Company valuations – especially startup valuations – remain an art based on experience. We expect to see cuts of over 50% and tougher terms. Higher liquidation-preferences (multiples 2 to 3x) will be the new normal. The numbers about in this article reflect the current market view, based on feedback our valuation and transaction specialists gathered through interviews last week.
Investors who ‘oppose’ COVID-19 crisis
The ongoing pandemic crisis is a shock for our economy. Startups were particularly severely hit by the market turbulences and ongoing governmental restrictions. In a lot of countries governmental rescue mechanisms do not consider startups in particular – we say, it is playing with fire leaving them all on their own or even to abandon them. France has done the best job so far when they introduced their EUR 4.3b plan to support startups, followed by Germany with a number of different programs for the vibrant startup ecosystems of Berlin, Munich and Hamburg. A lot of investors – in particular Business Angels – have trouble saving their main (family) business and focus currently on helping their portfolio companies.
Most venture funds have reacted the same way. Nevertheless, there are quite a few investors who are still investing. You may expect them to be as selective as they were before and – beware – some of them might look for bargain deals during the crisis. A recently published crowd-sourced list (still work in progress) or a list by Techstars show all investors, who are still investing.
BUT STAY CALM! Even if you desperately need funding, make sure you do not just contact hundreds of funds in an act of desperation – just because you found a list! Stay calm and think rational! Make sure you get proper introductions to the investors who make the most sense for your business. Read the investment criteria carefully before you reach out to investors. Pitching online is also quite different – we recommend to check out this free tutorial video to improve you skills.
DON’T BE BOLD. It is a deep crisis and you should hit the breaks if you face uncertainty. Cut your burn-rate, extend your run-way. Down-rounds might be the result and a long fundraising winter might be the mid- to long-term reality of this crisis. Come up with a survival strategy and have it ready, when talking to investors. VentureBeat nailed this in a recent article – we highly recommend to read this one.
We highly recommend to apply at European Super Angels Club – Europe’s leading investors network, if your company is within the investment scope of the club. Venionaire Capital´s analyst- and transaction team supports the club in selection of startups alongside partners of KPMG Austria. Members range from Family Offices, High-Net-Worth Private Individuals to Corporate Venture Capital Funds – a network of thousands of potential investors.
If you need any assistance – don’t hesitate to reach out to us. We support startups in fundraising day-in and day-out – who knows, maybe we have a fit and we can leverage your efforts to raise a successful round.
About the author: Berthold Baurek-Karlic is Founder and CEO of Venionaire Capital, with many years of experience as a serial entrepreneur, corporate finance expert and early-stage investor. He supports the startup ecosystem in various roles such as President of the European Super Angels Club, Board of Austrian Private Equity and Venture Capital Association and General Secretary of Business Angel Institute.
We have collected 100 thoughts, resources and questions from CEOs, in four core fields of attention, for you. Reflect for yourself and see, if there is a better chance to adapt your business. Try to consider this crisis as a unique opportunity to revisit and redefine processes and ways of doing business. And, if there are synergies to leverage together we are eager to hear from you!
The recent Coronavirus crisis forced many of us into unexplored territory – everybody became a remote worker overnight. Considering our place of work is an essential part of our corporate DNA, the requirements of different generations, laws and regulations – this is a challenge for entrepreneurs in any industry. It is a balancing act between legality, sanity, freedom, and efficiency in the new working conditions. Some of our clients adjust better, others move projects to Q3 2020 or cancel them completely. In our case that will not be necessary; we will offer the European Super Angels Club events, as well as Business Angel Institute trainings an option to be held online – we have all the necessary tools in place and have already done so in the past.
It looks highly likely that we will come out of this crisis with a new working culture. Sales estimates of video-calling and integrated communications solutions, like Grape and Phone-Automation systems, like Yodel.io, are going through the roof. Even Digital Team Österreich (an initiative from the Digital Ministry in Austria) is helping SME’s to find attractive solutions and special offers for any company in need of such services right now.
Not everyone can adapt to the new working environment equally. For most people, remote work is still a relative novelty. Even though laptops, cloud solutions and video calls are often supplementary to traditional office work, things become substantially more difficult once the entire team goes remote. It feels a little odd and you have to adapt and find ways to keep up your company culture – which can be tricky. There is certainly a lot we can learn from startups when it comes to remote work. Most millennials and startup founders practically grew up in remote teams at schools and universities. Global startups commonly have distributed teams, and some even work as digital nomads (while living on the beach or traveling the world). Some of our portfolio startups (in particular Grape, Butleroy and YodelTalk)have shared their learnings from previous years in blog articles (eg. Remote Work Checklist Guide, The World is Your Office), which we highly recommend reading).
We have summarized our personal, as well as learnings and insights of our startups for you in this article and hope sharing these will help you to work more efficiently from home in the coming weeks and maybe even beyond.
1. Be present and communicative with colleagues and clients
In order to be present and available for your team while working remotely, we recommend using a high-quality communication software. At Venionaire, we opened all our employees an account in an advanced unified communication platform named GRAPE.io. We also invite external project partners and clients to the same platform, albeit with restricted access.
We used to use WhatsApp groups for informal communication within our team; however, with everyone now working 100% remotely, we needed a much stronger solution, where we would not lose track of projects and developments. We needed to get a solution, which allows us to invite clients into private rooms and enables video chats, sharing of documents, and reduces the number of tabs open in our browsers. Switching between 5 to 10 solutions in parallel can drive you crazy really fast.
For those depending on multiple SaaS products (and working on a Mac) we highly recommend Stack, a specialized browser for multitaskers. Setting up our solutions only took a couple of minutes to structure the chatrooms and user-settings and some guidelines on how to work with the new tools. After only one day, we are good to go and everyone seems to have accepted it.
2. Set remote working guidelines
In our case, we have set very basic standards of communications – we say “hi” when we check in in the morning, we say our goodbyes before we go offline. Lunch and coffee breaks are still as important as before – therefore we encourage our team to chat during breaks and keep up social ties within the team. We use a separate chatroom for off-topic conversations and private video chats. We encourage our employees to use this for the sake of social relations and exchange while drinking a coffee.
Due to higher amounts of calls, email and chat-messaging through all kinds of channels, we encourage to plan in some “buffer-time” between meetings and in addition, introduced the concept of Timeboxing. We block times for internal meetings, for emails, for calls (internally and with clients) – this way our days and the workweek have a clear structure.This concept makes it easier for team-members and partners to engage with you, when you are ready for them.
My workweek is structured very simple and looks like this for myself:
- Meeting Monday – Internal Meetings (only), here tasks and targets for all team members are set
- Project Tuesday – Project Teams work on their milestones
- Relationship Wednesday – Schedule (Video) Calls with clients
- Silent Thursday – Take time to get your stuff done, with as little disturbances as possible
- Client Friday – (Video) Calls with existing clients, partners, and all other external stakeholders
4. Set your top 3 priorities a day
As we cannot simply walk by our colleagues and get a sense for their current stress level and resource allocation, things need to be done differently. Every team member needs to be transparent about their work schedule, tasks and targets, and share it pro-actively amongst colleagues. For the sake of simplicity, we ask for 3 main priorities for the day to be shared. A personal checklist will naturally have more sub-tasks, however 3 topics of the day are enough to give an idea of the workload and rough schedule.
If a job or task is done – we pro-actively share it in our team chat and tag a manager to make sure this is noticed.
5. Set limits for how much you work
Unless you’re working on a deadline, limit your workday. Schedule breaks at least every two hours and save time for sports. On a normal workday you would sit in the car or public-transport for 30minutes or maybe even more – use this time for physical activity. You will be most productive, if you set yourself goals and a timeline to deliver them. Create a balance so that you can enjoy your surroundings, take time for yourself and your family, which requires your support in troubling times such as these.
6. Be patient with your colleagues
Try to remember that nobody chose to be in the situation we find ourselves these days. Some adapt quicker, some slower – some struggle, some handle it more easily. This is a challenge, but at the same time an opportunity. It is important to share experiences and to listen to your colleagues when they share their personal situation and difficulties – we should all learn from each other and support each other every day. It’s up to you to ensure everyone else feels comfortable and welcome!
7. Congratulate yourself (even if it is weird)
Praise yourself when you get something done. Working remotely is a challenge. It may look easy – looking at digital nomads and startups from the outside. Inquire deeper, however, and those who are honest will confess that they smile after every hurdle they jump over – keep on celebrating your wins and involve your team in it (even if it´s only on video)!
About the author: Berthold Baurek-Karlic is Founder and CEO of Venionaire Capital, with many years of experience as a serial entrepreneur, corporate finance expert and early stage investor. He supports the startup ecosystem in various roles such as President of the European Super Angels Club, Board of Austrian Private Equity and Venture Capital Association and General Secretary of Business Angel Institute.
The Venture Capital Method is often used for valuing early-stage companies. We show you how it is done.
Fundraising is as much an art as it is hard work! We show you how it is done.
We will share 5 easy hacks to boost your fundraising efforts and recommend following them by heart! Life and death of a venture depends on liquidity and this usually implies multiple rounds of investments.
Silicon Valley Bank (SVB) is famous worldwide for its specialist banking services for the startup and venture industry. Having established a branch in London in 2012 which now employs 200 people, they have now opened a subsidiary in Frankfurt, Germany which will service the emerging European tech industry with venture debt services and products. Unfortunately, bank accounts for startups or VCs are still unavailable, as Frankfurt is a subsidiary office and does not yet have a full banking licence.
Munich played host to the opening party of SVB’s new branch in Frankfurt last week, its first on the continental mainland. It was a key investment meetup with private equity firms, partners of venture funds and family offices, as well as the European Super Angels Club.
Silicon Valley Bank offers a very unique set of debt products, which are very useful for funds, attractive to growth-stage startups and last but not least the bank has the world’s best network of investors. We are looking forward to working with SVB, explains Berthold Baurek-Karlic, President of European Super Angels Club after his return to Vienna.
Download the SVB presentation and find out what they can offer you!
Europe is under-estimated
It is a strategic decision of SVB to launch their first European mainland office in Germany. According to a recent report by London-based Frontline Ventures and Speedinvest, the German-speaking countries represents a very fertile breeding ground for tech ventures, with a reasonably homogenous market of 100m German speakers whose GDP/capita exceeds €48.000, a full 50% above the EU average and a smartphone penetration of 67%. If the region can fully leverage their position in the centre of Europe, use the (relative cheap and highly skilled) developer talent from Eastern Europe and match it with the increasing amounts of capital available (10 funds have launched over the past 18 months with a combined value in excess of €1bn), it could translate its historic high-tech goods manufacturing strength to IP-rich tech that is likely to dominate the next century.
Pan-European Networks are key
As VC investment activity continues to grow across Europe, with €16.9bn being invested over 3,306 deals, also Switzerland, Germany, and Austria have followed the trend of fewer and larger sized deals. However, if the region fundraising game remains fragmented, it will always underperform its potential. That’s why our pan-European networks of angel investors, family offices, corporate venture capitalists exists: to help build this ecosystem and connect it to the rest of the world.
With ESAC, business angels no longer have to rely on the best startups magically popping up by coincidence and founders are no longer tied to a limited network in their surrounding area. For more information about the European Super Angels Club please visit www.superangels.club.
On the 15th of January 2018, the Austrian law on Economic Ownership Register (wirtschaftliche Eigentümer Registergesetz – WiEReG) enters into force. The purpose of this register is to make ultimate beneficial owners transparent and verifiable and preventing money laundering and terrorist financing. The European Union ascertained a need to identify any natural person who exercises control over a legal entity. Europe argues that the need for up-to-date information on the beneficial owner is a key factor in tracing criminals who might otherwise hide their identity behind a corporate structure. WiEReG is implementing in Austria the European Directive 2015/849, also known as Fourth Money Laundering Directive. From the beginning of 2018, all direct or indirect ultimate beneficial owners with shares of more than 25% in an Austrian legal entity are to be entered into the new register.
What has to be registered?
The beneficial owners of a legal entity are to be registered. This includes any natural person who directly or indirectly has sufficient shares to exercise control over the management of a company. In this case, a direct beneficial owner has to register if he has a 25% + 1 share of the shares or a holding of more than 25% shares in an Austrian company. An indirect beneficial owner (i.e. indirectly through a group of companies) shall register if they have more than 25% shares of a legal entity. If no natural person as an economic owner can be ascertained, the members of the highest management level of the legal entity (managing director, board member) shall be deemed to be economic owners.
The name, date of birth, nationality, place of residence as well as the nature and extent of the economic interest or the extent of the participation or function of the person concerned shall be indicated.
The bodies with full powers of representation of all companies and legal entities must report the requested and relevant data by 1st June 2018. For newly founded companies from May 2018, generally, a 4-week deadline for the announcement of the economic ownership applies.
How to register?
Registering of legal entities can be made electronically on the website of the Austrian so-called Unternehmensserviceportal (USP). All registered legal entities have the right to access their data (free of charge) collected in USP. Tax and financial authorities are also entitled to have access to the data in the register, as well as interested parties for the purpose of prevention of money laundering and terrorist financing.
In order to ensure compliance with the reporting requirements, WiEReG provides for fines. If the legal entity omits the notification, makes unauthorized access or registers incorrect data, makes for a punishable offense, punished up to 200.000 € or imprisonment. We are happy to advise on and provide you with more detailed information about the WiEReG and the legal framework behind it. Therefore, feel free to reach out to our Partner Alexander Rapatz.
- DIRECTIVE (EU) 2015/849 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012. https://bit.ly/2xKX8k4
- Legal Text- Wirtschaftliche Eigentümer Registergesetz https://bit.ly/2yaPDPh
- Unternehmensserviceportal, https://www.usp.gv.at/Portal.Node/usp/public
Crowdinvesting as we know it today, began to gain traction in the wake of the 2008 global financial crisis, as raising capital through traditional institutions was becoming evermore difficult. Crowdinvesting was originally seen as a much-needed solution to the long-standing funding gap but this model soon proved itself as a legitimate source of investment. Although crowdfunding and crowdinvesting have experienced significant growth in recent years.
We want to give you an insight about Alternative Finance and especially about the European crowdinvesting market. As terms of Alternative Finance are often used wrongly, we want to give you first an overview of the three most common types:
What is crowdinvesting?
- Equity-based: purchase of company shares, usually from early-stage firms to investors.
- Mezzanine-based: debt capital that gives the lender the right to convert to an equity interest if the loan is not paid back on time and in full.
- Debt-based: lenders receive a non-collateralized debt obligation, typically paid back over an extended period of time. Similar in structure to purchasing a bond, but with different rights and obligations.
- Others: ghost shares, profit-sharing, exit-participation etc.
What is crowdfunding?
- Donation-based: no legally binding financial obligation incurred by the recipient to the donor and no financial or material returns are expected by the donor.
- Reward-based: backers have an expectation that recipients will provide a tangible (but non-financial) reward or product in exchange for their contribution.
What is peer-to-peer lending?
- Business lending: debt-based transactions between individual or institutional investors and existing businesses (usually SMEs).
- Consumer lending: debt-based transactions between individuals, most commonly unsecured personal loans.
Alternative Finance in Europe
In 2014, the cumulative European market size for alternative finance added up to €2,955.3m. Overall the whole sector grew by a 3-year average growth rate of 146%, which was made up by an increase of 149% from 2012 to 2013 and 144% from 2013 to 2014.
A closer look at the transaction volumes of different alternative finance models reveals that the market’s sustainable growth stems from its various sub-markets. From 2012 to 2014 most of these doubled in size, whereas individual ones even tripled (peer-to-peer business lending, invoice trading, and crowdinvesting). Thus, the European alternative finance market certainly has achieved strong and diversified growth.
Market Potential for Crowdinvesting
In years past, crowdfunding as a means of financing a business was more of a novelty. Today, announcing a crowdfunding campaign is just as common as any other traditional financing possibility, if not more so. With a market size of €173.6m, in 2014 it is difficult to overlook its macroeconomic importance. However, crowdinvesting has already overtaken crowdfunding in terms of volume. Following the previously introduced taxonomy, the market potential for crowinvesting has increased steadily over the past few years. With an average annual growth rate of 195% over the last three years, the European market for crowdinvesting has developed rapidly, from €24.9m in 2012 to €90.2m in 2013 and €205.2m in 2014. This is particularly remarkable compared to an average growth rate of 129% on the market for crowdfunding. An end of this growing phase is not in sight, as the crowdinvesting market profits from the also fast growing startup ecosystem in Europe.
If you are interested in learning more about Crowdinvesting in Austria, Switzerland and Germany, the legal framework behind it, and further trends in the market, we highly recommend you to download our 100% free report on Alternative Finance.