Going from an idea to a startup to a global success story might be the dream many of us come up with over a couple of beers, but, in practice, it’s not so simple and it tends to require a lot of one thing: cash.
Having sufficient funds is critical to take an idea to a globally growing business. It’s a resource that dictates how you can grow your team, how you can test out your tech and how you can scale. While we see lots of stories of startups raising money, it’s really not an easy process and there are many different ways to go about it.
Some decide to bootstrap, some head to VCs, some head to the bank, and some take different approaches. One thing is for sure though, it requires a lot of energy, time and resilience.
Occtoo, a startup based in Malmo, raised €4.6 million in November 2022. Founded in 2019, this is a quite impressive amount for a seed round. The startup is on a mission to help digital companies build more relevant experiences for customers with a low-code composable experience data platform. But we wanted to find out more about the fundraising process. We sat down with Founder and CEO, Niclas Mollin, to find out.
Can you give us an overview of the fundraising process?
In numbers, things went a little like this:
- We pitched to 54 Investors for this round, some new and some old. Approach all parties, be it new or old, with a similar mindset that proves to them why they should invest or continue to invest in your business. As daunting as it sounds, you need to brace yourself for every round of pitching with patience and persistence. Every single meeting matters!
- 42 said ‘No’ after the initial call, and that is the harsh reality of it that you need to be prepared for! Not everyone will see the ‘value’ in your ‘proposition’ and that’s okay, you need to continue this up-hill battle!
- After we completed our initial round of first meetings, we then proceeded to 26 second-time meetings, consider this as half battle won but focus on the other ‘half’.
- We boiled down to 10 third-time meetings after this round.
- 5 went silent after initial or second call, I’d much rather prefer for non-interested parties to just decline the offer and say ‘No’, but some things are slow to change. Be prepared to receive some ‘silent treatment’ and know when to stop chasing!
- 3 Term sheets were made during the entire process to ensure that we create a win-win situation for both the investors and Occtoo. This is an important step of the process that demands scrutiny. Get your nose in the books and go through every little detail!
It seems like quite a big process! What helped get you through it?
The constant back and forth from all the pitching rounds can dampen your spirit but if you are in the ‘fund-securing’ game, know that you are in it for a long-haul! So don’t let it wear you out, move tactically with perseverance and eventually, you will hit the bull’s eye.
Finally, we received about 60 emails from our legal counsel during the closing phase to tie all the loose ends together but luckily, on our end, we have people like @David Klose and @Henric Stråth that work as fast as Occtoo’s Experience Data Platform does! ☺
Once you got some meetings with VCs, how did they go?
We started having our first meetings as early in the year as March and were successful in scheduling a couple of meetings every week, but the cadence dropped as we approached summer with lesser activity during May and end of June. For us, it was evident that the market activity was slower at the advent of summer i.e. Q2 as many venture capitalists at that time were occupied with portfolio management, focusing much of their attention on their existing company and shares.
Our silver lining came in August when we successfully (and finally!) negotiated our term sheet and decided to proceed with Newion. I must say we had some really good alternatives but @John Sjölander and @Tea Elezi made a compelling case for Newion in the process. Again, pay attention to who you choose to work with and the compatibility between you and the investor.
Did you have to jump through lots of hoops?
The due-diligence related to the Technical, Financial, Legal and People aspects of the company was conducted during September and the formal decision (investment committee for some funds) to go ahead with the investment was made mid-October. To be efficient, we had already started to work on the SHA (Share-holder’s agreement) and IA (Investment Agreement) and to our support we had Moll & Wenden representing the Founders and current investors 42Cap & Industrifonden. Newion was represented by Ciro.
With the support from both parties’ legal councils, we closed the entire round in a brief time. The final agreements were signed on November 11.
What would you say are your biggest takeaways?
If I had to highlight just two points from my journey of securing funding for my startup, I would conclude those to be as follows:
- Decide on what kind of investor you want to work with- Know who can bring you the best value as you can to them! For Occtoo, it was experience within B2B SaaS and European focus/network
- Make sure you talk to investors that invest in the phase you are currently in and the space you operate within – Ask them about their current investments, their investment thesis, and ARR levels. That will give you indication if you are a fit or not.
What advice would you give to anyone currently fundraising?
Practice your pitch and try to pitch from an angle the VCs have invested in. Be completely aligned with the growth journey you envision for your startup business and have a constructive dialogue and, that’s also a fantastic way to get to know each other.
AND, don’t forget to work with legal councils that focus on the critical parts in the agreements and DO NOT get stuck in Legal cockfighting! From my experience, @Moll Wenden and @Ciro had this perspective during the whole process.
Now that you have covered the ground, go get your funding and good luck with your fund raise! ☺