in the door is to have someone open the door for you.

If you know someone who can make a direct introduction for you to an important investor, this is ideal, says Eléonore Lafonta, associate at Five Seasons Ventures.  Failing that, send an email that presents your startup and the solution it is offering – but don’t copy, paste, and send to everyone in the company.

“Don’t send the same email to all the people in the team,” says Lafonta. “We always get that and it's a bit annoying! Also, we then talk to each other between colleagues and, since you know that your colleague has received the same email, nobody feels responsible for replying.”

2. Send samples and organise a tasting 

When it comes to food, there is a simple way for VCs to identify what could be the next big thing: trying the product to see if it really does taste good. So, create samples and send them to the right people.

Even if you’re still in the development stage, many VCs will be able to see the potential in your prototype.

“When it comes alternative meat, one of the most difficult things probably to do is texture; taste is a bit easier to replicate. So, if you can show that you have the right texture, you can just present it to the VC, add some sauce on it for flavour, and specify that it's not the finished product,”says Lafonta.

If you’re an ingredient supplier, Lafonta recommends showing a VC how your ingredient performs in a test application.

“If it's an ingredient, you can do a use-case with it. So, for example, there are lots of alternative companies that are doing egg whites. In this case, you can just bake a cake to show how the egg alternative is functional.”

3. Standing out as an ingredient company 

To stand out from the crowd, manufacturers of consumer-facing brands can leverage their products’ great taste, eye-catching packaging, and relevant brand messaging.

For ingredient startups, however, this isn’t possible, and it can be difficult to avoid appearing as just another commodity. Ingredient startups need to differentiate themselves by showing how their product could be a positive disruption to the supply chain.

Thomas van den Boezem from PeakBridge says:

“It pays to make abundantly clear what exact industry challenge you are addressing, why this has not previously been successfully addressed, and what makes you unique in your approach. Don’t leave it to the investor to deduct this information but start with it, and finish with it and make it explicit.”

According to Saskia Hoebée, senior associate at Five Seasons Ventures, it’s also important that ingredient startups keep an eye on B2C market trends so they know how to help CPG manufacturers create the products consumers actually want.

“[…] for ingredient companies it’s always super important that they help their end-customers - how is my ingredient going to help your products be better, cheaper, healthier, more clean label? It needs to have the right applicability,”

4. Making the pitch: Tackle the fundamentals early on

Venture capital companies receive a lot of pitches and will want to cut to the chase.

When pitching, startups should therefore answer the fundamental questions – ‘why this opportunity, why you, and why now?’ – quickly and clearly.

“We know certain markets and segments through and through,” says van den Boezem. “In those cases, we will dig deep from the first meeting into what is unique and proprietary about the specific way this company is addressing an established segment we know well. We will quickly benchmark them in our head to their key peers and competitors.

“We will want to understand exactly what unique insight or invention – whether IP protected or not – is behind the innovation, and how difficult it is to replicate. We will quickly ask about existing validation and traction in the market. And we will ask about prior experiences, successes, and domain-matter expertise of the team.”

“After we’ve addressed these most important topics, we naturally dig into unit economics, capital requirements and milestones – which we encourage startups to include in a clear manner in their pitch.”

5. Don’t be afraid to ask questions

Many startups are so focused on impressing the VC and securing funding that they don’t prepare a list of questions to ask. But, just like a job interview, it’s important to ask questions to make sure it’s the right partnership for both parties.

“It's a bit of a mutual process,” says Hoebée. “From the moment we invest in a company, we might be working with the founders for between two to six years. So, it's also super important that the startup finds out if it’s really the right VC for them. 

“Ask the VC, how much money do you invest in companies and what is your ownership target? How do you envisage an exit one day? Are we aligned when it comes to ambition? But also, what is your governance style like? Do you like to be extremely active in every monthly board meeting, or are you extremely hands off?”

6. Don’t focus just on the money 

Venture capital firms – especially ones that are specialised in the food and beverage industry – are often very well connected with food industry professionals and could help your startup with a lot more than just funding.

“[Venture capital firms] are very good at financing,” says Hoebée. “We're very good at helping companies arrange follow-on rounds, for example, and how to model and structure those rounds. But it's good to test your VC also a little bit on what would they bring to the table except for their money.”

Establishing a good rapport is also important, according to van den Boezem. 

“We need to understand the team is equally eager to work with us, is coachable and generally a team we want to spend time with,”

7. Start sooner rather than later  

Securing funding does not happen overnight so start well in advance.

“If you need money in December, start your process in summer,” says Hoebée, “It seldom happens that we get a pitch and, three months later, there’s money in the bank. Most VCs like to build a relationship with the founders throughout the year so they can track the company and then see what's happening.”