Not all startups are funded in the same way. It may seem obvious, but it involves a lot more than may be imagined at first glance. Each company is its own world and the search for funding has to be tailored to fit. "Everything depends on your needs and the state of the startup," Rocío Flor, head of Funding at Acció, tells VIA Empresa. "If the company has a great need for capital, it will have to get it from venture capital, business angels, etc.," adds Flor, who is to moderate one of the debates on this issue at the next Bizbarcelona. Conversely, "if there is a low need for capital it can come from funding based on a personal guarantee." Nevertheless, "you cannot fund large growth with debt, it has to be with capital," the Acció head makes clear.
Normally, in the initial stages "what best fits startups is funding with capital," says Rocío Flor. This is usually through business angels at first and then venture capital at the second stage. Among these early investors are the members of the Esade Ban network, headed by Fernando Zallo. "We get projects and we get involved in the platforms that meet the requirements. Later we do a filtering stage that ends with the presentation of these projects in different forums," he tells VIA Empresa.
The network of investors
In the case of Esade Ban, they carry out forums segmented by verticals (health, clean energy, social impact) or others that are more specific depending on the evaluation. "We put on breakfasts to present the projects at very early stages, with evaluations of more or less a million euros," he says, and "lunches at which they present more developed ideas valued at between one and four million euros," adds Zallo. The latest initiative from this network of investors are the forums for family offices with projects with an evaluation of over four million euros. "Each one has its own type of investor and this segmentation really works for us," he insists.
However, how can an entrepreneur know if their project is ready to enter the Esade Ban investor network? "We want projects that have passed the idea stage, that have shown with a beta or prototype that the business is viable and wants to become big," says the director. The other requirement, he says, is that they "have some competitive advantage. And even better if they have a technological component."
Esade Ban receives some 800 projects every year, they publish between 200 and 300 on the platform and around 90 reach the forum stage. "Between 20 and 30 startups end up with investment," says Zallo. More than investing in more companies, he explains that what they like is to complete the investment rounds they enter. "Ideally for 80% of the round to be ours," he says. Currently, Esade Ban has some 200 investors, of which some 80 are active every year with an average ticket of 25,000 euros. Per round, this average ticket is between 150,000 and 300,000 euros per company.
Institutional investors
"We are an institutional investor that is already part of the entrepreneurial ecosystem." Xavier Gispert, director of Communications at the Institut Català de Finances (ICF), celebrates the fact that often "when business angels or venture capital funds invest in companies, in many cases we send them projects to jointly invest in." The opposite also happens, startups that present their projects to the ICF and "together we find a private investor that allows us to jointly invest." In short, says Gispert, "our aim is to produce a tractor effect to haul money to companies."
Since the credit line specifically for startups began in 2012, the ICF has devoted 10 million euros to some 70 projects. "We fund all types of companies through credit, on the one hand, and also through venture capital investment," points out Gispert. They do so through participative loans or investing in venture capital funds specialised in the seed capital segment.
The ICF's participative loans go from 50,000 to 200,000 euros. "It is usually the same amount that private investors put in. For the entrepreneur the advantage is that it doubles resources," points out the ICF head, who calls the organisation a "comfortable partner" for the entrepreneur. "However, with a participative loan we do not get involved in the management of the company as some investors do. What's more, it is a type of loan that does not require guarantees and adapts to the evolution of the business," he says.
Knowing the right amount
"You can only know the amount you need with a well-made business plan," says Rocío Flor. In fact, this is a requirement for getting financial advice from Acció. "The business plan will determine the amount of funding you need and, above all, when you need it," points out the funding head of the public agency. "There are cases in which the funding is needed for expansion and others in order to get going (patents, biotechnology, etc.)," he says.
Another important aspect to keep in mind with capital funding is that the entrepreneur will have to give over part of the company in the form of shares. "It is very difficult to establish where the red line is because the theory is not enough; it is a matter of negotiation," admits Flor, pointing out the dependence on the expectations of the investor and entrepreneur. "You have to work out how much you will need and how much you are willing to give up. Yet, if it is a startup that will require a lot of capital, you have to keep in mind that there will be different investment rounds and that you will be increasingly diluted with each one," he warns. Therefore, the evaluation of the company has to be worked out and taken into account.
"In the same way that investors are very clear about the projects they want to invest in; the entrepreneurs will also have clear criteria about what they want from their investors," Rocío Flor recommends. In the end, he says, "they are the company's future partners. You have to be clear about what you want them to contribute and what you are willing to give up."
Normally, in the initial stages "what best fits startups is funding with capital," says Rocío Flor. This is usually through business angels at first and then venture capital at the second stage. Among these early investors are the members of the Esade Ban network, headed by Fernando Zallo. "We get projects and we get involved in the platforms that meet the requirements. Later we do a filtering stage that ends with the presentation of these projects in different forums," he tells VIA Empresa.
The network of investors
In the case of Esade Ban, they carry out forums segmented by verticals (health, clean energy, social impact) or others that are more specific depending on the evaluation. "We put on breakfasts to present the projects at very early stages, with evaluations of more or less a million euros," he says, and "lunches at which they present more developed ideas valued at between one and four million euros," adds Zallo. The latest initiative from this network of investors are the forums for family offices with projects with an evaluation of over four million euros. "Each one has its own type of investor and this segmentation really works for us," he insists.
However, how can an entrepreneur know if their project is ready to enter the Esade Ban investor network? "We want projects that have passed the idea stage, that have shown with a beta or prototype that the business is viable and wants to become big," says the director. The other requirement, he says, is that they "have some competitive advantage. And even better if they have a technological component."
Esade Ban receives some 800 projects every year, they publish between 200 and 300 on the platform and around 90 reach the forum stage. "Between 20 and 30 startups end up with investment," says Zallo. More than investing in more companies, he explains that what they like is to complete the investment rounds they enter. "Ideally for 80% of the round to be ours," he says. Currently, Esade Ban has some 200 investors, of which some 80 are active every year with an average ticket of 25,000 euros. Per round, this average ticket is between 150,000 and 300,000 euros per company.
Institutional investors
"We are an institutional investor that is already part of the entrepreneurial ecosystem." Xavier Gispert, director of Communications at the Institut Català de Finances (ICF), celebrates the fact that often "when business angels or venture capital funds invest in companies, in many cases we send them projects to jointly invest in." The opposite also happens, startups that present their projects to the ICF and "together we find a private investor that allows us to jointly invest." In short, says Gispert, "our aim is to produce a tractor effect to haul money to companies."
Since the credit line specifically for startups began in 2012, the ICF has devoted 10 million euros to some 70 projects. "We fund all types of companies through credit, on the one hand, and also through venture capital investment," points out Gispert. They do so through participative loans or investing in venture capital funds specialised in the seed capital segment.
The ICF's participative loans go from 50,000 to 200,000 euros. "It is usually the same amount that private investors put in. For the entrepreneur the advantage is that it doubles resources," points out the ICF head, who calls the organisation a "comfortable partner" for the entrepreneur. "However, with a participative loan we do not get involved in the management of the company as some investors do. What's more, it is a type of loan that does not require guarantees and adapts to the evolution of the business," he says.
Knowing the right amount
"You can only know the amount you need with a well-made business plan," says Rocío Flor. In fact, this is a requirement for getting financial advice from Acció. "The business plan will determine the amount of funding you need and, above all, when you need it," points out the funding head of the public agency. "There are cases in which the funding is needed for expansion and others in order to get going (patents, biotechnology, etc.)," he says.
Another important aspect to keep in mind with capital funding is that the entrepreneur will have to give over part of the company in the form of shares. "It is very difficult to establish where the red line is because the theory is not enough; it is a matter of negotiation," admits Flor, pointing out the dependence on the expectations of the investor and entrepreneur. "You have to work out how much you will need and how much you are willing to give up. Yet, if it is a startup that will require a lot of capital, you have to keep in mind that there will be different investment rounds and that you will be increasingly diluted with each one," he warns. Therefore, the evaluation of the company has to be worked out and taken into account.
"In the same way that investors are very clear about the projects they want to invest in; the entrepreneurs will also have clear criteria about what they want from their investors," Rocío Flor recommends. In the end, he says, "they are the company's future partners. You have to be clear about what you want them to contribute and what you are willing to give up."
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