A Playbook For Fundraising
Fundraising guide for startups, from Taxibeat to Flyway, storytelling, jobs, communities, customer retention as growth lever, new fund-of-funds, and more
👋 Happy Friday! Welcome to Hunting Greek Unicorns #41. I’m Alex, a product guy turned VC, and every two weeks I send out a newsletter with everything you need to know about the Greek startup industry.
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A fundraising playbook for startups with Agapitos Diakogiannis, founder and CEO of Seafair
This week I’m really excited to have Agapitos Diakogiannis, founder and CEO of Seafair, on Hunting Greek Unicorns for a guest post with practical advice on how to navigate the fundraising process for your startup. A few weeks ago, Seafair, a maritime recruitment platform, announced a seed funding round of $5.7m from a group of top investors (General Catalyst, firstminute capital, Speedinvest, and more). Agapitos has also experienced the fundraising game from the VC side, as he was previously an Entrepreneur in Residence at FJ Labs. We will deep dive into how to get started, pick the right investor and partner, create a compelling story for your startup, decide how much money to raise, bring everything to the finish line, and much more.
Let’s get to it!
I’m happy to share some thoughts around fundraising; mostly applicable to early-stage startups, but some points may be useful for later stage startups too. I’ve experienced fundraising from 3 different angles: as an employee at a venture-backed startup (foodpanda), later as an investor at a VC fund (FJ Labs), and more recently as a founder of a venture-backed startup (Seafair.io), where we have raised capital from investors such as General Catalyst, firstminute capital and Speedinvest. My understanding of fundraising has evolved over the past decade, thanks to the learnings my failures taught me, and the guidance my mentors gave me. I hope you find this useful.
While bootstrapped startups rock, this piece is mostly helpful for founders considering to raise venture capital.
Start by asking yourself how much money you need to raise. To come up with a figure, you need to think about what kind of metrics (eg ARR, MAU, monthly GMV) you’ll need to hit before you’re able to fundraise again (usually 12-18 months after your current raise). Then start working backwards - I will need x engineers, $y acquisition cost, z additional resources to get there. Now you have a plan. Discuss your monthly burn targets with some mentors with startup experience and let them challenge you - you want to make sure that you’re not ± 20% off, otherwise it’s directionally fine.
While you are working on this plan, be wise and plan for rainy days. Among many things, you will need to take into consideration the following:
Hiring and onboarding take more time than you think. You will need time to launch the job descriptions, source/interview candidates, extend offers, wait for their notice period, work on their onboarding, etc.
Most startups think that customer acquisition costs decrease overtime - which may or may not happen. What usually happens after fundraising is that you want to acquire customers fast and you can’t wait for all those experiments and A/B tests to materialize, so you will likely spend more to grow fast.
Expect that many of your current processes and tech may break, while you are scaling. Your engineering team might have to rebuild features from scratch, so you are going to invest more time in building infrastructure and potentially refund/retain users, who might be ready to churn/might be getting a worse service now.
Based on the above, you will have a good understanding of how much $ to raise. Another aspect to think about is your target valuation (what the value of the company will be before and after raising the round). This also indicates what % of the company will be owned by the investors, aka how much dilution you will get in this round (which varies a lot, but is usually between 15-20%). Two important things to keep in mind:
If asked by investors, do not tell them what’s your target valuation; focus on target dilution instead. You may end up raising more or less money than you initially expected, so sticking to one target valuation may impact significantly the % the investor is getting in your company. If you end up raising less capital, a fixed target valuation may detract investors (as it gives them a very low % of ownership). If you end up raising more capital, a fixed target valuation will dilute the founding team more, as you’ll be selling a larger % of your startup.
You will probably need to increase your Employee Stock Options Plan (ESOP) after the round to give equity to the employees you hire. This means that you, as the founder, will get diluted even more. For the moment, it’s important to know how much more ESOP will be required. The simplest way to come up with this is to build a target hiring plan and include the min/max equity to attract great talent for each role (you may find this article by Index Ventures useful).
Pick the right investor & partner
Once you have a target in mind in terms of round and valuation, you can start thinking about who are the right investors for you. If you don’t have a list already, then it’s wise to ask 5 founder friends and get their lists. While researching the funds, you can shortlist them based on:
Stage/geography/round size: Focus on funds that invest in relevant rounds (eg Series A) and cover your geography. This is basic information you will find on any VC’s website.
Lead vs co-investor: Understand whether the VC leads rounds or not, meaning whether they invest the majority of money in the rounds they participate in or not. At least 1 lead investor is required, and you may or may not need co-investors. You will need this information later in the process.
Partner profile: You have to find the right person in the fund that will care about your business. To figure this out, it’s crucial to know their theses, other startups they have invested in, and try to understand why they may want to promote your startup. This information is particularly important for lead investors, because you will spend a lot of time with them discussing your ideas, challenges, getting support on various fronts, etc.
Fund economics: Ideally, you should be aware of what kind of outcomes this fund is expecting to get. Most VCs are looking for at least 10x potential returns, while large global funds (eg a16z, NEA, Greycroft) are probably only looking for companies that can reach unicorn (or decacorn status).
Finding the right partners at the right funds is extremely important. It ensures that you will run an efficient and effective process, as you will be pitching to qualified leads who are more likely to convert to investors.
Prepare your pitch
This can be the most difficult step of the process. You’re so in love with your startup, and you want to communicate all the great things about it to investors. That’s the wrong way to approach your fundraising process. Most startup founders spend 80% of their time perfecting details in the pitch and 20% of their time on the story itself. Don’t do this! Spend 80% of your time on perfecting your story, and the rest in the details. Here is why: investment decisions are based on an investor’s ability to pitch your startup effectively to their fund’s investment committee. Given that they talk to 20+ startups a week, they rarely remember details - they only pitch using 5-6 keywords.
Here are the top-5 questions VCs are asking themselves when talking to you:
Can this startup become **HUGE**?
Are these the most relevant founders to solve this problem?
Can I pitch this startup effectively to my investment committee?
Is there a reason why I’m seeing this deal before a top tier VC fund?
Are other things (traction/unit economics/competitive landscape) directionally ok?
Your story needs to be stellar and consistent, and it involves science and art. Science is how you put all the right elements in your pitch (you may find this helpful). Art is how you connect the dots to paint a unique picture for your audience. For example, the fact that you worked at eg Google or Tesla will increase your chances of getting funding, but what will land even better is a consistent story of how your previous experiences prepared you for this startup, even if these experiences were not at Google or Tesla. You need to present facts in a way that will convince the investor that you are the best person in the world to solve this problem.
While you’re building your story, you will be tempted to explain what you are doing in detail, and describe the actual problem your startup is solving. At some point you will have to do that; what is even more important is to give the investor some examples or keywords that will excite them and help them pitch your startup effectively. When you do that, use keywords all investors understand. Here, I’m sharing an example from Seafair’s seed round, which helped us communicate our key messages to investors.
Scenario 1 - what I would highlight if I ran fundraising without getting great advice from the right mentors:
Seafair is a SaaS-enabled labor marketplace for the maritime industry.
They’re solving an important problem in a $60B industry.
The founders have solid backgrounds and relevant experiences.
Scenario 2 - what I ended up highlighting:
Seafair is Rigup for maritime.
If Seafair existed, the Evergreen <> Suez Canal crisis would have been averted.
The founders come from Greece, aka the global superpower in shipping.
In both scenarios, investors understand very little about the business. However, in scenario 1, probably everyone decides to check that super non-urgent Instagram notification on their phone after the 3rd sentence. In scenario 2, they’re at least willing to listen if the details make sense, because they’ve been anchored by important keywords (FYI Rigup was funded by a16z and is worth $3.2B).
Prepare the process (!)
Once you’re ready to pitch, you should time your process carefully. Investment decisions are driven by FOMO, and investors will have to feel that there’s some interest in the startup to pull the trigger.
Here’s some tactical advice I found useful:
Your whole process needs to happen in 3-6 weeks. Otherwise, investors may perceive this as a bad signal and that the market does not value your startup.
To make it happen in 3-6 weeks, be 100% focused on the process. Someone else needs to run the startup at that time. This is why it’s not ideal for all founders to be involved in the fundraising process.
Before your first meeting, ask any people you trust who are connected to the investor to put in a good word for you/your startup. Make sure that your promoters highlight the same elements and that the messages are consistent.
Be proactive in scheduling all the first meetings in 1-2 weeks. If not, you may be taking 50% first meetings and 50% final stage meetings in 1 week, which will require a lot of context switching.
Sleep well and prepare yourself for effective meetings. I’m a morning person and I sucked in 100% of my calls after 6pm. Try to schedule your meetings when you can perform best.
The process is tough - you will hear more No’s and Maybe’s than you hear in most processes. I found it extremely helpful to communicate openly every 2 days with some good friends who are founders.
If you can generate some traction for the process, that’s great. If there are funds that are more likely to commit first (even if they are co-investors), this will excite potential investors and make them move faster.
Perhaps the most important element here is to keep your team in the loop - they are working hard to help the startup grow and they deserve to know how things are going.
Bring to the finish-line
At this point, hopefully you have 1 or more investors willing to lead your funding round aka send you term sheets. Congrats! Things are not over yet, as you need to put together the best possible investor syndicate. First, never accept an offer before considering it deeply - if an investor gives you an unrealistic deadline for a decision, this is a bad signal and you should not accept it. Furthermore, decide what your deadline to decision is, and communicate this to all the investors who are still in the process. Try to make yourself available for the funds trying to accelerate the process for you.
In addition, make sure that you have all the critical information about a term sheet in written form from investors. If you are comparing term sheets, apart from round size and valuation (which btw should be crystal clear whether it is pre-money/before the investment is made or post-money/after the investment is made), you will have to clarify additional terms, especially the option pool (shares given to employees) and if it’s calculated pre or post-round, the investor’s liquidation preference (this is a term that protects a fund’s investment if the startup is sold at a price that they don’t consider a great outcome - 1x is the norm here). You may also decide to clarify additional terms with the investor upfront, like right-of-first refusal, co-sale rights, information rights, but these are less likely to affect your decision when choosing an investor.
I hope you find this useful. If you want to learn more about fundraising, check out “Venture Deals” by Brad Feld. I’d be happy to help your journey if I can - feel free to reach out on LinkedIn. Moreover, you can check our open vacancies at Seafair and share them with your friends.
🦄 Startup Jobs
Looking for your next opportunity? Check out job postings from Greek startups in Greece, abroad, and remotely. Company information is also available.
A new fund-of-funds for startups is launching soon with a size of €100m and managed by the Hellenic Development Bank of Investments. More details here.
Zeit Medical, a YC startup that builds an EEG device to analyse brain activity and watch for signs of an impending stroke using ML, founded by Orestis Vardoulis, raised a $2m seed round.
OneRoof, a social network for residential buildings founded by Nikos Georgantas, announced a $1.25m seed raise to organize communities based on ZIP codes or neighborhoods.
Threedium, founded by Kyriacos Kyprianou and Mike Charalambous, raised $2.1m to help online retailers replace static product images with immersive 3D experiences.
DeepCure, a team in AI-driven drug discovery founded by Thrasyvoulos Karydis, raised a $40m Series A round.
The Finish on-demand delivery startup with significant presence in Greece, Wolt was acquired by Doordash for $8.1b.
The startup accelerator ΟΚ!Τhess is accepting applications until the 28th of November.
Geekbot launched its Microsoft Teams product on ProductHunt to help teams run asynchronous standups, retros, and surveys in MS Teams.
Arrikto, Bitloops, modl.ai, Flyway, CaptainBook
🤓 Interesting Reads
Over €320m have been raised by startups based in Greece from January to September 2021, an amount that is more than 2x the equivalent of 2020, according to this article published by Kathimerini and data reported from Found.ation.
An interview with Marios Stavropoulos, co-founder of Softomotive and Partner at Microsoft, discussing the plans to build a Microsoft development hub in Athens, the power of Robotic Process Automation (RPA), and more.
Natalia Mila, Chief Technology Officer at Upstream, on navigating the tech talent shortage as an employer, here.
Being agile without scrum by Ilias Mentzelos, Tech Lead and Software Engineer at Plum, here.
An interesting post by Antonis Rousounelos, Product Manager at Blueground, on a continuous product discovery framework for agile teams.
We sat down with Panos Papadopoulos, Partner at Marathon Venture Capital, to discuss storytelling in the startup world. Key components of strong narratives, founders as storytellers, stories as the gateway to capital, talent and customers, and building your own distribution, here.
A podcast with Andrew Michael, founder & CEO of Avrio, on churn and retention for growth, pricing and packaging strategies, the role of Customer Success, and more.
A podcast with Eleftherios Diakomichalis, co-founder of Radicle, discussing his journey from Soundcloud to Radicle, the promise of decentralisation with crypto-networks and building a peer-to-peer code collaboration platform.
Nikos Andrikogiannopoulos, founder & CEO of Metrika, on blockchain reliability, use cases that are driving blockchain adoption, and more, here.
Takis Malavetas, founder & CEO of Pop Market, discussing the rise of quick commerce in Greece and launching Pop Market, here.
A podcast with Demetri Kofinas, host of the Hidden Forces show, on his journey in the media world, financial nihilism, narrative investing and building a modern media business.
“Do we really need meetings?” with Caterina Kostoula, Executive Coach & founder of The Leaderpath, here.
Interesting events coming up from the Greek tech community:
“Connective Cities Lab Hackathon” by Big Data, Athens on November 18
“GCC Social Meet-up in Thessaloniki” by Greek Cryptocurrency Community on November 20
“London Greeks in Tech” by Marathon Venture Capital on November 23
“Building analytics at Pleo” by Business Intelligence and Analytics Athens on November 25
“Reinventing Greece through Investments in Innovation” by Innovative Greeks on December 1
The list of Greek tech communities is now live on the website! There are 68 of them here and planning to keep it up to date. Meetups, Discord, Facebook and Slack groups in engineering, design, product, crypto, analytics, marketing, remote work, HR, and more. Check it out!
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Thanks for reading and see you in two weeks,
Greek Startup Pirate 👋