Rejection is something most founders experience frequently. Be it a potential new client, a very interesting strategic partner for your startup or a venture capital investor — dealing with rejection is common as founders typically put themselves “out there” and sell their vision to others. This is especially true in the early-stages where there is often a lack of resources, a (very) small team executing the MVP or even a complete lack of a product.

Startup founders risk getting rejected more often than other “jobs” due to the sheer risk that is perceived by customers, investors, potential co-founders etc. Founders are often-times the face of their startup and everything they say and do represents their venture. People making an evaluation of your startup certainly do so by including you in their evaluation. Unfortunately, not everyone deals with rejection in the same way. For some it can be a very emotional process of sadness, fear and inadequacy which may even lead to imposter syndrome. Hearing that your idea or business model is “not ready yet” or “won’t ever work” can be very harsh for some. The amount of effort it takes to raise your first round of funding or close your first ten customers is typically a lot. Dealing with failure after all that effort can certainly be demotivating. So how can first-time founders that are working on their startup deal with rejection from others?

Keep Calm

Coping with rejection can be a very emotional experience for many founders. Frustration, time invested and expectations can lead one to lose character and have a negative reaction when receiving a rejection. Taking it personally and “attacking” the other person is a major fallacy. Founders should always strive to refrain from doing this, especially during communications (be it during a call, via messages or email). Not only does it leave a bad impression on the other person but it also has a negative effect internally. A co-founder or team member might not want to continue to work together as it may be seen as being unprofessional and even disrespectful (in some cases).

What to do instead? Startup founders can always choose not to reply or thank the person for their time and simply move on. Losing character and lashing out on a customer or a potential partner due to frustration is not the way to go. In today’s world, an investor that says no today, might be saying yes tomorrow. This is very true for seed-stage startups that lack traction or P/M Fit for example. In some cases, a founder could get rejected for their first venture but get a term sheet for another venture they start later on from the very same investor they spoke to before. However, burning the bridge might mean losing a contact in your network as well as a future potential investor. So whatever the situation, stay calm first!

Develop Resilience

As founders go through their entrepreneurial journey and experience rejection, they tend to develop resilience. This means not putting all their eggs in one basket or knowing that lengthy discussions with a potential investor doesn’t always mean that they will actually invest at the end. Being able to manage your expectations better helps to develop resilience and deal with rejection as it comes your way. Changing your mindset and not taking things personally is a big step towards this.

What often helps is realizing the perspective from which the other party is coming from, i.e. how are they looking at things?

A startup usually has very little history, a lack of clients/portfolio, partners, investors, advisors etc. who can be a point of reference for someone to evaluate. This often means that you’d have to make a judgement based on what is being presented in front of you. Given such limited information, many people choose to stick with what is familiar to them and avoid the “unknown”, in this case your new startup. Others of course would still be willing to take the risk and collaborate to “see how it goes”.

The most important ingredient for developing resilience is to not give up. Doing your outreach, placing cold calls, sending cold emails — it’s all part of the process. While the first few rejections can be very disappointing, as you move on, the weight of the rejections usually becomes less, allowing you to spend more time working on improving what you are doing, be it pitching your startup to investors or winning customers over during a sales call for a pilot project.

In addition to building up your resilience, asking for feedback is also a great way to cope with rejection!

Ask for Feedback

Asking for feedback can be a great way to get some insight into what is working and what is not working for you. For example, when looking for a vc to invest in your startup or a new customer — it can be very insightful to know why the investor or customer rejected your startup/offer.

When getting rejected by an investor, a founder can learn about things they may not have been aware of previously.

For example, their way of presenting the startup, their (quality of) answers provided to key questions asked, the business model or even simpler things such as the founder’s attitude or perceived personality. Early-stage investors very much look at the team and the qualities of the founding team. This also influences an investment decision and can even be the deciding factor for some vc’s. When asking for feedback, politely thank the other party for their time and ask what could have been improved or done better. Some vc’s are passionate about what they do and some are very generous with their time — willing to provide such valuable feedback.

Share Your Experiences

Talk to other founders! Sharing your experiences with others helps to confirm things and get a better idea of how to move forward. For example, if everyone got rejected by a certain angel investor (due to the same reason) then it might help in changing your mind and/or points of view on the rejection received by said investor. Being able to attend networking and/or startup events and discussing things with other founders or even investors, mentors or advisors can be of major help and a kind of therapy in a sense. Discussing how you feel and what your experience was can help you to gain insight into how to go about things next time without the fear of being rejected. This is especially helpful for startup founders who are not yet comfortable when dealing with rejection. As a first-time founder, learning from founders working on their 3rd funding round or even 2nd startup can be a great learning experience.

Be Open to Change

Working on a startup means that things are always changing and developing. This means that ideas are constantly getting challenged and changing. For founders, this means not getting married to any idea and realizing that your initial idea/business model can change as you move forward. Talking with customers, users, investors, partners etc., all helps to develop an initial idea about your business model, product or strategy and build it up further.

This can result in a new and improved idea or realizing that you need to go back to the basics and re-evaluate your entire venture again. This cycle is key for any startup founder and helps to test and improve ideas until they are confirmed to work. Achieving P/M Fit is an example of just this. Many founders end up doing a changing their business models several times along the way and some even end up doing a pivot and develop an entirely new focus or MVP. Hence, not being afraid of rejection and failure is a prerequisite for being a startup founder. It’s very much necessary to test out ideas, being willing to receive criticism and feedback in order to change and/or improve your startup.

Closing Remarks

Everyone is different. As such, founders are different. Not everyone deals with rejection in the same way. For some it might be a brief thought — moving on right away, while others are more affected by rejection and take more time to process what happened. Regardless of this, asking for feedback, being open to change and developing resilience can help founders become better at what they do and gain more experience as they go. However, it’s key to realize that you are in a learning process as a new startup founder. You gain experience as you go and build up your skills from those experiences. As such, don’t fear the big “NO” but try to turn it into a potential YES — remember it’s all about your attitude! There are countless examples of founders who were rejected by vc’s only to end up being very successful in the end.

Here at N3F Ventures, we understand that it takes a lot of effort to build something great. Having been on the other side of the table ourselves, we always aim to listen to founders and find ways to collaborate together on their startup. If you are working on an exciting early-stage startup, feel free to get in touch with us and let us know how we can help build your vision.

All images in this article were sourced from Unsplash unless otherwise stated.

This article was first published on n3fventures.com

At one point or another in your journey as a startup founder you’ll start thinking about raising funding for your venture, which can be one of the most daunting tasks ever to accomplish. Raising funding, if anything, takes a considerable amount of time both for preparing the funding round as well as actively prospecting potential investors and taking pitch meetings. For the first-time founders out there, raising funding may bring about a series of questions which you may not be too sure of. That’s the reason why we’ve decided to write this quick guide tailored for raising seed-stage funding!

We’ll start by looking at the timing for raising capital, how much you should raise and then discuss the fundraising process in more detail. At the end we’ll also cover the funding options you have as a founder along with some concluding remarks on seed fundraising.

When to Raise Capital?

Raising funding generally depends on the stage of your startup as well as your own needs as a business. It’s typical to raise funding once your startup has a solid proof of concept coupled with PMF (Product-Market Fit). An idea turned into an MVP backed by tangible results (be it # of active users, downloads, tests, pilot projects or even early sales) is a good sign to get new investors involved in your venture. The key point here is to build up traction and momentum for your startup. The dilemma for many founders of course is to build up traction without having raised lots of funding first to do this. This can be solved in some cases by bootstrapping and leveraging resources available to startups (e.g. discounts on server hosting etc.). At the seed stage, funding is typically used to develop the product/MVP further and achieve a working model of the business that’s ready to be scaled up. This scale-up or growth phase is what the Series A round is for.

However, all of this should not make you forget the other aspects that investors look for in a deal. Having a strong well-balanced team is the basis for any startup to be successful! Seed investors invest first in the team managing the investment and secondly into the business model and market potential itself. A large market is key and having a new innovative business model that is technology-driven (or enabled) is a must in order to be competitive. Remember, your startup faces competition not only from incumbents but also other startups. No one would be too excited to invest in a startup that’s simply a copy of an older business model as the landscape tends to be very competitive (e.g. mobility or food delivery). Standing out and differentiating your venture from others is important!

In addition, startup founders ought to raise funding when they know what they are missing in order to grow things further and achieve success. This means looking beyond capital alone and asking yourself “what do I need to make this work”? For some it may be expertise in a certain domain (e.g. clinical trials for a new medical treatment or deep knowledge of AI). For others it may be support with recruiting to put a strong C-level team together post-round or gaining access to large industry networks. Knowing what you need both in terms of capital and non-capital allows you to look for smart money and focus your search on investors that can provide what you really need. As any experienced founder will tell you, having a strategy is important but being able to actually execute the strategy successfully requires many things. Investors today are selected based on what they can bring to the table. Gone are the days that investors just invest their money, sit back and wait for the good news (a big exit!). Actively managing the investment and supporting you as the startup founder is a must in today’s landscape.

How Much to Raise?

Once you know when you should raise funding, the next question becomes how much to actually ask for. How much is enough and how much is overdoing it? “How do I find out what I need”? Startups at seed typically raise at least 12–18 months of runway, meaning sufficient cash in the bank to cover not only overhead but also a number of key milestones to be achieved in your roadmap. Achieving these should help you grow the business even further and get you ready for the next funding round potentially. It’s important to also factor in your next round of funding (if you intend to raise again) in order to start raising on time. Raising capital once you’ve run out of cash might mean taking the first term sheet any investor offers you due to the urgency of the situation instead of taking a better deal being offered by another investor that’s a bit slower in their due diligence for example.

Overall, determining how much funding you need is a financial exercise of budgeting your regular costs, overhead etc. as well as your chosen strategy to grow the startup and achieve your milestones (R&D, marketing etc.). Having sufficient financial skills in-house is key for completing this exercise properly as most investors will ask you about the funding amount, your logic behind it and your use of funds (i.e. a % breakdown of how you’ll spend the capital). Not being able to answer such questions properly won’t be a total deal-breaker but does show the need to do your homework better. Quick tip: if you are the founder & CEO of your startup but finance is not your strong suit, see if another member on your team is more skilled at crunching numbers in excel and putting together a financial model — this doesn’t make you any less of a founder. In fact, realizing that you have an area to improve in means you have room for growth!

What Should the Process Look Like?

The main idea when raising funding from investors is to pitch them and get them excited to invest in your startup. For VC’s in particular, as much as you’re pitching your startup it is also somewhat of a race for VC’s to get into the best deals in the market. Investors should also convince you and your team of why they are the best partner for you. Thus, getting a good match between what an investor can offer you and what your startup is looking for is essential for a strong partnership, especially at the seed-stage.

The fundraising process starts by preparing your pitch by putting some documentation together. As a result, any funding round will usually include (as a minimum) a series of fundraising documents, including a pitch deck and financial model. For good measure it is helpful to also prepare an investment teaser (i.e. a one-pager) and a Due Diligence Questionnaire (DDQ). Working on a traditional business plan or business case document can be appreciated by some investors but is certainly not a must-have in the process. There are many formats and templates available for putting these documents together. Getting help in this area is a good idea as it’s important to convey your message in the right way and tell a good story (more on this below). This is especially true for pitch decks as they are the first document investors typically look at in order to get a feel and better understanding of what your startup is about.

When putting the documents together it is also good to think about the terms of a potential deal you’d be willing to agree on. For example, the type of funding round (equity vs debt), % of shares to be sold, types of shares sold (A or B class), pre-money valuation, board seat rights etc. This not only helps in being more prepared to raise funding but also gives you a better position to negotiate from. Once you’ve prepared the details of the round and put some documentation together, it’s useful to set up a data room. This doesn’t have to be something very fancy and can be done by setting up a shareable folder on G-Drive or any other cloud storage platform. The idea is to provide quick and easy access to all your relevant fundraising documentation so that investors are able to review the information and conduct their due diligence. The term due diligence is something you will keep hearing about as you raise funding. In a nutshell it’s a process of fact-checking things and making sure everything presented by you is in fact as such. For instance, saying you have a partnership with a big brand out there should be backed by some kind of written agreement or email correspondence. Some investors are more thorough with their due diligence process while others do a lighter form of due diligence. This tends to be typical for smaller investors (e.g. micro vc’s and angels) but every investor is different so it’s best to be ready for a full due diligence process. Furthermore, it’s good to note that there are different types of due diligence processes, for instance due diligence on the team, technical aspects, financial aspects etc.

With a data room in place, it’s time for the fun part — investor prospecting! Finding investors should be very straight forward. There are tons of platforms and databases out there for discovering investors. As a rule of thumb, we recommend having a set of criteria, for example the stage of investment, verticals they invest in, amount they invest, geography. Quick tip: make sure the investor is actively investing. Most VC’s invest from a fund they raise from LP’s. It might be the case that their main fund is already fully allocated and they’re not investing at the moment, so being aware of this can help save you time and/or manage expectations better.

Furthermore, every investor will have a slightly different investment procedure, be it completing a standardized form or sending an intro email to them as a first step. We recommend following every investor’s procedure as outlined by them instead of trying to “outsmart the system”. If a VC asks you to go through an investment associate, then don’t try to get in touch with a partner instead. VC’s see a lot of deals throughout the year and put together their procedures in order to process every startup that knocks on the door. While a partner might have some decision-making authority, it might be best to convince an associate about your startup first and get them to pitch the opportunity to the decision-makers internally. Partners also tend to be very busy while associates are generally expected to be the first point of contact for startups.

Funding Options?

There is a myriad of options available in terms of the type of funding you can raise. Every option of course has its own pros and cons that need to be considered carefully. Some types of funding are more suited for certain startup stages (e.g. debt financing for a Series A, B, C etc.). In general, seed-stage funding occurs as an equity deal for the most part but depending on the vertical and whether we’re talking about a hardware startup or not, it might be an idea to look into grants, subsidies as well as startup competition prizes. In other cases, a crowdfunding campaign (be it equity or rewards-based) can also be a good alternative for raising seed funding and building the startup further whilst testing new features etc. The same applies for incubator and accelerator programmes that can provide seed-stage startups with lots of support. It’s important to realize that as the startup’s founder, you are responsible for the decisions you make. Therefore, you should be comfortable and convinced about any investor you partner with (be it a vc, an angel or a lending institution). Internal dynamics tend to change as a startup grows and adds a board of directors, a board of advisors or third parties such as accountants and external audit firms becoming part of your startup’s operations. This means managing various stakeholders and expectations as you move along. Having investors that believe in your vision and support you is essential.

Taking a bank loan or closing a credit deal, while unusual, are also options that you can consider. However, realize that a loan means there’s a lack of balance in terms of taking risk. Even if things don’t work out, you still need to pay back the loan plus interest, which is very different from an equity deal. If things don’t work out, then the investor simply loses their investment. While most seed deals today occur as a convertible loan (that converts into equity after a certain date or funding round), doing deals as a loan to be paid from the revenues or profits (Revenue Based Funding) is on the rise and certainly an alternative option to look into!

Concluding Remarks

Realize that not all startups go and raise funding from professional investors. Some founders make do with smaller rounds raised from friends and family and/or grants, startup competition prizes or their own savings. Others bootstrap their way to paying customers that end up funding the venture over time. The type of startup you have can make a big difference here. A hardware startup for example has a lot of R&D costs early-on while a SaaS startup can be built in a very lean way with much less investment. While this is a slower path to growth it is also the safest and most reliable one as a business with no sales will soon be out of business.

If you’re thinking of raising your very first seed round, then make sure you’ve done your homework first. Investors ask questions, not because they want to sound smart but because they want to know why they should invest in you and your startup. Investors see many startups and pitch decks — telling them a clear and compelling story during your pitch is essential for grabbing their attention. If you receive feedback and are asked to follow-up once you have more traction, accept the feedback and work on things further. Remember, one investor’s no might be another investor’s yes so improve what you can and try again. VC’s often invest in founders that remind them of other successful startups they’ve invested in (so that have similar qualities). Quick tip: if pitching is not your forte, then get better at presenting before taking on more meetings. If you’re not good at the financials, then get better as you’ll need to understand the numbers order to succeed.

You can always meet an investor at some event that decides to give it shot with you but realize that this is not the norm — don’t attend more startup events than you need to just to “luck your way” into funding. Raising funding is time-intensive and requires your utmost attention in order to be successful. Getting startup advisors to support you is a good idea as they can take on the fundraising activities while you focus your time on building the business. However, make sure your advisor(s) keep you in the loop of what is going on and that they put you in meetings with investors as soon as these show interest. Investors like to speak to founders directly so the sooner this happens the better. Incentivizing advisors is important — it depends on how much of the work you’re delegating to an advisor and how much fundraising you’re doing yourself. There are success-based models as well as fee-based models. Some advisors only do fundraising and provide intro’s while others do much more. Choosing a startup advisor to support you early-on can be a big asset but make sure you choose your advisors carefully.

N3F Ventures aims to support founders by partnering with them early-on to build sustainable ventures, especially in the financial sense. Our objective is to assist early-stage startups in every way we can — from prototyping and testing the MVP all the way to scaling up the business. While we support founders with fundraising we also like to play an active role in key areas such as recruitment, business development, strategy and marketing to name a few. Feel free to pitch us your startup or get in touch directly via email. Whether we work together or not you can always expect to receive valuable feedback on what you’re working on and improve!

All images in this article were sourced from Unsplash unless otherwise stated.

This article was first published on n3fventures.com

For many, angel investing can be an exciting next step in their career. Some investors enjoy being directly involved with companies that are at the fore-front of innovation. Others like the thrill and buzz that comes with tech startups whilst being able to diversify their investment portfolio and benefit from tax incentives (e.g. EIS or SEIS). Angel investing is nonetheless challenging, especially if you’ve never done it before. Ideally, you’d want to be good at angel investing and also be of added value to the startups you invest in — some effort beyond the initial bank transfer is usually needed to make things a success. What makes for a good angel investor and how to become one are some of the aspects we will touch on in this article!

Angel Investing: What is it and how does it work?

An angel investor is an individual that typically invests in the early stages of a new venture in exchange for equity. The startup can be at the idea stage, have a (working) prototype, an MVP and/or some initial market success. Angels are very different from a bank or venture capital fund as they invest their own capital and tend to get involved very early-on (pre-product, prototype etc.). While some may believe it to be so, an angel does not have to be a high net-worth individual with several millions to invest. Someone who has built a long career in the banking sector for example could choose to become an angel and leverage their experience, knowledge and network to invest in fintech startups. Investing for an angel can be done to develop multiple streams of (future) income but it can also be to delve deeper into a specific vertical or to diversify an investment portfolio with high-risk/return allocations.

Angel investors tend to be one of the most important seed investors for getting the idea off the ground. Angels are usually sought after by startup founders due to their guidance, network, experience, knowledge and overall risk appetite for venturing. While angel investors can be accredited investors, it is not a must. Some angels invest exclusively on an individual basis (building their own dealflow, conducting due diligence etc.) and others invest as a group of angels. While neither option is bad, anyone wanting to start out with angel investing ought to make a careful consideration of the options available.

So what’s in it for the investor? Angel investors make a return on their investment by exiting the venture at a later stage. They can also be “bought out” by a new investor (e.g. a vc fund) or by the startup founders themselves. While angels typically invest early in exchange for a favourable equity position, investors can also opt for a (convertible) loan (i.e. debt that converts into equity) or a revenue-based return which is more founder-friendly, provides liquidity and is more aligned with the success of the venture.

The main differentiator between an angel investor and a bank or venture capital fund is that angels invest their own personal capital while a fund typically invests capital from its own investors (i.e. limited partners). Angels also tend to participate in smaller rounds, with ticket sizes being relatively small (under EUR 1M). Furthermore, angels generally have a limited capability for follow-on rounds, meaning that they might only be able to invest in two or three funding rounds due to risk diversification or a limit of available capital. Nonetheless, angel investors are highly sought-after by startup founders as they tend to be very knowledgeable in a specific market or vertical and have a lot of experience. Some investors were former entrepreneurs themselves and are able to provide valuable insight and guidance to founders.

Becoming an Angel

Making the decision to become an angel investor requires a personal consideration and weighing the pros and cons. In principle, once you’ve made your first startup investment you have pretty much become an angel investor. Let’s take a closer look at some key aspects of the work behind an angel investor:

Capital

Investing in startups can be done by committing capital from 10k up to the millions. It all depends on your capital available, portfolio strategy and risk appetite. Being able to invest in follow-on rounds is also an important factor to consider. For angel investors starting out it is good to realize that angel investing is a long-term game. Capital invested is usually used by the startup for R&D, prototyping, hiring staff and testing the market. As such it is tied into the success of the venture, making it an illiquid asset class generally speaking.

Building Dealflow

Angel investors tend to have a network and constant inflow of new opportunities and deals coming in. Building a pipeline of potential investments will be one of the first tasks for a new angel investor. Consider making accounts on industry/startup platforms, launch a website, write blog articles, join an angel group, attend meetups and other startup events and reach out to founders you come across to start “getting our name out there”.

Pitch Meetings

Many founders will request meetings with angel investors in order to pitch them their idea and why their startup is a good investment. Choosing which meetings to take on and which questions to ask during such meetings can make a big difference in terms of time invested. It’s usually a good idea to request a pitch deck before moving forward to an introductory meeting. This gives the investor a quick glimpse of the startup, its team, product, market and overall traction. While angel investors invest in early-stage venture ideas, they are usually focused on the team behind the idea, the founder in particular. An initial startup idea with potential is not worth much if the founder behind said idea is unable to develop the idea and create a successful business. As any sound investor would do, an analysis of the business model, the market, the financials etc. all weigh in the final decision an angel investor makes. As such it is key for founders raising their first funding round to devise a strategy to pitch to investors and convince them why they are the right team for bringing a new innovative product to the market. The quality of the team, resourcefulness of the founder, talent and ability to take constructive feedback are some of the key aspects that angel investors look for.

In fact, when meeting angel investors and pitching them, founders ought to try and get a feel for their background, potential added-value to the venture (smart money) and investment interests. As much as a founder is pitching an idea to an investor, it is also important for the founder to have the right investors on the cap table and gain the proper support needed to turn the startup into a success.

Investment Decisions

Conducting proper due diligence and negotiating the terms of investment with startup founders will also be part of the work involved. There are many aspects that are relevant for a good term sheet such as the valuation, investor rights, provisions etc. However, it all boils down to your own preferences as an investor and what you are able to negotiate with the startup. Ultimately, making the decision to invest in a startup is going to be one of the most challenging aspects of angel investing. Deciding on the right team to invest in, the right idea that you think will work — all of this requires good judgement on behalf of the investor. Once a decision is made, it is good to review any investment agreements provided and seek legal counselling whereas needed.

Closing Thoughts: Angel Investing is Risky

Investing in early-stage startups is a long-run and risky endeavour, hence there is no need to rush things. While many success stories can be found everywhere nowadays, it’s good to know that early-stage ventures carry a high risk with them. It takes a lot of sweat equity to take an idea off the ground and turning it into a success business that can generate a decent return. Hence, it is advisable for new angel investors to ease into things and gain their own experience step by step. Being excited about new technologies and startups is a great motivation, but investment experience can be the difference in success or failure as an angel investor. In some cases, a startup only manages to build a rough MVP or small client base without achieving product-market fit, the founder might not be on the same page with you anymore somewhere down the line, product pivots occur, you can forget a key investor term in a term sheet, the dynamics of new investors change the relationship with the founder — all of these experiences can help one become a better investor over time. As such investing small tickets (e.g. under 100k) in a range of initial startups is a good way to gauge your own performance as an investor, learn from mistakes whilst taking a lower financial risk and developing your own investing strategy. In fact, it is a good portfolio strategy to consider as spreading risk, diversifying startup investments and investing smaller tickets can help in finding that one unicorn that makes the big difference in terms of returns. Being more reserved in the first funding round and investing more in follow-on rounds is also an approach that can help mitigate risks further and only focus on those startups that are making good tangible progress.

All images in this article were sourced from Unsplash unless otherwise stated.

This article was first published on n3fventures.com

Launching one startup is hard enough. Imagine juggling multiple early-stage companies at the same time. Certainly this would not be possible right? Well yes and no. There’s no written rule anywhere saying that it is not impossible — it really all depends on the founder and their approach towards entrepreneurship. These entrepreneurs are not called serial entrepreneurs per se but parallel entrepreneurs! According to the Oxford dictionary, the word ‘parallel’ refers to: “very similar or taking place at the same time”. In terms of entrepreneurship, launching different ventures at the same time and running them alongside each other is called parallel entrepreneurship or “side-hustling” as it is commonly referred to. For most, this already sounds like a very difficult endeavour and it is! Building multiple ventures at the same time is very time consuming and energy intensive. So why would anyone want to be a parallel entrepreneur?

Why do the impossible?

It’s hugely rewarding! For some, it is the drive and passion they have for entrepreneurship and wanting to do more in less time. Building a handful of successful businesses in five years au lieu of doing so in fifteen long years might seem more appealing. Some founders also feel more secure having multiple streams of income instead of just having one (e.g. a business or day job), which can be prone to changes due to the economy or (as we’ve just seen) a new pandemic for example. Others have an investor mindset from the start of their careers and want to build a portfolio of ventures which they can leverage to invest and/or build new ventures with. This means having strong entrepreneurship skills, experience and knowledge on how to build a venture, scale it and grow it successfully. In essence, this strategy follows investment portfolio theory as you are not investing all your time and resources into one venture but into multiple companies at the same time. This helps to spread risk and increase the chances of success. Angel investors that invest in a portfolio of startups and/or venture capital funds are often-times not impressed when a startup fails as it’s essentially “part of the game”.

However, a founder that invests all of their time (and resources) for multiple years into a single startup that ends up failing can be a huge emotional blow to them, with some changing career paths altogether and not launching a new business ever again.

While parallel entrepreneurship is not for everyone, there are successful entrepreneurs that apply this strategy (e.g. the founder of Tesla). In some cases it is best to start with one company first and build this until it can generate cash flows which can be used to finance a series of side-projects from which the successful ones go on to become cash generating companies themselves. Another strategy is to start with two or more ventures at the same time, test their MVP’s and continue to build those that are successful. Getting there though implies overcoming a series of challenges and hardships. For instance, spreading yourself too thin can be a major pitfall as your time is caught up having to work on too many different companies at the same time. Lastly, the most common strategy is to build a portfolio of ventures while working a daily job, which often becomes the source of funding for the side-projects. This is by far the safest and most risk-averse option, but it also means that it will take more time to build the ventures successfully as a big amount of time is caught up working a job.

In addition, building one company can be a very expensive endeavour due to the required startup costs and investments necessary. Imagine doing so for multiple companies at the same time! This by far one of the most difficult aspects of entrepreneurship and can be a real dealbreaker for founders intending to work on multiple side-projects.

How can parallel entrepreneurs overcome these challenges?

For starters, a parallel entrepreneur can try to build strong and highly skilled teams for each of their ventures. In doing so, they can rely on their team for dealing with operational tasks and taking out the immediate fires that come along the way. Delegating tasks to co-founders and other team members is also a smart way to have less on your to-do list as a founder (more on this at the end).

Another intuitive approach is to share resources between the various ventures. This can be office space, equipment (e.g. computers) but also a vehicle! Doing so lessens the overhead burden which makes it easier to build two or more companies at the same time. Having a separate office with loads of overhead per company might lead to a heavy financial burden, especially during the early-stages where cash is tight.

A parallel entrepreneur must also realize the need for great project management skills. Running multiple projects in tandem is essentially what a parallel entrepreneur does. In the early-stages the focus is usually to test MVP’s and achieve product-market fit. Hence, being able to plan, roadmapping and allocating proper resources to each company is essential for achieving tangible results. It makes no sense to run around doing a lot of work without getting anywhere by the end of the day. Have some kind of structure and approach in place is key.

Another handy tool for parallel entrepreneurs is to include as much automation as possible in their tech stack. Accounting, marketing and sales are some of the areas where founders can make use of great platforms nowadays to automate daily tasks that take a lot of time. Using tools such as Zapier and IFTTT can make an enormous difference in the day-to-day operations of your companies. This often leads to lower costs (both time and financial) as well as a sense of control which can be lost if you are working on too many different companies at the same time. Automating tasks and taking it from there can be an extremely useful way to overcome some of the hardships of being a parallel entrepreneur.

When it comes to costs, financing a list of ventures at the same time might only be possible for someone such as an angel investor. However, there are some useful strategies to overcome the huge overhead, investment expense and startup costs involved with being a parallel entrepreneur. Exiting one successful venture and using the funds to seed an already running startup process for a second or third venture is a great strategy to mitigate most financial risks that parallel entrepreneurs face. This essentially allows you to inject seed funding from one successful venture into a new one — a very repeatable process! Another strategy is to build ventures that are able to bring value to each other — i.e. ventures that can complement the business model of each other instead of being two standalone businesses. This helps to build up revenues for multiple ventures, leading to better synergy and efficiency as an entrepreneur.

As an entrepreneur that’s working on several ventures at the same time, it is imperative that you manage and allocate your time as effectively and efficiently as possible. This means not wasting your valuable time on recurring tasks that could be taken care of by automation for example or taking on too many meetings during the week. Allocating your time towards problem-solving and generating sales for the various ventures ought to be a major focus area and requires proper attention. Furthermore, parallel entrepreneurs face an even bigger challenge when it comes to work-life balance!

Founders are often faced with crazy work week schedules and lack of time for their own personal life. A parallel entrepreneur that’s working on multiple ventures therefore faces additional risk when it comes to having a healthy work-life balance. Being able to maintain one is a constant challenge as these entrepreneurs are always pressed for time. Digging yourself into work is not a healthy strategy and can often lead to (severe) burnouts down the line. Finding the right balance between work intensity and taking time off is by far the most important ingredient for successful parallel entrepreneurship. In fact, it can make you as an entrepreneur more productive.

Taking time off, getting enough sleep, exercising, eating proper healthy food and taking time off every now and then are very important aspects that should not be neglected!

Most entrepreneurs start with a goal and vision in mind. They often-times work tirelessly towards this goal which comes at a price. The same applies to parallel entrepreneurs — the passion for entrepreneurship is usually a key discerning factor of these types of entrepreneurs, which can be a doubled-edged sword.

Finally, we have to point out the need for building teams for each of your ventures. Solo entrepreneurship has its limits and attempting to build multiple companies at the same time without any staff is very inefficient and largely ineffective. Involving others early-on and having their support is a must if you intend to build real companies that are successful in the long-run. Whether this means working with a co-founder or partnering with an agency or two, in the end, being able to share responsibilities and delegate tasks is essential for taking on the enormous challenge of building a company from scratch.

Choosing the right approach

When approaching entrepreneurship we can essentially distinguish between two lines of thinking. First, one can opt to plan everything and have strict (gateway) process which includes various growth phases. This means a startup can start small and have a path set out for it to go through from the outset. On the contrary having a more creative (as you go) process means starting with one idea and MVP, testing this out and seeing where things go from there. There is no set roadmap in mind, with the focus being more on overcoming challenges as they come along, learning and being creative when it comes to generating solutions (and/or pivoting). This helps the initial idea to develop and grow, ultimately leading to a company that grew more organically.

Building a business is difficult and filled with unpredictability. Will the market respond positively? Will the technology work? Will the strategy work? These are all questions and uncertainties that entrepreneurs have. Being a parallel entrepreneur is even more difficult. Some might prefer to build one venture and see what to do afterwards, or simply build one business at the time as a serial entrepreneur. The decreasing job security in our economy and rise of automation leads many to not commit full-time to anything (be it a job or freelance work). This can lead to parallel entrepreneurship as a means to spread risk and build multiple income streams. For the successful founder, a cash-generating business portfolio can become a great asset to have. Nevertheless, these entrepreneurs face a series of challenges that tend to come at the same time. Finances, time allocation, work-life balance — these are all factors that can end the dream for many founders aiming to become a parallel entrepreneur. Moreover, into today’s economy, there is increased competition from other entrepreneurs and founders that are aiming to build similar solutions and products to cater to similar markets, ultimately leading to more picky customers and more competition. This means that your average founder needs great skill and support to test ideas properly and scale them afterwards. Hence, building one startup and learning as you go is a great strategy for new entrepreneurs who are just starting out their business venturing career. Pick up experience, learn new skills and determine your own (entrepreneurial) process that works for you and take it from there!

All images in this article were sourced from Unsplash unless otherwise stated.

This article was first published on n3fventures.com

The past decade has shown us that you can’t have a single plan in life. Whether you’re a university student or an employee, having a “Plan B” has become a must-have. Similar applies to startup founders, who undertake huge personal risks as a means to bring about innovation in the economy. Such endeavors are also filled with uncertainty and various business risks, which is one of the reasons why most startups end up failing within five years time. Achieving P/M fit, being able to scale up, growing the startup and exiting afterwards can be seen as a successful journey for most. However, exiting the startup earlier doesn’t mean it has failed. Founders have various reasons for exiting, and in this article we will be looking closer at what early exits are and how startup founders can go about them. We will also shed some light on what our approach at N3F Ventures is when assisting founders in exiting their startup and discuss a decision-making process towards an early exit.

So what is an Early Exit?

The sale of a startup’s shares or assets through a standard M&A transaction is usually called an exit in venture capital. While there are many types of exit strategies, including a trade sale, management buyout (MBO), asset liquidation, leveraged buyout (LBO) and IPO/STO, these exits typically occur at an advanced stage of the startup’s lifecycle as illustrated below:

Specifically, we can distinguish between seed stage, growth stage and maturity stage, with M&A transactions usually occurring after the growth stage. However, things don’t always work out as planned and startup founders can find themselves in situations where they need to exit their startup and/or discontinue operations either due to the startup’s failure or personal reasons for example. As such, an early exit is an exit that occurs early in the startup’s lifecycle, where the venture (or its assets) are typically acquired by a buyer. In these cases, we can distinguish between early exit strategies such as a MBO as well as an acquihire, a trade sale and an asset liquidation. What early-stage startups usually sell are their assets such as the IP developed (e.g. patents, website, mobile app, proprietary algorithms etc.), tangible inventory of products produced, brand value (incl. community developed), established partnerships and client base as well as the skill base of all employees working at the startup at the time of the transaction. Nonetheless, early exits are usually not deemed as being a founder’s preference or a portfolio strategy by a vc. The reason is obvious — any founder or investor that embarks on a startup journey has their eyes set on the long-term.

It’s situations where further growth seems impossible to achieve, or the founder is met with personal problems or lacks motivation to continue the venture, that can lead the startup to an early exit. As such, early exits can be a good way for founders to get a return on their sweat equity and for (Angel) investors to recoup their investment back (or at least a part of it). Moreover, an acquisition by a larger company is a good way for said company to build a new innovative product quickly with less risk. Startups usually do better at innovation as opposed to large corporates, hence acquiring startups early-on and scale them up is an ideal strategy many firms implement. Furthermore, the early exit M&A market is a relatively volatile market, due to innovation trends from larger companies, economic changes and increased startup activity. Acquisitions at the early-stages are happening more often than ten years ago, which is a clear sign of demand for new innovative startups across several sectors (e.g. fintech, insurtech, SaaS etc.). In a nutshell, an early exit, if executed properly, can be a good way to benefit various stakeholders involved.

How Can a Founder Execute an Early Exit?

As with any other M&A transaction, executing an exit in the early-stages will require a substantial time commitment. Not only would the founder need to prepare the documents required, but the main work will consist of finding potential buyers, having meetings, doing due diligence and closing a deal. If day-to-day management of the startup is not an issue, then it can be a viable option to take on all this work internally. However, it’s usually best to team up with others that can provide professional support in this specific area as this can improve the odds of success for an exit. We suggest founders to check with their immediate network of mentors, advisors, investors, accountants and legal counsels as a first step as these may be able to support directly or point you in the right direction.

Early Exits vs Business Continuation

In reaching a decision, a founder along with her co-founders typically weigh various pros and cons of doing an early exit. In essence, the matter becomes a question of continuing the business (by raising funding needed, hire new staff, pivot etc.) or selling now and exiting in the short-term. In both scenarios the founder loses some control over her startup depending on the type of investor sought (e.g. venture capital). However, with an early exit all shareholders can liquidate their stake immediately while a startup that seeks further vc funding will need to grow the venture further before being able to exit successfully at a much later stage. In such a journey, they may also not be the (only) director in charge of things as some investors or board members may opt for a more experienced C-suite to take the business from its growth phase to maturity. However, the main aspect to consider is whether the startup will continue to exist, be it under a different brand, with a new management team or if it will cease its operations entirely. Founders exiting early might not want the venture to cease its operations, which makes it important for them to find the right buyer or investor. So how can founders reach a decision? At N3F we find it useful for founders to consider the following set of questions along with their co-founders:

-Do we want to continue the startup with our own resources?

-Do we have the know-how, skills and required support to grow the startup further?

-Do we have the motivation to grow the startup further, taking into consideration the time investment required?

-Do we have other startup projects we are keen to work on? Do we see other opportunities that we might be missing out on?

-What is the likelihood of attracting new investors to our startup in the short-term?

-What is the likelihood of finding a buyer for our startup in the short-term?

-Would we be ok with the startup ceasing its operations tomorrow?

-What does our team, advisors and investors think of selling as opposed to continuing the venture?

These are but a handful of questions that startup founders can ask themselves to reach a conclusion. If an early exit is deemed as the best option, we usually suggest founders to work with an advisor or investor that can support with the execution of the early exit. At N3F we have our own particular approach towards early exits that we discuss in the following paragraph.

Our Approach to Early Exits

We believe that founders take on a lot of risks and face multiple challenges in their journey as an entrepreneur. As such, they should be properly rewarded if their startup becomes a success or if they exit the business and sell it. In terms of early exits, our approach starts (1) by determining the motivation to sell by the founder. Without a strong motivation it is easy to discontinue the execution of an early exit if a new big client is closed or if a new investor shows up, which usually are reasons for continuing with the business. This is especially true if the founder is motivated to continue at the outset but is unable to do so do to a lack of funding, sales or other aspects that may change in the short-term.

Once the founder’s motivation is determined and there is a clear consensus on the way forward, we (2) discuss the exit options for the startup and reach an agreement with the founder. There’s a difference in a trade sale, an asset liquidation and an acquihire for example, which has a big impact on how we execute the exit. This also requires internal team discussions and determining what to sell in order to get potential buyers interested in the opportunity. Hence, knowing how the startup will exit is paramount before moving on to the preparation phase where (3) an initial valuation is determined and all respective documents are drafted and made ready for executing the exit. These documents, include (but are not limited to) a bespoke pitch deck, a memorandum and a DDQ prepared in advance for prospective buyers. The purpose of these, similar to fundraising documents, is to inform buyers of the opportunity and help them in making a decision. Describing the opportunity accurately and informing potential buyers of the technology, market, trends, competition etc. is key for garnering interest. Once these are in place, we typically (4) look into proposing prospective buyers to the founder and do the outreach to get the first meetings going. As with any M&A transaction, (5) conducting further due diligence during in the process and (6) transitioning the startup post-deal are aspects that we also support founders with.

Closing Remarks

When embarking on their startup journey, founders typically imagine themselves being committed for the long haul. However, the path of entrepreneurship is a roller-coaster ride with many unknowns. Exiting at the early-stages is certainly not a strategy or goal of any founder or investor at the outset but it can be a great way for various stakeholders to win. The founder, her investors, the buyer and the market being catered to all can benefit from an early exit. The founder receives a good reward for all her hard work and hours put into the startup, investors get a return or at least a portion of their investment back (au lieu of losing the investment entirely), a buyer acquires a new innovative product which it can fund, scale up and grow into a successful product line and customers who benefit from the startup’s product can continue to purchase it whilst receiving new and improved features etc. Founders seeking to execute such a transaction ought to seek support from their immediate network of advisors and investors or externally. At N3F, we focus on understanding the motivation of founders, determining the potential value of the startup to a buyer and putting together a realistic case for an early startup exit.

If you want to learn more about our approach, need an opinion or are interested in an early exit for your startup, feel free to reach out to us via pitch@n3fventures.com.

All images in this article were sourced from Unsplash unless otherwise stated.

This article was first published on n3fventures.com

Building a startup is a really hard thing to do. Overcoming multiple challenges is part of any founder’s journey towards success. One of these challenges, especially for entrepreneurs that are just starting out on their first venture, is dealing with Imposter Syndrome.

For many, this feels like being a fraud — what you are doing as a startup founder is fake and not the real you. For example, if you work a regular job during the week, with the startup only being some kind of side gig. This feeling of “being an imposter” can become very strong when trying to convince other people about your startup, for instance potential partners, clients or suppliers — the feeling of being discovered as being an imposter can become a wall of sorts that stops you in your tracks or that prevents you from getting stuff done. For some, this even extends to friends and family or investors — not feeling like being a real startup founder can become a major obstacle in progressing and getting the business to grow. In this article we will be looking at what founders can do to tackle Imposter Syndrome if they have these feelings from time to time and how to overcome it ultimately. While it is mainly nascent entrepreneurs that tend to experience this syndrome, it can also be useful for other more experienced founders to look into it in order to recognize the symptoms of Imposter Syndrome early-on.

Imposter Founder?

In the world of startups, founders are likely to face many people that tell them “no” along the way or that simply don’t believe their startup will ever take off. This can be due to perceptions of their product, business model or the team itself. As a vc, we are often required to say no to many founders with very good ideas due to a lack of fit with our thesis. Nonetheless, being strong-willed and determined is a big requirement for success. Just because one vc says no, does not mean all other vc’s will say no. In fact, it does not mean all other investors (i.e. angels, incubators, accelerators etc.) will say no or that a no can’t become a yes later on. Luckily, not everyone you meet will tell you no. A handful of people that believe in you and your startup can be enough to give you the push needed to continue in the right direction.

There are multiple things that founders with Imposter Syndrome feel that may add to their feeling of being a fraud such as: working part-time as a founder, not having (much) staff, blurry roles/responsibilities, having a “wonky” product or rough prototype, having a lack of funds, not enough customers, working from home (i.e. no ‘real’ office) etc. Furthermore, some founders are also somewhat perfectionist, want to be super(wo)man, try to become an expert in an area or go about the entire journey as a solo founder. These approaches are not necessarily the best for a founder that has Imposter Syndrome. Building a team, relying on the expertise of others, delegating tasks and knowing when to take a break are essential aspects for a balanced work life. Becoming a workaholic to gain external validation at every step of the way whilst ignoring yourself as a founder is also a red light that should be avoided by any nascent entrepreneur that’s just starting out. So how can founders overcome this syndrome?

Build Legitimacy

A good way to overcome the so-called Imposter Syndrome is to build legitimacy. But what is it? Legitimacy refers to actions you undertake to establish yourself and your startup as being the real deal, i.e. legitimate. In the context of entrepreneurship, it can be seen as social approval of the founder’s actions as being good and moral according to pre-established rules, norms and structures prevalent in society. Strategies that help founders gain legitimacy can also help strengthen entrepreneurial identity development as suggested by research. Think of simple things such as assigning job titles for everyone, having a website, providing contracts to new team members or having a tangible track record that others can look into. A meeting with a potential client may result in being prompted to provide referrals, or a list of past clients — working on your client base could be considered as a strategy to build your legitimacy. In essence, you’d be “walking the talk” and doing what you say you do as a startup, which is to provide a solution to a market.

Read the Signs

Another important way to overcome Imposter Syndrome is to recognize the feeling of being an imposter as it emerges. Pay special attention to the time and place of this and reflect on your thoughts and behaviour— why did I feel like that at that particular time or why did I behave in that manner? Being aware that something might be amiss is already a big step. Talking about such feelings to others you trust is another way to better understand what might be happening and rethink things. Furthermore, being able to put a clear vision together is one of the best ways to overcome Imposter Syndrome. Where do you want to be, how do you see yourself or your startup in x amount of years? These are good questions to ask that help frame the path you’re walking more. Putting a vision together essentially visualizes the success you are seeking, making it easier to break that success into smaller parts (i.e. milestones).

Seek Support

If all else fails, do not shy away from seeking support from friends, family or advisors and investors that truly have your back. At N3F we work closely with founders at the early-stages of business ventures and understand that the team means everything. As such, having a confident leader that is focused, motivated and determined is essential for achieving success in the early-stages. It is key for pushing the startup further and turning it into a successful and sustainable business. This is why we believe in supporting founders to overcome such challenges by being their sparring partner.

A great listener at the right time can help ease concerns and lift a heavy weight off your shoulders.

We understand that as a startup founder, there are not many familiar signposts such as a job promotion or other sources of external validation that help you in determining the path forward and to keep you grounded. Founders tend to pave the way themselves through trial and error with the goal of establishing themselves and their startup. This often times does end up creating a heavy burden for the founder if she does not have a clear vision in mind. Founders are continuously tested, with every decision they make seeming to be detrimental to ‘keep the ship afloat’. Identifying the Imposter Syndrome early and knowing how to deal with it can be critical for the success of startup founders. Building a startup is already a challenging endeavour on its own, and doing so with doubts in your mind will only add on to that challenge. So recognize the signs when you see them and aim to overcome the imposter feeling by working with others and taking things step by step. Startups are rarely built overnight, so take your time.

All images in this article were sourced from Unsplash unless otherwise stated.

This article was first published on n3fventures.com

We often get asked what type of startups we invest in or like to support. In recent years, the boom experienced by startup unicorns in terms of funding, press and overall growth has been outstanding. Such is the case that even incumbents have recognized their threat partly because these types of startups have lots of funding access available to them to innovate further and disrupt the market (e.g. Revolut in fintech). As such their potential is very high, with vc funds looking to support them as it also makes sense for their own business model.

However, as the venture capital industry develops further, we are beginning to see a slight new focus, not on the now standard unicorns, but on startup zebras. What a zebra is and how it’s defined is very much talked about these days. At N3F we like to define startup zebras as being:

Startups that are focused on developing a sustainable business model, that rely on customer acquisition and sales to finance operations as well as growth.

These startups focus on solving important industry or market problems that make a difference. While these markets may not be as big as in the case of unicorns, the problems zebras solve are still important for their (niche) target markets, thus enabling a business model. Furthermore, the operations of zebras tend to positively impact society and/or the environment as they don’t operate a growth at all costs model. Lastly, zebras don’t typically raise a lot of external (vc) funding as they often like to keep ownership of the business and grow at a slower (than average) speed — their goal is not to take over the world but to meet the needs of their direct customers, investors and other stakeholders whilst making a difference.

Although it sounds great, the downsides of being a startup zebra are also worth taking note of. Less access to venture capital funding, a (potentially) slower growth curve, developing a sustainable business model and measuring impact are some of the challenges that all zebras face. A common issue for instance is combining a revenue/operations model with sustainability — i.e. making your business model truly sustainable, which can result in increased costs or difficulty in sourcing materials for example. Measuring the impact of the business is also something that is relatively new in today’s business landscape. While there are great frameworks and models available such as the SDG’s by the UN, IRIS, and the IMP that are widely used in the world of impact investing, implementing these can require some additional expertise and pose as a challenge when putting together a performance dashboard for monitoring results.

However, if we look at the pros of being a startup zebra in today’s investment climate and society, it’s clear that zebras’ focus on impact is an added plus if compared to traditional for profit only businesses (incl. startup unicorns). As concepts such as sustainability and circular economy slowly start becoming the norm and economically advantageous, having a business model that yields a net positive impact on society and/or the environment means being at least one step ahead of competitors be it incumbents or other startups.

Moreover, one of the overseen advantages of startup zebras is the fact that they typically grow at a slower rate. While this may initially be seen as a disadvantage, if coupled with the fact that they have less pressure from investors to achieve product-market fit and scale means that they have more room to test products, features and new ideas. Not having a funding runway of 12–18 months to dictate the development of things can allow the team to have more room for testing and doing research on what works and why. For example, something that did not work this year might’ve worked in a couple of years from now due to new trends, more adoption of a technology, adapted legislation etc. This ultimately helps to acquire customers that essentially fund the business further, developing a solid base from which to grow in the next 5–10 plus years. Once a sustainable revenue model has been identified, scaling the model usually becomes the next step. Should a founder opt to raise funding at this stage she/he would also have a bit more leverage as the startup could grow further without it, i.e. external funding becomes a “good-to-have” as opposed to a “must-have”.

So what does this mean for traditional vc’s and their investors? It’s well-known that a vc fund requires a handful of large exits to return the entire fund and make a profit for their investors. Unicorns being part of this strategy is a target of many fund managers as it is otherwise more difficult to achieve the desired returns on the investments made. As such, increasing investment in startup zebras is likely to happen slowly over time. According to TechCrunch there are even cooperatives being formed to assist and help fund “underrepresented” founders through affordable debt and equity financing. For us at N3F, we aim to support zebras with business development and revenue-based funding. We understand that founders of startup zebras also require support, network, insight and the experience of vc’s but want to grow the business on their own strength and grind without having to raise a series of funding rounds to achieve success. Additional risk does come along with such a model however, we are confident in our ability to find the teams that will make a difference and willing to make bets based on solid data. As such, we place a lot of emphasis on teams as we typically work with very early-stage startups (e.g. Proto, Pre-Seed, Seed). Doing so means partnering with startups that are still developing their business model and MVP to collectively create a sustainable venture that generates a decent return whilst having a net positive impact from its operations, be it through e.g. job creation, social community programmes or ethical sourcing.

The bottom line is that zebra founders can have an upper hand on their unicorn counterparts. We see that many of them are able to turn their passion (and expertise) for a particular field into a flourishing business that can change their communities. Are you a young startup zebra or are aiming to become one? Feel free to reach out to our team and tell us what you’re working on. If you want to learn more about us, be sure to check out our thesis.

All images in this article were sourced from Unsplash unless otherwise stated.

This article was first published on n3fventures.com

Often times, when the going gets tough, sound advice from others can make the difference. For nascent entrepreneurs looking to launch their very own startup, entrepreneurship can be a daunting process filled with mistakes and learning along the way. However, making all the mistakes in the book is not necessarily a prerequisite to becoming an entrepreneur. Essentially, entrepreneurship is still a mindset and not a job. Hence, a solution for such a scenario would be to find a good mentor that might have already made those mistakes in the past, in order to give you a proper heads up when the situation calls. A former startup founder, business angel or experienced advisor, are all well-qualified for assisting you in your journey.

But how the heck do you go about finding one of these mentors and get them to mentor you in the first place? In this article we will be covering the top 10 tips for finding a startup mentor successfully. Whether you are at the idea stage, seed stage or pre-everything stage, the tips provided below should at the very least give you some new thinking material! These are very much applicable to a founder that is just starting out with their first venture (idea).

Tip #1: Start With Who You Know

Friends, family, work colleagues — are all people you can approach and ask for a contact that could be a startup mentor for you. As a founder, getting a good intro from someone you know helps to break the ice and connect with a total stranger somewhat quicker. You never know whom a friend or aunt of yours may now so don’t be afraid to ask and explore. Most people have a (former) entrepreneur in their family somewhere so it would not be a waste of time to ask that person for some advice and their thoughts on finding a startup mentor to guide you.

Tip #2: Contact Local Incubators

Incubators in your city usually have a good network of investors, advisors, founders etc. that are interested in being pitched and assisting early-stage startups. Taking part in an incubator programme therefore has its added advantage as you are able to tap into their network and find yourself a good mentor. Note that some incubators charge a fee, while others are free of charge with many being based on an equity share.

Tip #3: Attend Startup Events

Investors, founders, and advisors are all attending startup events regularly (us included!). While you may not be their top priority when doing so, coming across a new founder and hearing about their venture is always interesting. The key here is to entice the person and get them interested in who you are and what you’re doing. It is always good to figure out what the person’s interests are with regards to startups (to see if you’d be a good match) but also get a feel of their time availability and wiliness to provide advice. In general, the idea is not to hop on a flight to Lisbon and attend Web Summit this year per se, but definitely start locally with smaller startup meetups and events. These can be found via Facebook groups, accelerators and incubators. Your local chamber if commerce might also be active and organizing events so look out for those as well.

Tip #4: Use Your University’s Network

If you are attending a university education programme, then it would be an idea to do some extra curricular activities and approach the entrepreneurship club for example. Any good university has a massive network of researchers, entrepreneurs and so forth. Getting an introduction from one of your lecturers could also be a way to kick things off and find a mentor. University teachers typically do research and attend events all-over, meeting various people from a range of professions. Thus, if you are not sure where to start, knock on the door of someone after a lecture and see what happens. There’s no downside in trying.

Tip #5: Follow-up!

People are busy, and this is especially true in the startup community. Someone not getting back to you does not mean they’re not interested right away. A follow-up here and there will let you know if the mentor is really engaged or not. Also, use their time wisely. If you’re having a meeting, put an agenda together, send a status report prior to the meeting in order to get the most feedback during this time. Not only does it show that you take things seriously but it also helps to structure things and guide the mentor as to how they can help you. Identifying the problems to tackle is key, and discussing these with a mentor is what can benefit a founder the most.

Closing Remarks

Finding a mentor to guide you during your entrepreneurial journey can make a big difference in the outcome. Not only can such a person help you to analyze ideas, but a mentor can also impute their knowledge and experience into you which can help you as a founder avoid (costly) mistakes. Know that a good mentor is someone that is there for you but won’t necessarily baby-sit you. It is someone that makes time to meet with you and that follows-up. While a good mentor might not fly out every month to your city to meet with you, it is someone that you can call, give you intro’s and helps you as a founder in organizing your thoughts. Above all things, a good mentor challenges you and your ideas before you rush and act upon them.

All visuals in this article were sourced from the open-source platform unDraw.

This article was first published on n3fventures.com

Most of us today have heard of a startup and possibly thought about doing something in this space. In fact, there’s a good chance that you’ve already downloaded (and used) an app made by a startup. However, for the young or inexperienced, it may be a bit difficult to pinpoint what exactly to do with your interest and enthusiasm in the startup world. Should you become a founder, an investor? Maybe an advisory role would be more suitable for you given your background? Whatever you choose, remember that it’s better to do something you really like. Entrepreneurship can be very tough, so it ought to be something you genuinely want to be involved in on a day-to-day basis. In the following paragraphs we’ll cover several startup roles you can consider to take on.

Founder

When it comes to startups, one of the first ideas many of us have is to become the founder of our very own venture. Though the path is hard and you will probably have to learn from many failures, it is one of the most active roles you can take on in entrepreneurship. Even though most startups fail within the first three years, the journey of putting a team together, creating an MVP and launching a new product on the market is an extremely valuable experience that many may never acquire. On the flip side however, becoming your own boss is not something everyone would choose to do today. Not everybody is ready to pass on their ‘safe’ job and salary to move into a (sometimes) chaotic work environment with (almost) no salary in the beginning and a ton of workload that doesn’t seem to end no matter how many emails you send or meetings you take. Not only will you have to shoulder the full responsibility of the venture and its success/failure, but you will also be required to lead a team to build a product around a working business model that caters to a market that truly wants what you’re intending to sell. If all goes well you manage to sell something people actually care about and want to buy, however in between that and everything else that might happen there’s a very large trench.

There are a myriad of reasons for startup failure, so it’s not crazy to hear of a founder that’s successful after the 3rd attempt.

Thus, if you have an idea, see an opportunity and want to take a serious shot at becoming a startup founder then one the best things you can do is to learn from others and their past mistakes, especially if you’re intending to innovate in novel spaces such as VR or AI for example. Reading articles such as these would be a good step to pick up viewpoints and experiences from others — all to frame your thoughts and give you a better idea of what to expect. Afterwards, there’s only one way to truly test the waters and that is to make the jump and dive in!

Co-founder

If taking on the full responsibility for a company and leading a whole team seems to be a daunting task for you then you can always look into becoming a co-founder of someone. There are founders everyday looking for someone to be their ‘right-hand (wo)man’ or a person with a skill-set different from theirs. Teamwork makes the dream work they say — however it is critical to have a balanced startup team. There usually is little success in teams where everyone is an engineer and no one knows how to sell a product for example. Thus, you may come across founders looking for technical know-how, sales genius, marketing skills or financial prowess to help build the venture and create something. Being a co-founder can be a great way to learn a lot about entrepreneurship and innovation as well as how team dynamics work.

Inventor

A lesser-known and talked about role in startups today is the person who actually goes into the garage or lab and engineers a new piece of technology prototype. Being able to actually make something from scratch is an incredible skill to have, however not knowing how to put a business around the invention may be a challenge for some. For someone who is more excited about the invention, testing and engineering side of things, it might be a good idea to improve your skill-set and team up with others at some point to take things to the next step. Not every founder has to become the next CEO. Having an early working prototype might be a game changer if you reach commercialization and mass market, however the journey there will require you to take many steps. Nonetheless, it can be very exciting to build something and have it change the life of others later on. Think about the many health-tech solutions that are being developed today to tackle known health issues that people face. Being the inventor of one of these could be a great personal achievement!

Startup Lawyer

If you have a legal background as a law graduate or as a practising legal counsel then becoming a startup lawyer could very much be an option for you. Startups are always facing legal challenges, be it in terms of intellectual property or raising funding from multiple investors across different jurisdictions — there’s always a legal aspect that comes into play when it discussing development at startups. This is especially true nowadays given the technology innovation climate we live in. Novel and disruptive technologies such as blockchain bring about many changes and questions — startups in this space tend to push the boundaries of what is “regulated” and may even end up operating in a kind of grey area as there may be a lack of regulation, policies and/or laws made. This makes it important for founders to seek the support and reliable advice from a legal counsel — ideally one who is familiar with the startup world and its different dynamics.

Entrepreneurship Academic

Being inspired by startups and innovation as a subject can be essential for choosing an academic career path in entrepreneurship. Whether you become a researcher or a teacher, teaching others about the theories behind entrepreneurial science and innovation can inspire students to launch their very own venture some time later down the line. It can also be a role that allows you to learn much more about the “black box of innovation” and help others (e.g. founders, investors) understand what works and what doesn’t and at which stages of the entrepreneurial journey. As an academic you will gain access to research data and may even work on developing new theories hat may help the founders of tomorrow innovate better with increased success. Most startups tend to fail and this lies around 90–95% depending on whom you ask. Several years ago, the theory on disruptive innovation would have been a completely wild idea to many people. However today, after many books, articles, CEO’s and founders applying the constructs of disruptive innovation, it has become a theory that is generally well understood and is being embraced by many small (and large) firms.

Startup Advisor

If you have some kind of field experience or have worked as a consultant for example, then becoming a startup advisor could be a great move. As opposed to advising large corporates, taking on smaller cases with early-stage startups might be a more exciting endeavour given the types of challenges that startups face in terms of product development, team building, commercialization, business modelling and funding for example. That being said, you will find that there are many kinds of startup advisors that advise (and provide mentorship) in a range of areas. Some you may come across include: finance, sales, operations, legal and engineering. What makes for a good advisor and what doesn’t? Many things really. The most important however is your reason for advising others. Why you do what you do is important and if having a positive impact on the world is your reason then putting your experience and skills to the service of others is a good way to realize such impact. Entrepreneurship is a very challenging path, and having good advisors to look out for a team and genuinely support them can make a real difference in the end result. Of course, to advise someone on something you will need some solid experience, be it from a past career or from your own previous startup experience.

Incubator & Accelerator

A startup incubator or accelerator can be vital for supporting startup teams in their early days when they may be lacking access to key skills, funding, knowledge and networks to move their venture forward. If you believe you’re good at facilitating things for others and connecting people together then an incubator or accelerator route might be an interesting option to consider. Most programmes tend to be based on a theme, e.g. startups in robotics, and include a demo day at the end. Thus, it is important to find your own niche and be able to put a team together to support you in the early development of a community of startups, advisors, investors and service-providers. Having project management experience and knowing how to acquire sponsorships can be a great start for someone looking to put their own incubator or accelerator together. Of course, location is key, thus it’s recommended to choose startup hubs such as London, Paris or Berlin for their concentration of people active in the world of startups.

Angel Investor

Many startup founders at some point kick the bucket and decide to move on into a different path. Some choose to become an advisor or mentor, while others may decide to choose a completely different career path. Some however, may choose to use their startup experience from being in the field and invest in new exciting ventures as an Angel Investor. Angel investing can certainly be fun and it can be a very flexible way to invest as you don’t really have to be accountable to anyone in terms of what you invest in and why. You can also participate in syndicates and angel groups to share the fun. So if regular mutual funds and real estate is doing it for you, you can always look into investing in startups here and there. As with any type of investment, learn more about what you intend to do before wiring your first 100k, as the lessons can be…well, costly so to say.

Venture Capital

Probably the toughest route you can take is to raise a venture capital fund and invest in a range of startups to make a return over a ten year period. Being a VC would allow you access to many different startup teams and ventures, which would dramatically improve your understanding of the whole startup ecosystem, the ins and outs of entrepreneurship as well as give you a solid know-how of different markets (depending on your fund’s strategy and thesis). This kind of access can be very challenging but also rewarding.

Although it is not for everyone, a venture capital fund can be a great way to not only participate directly in the ecosystem but also a way to create real tangible impact together with founders who you work with on a daily basis.

In fact, as opposed to a regular job, no day is the same as a VC. Whether you’re travelling to a startup event or meeting a founder for the first time to discuss a potential investment, your days will most likely be hectic, but never the same! The path to becoming a VC can be different for many. Furthermore, it is important for a fund to be able to differentiate itself from others and develop a model that truly fosters innovation. So if you are in it for the long-run then the VC route could be an option to consider.

Startup Podcast!

Some like to do it, while others rather talk about it. While it may be easier to set up relative to some of the other options we’ve laid down, starting your own podcast on the subject of startups can be done early-on, perhaps when you’re active or much later in life after you’ve had your fair share of experiences. There are various great podcasts out there that cover subjects ranging from funding mechanics or new technologies and their impact on the world, to putting venture teams together and acquiring grants for doing R&D for example. Depending on your chosen model, you can have a set panel or a different guest on every episode that discusses a set of topics together with the host. Podcasts can be very valuable for gaining insights and learning from others that may have done what you’re intending to do. It can also be a great vehicle for providing exposure to new ventures and founders that are working on amazing ideas with potential and build a community of people who are interested in the topics of technology, innovation and entrepreneurship. Finally, podcasts are a great way for sharing your experience with others and reach a very wide and global audience. In all, it is one of the most low-cost roles in terms of resources needed but may be one of the most rewarding roles to take on for some.

Bonus: Startup Guru

Perhaps not one of the roles to take on in the beginning — a guru is likely to be someone that has been around startups for a good while (think Yoda from Star Wars). Former investors, advisors, and founders who have been across the board and have gained valuable insight and wisdom over many years are those who could be considered as gurus of the startup economy! If you manage to have one of these mentor you then it’s a major achievement!

Every beginning is tough, so fear not! As a startup enthusiast it is good to ask yourself what you’d like to do in the big world of startups and innovation. Perhaps you can even ask others what they would think of you being an investor or a founder — feedback from your peers can be valuable in being able to make a good decision. As highlighted throughout this article, not everything is for everybody so it pays to know your skills and interests and choose roles that truly suit you. Of course, there is no harm in trying things out. For these instances, we recommend learning about the role more in-depth and even approaching investors, founders and advisors to get their feedback and points de vue. At N3F we like to welcome everyone who is an aspiring investor or founder for example — so feel free to drop us a message and request our take on things. If you are an avid technologist as we are, then know that we are in it for the long-term impact and change and understand that it takes these little steps to make big things happen.

All visuals in this article were sourced from the open-source platform unDraw.

This article was first published on n3fventures.com

For the past couple of years, our team has seen an innumerable amount of startups, investment deals and venture teams. We’ve seen many startups rise to success but many more tapping out somewhere along the way despite having promising products and teams behind them. Having done so, we have developed our very own thesis based on what we’ve seen that works when it comes to building a startup from scratch and making it a success on the long-run.

So who are we? N3F Ventures is an investment and development firm that assists tech startups with MVP execution and venture growth. As many already know, innovation is a combination of both invention AND adoption. Coming up with a cool piece of hardware or software is not enough in today’s competitive landscape. Getting the market to adopt new solutions and technologies is a challenge as well, especially if you are a startup entering an age-old industry where everyone is used to doing things a certain way. With a clear understanding of these challenges, we work together with startup teams to make their venture a success! 🥳

We operate across 4 main areas, including: (a) Investing, (b) Venture Growth, (c) Fundraising, (d) Exit Strategies, and are mainly active throughout Europe, Asia and LATAM. We work in a distributed team across these regions but you can find us in hubs such as London and Amsterdam for the most part.

When Do We Invest? 💶

We currently invest in a limited amount of startups per year. We mainly focus on the pre-seed stage for these investments and look for Alpha startups that are either pre-prototype or at the early prototype stage. Beyond the potential of an MVP, we cannot overemphasize the need for a strong and balanced startup team. Not only do we look for this, but it is one of the key ingredients for making things work in the later stages. As a minimum we expect a founder or two-person team with some mockups, early business model and convincing indications of a real market problem that can be solved with your solution. An initial pitch deck suffices to start the conversation with us.

In addition to investing, we like to be hands-on when it comes to venture growth. As such we assist startup teams in various areas such as sales, marketing, business development and recruitment. Sales is one of our core beliefs, and here’s why:

Turnover, Revenues, Sales 🎯

Startups rise and fall because of sales (amongst other reasons). As a founder, whether you opt to raise several rounds of funding or focus on getting customer sales from day one, ultimately, your startup will need to generate revenues in order for it to be a success. Having an innovative product alone will not be enough. As such, founders need to be wary of the choices they make, and how they spend their scarce resources, both tangible (e.g. capital) and intangible (e.g. time). Obviously, depending on your chosen business model it might not be possible to sell from day one. In some other cases it may be required to improve the prototype/MVP more before reaching a commercial launch stage. Whatever the case may be, having a business/revenue model that delivers sales is always better to have as opposed to one that doesn’t.

Thus, our main focus is to assist founders in developing sustainable business models that generate recurring revenues. Sustainable in this sense refers to a revenue model that can be sustained on the long-run, ensuring a steady cash inflow for the startup (can’t pay salaries with peanuts…). In doing so, growth can be financed through sales profit instead of having to raise additional funding. Whether we are developing a new GTM-strategy or finding new partners, we always look to build a foundation for the long-term, which is based on a product supported by a sustainable business model. Together with founders, we also support the growth of startups as a means to reach critical milestones. Looking for external funding afterwards is always possible but ultimately, things rise and fall with sales in our opinion.

In addition to a business model and high-potential market, we very much believe that a startup team is the foundation for success. A strong team will be balanced and realizes that it’s ok to make mistakes with the aim of improving the solution. All too often do we find startups with great product teams that lack business savviness and/or a working/viable business model. This is why we believe in assisting early-stage teams with talent acquisition and finding co-founders that match with the current mix of things. As any early-stage vc would tell you, the team is one of the most important parts of the investment decision equation, and this is for good reason. Without a good team pushing things forward in the same direction, it is virtually impossible to make a success out of a value proposition with potential.

N3F offers pre-seed and seed-stage ventures with real support as a means to navigate through the various ups and downs of the startup journey. Our team has been on every seat of the table, and is committed to discovering and investing resources into great solutions and teams that have a vision of changing the status-quo. Our approach is always hands-on with a clear understanding that we ourselves would want dedicated assistance on each aspect of what we’re doing should the tables have been turned.

Exit Strategies 🤝

Not all founders work on their startup until the end. Motivation, interests, opportunity and progress can be reasons for opting to exit a venture early. As a founder, you may have started with a lot of motivation to put things together but a year or two into it leads you to realize that it is not what you want to do (at least not everyday) anymore. Changes in a founder’s personal situation may also lead to the end of a startup in the early-stages — this tends to occur often, although those with strong conviction find a way to “restart the engine” somewhere down the line. Then there’s always the chance of bumping into a company or investor that wants to buy the whole startup. You may have developed an early version of the product for example and the potential is certainly there. Selling at this stage might be an idea to exit early and put your next venture plans into motion right away. Finally, being able to make progress as a startup is key. If it’s been several months without any meaningful progress then it’s good to look at what the roadblocks are. A startup may not be getting any new beta users, customers, or perhaps raising funding has proven to be a much more difficult endeavour than imagined. Whatever the reason, over 90% of startups fail due to a misaligned team, wrong business model, lack of P/M fit, insufficient capital etc.

In such cases we support founders (and their teams) in devising (early) exit strategies and execute these in order to deliver the best results possible. The main idea is to generate a return in line with all the sweat equity and effort put into the venture and getting it to its current stage (e.g. MVP developed, IP secured, partnerships closed, early customer traction etc.). After determining an initial valuation, we conduct due diligence on the entirety of the case and assist founders in finding a suitable buyer. Our role is always supportive, with the founding team being in the driver’s seat.

Raising Funding? 🚀

We also assist startups in organizing funding rounds to raise much needed financing. We tend to work on rounds between EUR 150k and EUR 5M for the most part but are open to working on larger Series A rounds as well using flexible terms. As part of the process, we conduct our own due diligence and assist in preparing the investment documents needed for the round. All of this to help identify red flags early-on and improve the overall strength of the investment case. We’ve seen that as a startup it is important to not oversell yourself or make claims you can’t substantiate. Claiming to have a partnership with Apple for example sounds great. However, if it turns out that your partnership is just you submitting your app to the App Store, then that might be somewhat of a turnoff for potential investors.

With fundraising rounds taking between three to six months on average to close, we partner with startup teams to guide them throughout the entire process as well as afterwards when it comes to execution and achieving milestones.

During the past years of activity, we have influenced the journey of various innovative ventures — thus we are wary that it takes serious effort to build successful (high-tech) ventures. Our long-term vision is to help usher in a new era of technological innovation and support teams that are working on exceptional solutions in terms of venture-building and funding. Thus, we are very much interested in hearing about frontier technologies that have true market potential! 😉

So if you’re working on something great feel free to reach out to us and let us know what you’re working on and how we could help!

All images in this article were sourced from Unsplash unless otherwise stated.

This article was first published on n3fventures.com