What is Venture Debt?

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As an early stage startup, your most prominent concern is probably access to capital and securing the first 18 months. You do not want to see the fruits of your early work dying before they hit the market. You demand supplemental forms of financing that provide your company with the required capital at a reasonable cost.

Venture debt is an essential part of any entrepreneur’s toolkit to respond to this demand – but is it suitable for early-stage? We gathered in this 4 part series critical and general information on venture debt. We would like to give you an overview of this rising alternative to traditional Venture Capital by answering the most frequently asked questions we received during the last months.

 

So what is Venture Debt?

Venture debt is a form of debt financing for venture equity-backed companies that lack the assets or cash flow for traditional debt financing, or that want greater flexibility. Patrick Gordon, Kaufmann Fellows. 

Venture Debt is provided by banks, finance companies and funds and is generally structured as a three to a four-year term loan with warrants for company stock – enabling an equity kicker and serving as collateral to protect the downside.

Note:
Startup Valuation is always a challenge but we created a free tool for that!

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The expected returns on venture debt capitals usually range from 12–25% in monthly repayments in association with loan interest and equity returns. (IPFS, 2016) Lending to early-stage companies is riskier than the interest rates. Therefore, lenders also take warrants while lowering the rates. (Denning, 2017)

Venture debt is an attractive option to finance business because it amounts to less equity dilution and it does not require valuation and is, therefore, a fast alternative. (Trinity Capital Investment, 2018) Furthermore, venture lenders need no board seats, and in comparison with equity, the due diligence procedure is less time consuming – because they are collateralised in the first rank with equity.

 

There are generally three types of venture debts:

  • Growth capital is structured as a term loan and can be used to replace an equity round or provide additional working capital
  • Accounts receivable financing allows revenue generating startup companies to borrow against their accounts receivable items
  • Equipment financing is structured as a lease and is used for the purchase of equipment. (Alex Erhart, 2016)

 

In our next article, we will compare venture debt and venture capital and their differences.

E-Car-Pionier Henrik Fisker joins motec ventures

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The “Steve Jobs of the automotive industry“, Henrik Fisker, design icon and electric car pioneer, has joined forces with our joint venture motec ventures in an advisory capacity. motec ventures is an innovation platform and investment company with the aim of shaping the future of mobility as a link between European SMEs and high-tech start-ups. The cooperation was founded by us and e&Co AG, a leading consultant and investment company in Germany.

Fisker will support motec ventures managing directors Berthold Baurek-Karlic (CEO Venionaire Capital) and Geza Brugger (CEO of e&Co AG) through regular exchanges on technical and entrepreneurial topics – and Fisker Inc. will also invest in portfolio companies of motec ventures. “Henrik Fisker is, from my perspective, the Steve Jobs of the automotive world: a strong visionary and full-blooded entrepreneur with experience from both successful projects, as well as those that brought challenges and lessons learned. We are very much looking forward to working with Henrik and are pleased to have gained an experienced icon in the automotive and mobility industry”, says Geza Brugger, Co-Managing Director of motec ventures and Principal at e&Co.

Read the full story here:

  1. Autocar Professional, India
  2. Unitedworker.com, Germany
  3. Automobilwoche, Germany
  4. Wards Auto, USA
  5. Der Brutkasten, Austria
  6. Wirtschaftszeit, Austria
  7. electrive, Germany
  8. Autohaus, Germany
  9. intellicar, Germany
  10. Bolidenforum.de, Germany
  11. Autobeatdaily, USA
  12. Finanznachrichten, Germany
  13. Venture Daily, Newsletter, Germany
  14. Auto Information, PRINT, Austria
  15. Delaware Business Now, USA

 

Invest Europe: Key findings 2017

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Invest Europe published its annual report on investment and fundraising for the European private equity and venture capital industry. The report covers activity on over 1,250 firms, directly verified by fund managers using the European Data Cooperative (EDC). The EDC holds data from over 3,000 European private equity firms on 8,000 funds, 64,000 portfolio companies and 250,000 transactions since 2007. The research is recognised by coverage in the Financial Times.

 

The investment market is booming

Findings in the report paint a delightful picture of the Investment development in Europe. Fundraising reached €91.9 billion, surpassing 2016 by 12% and the highest level since 2006. Pension funds provided 29% of all capital raised, followed by funds of funds (20%), family offices & private individuals (15%), sovereign wealth funds (9%) and insurance companies (8%).

 

Private equity hits ten-year high

Simultaneously Private equity investment in European companies hit a ten-year high at €71.7 billion, a 29% year-on-year increase. Almost 7,000 companies received investment, of which 87% were small and medium-sized enterprises (SMEs). Divestments (measured at cost) increased by 7% to €42.7 billion. This is the third highest level of the past decade, with around 3,800 European companies exited in 2017. Venture capital investment increased by 34% to a ten-year high of €6.4bn, surpassing 2008’s amount by 13%. Nearly 3,800 companies were venture-backed, an 8% increase.

 

PE investments by industry

Companies focused on consumer goods and services in Europe received 15% more private equity investment compared to last year, representing 24% of the total. Almost equalling this were business-to-business products and services, increasing by 51% to account also for 24% of the total. The technology sector (ICT) reached a ten-year investment high, with 17% of the total, a year-on-year increase of 6%.

Geographical Distribution of the Investments

France and Benelux-based companies received 27% of private equity investments in 2017. Close behind was the UK & Ireland with 26%, followed by DACH-based companies (20%), Southern Europe (13%), the Nordics (9%) and CEE (5%).

 

Digital Revolution in Marketing – Growth Hacking

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Digitization turns our world upside down – new business models, new organizational structures, new management, increasing automation and experimental strategies based on data. Corporate management, controlling and marketing demand completely different skills today, then just 10 years ago. Business is changing in all means and this can be felt most clearly in marketing. Growth Hacking, the evolution of marketing – in many cases still smiled at as a “buzzword” – is eating Marketing for breakfast. NO – this is not about social media or another goofy new tool, Growth Hacking really is a totally new approach to digital marketing.

 

What is Growth Hacking?

Growth Hacking describes a discipline that combines various methods of digital marketing with the goal of efficient growth. It’s all about improving your so-called “NORTH STAR METRIC” – the one and only, most important, KPI – which is crucial to the success of your business. A Growth Hacker is an interdisciplinary marketing manager who understands virality, PR, SEO, SEM, product design (basics), UX, marketing tools (technology stack), email marketing, content marketing, funnel marketing, behavioral psychology, brand positioning, and storytelling. These disciplines are traditionally organized in separate departments in larger organizations – Growth Hackers combine those and act across them.

Growth hacking. Width of knowledge vs Depth of knowledge

Growth Hacking comes from startups, which are forced to grow as fast as possible with little human and financial resources. The better a startup may hack its growth, the faster its value increases and venture capital funds will, therefore, fund them round over round. Only those who are at the top in the race of start-ups receive venture capital and can thus continue their international triumphal march.

However, corporations and medium-sized businesses are also fascinated by the new methods that “conventional” agencies usually are not able to provide, yet. Growth Hacking does not require large teams, but creativity, speed, technical know-how (simple programming skills) and strong data analysis skills. The challenge lies in finding and developing this know-how or to hire it.

Unfortunately, there is still far too little experience in our latitudes with this discipline and the best work is often done at one or in a startup. The industry is clearly losing out in the “war of talents” in this area. In most cases one will have to invest in the targeted training of young talents – the first structured training courses are slowly emerging  (see Growth Base in cooperation with Lauder Business School).

Data & Experiments

Data is the greatest blessing of digitization, it allows targeted analytical action and is the basis for automated decisions. Growth hackers love data and use a so-called “technology stack” that helps them to work as efficient and automated as possible on the basis of true data. Check out the automated workflow of a SaaS company (e.g. CB Insights), in my opinion, is a perfect example of automation.

 

Marketing Stack Automation Flow by CBinsights.

The process improves best through ongoing analysis of data and iterative experiments. Texts, colors, the arrangement of links – everything plays a role – and growth hackers are constantly testing and experimenting how they can optimize the so-called “conversion rate”.

 

Become a Growth Hacker yourself!

If you’ve got an appetite for more – then it’s best to buy a few books, experiment a little yourself and work step by step to become the next Growth Hacker yourself. I’ll be happy to give you reading tips and link you to professional growth hackers from our network if there is a need.

Fundraising Playbook

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Raising capital is always difficult – on average Startups get rejected over 100 times before they close a sufficient seed-round (to be clear: Investors not FFF). It’s obvious that this process wastes a lot of times for founders, as they should be working on their products, services, technologies, and clients.

Having raised money for a lot of startups and SMEs in different stages over the last years, we have discovered a pattern which will make you successful in fundraising.

 

Our playbook in 7 steps

 

1.) Build relations

Build relations in times you are not running for an investment. Investors / Fund-Managers like to get to know founders and follow their progress early. This helps them to understand your business better and it will build trust in your management capabilities.

2.) Set a Schedule

Set yourself a timeframe (e.g. 2 weeks for Research, 3 weeks for approaching, 4 weeks for first-round calls and 2 months moving forward) and be realistic about it. Fundraising takes about 3 to 6 months. Set your self a strategy for your fundraising and stick to it. Investors will understand that you do not want to waste time – therefore it’s ok to communicate a timeframe and be transparent about it.

3.) Be prepared.

Make sure you have a good FAQ for all your fundraising partners prepared and all relevant documents – legal, financial, KPIs, technology, roadmaps, strategy papers, research, etc. – arranged in a data room, ready to be shared.

Professional investors need to be efficient as well, so make their lives as easy as possible and show them that you are prepared to raise funds now.

4.) Manage your process.

You will need to manage involved team-members, Business Angels and consultants – and maybe press (if you run transaction PR to increase visibility). Therefore you should use a professional software tool to manage your fundraising funnel, tasks, documents, reports, including a growing investors database – all in one place – like foundersuite.com.

 

5.) A good storyline

Make sure you have a good storyline for your campaign. Investors like traction, momentum, numbers (does not always have to be revenue) and it is important to support your fundraising campaign with a strong story which gets repeatedly updated during the process. Launch successful press releases of achieved milestones, partnerships or new alliances you have been able to close.
Drip this information – piece by piece – and communicate with your audience.

6.) Be realistic about your valuation

Some startups slam doors by calling for ridiculous valuations – this is simply stupid. You should know in which area your company should be valued, but it is always to signal that you are open for negotiations. Valuations and terms play together like a swiss-clockwork and you will have to find a good balance between them.

7.) Ask for more

Make sure you ask for more than money. It’s important to understand that early-stage Investing is not like calling a bank loan. The right investor will bring your company up to speed and be worth a fortune. His reputation can even be the underlying asset, which opens doors for next rounds and exits. Ask investors, why you should work with them instead of their competitors. All the best for your fundraising!

Finally, if you need advice or simply additional (professional) resources for fundraising – we are always happy to look at your deal and see if we can be of value for your venture.

 

The Austrian Startup Ecosystem – Strong as Ever!

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Note: You can read this article in German at DerBrutkasten.com.

 

For a long time, thinking about self-employment and entrepreneurship wasn’t a priority in Austria with high entry barriers (investments). Luckily, times have changed. Digitization has dramatically lowered these barriers. Today, anyone can come up with a good idea at the kitchen table and use it on their laptop, and soon after, business life begins. High investments in machinery and factories are no longer necessarily needed.

 

Beginning and end of the first VC funds

Only a few years ago, almost all initiatives within the Austrian startup ecosystem were run by the state. We experienced a market failure. The veterans of the venture capital scene Gert Reinhard Jonke (Venture Capital Funds), Michael Tojner (then venture investor behind BWIN), PONTIS Ventures and later Gamma Capital Partners had either already developed further, could no longer put together new funds, or have simply missed the advent of a new founder era. Startups in Austria were not completely at the beginning, but they needed new pioneers.

The beginning of the startup ecosystem 2.0

With Start Europe and later Pioneers Festival, the potential of the Austrian startup ecosystem and the need to catch up internationally became very clear. The most well-known early drivers of today’s startup ecosystem Speedinvest, i5Invest, Hansi Hansmann, Stefanie Pingitzer, Selma Prodanovic and our company (Venionaire was established in 2012) had initially a hard time to attract the attention from media, politics, and society. Even in 2015, it was too early to convince institutional investors on a larger scale, with many still licking their wounds from the dotcom bubble. Today, there are again efforts to address these investors, whether it will succeed to convince them this time is still uncertain.

 

Private initiatives are getting stronger

In addition, Austria hadn’t enough successful startup founders, who could support the ecosystem as mentors and investors after their exit. All of this has changed dramatically in recent years and the ecosystem has developed greatly – the number of investors has multiplied, established companies are regularly working actively with startups, and some government initiatives have done an excellent job creating a market that adapted the dynamics of the private sector. Above all, the commitment of institutional investors should be promoted so that Austria’s investment power will be further expanded. Especially in the field of high technology is still hidden potential that could be exploited through investments and technology transfer centers. The current strength of the scene can still be expanded!

 

In the next segment of this article, we present you an overview of the startup ecosystem in Austria from an investors perspective. This list was inspired by Bernhard Hauser’s blog and is build on his content. If an important player is missing, we are very happy if you shoot us a quick email.

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Business Angel Networks (private sector)

Mergers of Business Angels are not a new invention. They offer Angels several benefits, such as sharing experience, co-investing, or better dealflow. Networks, which (also) operate in Austria in alphabetical order:

Business Angel Network (public)

Venture Capital Fonds

Corporate Venture Capital

Acceleratoren

Company Builder / Incubator

Startup Zentren bzw. Innovation-Hubs

Training and Coaching for Investors / Startups

Next Level Leadership

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Last week, I traveled to San Francisco and Berkeley, California to join the exclusive professional classes of Innovation Orbit for the latest on leadership, innovation techniques, and how to change corporate culture.  Innovation Orbit is a global executive training program focusing on innovation strategies, culture and tools used by leading corporates, public entities and startups. The classes rotate between Vienna, Austria, Shanghai, China and San Francisco, California.  Next year, Nairobi, Kenya will be added.

Like leading MBA programs, the secret sauce in this program are the hand-picked, multi-cultural leading professionals with diverse backgrounds. The discussions and presentations covered the challenging topic about changing a ‘non-innovative’ corporate culture from the ground up.   The speakers reminded us of one very famous quote by Peter Drucker: “Culture eats strategy for breakfast.” This means that defining the right KPIs and training your managers is not enough.  Organizational leaders need to create a mindset and environment for change and motivates all stakeholders.

As important is identifying those who will never change.  This is probably one of the hardest things to do.  After last week, I am happy to share with you some simple “rules & tools” to make this happen.

 

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Change starts with me

If you are willing to change as a manager you have a chance to change your corporate system. Like a human body you will naturally face anti-bodies within your organizational system which are simply not ready to adopt change right from the beginning (expect this group to be something like 20% of our colleagues) and a large group of around 60% who will see what’s coming up “new” – being indifferent – and the rest will be ready to adopt and drive change with you. Follow this last group and forget about those, who are not willing to see the future of a better, more creative and inspiring working environment.

 

People support what they create

One of the most important drivers of corporate culture is the commitment and drive of all managers, across hierarchies, within your organization. Peter Drucker once said “Culture eats strategy for Breakfast” and this the Damocles Sword everybody in Silicon Valley will remind you over and over again. You need to reduce the negative factor of managing people from distance by involving them directly. Managers need to see the future and be the natural creators of change that happens within your organization. Experienced Managers suggested the concept of GEMBA walks in order to make managers start to understand an organization from the ground up again, instead of falling into the so-called “Melon Trap”.

 

Change happens in the here and now

If you are willing to change – don’t wait. It is never the right moment and it will never be better. Your personal work-life-balance is bullshit, if you realize and be honest with you that work will always eat up a little more of your time than family because this is what you live off – BUT you can make a difference concentrating on tasks and projects which give you energy instead of fighting against windmills that eventually drive you into burnout.

 

Cultural Change is not esoteric

I believe everything you do only make sense if you measure your performance. This is the most simple tool you may use for reflection and you need to take into account that measurement always come with a human misbehavior or misperception (not important if this happens on purpose due to biased reporting – or not). 4 KPIs should help you to consciously drive change in your system and make a true difference.

  • OHI (Organisational Health Index) by McKinsey
  • ESAT (Employee Satisfaction)
  • CSAT (Customer Satisfaction)
  • CASHFLOW improvement

 

5 things you should train your management

Whatever you do needs to be driven and created by the management itself, therefore you need to make sure they are the right role models and that they live values rather than only talking about a mission. Train your managers constantly in 5 different fields and make them true leaders and drivers of your next level leadership team.

  • Nutrition
  • Mindfulness
  • Constellation (like Family Constellations / Aufstellungen)
  • Design Thinking
  • Rapid Prototyping

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Interested in learning more about leadership, next level innovation and the future of corporate organizational design? Contact us and see what you can learn from the fastest companies in the world out of Silicon Valley and China.

Startups meet Lederhosen – Bits & Pretzels 2017

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© Featured Picture: Andreas Gebert

 

At this time of the year (September) Munich is full of people from around the globe where Lederhosen or Dirndls – it is the time of the traditional Oktoberfest. A festival rather known for beer, Volksmusik, celebrities, and traditional Bavarian food – but there is also the largest and one of the most impressive Startup Events happening alongside this event “Bits & Pretzels”. The founders, three successful entrepreneurs from Munich, claim they want to host the coolest Startup Festival in Europe and they do.

Where else do you find so many international top speakers, but a limited number of guests (around 3.000) in a loose atmosphere inspired by a Volksfest like Oktoberfest – this is hard to beat. We simply love the concept and proud partners for this event.

Bits & Pretzels still was a little bit of an insider tip to the Austrian Startup Ecosystem – but this radically changed. We have seen a large delegation of fellow Austrian Investors and Entrepreneurs at Bits & Pretzels. It was amazing to see that our ecosystem organized themselves very fast through WhatsApp – sharing impressions, tips where the cool things are happening or simply gathering everyone together for a small “after work” beer. We have met great people and hope everyone is coming back next year.

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The highlight of this year’s conference besides a great lineup of Corporate Venture Capital Players (among them Raiffeisen Bank Internationals – Elevator Lab) was definitely the announcement of Kevin Spacey (Opening Keynote Speaker 2016) as new Partner of the event. He will open his network and secure more international speakers out of his personal network and I am sure 2018 will move the level up a notch again. Kevin Spacey was all over the event, engaged with startups and took selfies with a lot of fans – much more open and easy going like someone would expect.

Our Partner Alexander Rapatz with Kevin Spacey at the Speakers Dinner.

Our Partner Alexander Rapatz with Kevin Spacey at the Speakers Dinner.

This year, opening Keynote was held by German Godfather of Soft-Comedy and Self-made multi-millionaire – Stefan Raab. He was funny, yes – he is a star, yes – but IMHO he did not rock the stage. I did miss him at the rest of the event. Famous soccer stars like Philipp Lahm (World Champion & Business Angel) and Oliver Kahn where all over the place and open to speak to random visitors. I was more impressed by those who spoke excellent on stage and stayed for the rest of the show … this is what such a festival is about. Be open and network – built relations and get inspired!

Startups did also profit from this years event – Dealmatrix (one of our Portfolio Companies) was a partner of the conference and busy for two days at their booth. “Something changed – everybody this year realized that they need a smart tool to manage deal flow and improve scouting capabilities. We signed more than 60 new clients at the conference and we will follow up with more than 100 contacts”, explains Christoph Drescher (Founder of Dealmatrix).

Christoph Drescher, der Founder & CEO von DealMatrix, im Live Gespräch über seine Innovation Scouting und Dealflow Management Platform, die bei Bits & Pretzels voll im Einsatz ist.

Gepostet von DerBrutkasten am Montag, 25. September 2017

 

And our European Super Angels Club – selected the smart butler “myAlfred” (currently in NEXTAmsterdams Accelerator) out of all 70 Bits & Pretzels finalists. Read more here.

Find out more about the European Super Angels Club and how your startup could profit. 

Karrieremeldung: Ex-Raiffeisen-Manager Solonar unterstützt Fonds von Heinrich Prokop

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Der aus der Puls4-Show „2 Minuten 2 Millionen“ bekannte Startup-Investor Heinrich Prokop hat den Finanzexperten Raimund Solonar für seinen Fonds Clever Clover gewonnen. Solonar unterstützt als Senior Advisor die finanziellen Belange der Portfolio-Unternehmen und wird zudem bei Exitverhandlungen sein Know-how einbringen.

„Raimund Solonar ist ein erfahrener Fonds-Manager der 40 Jahre Wissen in der Finanzwelt mitbringt. Sein internationales Netzwerk wird uns entscheidend beim Fundraising des zweiten Fonds unterstützen, mit dem wir qualifizierten Investoren die Möglichkeit geben, in zukunftsträchtige Unternehmen aus Handel und Fast Moving Consumer Goods zu investieren“, sagt Prokop.

Bankenmanager und politische Karriere
Solonar war zuletzt als Geschäftsführer der CARY Austria GmbH tätig, wo er unter anderem Kunden bei der Strukturierung und Verwaltung von Fonds beriet. Davor war der Wiener als Vorstandsvorsitzender der Raiffeisen Centropa Invest AG tätig, dessen 100 Millionen Euro Centropa Regional Fund in zentraleuropäische Unternehmen sowie in Staats- und Unternehmensanleihen investierte.

Der Top-Manager begann seine Karriere im Wertpapierbereich der Girozentrale, von wo er nach kurzer Tätigkeit bei der Chase Manhattan in New York nach London ging und dort den Wertpapierhandel der Girozentrale aufbaute. Danach betraute ihn die Bank mit dem Aufbau und der Leitung der Girozentrale New York. 1990 wurde er Generalsekretär der ÖVP. Nach seiner politischen Karriere leitete er das gesamte Kreditgeschäft der Girozentrale. Es folgte die Berufung als Vorstandsvorsitzender der M&A Bank und der Aufbau des Auslandsgeschäftes der ÖVAG.

Über Clever Clover
Clever Clover ist eine Venture Capital Firma in Amsterdam und Wien. Das Unternehmen fokussiert auf innovative Ideen und neue Geschäftsmodelle in traditionellen Branchen. Clever Clover hat eine Reihe von Partnerschaften mit innovativen, frühphasigen Unternehmen in den Sektoren Lebensmittel, Reisen, Freizeit und Fertigung geschlossen und unterstützt diese durch Investitionen, Wissen und ein umfassendes Experten-Netzwerk. www.cleverclover.vc

Kevin Spacey at the Bits & Pretzels Founders Festival 2017

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Great news from the largest German start-up conference Bits & Pretzels: Hollywood actor Kevin Spacey comes back to Munich.

The largest German Founders Festival brings together more than 5,000 founders, start-up enthusiasts, investors and key decision-makers from the startup ecosystem, including many top CEOs, as well as the founders of Airbnb, Delivery Hero, Zendesk and many more successful startups. The festival ends with the grand finale at the traditional Munich Oktoberfest.

Last year Kevin Spacey held the opening speech and visited the Oktoberfest. The team is now pleased to announce that Kevin Spacey will return to Munich to attend the Bits & Pretzels Festival.

In addition to his success in the film sector Spacey is an investor in various start-ups and technology companies, and a world-renowned speaker at tech conferences. Among other things, he already inspired the audience of the World Economic Forum in Davos. There he talked about the art of storytelling and its role in the future of technology.

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