Well prepared when talking to investors

“Start-ups need investors. When meeting up with these smart investors, it is important to have a lot of knowledge about funding and valuation,” says Joris Kersten on the importance of these topics for start-ups. Under his guidance, the 'Startup Funding & Valuation Seminar' took place at Nyenrode Business University in Amsterdam on June 10th for companies based at the Nyenrode incubator.

As a consultant, Kersten advices companies on acquisitions and financing. He also gives training and lectures about Finance in the Netherlands and abroad, including at Nyenrode. “As a start-up, you need to have ammunition and a strong story to convince investors. You must also estimate as accurately as possible your start-up’s future turnover. Let's say you expect your revenue will be € 500.000 in 2021 because you're hiring someone to do the sales. Then you’ll have to figure out exactly how many customer visits this salesperson is able to make in a month, how many customer visits he has to make before selling, after how many visits customers make a decision, and so on. Start-ups find that difficult, but it is very important. If they do not have these figures in order, the chances are as good as zero that they will raise funds from an investor. With proper figures and a good story, they can negotiate better and will need to hand over fewer shares to investors. Ideally, they would hire an advisor for the negotiations, but they don't have the money to do that.”

Quantifying your vision and plan

During the seminar, various valuation methods for companies were discussed, as well as the different phases in the financing of start-ups: first you do everything yourself, then there are investment rounds and finally the ultimate goal, the stock market. “I also talked about the technology behind it, addressing topics like ‘convertible debt’. Convertible debt is when a company borrows money from an investor and the intention of both the investors and the company is to convert the debt to equity at some later date. Finally, I discussed how to translate a qualitative story, i.e. your vision and plan, into figures. Many participants found this quantification difficult to do, so many questions were raised regarding that. But also, about the valuation techniques: should you use all of them or choose one? It is best to look for comparable companies in your own country or abroad and try to find out how they are valued. Such numbers are strong signals to investors, as well as specifying what you already have established, for example a management team or a working prototype.”

Introducing in the Netherlands

One of the participants in the seminar was Julia Baud. She founded the start-up DAM Seltzer with some friends. DAM Seltzer is sparkling water with alcohol and a fruit flavor. The alcohol is based on fermented sugars and the beverage is very low in calories. "It fits the trend that millennials are increasingly concerned with their health," says Baud. “We were introduced to the drink when visiting the US. It is very popular there, but it was not for sale in the Netherlands. So, we decided to market it ourselves.”

DAM Seltzer is based in Nyenrode's Incubator. "We now have a good workplace, but the presence of other companies is especially valuable to us," says Baud about the benefits of the incubator. “One company helped us with marketing, for example with our questions about using social media, and in the field of operations. Another company, which has a lot of experience in the beverage industry and the event industry, helped us decide who to approach. I think we would have managed without the incubator. But with it, you can work much faster and you make fewer mistakes.”

Team DAM Seltzer: Julia Baud, Elisabeth Merel Kraaijenbrink and William Judson.

Better prepared

"I studied Finance, so I knew a thing or two about the subject," says Baud about the seminar. “But I had never looked at it from a start-up perspective. We learned, among other things, which investors are around, what you need to make a valuation and which factors are important when estimating your fixed costs. I found the latter very difficult when drawing up a financial plan for our start-up because initially you do not have reliable figures. It is also important to understand the investors’ view on matters. For example, start-ups tend to estimate their valuation higher than investors. Due to the seminar, I feel much better prepared when the time comes to talk with investors. Furthermore, I learned that when making a marketing budget you must think carefully about what you actually get out of it. For instance, how many sales do you get from social media campaigns?”