Consilience Ventures recently invited industry expert Stefan Laux, to speak at our monthly meet up. We got such a great response that we asked him to turn his talk into a blog we hope you like it.
"My name is Stefan Laux I trained in engineering, a marketer by trade, and fascinated by all thing’s tech and digital. As a result of my extensive and diverse experience with start-ups across industries and continents, out of experience I am quite familiar with what capital raising strategies work well as well as which ones tend to not really work for start-ups. Throughout this blog, let’s examine various issues that start-ups face alongside discussing a new exciting FinTech concept that allows start-ups to maximise the effectiveness of their capital raises.
Throughout my career, it has become evident that avoiding non-beneficial investors is critical to start-ups during their fundraising rounds. Don’t drink their cool-aid at all costs, no matter how thirsty for cash to get going. From my experience, four investor types will likely lead to an increased probability of failure.
The 'Ant investor'
Firstly, ‘the Ant investors’. Let’s say your start-up completes a large fundraising round. However, this total raise is comprised of many small investments leaving you with, e.g. 1900 individual ‘ant investors’ (seen that with my own eyes). This composition of investors often results in larger capital investors to steer away from the company due to having such a large number of stakeholders holding voting rights. In light of this, it is crucial that start-ups do not spread themselves too thin and block the attraction of strategic investments. I would, therefore, suggest having a minimum ticket size and to not compromise on it. Alternatively, if crowdsourcing is unavoidable, issue non-voting shares.
The 'Greedy shark'
Secondly, avoid ‘greedy sharks’. ‘Greedy sharks’ are typically principal investors who plan to hold a large proportion (think controlling stake) of the company. These investors frequently demand to hold the chair position as prerequisite for investment, allowing them to bully management into approving decisions that would favour their planned take-over. Start-ups must be wary of this as these investors have minimal concern about the long-term success of the company under the current owners but are trying to acquire the whole company for a small percentage of what it is worth. It is essential that start-ups are aware of, and resist, investors that may want to invest, just to shut you down.
The 'Lazy door openers'
Another valuable lesson came about from my time working away from home in foreign cultures, in hot countries, There I coined the term ‘the lazy door openers’. I was advised to take on local partners as shareholders due to their knowledge of distant culture and local ‘savoir faire’ expertise. However, it was quickly apparent that these “local magicians” were not really experts and that I would have to do all the heavy lifting while they waited for the significant returns. Of course, experts are fundamental in start-ups; however, look for individuals with a track record who will pull their weight and invest time into the company.
The 'Instant return seekers'
Finally, ‘instant return seekers’ equally have the potential to cripple start-ups from the inside. Start-ups, without fail, will encounter unexpected setbacks resulting in an under estimation on time to return. ‘Instant return seekers’, as in our specific situation, often then import toxicity into the company by failing to understand the nature of the setbacks. Consequentially, such investors begin to fight with the founders and instead of working together constructively to solve a problem they argue over it. This toxic environment can kill your start-up. Therefore, it is vital to look for smart money that gives you the time to rethink, adjust and adapt based on new unknown facts and information.
Raising capital is stressful and, therefore, start-ups take money from investors thinking it can’t go wrong later down the line. However, for the reasons highlighted above, it often will. It is essential that founders surround themselves with smart people that refresh their thinking and look for investors that not only bring the badly needed cash but come with value in advice, connections and support.
Why I choose Consilience Ventures
The aforementioned fundraising and expert sourcing issues have led me to be highly impressed with the Consilience Ventures platform for tech start-ups. In short, the platform allows start-ups to trade in shares of their company for a digital, but not crypto, currency which, in turn, can be traded off for either capital from investors or time from experts. And experts you need, with all kind of skills, sometimes only for short but important and meaningful help over a hurdle. This unique platform contains an ecosystem of rigorously assessed and skilled experts wanting to help you, investors and start-up ensuring that any individuals within the ecosystem are only in contact with other individuals that have passed the highest level of diligence which, in turn, de facto, eliminates the pit falls discussed above. With rigorous vetting, this platform benefits not only the start-ups but also the investors by granting them access to curated investment opportunities and access to experts that will help them ask the right questions and find the right path. Traditionally, investors have been limited to hold their capital in one, maybe two, positions. Consilience Ventures digital share allows investors to diversify their portfolio across several prequalified start-ups that tick the right boxes, which successively reduces an individual’s risk as the total investment is spread across many positions.
Overall, there are currently many issues surrounding the way that VC and PE investors, experts and start-ups interact. Consilience Ventures, however, provides a fresh, new, disruptive and unique opportunity for these individuals to interact, disregarding many of the problems seen with traditional start-up fundraising. Have a look."