It has been a busy first half of 2023 for VarsoGroup. We have participated in several equity and debt fundraising rounds. Mostly non-disclosed insider rounds. Here’s a summary of some of our learnings:
👉 Existing investors are willing to bridge to a cash flow positive plan, ideally within six to twelve months. This means reducing costs and top-line growth. Not yet clear how this will pan out going forward regarding internally funded organic growth versus selling a minority or majority stake to a new later-stage growth investor.
👉 Existing investors may set new valuation benchmarks, maybe in combination with a tranche of discounted secondaries to arrive at an acceptable blended price per share. This seems sensible, allowing founders and early investors to (partially) exit and institutional investors to double down on valuable companies.
👉 Local banks won debt mandates due to state guarantees. We ensure founders obtain venture debt (VD), revenue-based financing (RBF), and local bank term sheets. Something to look out for is the inflexibility of senior secured debt in later rounds.
👉 Raising venture capital (VC) is like managing an enterprise sales funnel. The founder needs to create many, ten or more, pitch ‘demo’ opportunities to convert one of them into a paying investor. The underrated founder challenge is identifying the right VC partner to build a relationship with. The generic advice is to get warm introductions. That’s easier said than done. The VC industry should agree on open-sourced data sets allowing founders to quickly search and find relevant VCs, VC partners, and VC portfolio founders.
👉 Many early-stage companies are unofficially for sale but are not transacted due to valuation misalignments, pre-emptive preference stacks, and a lack of a decisive sales process. Underrated lost opportunity cost infects sellers as well as buyers. Europe needs more gutsy strategic buyers to support the ecosystem of tech innovators.
👉 Spreadsheets remain the premier tool of the early-stage finance director. This works well for siloed activities but falls short of robust tracking and reporting of company-wide performance KPIs. Getting dashboarding right is much more complicated than it sounds. Creating seamless zooming in and out on levels of detail and periods (past, present, and planned) is worth the effort. For one, investors expect it.
Here’s one for the rest of 2023 🍻