Navigating the Startup Funding Landscape: Insights from Kiuas Open Meetup
Last week, Kiuas Open Meetup hosted a friendly fireside chat addressing different aspects of building a fundable startup. We sat down to talk about team dynamics, the significance of traction, the timing of fundraising efforts, and how investors evaluate and engage with startups.
It’s now time to recap the key takeaways from Kiuas and our guests; Kevin Lösch, investment manager at Inventure, Annukka Mickelsson, President emerita of FiBAN & angel investor over 8 years, and Hai Ta, co-founder of Wudpecker, a first-time founder and Kiuas alumni from the fall 2022 accelerator program.
The 3 T’s - Traction, Team and Timing
Surprisingly, when we started to talk about traction, the conversation revealed divergent opinions. Kevin cautioned against overemphasizing traction in early stages. Early traction can’t & should not be considered a fixed predictor of future success, due to the fast-changing nature of startups. It should not, therefore, play such a significant role when making early stage investment decisions.
Hai provided a counter-narrative based on his own startup's experience. In their case, the reality was very different; Wudpecker first tried to fundraise in late 2022 with around 20 paying B2B subscribers - with no luck. The team pivoted to a freemium product, putting their efforts into growth. In Hai's opinion, a year later, when Wudpecker had gained 2500+ freemium subscribers, investors showed significantly more interest & improved response rate. The team then successfully raised a pre-seed round of 330k from Sofokus Ventures, Trind & Accelerace.
We at Kiuas see and hear some investors being after the magical 10k MRR milestone. On contrary, we have also seen our own accelerator teams, even with first time founders, successfully fundraising pre-revenue, pre-product. On that note, all the panelist unanimously agreed that a startup's success is inherently tied to the capabilities and characteristics of its team.
Those teams successfully fundraising very often have:
Both of our investors stated that there is no such thing as seeking for funding “too early”. But if we go back to Wudpecker’s journey, and from our experience with first time founders, sometimes the smartest move is going back to the drawing board for a while and spending your limited time to improve your idea & product.
Annukka also shared insights into the fundraising timeline, emphasizing that raising a round can take up to 18 months, with at least 6 months being typical. She suggested that startups should keep their investor channels open from the very start, making it never too early to initiate discussions. The advice was also to start preparing for the next round soon after closing the current one.
How should you then approach investors, when seeking funding? The emphasis was on building relationships and making investors an integral part of the startup journey. Annukka importantly positioned angel investors as mentors and advised founders to seek their advice rather than just funding. These people want to become part of your company and be there to support you.
Both investors agreed that majority of their investments have come through their networks and as warm introductions. If you come from the outside, find your way in. It’s not a secret that many angels mentor at Kiuas to find potential investments, and our VC network is always eagerly waiting for us to provide them a list of new accelerator teams when a new batch has been selected.
Should you then only rely on your networks when seeking funding? Probably not. There’s a chance that you'll get lucky through a handful of introductions, but as with our alumni Wudpecker, and many others, the reality looks very different. You can read more about Wudpecker’s fundraising process on their LinkedIn post. They sourced over 1000 investors, approached approximately 600 of them, of which 54 returned back to them asking for a deck, leading to a total of 16 investor meetings. Even for the best startups, successful fundraising is often a pure numbers game.
When reaching out to investors do your homework. Make sure the investors you approach match your company in terms of stage, investment size & industry. Also take a look at their portfolio companies. If there is something similar, without them being a direct competitor, there is a good chance they get interested in you.
Who you contact within the fund can also play an important role. Partners are the ones responsible of investment decisions, while analysts take care of sourcing a larger number of cases. Our suggestion is to find the person, who most likely understands what you’re working on. They have experience on your industry, on the technology you’re building or has otherwise worked with a company like yours. Make your first reach out short and sweet. Raise their interest with only the essentials. If they find your company interesting, they will get back to you asking for a deck.
Kevin also shed light on how funds nowadays automate a lot of their startup sourcing, while many founders neglect their online presence. If you find platforms such as Crunchbase too pricy in the early days, at least make sure to be visible on LinkedIn.
To sum it up, there’s no doubt that in the early days it’s you and your team that plays the essential role when seeking for funding. The importance of traction can be debated. If you are a first time founder, you might be often expected to have some. On the other hand, it’s never too early to start building bridges with investors. Just make sure it’s not done at the expense of your progress with the business and product. Your speed matters. Time is the only asset you can’t get back.
At Kiuas, we help founders to focus on the right things. When you are ready for funding, we help you to get funded. During the Kiuas Accelerator program we match our teams with the relevant investors from our network of 100+ VC and angel investors. Instead of pitching at a Demo Day, teams are provided with direct 1-on-1 meetings, with just the right investors, to provide the highest value.
During the fall 2023 accelerator program we facilitated over 160 investor meetings. On average there were 9 investor meetings per team. For some of our teams, who gained the most interest from our investor network, we were able to match and facilitate over 15 meetings in just 8 days. You can read more about our investor network and our matchmaking during the accelerator programs here.
The application period for the Spring 2024 Accelerator Program is NOW OPEN. We’re accepting applications until February 5th. Secure your spot and APPLY NOW.
Head of Community & Operations