Glenn Jones

Hello 👋 Welcome to my corner of the internet. I write here about the different challenges I encounter, and the projects I work on. Find out more about me.

Learning from a failed contech funding round during a funding downturn, in the Netherlands (Q1/Q2 2023)

Preparing for a good process

Hi <first name>,

<introduce yourself in one line>. I’m approaching you because I see a strong match with <fund name>‘s investment philosophy: <investment thesis summary in one line> and previous investments <investment A> and <investment B>. I think <company name> might be interesting for you.

<One line pitch: what you do - how you do it - how you are unique>

< Max 5 brief bullet points that illustrate your potential & traction, skew towards irrefutable figures >

We are seeking investment to <operational purpose of investment>.

Deck: <docsend link>

Could this be interesting for you and your firm? I’d love to discuss our approach and plan with you. Would you be interested in a brief call?

Thank you for your time,

<your name and company name>

Specifics to our process

This was a full-time process, planned to be one quarter, eventually turning into 8 months. It requires a lot of time, and as an experienced founder told me during the first weeks of the process “fundraising is either very easy or very hard”. It is hard to combine fundraising with engineering responsibilities.

I started with “C” matches to finetune the messaging and practise the pitching. As I was new to the venture capital world, I opted for cold-emailing.

We received a lot of interaction; many opens, subsequent opens, replies, calls.

Investors penetrated the plan incredibly fast. We received replies with varied feedback, processed the comments and adjusted the deck accordingly.

Over a few months the proces boiled down to 3 interested investors, one a group of local angels, then an American seed fund which did small bets, then a local relatively new but wealthy company (I’ll refer to them as party III).

Party III

This party was a strategic investor. They were a real estate developer with, these are their own words, a huge repertoire of new developments and a large holding of real estate. Due diligence on our part confirmed they did have capital to invest. During the process of edging towards terms, a number of red flags appeared:

Learnings

  1. Red flags during a process do not magically dissipate when coming closer to the actual terms. In our case, these were all in bad faith, and uniquely served to improve their position and worsen ours.
  2. It would have been better to have “ran by” the status of the fundraising with experienced entrepreneurs in our network. I think this would have busted the “fantasy” me and my co-founder were maintaining in our heads about the possibility of the deal.
  3. There is a lot of online advise about dealing with the fundraising process and with investors. However, there is so much that it is impossible to know which advices to take to heart and which not. The map is not the terrain, and finally the antidote for following the wrong markers on the map is personal experience, or less ideal but acceptable: second hand experience but applied to your specific case (e.g: discussion with experienced and trusted advisors).
  4. It is quite impossible to hide intentions in a term-sheet. As read in numerous advices: term sheets are the goal during this process. Words have no value without term sheets. A interested investor has incentive to provide a term sheet faster than others.
  5. Do not go into debt to finance a “possible deal”.
  6. Set a hard deadline and do not make excuses when it gets tight. Accepting a failure will always be a tough decision and stretching the process is not going to provide relief.

Links

Previous: Solving using ai at contech startup plot