"I hear everything and its opposite about fundraising, I don't know what to think"

A few clarifications for those who are lost in the jungle of information on fundraising

"My cousin raised 2 million euros without making any sales. Why am I being asked to make over a million in sales already?"

First, good for your cousin, that's great. But here are some questions to ask yourself before you cry foul:

- how much money did your cousin personally invest in the company?

- there was no turnover, ok, but there was certainly something, what we call "an asset" in the company: a patent, an order book, a proprietary technology...

- Who did he raise this money from? Perhaps he knew his investor well, for years, and therefore this investor may have great confidence in this entrepreneur

- what is his professional background? He may have already created or taken over and sold one or more companies with great success, making a lot of money for an investor in the process... We then talk about "Serial Entrepreneur", which is a specific "box" in the investors' grid. Some investors have set as an investment strategy to invest mainly in companies created by Serial Entrepreneurs.

- What is the activity of the company? It may be a business or a sector that is currently in high demand for one reason or another. Many exits may have taken place recently with very high valuations; some limited partners of the fund in question may have given the investment instructions to invest specifically in a certain sector, etc.

- what are the terms of the investment? How much of his capital did he give up for this amount? How much will the investor get back at least when the company is sold? He may have signed for a preferential liquidation clause of x4 in favor of the investor, which means that as long as the investor has not made x4, your cousin will get nothing when selling his company, even if he holds the majority of the capital...

As you can see, each deal is unique, just like each company! What do company A selling instant soup via the retail market have in common with company B selling cash management software directly to SMEs? And yet they may look the same on paper: same sales, same number of customers, same number of employees perhaps... Their valuation will be different and their power of attraction on investors too!

>> Generally, in France, in the "Venture" ecosystem in the broad sense, an entrepreneur raises between 0.5 and 2 years of the current year's turnover. Obviously, this is only an empirical observation of what we see on the market, there are always exceptions!

"So-and-so told me my company was worth so much and another told me it was worth much more. Who to believe?"

Aaah, valuation questions... Here's a good answer: your company is worth the price you find on the market!

If you find a buyer for your company at the price of 10 million euros, well, we can say that's its value! You can also apply revenue multiples from companies with a business model comparable to yours. In truth, the valuation of your company will be made during your round of financing and will most often be dictated by your investor! And even then, it will only be a virtual valuation, especially if your company loses money... If you want to sell it one day, it would be better if it makes money!

Of course, there are always exceptions. Some companies have sold for a lot of money even though they were not making any money or were not making any money at all. But in this case, they all had a unique strategic asset: hundreds of millions of users (Instagram), cutting-edge technology that surpassed the acquirer's (PriceMatch), a crack team (this is called an "acqui-hire")...

"Raising capital from an investment fund is the only way to finance a startup."

Fortunately, this is not true! Today, there are many ways to find fuel to accelerate: crowdfunding, gas pedals, BA networks, corporates, bank and BPI loans, associations, foundations and other private or public organizations... You can't imagine the number of entrepreneurs who manage to raise 100, 200, 300k€ thanks to these actors, most often in non-dilutive.

There is also a very healthy way to finance your business: use your customers' money! If you quickly reach profitability, you can use this money to finance your growth, your investments (we talk about self-financing)! Of course, this is often not enough. But it's a good start!

"There's no point in being profitable, what counts is growth".

So, yes and no. It's true that most startups prioritize growth over profitability. But keep in mind that this is and should be temporary! The long-term survival of a business is necessarily through profitability. There is a point where injecting cash into a company has its limits, if it is to destroy value!

Making sure that your company makes money is to ensure a comfortable position, a serenity that changes everything. If you can hold on without raising money, you are in a position to negotiate the conditions of your financing. If not, the investor knows it and will impose his conditions on you, which you will have no choice but to accept. Remember that a business often takes a decade to really emerge. It's a long term process.

One of the important points is to show a good profitability in gross margin and, better, in contribution margin. It is the famous LTV / CAC equation that counts! How much each customer brings me in gross margin over its lifetime and how much it costs me to acquire. Generally, it is estimated (see the entrepreneurial literature such as "Customer Development" by Steve Blank) that a customer must bring in at least 3 times what you spent to acquire him and that your CAC must be paid back in less than 12 months. The best is obviously to make a customer profitable from his first order and the grail is to impose a recurring payment.

"What's the point of making a concrete financial plan and a very neat PPT presentation? What matters is the quality of my business, period. The rest is just talk".

On paper, you are right. Except that. Put yourself in the shoes of an investor for two minutes. You arrive at the office in the morning, you open your computer, it's 9:02 am and already 2 or 3 new startup files arrive by email. On top of the 10 files from the day before that you haven't yet processed. You are literally invaded by startup files: Business Plans, Executive Summaries, Pitch Decks... Startup A's file is poorly designed, not very happy, written in jargonous terms, with figures that seem inconsistent with each other. File B is beautiful, pleasant to read and in 1 minute you have understood the startup's business model. Which one sticks in your mind? Which of the 2 entrepreneurs do you want to meet? CQFD...

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