I have FOMO for not being there this year.
Pitching to 5-year olds
I’ll never forget when I realised the tides had turned.
Almost exactly one year ago, I was sitting on the train toward Sundsvall, where the Swedish fashion-tech-scale-up Renewcell was going to showcase their new cotton-recycling facility. Murmurs of a market slowdown had already been heard around town and in the business press. But now I got to hear it from the horse’s mouth. On the train was a person working closely with a very large VC firm, who described the changing market dynamics in the following terms:
– We still invest, but the difference is that now we are only looking for companies that we think can become profitable.
I almost choked on my paper cup coffee.
They were only looking for profitable companies! As opposed to…. what exactly?
Unprofitable businesses?
The interaction was more a sign of the times rather than a poor reflection of themselves.
We just exited the strongest economic boom in modern history, which sent venture capitalists in an investment frenzy. In a financial climate where interest rates are low and early investments can generate some 200x payouts, as in the case of DoorDash buying the Finnish food-delivery service Wolt, one can understand why investors are eager to get on the next band wagon.
As one lead-generator told me about the heyday of the covid years: “term sheets were flying out of the office.”
Fast forward to 2023 and the picture is less jolly.
Investments in the European ecosystem will reach €45Bn in 2023 according to The State of European Tech Report, published by VC-firm Atomico in collaboration with Helsinki tech event Slush.
That’s less than half of the record year 2021, when investment volumes surpassed $100B for the first time ever.
A temperature check on the projects that we are working on at Scandinavian MIND Agency reflects that cooling atmosphere. Several of our clients have not met their fundraising targets, and those on track to reach them have done so in much longer time frame than anticipated. Many VC funds are well-stocked, but the speed at which capital is deployed has significantly slowed town.
Needless to say, this climate is challenging when you run a consultancy targeting startup and scaleup companies. Thankfully, we have a diverse revenue stream, and a healthy media and events business to fall back on.
And the situation helps you refine your craft, and learn more about the dynamics of investors. I’ve written before about the roller coaster ride that is helping firms with fundraising, specifically around pitch deck development. Recently, I’ve gotten to learn more about how investors are thinking around
Working with a client in the fashion-tech space, I was recently on a call with an experienced investor in the European market that was mentoring the company in their fundraising journey.
When addressing our early draft of the pitch deck, the mentor exclaimed:
– There are too many words! You have to understand, VC companies are like 5-year olds. We like bright and shiny things and don’t read long sentences.
I thought that was some of the most helpful advice I’ve ever gotten from an investor.
Here are three other pieces of advice that might help you get ahead with investors:
1. Have patience. Fundraising takes time, a typical fundraising cycle is 8 months, and no one likes desperate entrepreneurs. Letting people know you are in it for the long haul is key.
2. Go international! If you are looking to raise a seed round, typically €1-3M, you might find your luck outside of the Nordics. If your solution is aimed at an international market, getting international investors will prove your concept even more.
3. In your pitch deck, explain things in detail, don’t use fancy acronyms. Write headlines that acts as takeaways for that slide. Going against my better nature as an eloquent magazine editor, I like this template on how to write headlines like McKinsey.
