- funding, Raise capital, US growth
Raising capital from US investors is a tough task.
So we learned, at our well-attended April 26 2016 “Raising Capital” event, kindly hosted by Njord Law Firm. Speakers Gerald Brady from Silicon Valley Bank, Theis Søndergaard, co-founder Vivino, and David Horn Solomon, CEO at Bionor Pharma (and prior that, Zealand Pharma), gave us good insight into what to do and what NOT to do! (We also learned from Peter Olson at Njord about the importance of protecting your IP assets, see more in another article coming soon here).
From Gerald (a Brit who has worked many years in Silicon Valley), we got a few well-illustrated points:
- Danes really need to DO THEIR HOMEWORK. People in the US seem to grow up with preparing and presenting, and you need to be AT LEAST AS GOOD as your American peers. The average VC in the US makes only one to two investments per year, but reviews hundreds, so you need to stand out
- America IS culturally different – different philosophy and a MUCH FASTER PACE. Know the answer to all kinds of questions, the first of which is usually (for Series A) “when are you moving here to the US?”
- VC’s are in the frog kissing business – they’ll meet 100 and invest in the one they think will turn into a prince (or princess)! Select the ones you want to work with CAREFULLY – you’ll be working with them for 10 years, ensure that you like them
- Do your due diligence on the VCs. It’s not a one-way street. Map who has invested in your sector. Get references on them – do others like working with them, even through the inevitably stressful ups and downs? You will impress investors if you show them you’re not just after the money, but also done your research on THEM
- GET REALLY REALLY GOOD AT PITCHING! Telling your story is about creating an engaging conversation. Practice! And ensure the entire executive team can pitch. You have only 30 seconds – make sure you can put your business idea in words your mother can understand. Good learnings for pitching: Guy Kawasaki’s 10 slides and also Mark Suster’s blog Both Sides of the Table
- Get referrals to the investors. You won’t reach them by email 🙁 Referrals from your bank, well-connected lawyers, angel investors, board members – this is much more important in US than Europe.
- Get on investors’ radar. Start early. Talk to them before you need money. Follow up periodically – telling them your journey. Target the investors you want then show them how you are hitting your milestones and delivering on your promises – they’ll follow you and know you when the time is right
- Be ready to show your entire top team so they can see it’s a winning team that works together well. Fly out there if you get a meeting. It’s never about one individual. Show your board, your mentors, anyone who’s good who is helping you especially if they are well-known
- Don’t use placement agencies. NEVER pay someone for introductions. It looks really bad to investors and they want to meet YOU with your passion, not a representative
- Show how you’ll be scaleable. VCs expect 10x their investment in US, not 3x as in Europe
- Only inexperienced VCs will ask about your exit strategy. 97% of exits are M&A. Focus on your vision and passion and find a better VC
- The top VCs in US can help you recruit top people – very well connected
A few words of advice from Gerald here:
Next we learned lessons on what NOT to do (with a lot of humor!) from Theis Søndergaard, co-founder Vivino.
Vivino has successfully raised huge amounts of capital over the past 4 years, but NOT from US investors, despite a lot of trying! His key lessons:
- Think first about whether you really NEED a US investor. There is money to be had elsewhere!
- Know your business so well you can think on your feet – you’ll be asked questions you never thought of, despite all your preparation
- Bring your partner(s)! They made the mistake of not doing that at first – let them see your team dynamics
- Keep it simple! No complex business plans, no side businesses, especially if can’t be explained to your mother
- Know where you’ll locate and why (or better yet, be there already)
- Get great at your use of English! Essential.
- Spend time in the US, learn the culture, know some sports (not soccer!). Be able to talk and relate on a personal level. Both sides are looking for people they can built that 10 year relationship with – they need to connect with you as a person instantly
- Be super high energy. For a Dane, it’s tough to match the energy level of an American who’s pitching. They’ve been training since childhood show&tell at school
- Know your path to profitability (lastest buzz term). US investors have more experience, higher risk willingness, willing to see monetization later than EU but they still want to see the profits will come
- It’s a very long process so start early to get on investors’ radar. Tough not to run out of money in San Francisco when living there, paying lawyers etc. but living there is a requirement for most US investors. US lawyers super expensive – you need them but minimize where you can!
And a few words of advice from Theis here:
Last but truly not least, we heard from David Horn Solomon, CEO at Bionor Pharma. He’s had long experience as a venture capitalist (adventure!) as well as running the business and managing teams.
He’s been through all the stages including M&A and taught us a few key ways to think:
- “The solution lies in the problem”
- “Be the tallest dwarf in the room”
- Be the fastest – first mover advantage
- Get investors you are sure have the appetite to hang in for the long term
- Think like an entrepreneur
- Is this idea evolutionary or revolutionary? Only do revolutionary
- For success in health care, you need great science, patent protection, scientific champions and strong market pull
- Ensure you find strong aligned, qualified investors that can work with the right management team
- Ensure you meet the requirements at each stage of funding (see slides above – for Early, Mid and Public stage)
- Advantages of going public? Access to a lot of capital to scale. Disadvantages? investors to please, as well as lots of regulatory bodies
- Loves the wall-crossed private placement!
And here’s a one key point from David’s advice!