{"id":135213,"date":"2022-05-30T00:00:00","date_gmt":"2022-05-29T23:00:00","guid":{"rendered":"https:\/\/gs:8890\/academy\/getting-it-right-at-every-funding-round-with-max-fleitmann\/"},"modified":"2022-05-27T00:00:00","modified_gmt":"2022-05-27T00:00:00","slug":"getting-it-right-at-every-funding-round-with-max-fleitmann","status":"publish","type":"post","link":"https:\/\/www.jpmorganworkplacesolutions.com\/uk\/insights\/getting-it-right-at-every-funding-round-with-max-fleitmann\/","title":{"rendered":"Getting it right at every funding round with Max Fleitmann"},"content":{"rendered":"<h2>Fundraising dos and don&#8217;ts with entrepreneur and investor Max Fleitmann<\/h2>\n<p>\u201cWhen I did my first fundraise I shouldn\u2019t have raised money because it wasn\u2019t clear for me what that meant for the longer strategy of the company,\u201d Max Fleitmann founder of <a href=\"https:\/\/www.basetemplates.com\/\" target=\"_blank\" rel=\"noopener\">BaseTemplates<\/a> and <a href=\"https:\/\/www.studyhelp.de\/\" target=\"_blank\" rel=\"noopener\">StudyHelp GmbH<\/a> tells us.<\/p>\n<p>He joined us to talk honestly and openly about <strong>mistakes made, lessons learned<\/strong> and <strong>top tips<\/strong> from his over 15 years of experience.<\/p>\n<p>For founders or startups who\u2019re thinking about, or have reached the <strong>fundraising stage<\/strong>, figuring out how to choose the right investors to go with and the importance of getting your equity compensation plan set up correctly early in the game, it can feel like you\u2019re moving about in the dark. We want to turn on the lights and show that regardless of the industry investors all ask the same basic questions; how it\u2019s going to work, scale up and generate a return for them.<\/p>\n<h2>Raising money \u2013 is the time right?<\/h2>\n<p>\t\tNot everyone needs to raise funds. Think from your <strong>company perspective, not your personal perspective<\/strong>, could you have a successful, smaller scale businesses or are you creating one that could potentially become a market leader one day? Can you bootstrap through generating your own revenue early on or are you building something that\u2019s going to take investment, e.g. a technology company? Once you\u2019ve established which path you\u2019re on it\u2019ll help cut through the noise. Remember, raising capital to just pay your bills is the wrong approach.<br \/>\n\u201cWhen I was first fund raising we had no clue what we were doing and I made the big mistake of not reading enough about it or talking to other people,\u201d Max reveals. \u201cWe took the VC funding rather than the acquisition offer. To be honest we were very naive. (Founders need to) create some kind of fundraising plan or strategy.\u201d<br \/>\n\u201cWe realised we now had these VC investors and they had this big expectation that growth was the main KPI. More important than everything else,\u201d Max realised too late they should have remained bootstrapped as once started down this path it\u2019s very difficult to get off of as your decision making power becomes diluted. \u201cThe moment you get external shareholders on board they have differing opinions you have to hear, then in the end <strong>you as a group of shareholders<\/strong> make the decision. It\u2019s no longer just you as an individual anymore.\u201d<br \/>\n\t\t\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"523\" height=\"523\" src=\"https:\/\/www.jpmorganworkplacesolutions.com\/wp-content\/uploads\/2022\/05\/mf-square-big-523x523.jpg\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.jpmorganworkplacesolutions.com\/wp-content\/uploads\/2022\/05\/mf-square-big-523x523.jpg 523w, https:\/\/www.jpmorganworkplacesolutions.com\/wp-content\/uploads\/2022\/05\/mf-square-big-314x314.jpg 314w, https:\/\/www.jpmorganworkplacesolutions.com\/wp-content\/uploads\/2022\/05\/mf-square-big-768x768.jpg 768w, https:\/\/www.jpmorganworkplacesolutions.com\/wp-content\/uploads\/2022\/05\/mf-square-big-500x500.jpg 500w, https:\/\/www.jpmorganworkplacesolutions.com\/wp-content\/uploads\/2022\/05\/mf-square-big-650x650.jpg 650w, https:\/\/www.jpmorganworkplacesolutions.com\/wp-content\/uploads\/2022\/05\/mf-square-big.jpg 800w\" sizes=\"auto, (max-width: 523px) 100vw, 523px\" \/>\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/p>\n<blockquote>\n<p>\n\t\t\t\t\u201cThe moment you get external shareholders on board they have differing opinions you have to hear, then in the end you as a group of shareholders make the decision. It\u2019s no longer just you as an individual anymore.\u201d\t\t\t<\/p>\n<footer>\n\t\t\t\t\t\t\t\t\t\t\t<cite>Max Fleitmann<\/cite><br \/>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/footer>\n<\/blockquote>\n<h2>How much should you raise?<\/h2>\n<p>In the early stages many founders struggle because they\u2019ve never built a solid financial plan, aren\u2019t sure where they want to go with the company or exactly how much funds they need to raise has never really been considered. Going from seed to exit is a long journey. There\u2019s no one size fits all solution and success to one person might not look the same to others.<\/p>\n<p>Max advises thinking backwards here. Ask yourself:<\/p>\n<ul>\n<li>What money do I need to accomplish this 12-18 month goal?<\/li>\n<li>Who do I need around me to achieve that?<\/li>\n<li>What sort of skills and inputs do I need to make that happen?<\/li>\n<\/ul>\n<p>Then build in a buffer. \u00a0<\/p>\n<p>\u201cThink about the costs of what you\u2019ll need to get to that next stage of growth,\u201d our <strong>MD of Emerging Companies, Derek Gallagher<\/strong> also advises. Investors will be looking for evidence that the founders have considered assumptions about customer attraction, customer acquisition costs etc. You can expect to be challenged about these, so have your homework done.<\/p>\n<h2>Who do you want to raise from and for how long? It\u2019s a marriage with a planned divorce.<\/h2>\n<p>\t\tWho you choose to to raise funds from comes with different expectations. Family and friends may be less eager to get a financial return, especially in the early stages, but as you grow you\u2019ll be looking beyond that pool.<br \/>\nHere, we look at Angels, Accelerators and Venture Capitalists.<br \/>\n<strong>Angels:<\/strong> Invest their own money. Good for advice since lots of them are\/were founders or operators themselves.<br \/>\n<strong>Accelerators<\/strong>: Basically a professionalised version of angels. Great for building your network.<br \/>\n<strong>Venture Capitalists\/VCs<\/strong>. Investing other people\u2019s money so have to really drive high returns and are looking for businesses that can generate these.<br \/>\n\u201cYou\u2019re going to be working the next 7\/10 years together. The personal component is important,\u201d Max says. \u201cI would never take an investor on board just because of the money. If you are not 100% aligned with the person then you are going to have a hard time every single week. Be sure you get along personally.\u201d<br \/>\n\u201cIt\u2019s like a marriage with a planned divorce,\u201d Derek explains<strong>.<\/strong> \u201cYou\u2019ve got to know what level that VC wants to exit. Know that as part of your due diligence on your investors.\u201d\t\t<\/p>\n<h2>Making those connections<\/h2>\n<p>\u201cI would set up a personal CRM for myself in hour zero because you really have to track all the interactions you have with investors on the one hand, but also potential people you want to hire later on,\u201d is Max\u2019s advice if he were starting over again.<\/p>\n<p><strong>Other founders<\/strong>: Do they have any investors on their cap table they can recommend? A warm introduction comes with a trust factor.<\/p>\n<p><strong>Events:<\/strong> Conferences or local meet ups. Investors are always looking for new people who want to change the world.\u00a0<\/p>\n<p><strong>Online communities:<\/strong> Like-minded investors, founders or potential new hires who are interested in interacting with each other.<\/p>\n<p><strong>Accelerator Programs:<\/strong> These are your peers and long-term connections are forged here.<\/p>\n<p>Use outside input as a chance to adapt, make changes and choices that you would never have considered before.<\/p>\n<h2>Managing your Cap Table<\/h2>\n<p>Max recommends not trying to reinvent the wheel. \u201cUse a common structure for how the cap table is split. Don\u2019t start with any experiments on that because it will give you a hard time later. It should be as evenly distributed among co-founders as possible and don\u2019t start with any debt capital in your cap table.\u201d<\/p>\n<p>Always be thinking about what exits from the cap table look like, who you want on it in 18 months\u2019 time and, in terms of equity split and vesting periods, have these discussions early on and openly with your co-founders.<\/p>\n<h2>Equity Compensation as a tool to attract talent<\/h2>\n<p>VCs and investors <strong>will expect you to have an equity plan in place<\/strong> to attract and reward staff. Your employees are the ones who\u2019ll help get you where you need to go so you should be setting aside 10% to 20% for attracting talent. At this stage you have more flexibility for rewarding your staff. Use it to your advantage.<\/p>\n<p>\u201cYou need the best people that you can get your hands on. There are people who want to be part of it and are open to taking the risk, but they want the benefit, the reward that comes from taking that risk. VCs know that,\u201d Derek advises.<\/p>\n<h2>What does an exit look like?<\/h2>\n<p>\u201cDon\u2019t build a business for an exit case, build a business because it\u2019s a great business\u201d Max says as he and Derek discuss how this goes back to whether you\u2019re building a lifestyle business or not. In some instances there may be no exit while in others you\u2019ll need to have conversations around succession planning,<\/p>\n<p>\u201cIt\u2019s suddenly a life changing amount of money for you to get in your pocket. A lot of (first-time) founders sell their business too early and this is something that investors don\u2019t like because the big returns come later,\u201d Max explains. \u201cIt\u2019s important to do some secondary deals and make the secondary market more liquid and keep some of the cash behind a firewall.\u201d<\/p>\n<h2>Key Takeaways from Max<\/h2>\n<ul>\n<li>Clarity of vision<\/li>\n<li>Strong relationships and connections<\/li>\n<li>Populate your cap table with the right people<\/li>\n<li>Create your own milestones<\/li>\n<li>Plan but prepare for change<\/li>\n<li>Have the right exit plan<\/li>\n<\/ul>\n<p>\u201cIf something isn\u2019t working then adapt quickly and try something else. But don\u2019t spend on stupid stuff like a fancy office or company swag or tv commercials,\u201d Max concludes.\u00a0<\/p>\n<p>\u201cYour journey as an entrepreneur will be really hard. I have never seen a successful business that only has good times.\u201d\u00a0<\/p>\n<h2>Talk to us<\/h2>\n<p>If you want to learn more about how you can leverage your cap table to attract the right investor, get in touch today.<\/p>\n<p>\t\t\t<a href=\"https:\/\/www.jpmorganworkplacesolutions.com\/uk\/talk-to-us\/\"><br \/>\n\t\t\t\t\t\t\t\t\tContact us<br \/>\n\t\t\t<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Fundraising dos and don&#8217;ts with entrepreneur and investor Max Fleitmann \u201cWhen I did my first fundraise I shouldn\u2019t have raised money because it wasn\u2019t clear for me what that meant for the longer strategy of the company,\u201d Max Fleitmann founder of BaseTemplates and StudyHelp GmbH tells us. He joined us to talk honestly and openly [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":135214,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[573,625],"tags":[707,720,729],"class_list":["post-135213","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ceos-founders-uk","category-venture-capital-and-investing-uk","tag-no-descriptioncap-table-uk","tag-funding-round-uk","tag-series-a-uk"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.jpmorganworkplacesolutions.com\/uk\/wp-json\/wp\/v2\/posts\/135213","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.jpmorganworkplacesolutions.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.jpmorganworkplacesolutions.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.jpmorganworkplacesolutions.com\/uk\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.jpmorganworkplacesolutions.com\/uk\/wp-json\/wp\/v2\/comments?post=135213"}],"version-history":[{"count":0,"href":"https:\/\/www.jpmorganworkplacesolutions.com\/uk\/wp-json\/wp\/v2\/posts\/135213\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.jpmorganworkplacesolutions.com\/uk\/wp-json\/wp\/v2\/media\/135214"}],"wp:attachment":[{"href":"https:\/\/www.jpmorganworkplacesolutions.com\/uk\/wp-json\/wp\/v2\/media?parent=135213"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.jpmorganworkplacesolutions.com\/uk\/wp-json\/wp\/v2\/categories?post=135213"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.jpmorganworkplacesolutions.com\/uk\/wp-json\/wp\/v2\/tags?post=135213"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}