CLOSING A DEAL, NINA'S WAY
We feel fortunate whenever we get to speak with a new founder like yourself, as we always learn in the process and get to be inspired by your stories. That said, we happen to come across well over 100 new startups each month, and a lot more activities are necessary to the functioning of our firm beyond discovering opportunities for investment (we try hard to help our portfolio companies, to name one). To speak with you all, we'd need to replicate ourselves three times over. And even if that were possible, we want to be respectful of your time: your plate is as full as ours, if not more, and we don't want to ask for space in your agenda unless we genuinely see the potential for us to partner. That's why our process generally begins with a pitch deck and some questions via email—both yours and ours, of course; we like founders who vet their potential investors thoughtfully.
The next step in the process is a first mutual introduction by Google Meet (or your preferred video conferencing platform). If we both leave the meeting wanting to continue the conversation, that's when we report back to our team during one of our weekly internal meetings. We involve more from our team in order to better prepare for and start our analysis, during which we will want to know more about you, your team, mission, past work, and plans for the future. Eventually we will ask you for a Data Room, where we hope to find materials from a list that we will share with you, and which triggers the due diligence stage of our process. By this time, we have already started to write our internal memos, with the objective to create a full "factsheet" for final presentation to our Investment Committee; and, we know the key terms of our investment—because you have already agreed on them with another investor, or with us. All in all and assuming a Data Room is ready for us to access, it normally takes us between 4-8 weeks from first call to IC decision.
Curious to learn more? Find below the guiding principles of our process towards making a new investment.
OUR PROCESS PILLARS
CHEMISTRY. We do our very best to connect with the founders. If we don't have a great personal connection, we won't invest. We believe chemistry between founders and investors is a strong foundation for a long and fruitful partnership.
MEET THE FIRM. We bring our full partnership into the deal process early, consistently, and transparently. Entrepreneurs are smart and they know they are doing a deal with a firm as well as an individual. We let them see the full picture early. We make it easy on the entrepreneur to meet the full partnership.
TRANSPARENCY. We are transparent about the process, throughout the process, including our constraints as a fund when making decisions. We have a duty to deliver our promises to our own investors (our Limited Partners), which includes a thesis of investing in companies that have an international ambition to enter large markets. Sometimes the company has the potential to be a great business for the German market or the Nordics but that does not fulfill our fund thesis.
REFERENCES. We encourage the entrepreneur to get feedback on us and our firm. The founders in our portfolio have written some testimonials, which we are happy to share. They are busy running their companies, so we try not to impose too much, but we can of course offer references. We encourage entrepreneurs to decide which founders from the portfolio they would like to speak with, beyond those we’ve already received testimonials from.
NO PRESSURE. We don't pressure. We don’t put the entrepreneur in a corner, signaling that they have no other option. (Corollary: We don't put aggressive no-shops into term sheets.)
LET'S TALK. If we decide to lead an investment, we make our offer via video call before providing a term sheet. We tell the entrepreneur we want to be their business partner. We tell them how much we will invest and how much ownership we want. We explain our rationale, and then leave it at that. We tell them that if they are interested, we will send them a term sheet. Leading with a term sheet focuses the discussion on the wrong things. The process should start all about personal fit and very high level deal terms. Once the decision is made to try and work together, we can get into the specifics of the deal.
VALUE ADD. We try to add value during the process. We try to ask good questions. We speak about our contribution as partners to the company. We bring actual examples—without breach of confidentiality with our founders, of course. We talk through the strategy issues and go-to-market challenges the company faces. We speak about your knowledge about (and conversations with) potential customers. We try to help even before we are an investor, as a way to show what we can do right away.
GOT DEMO? We like to watch a Demo, use the product whenever possible. Not always possible given our sector, yet so helpful when it is. Ideally we should be using it well before we start diligence.
HEALTHY ROUNDS. When we lead, we offer a fair price based on thoughtful use of funding and market rates. We belong to that school of thought who believe entrepreneurs should only raise the capital necessary to meet meaningful milestones, plus contingencies for a rainy day, because equity is the most expensive way to finance growth and one should never sell it lightly. We communicate that if the entrepreneur chooses to work with us, there is some flexibility on our initial offer.
LONG-TERM THINKING. Conversely, we have no desire to extract every dollar out of every deal. There are two reasons for this approach. First, we are looking for outliers: if a startup realizes its full potential (or not), having 0.1% more of the company at exit will not significantly change our success (or failure). Second, we are entering a multi-year relationship: mercenary negotiators leaving the other party with as little as possible are short-sighted. The focus is to build lasting partnerships with amazing prospects for growth.
YOUR CALL. We only team up with another VC firm if it is one that the founder is excited about and introduces us to. Entrepreneurs want to choose their syndicate partners, rightly so. We want to help build a syndicate, not control it. Instead, we pool our networks and work with them to facilitate relevant introductions.