Digital Insights #54
A Guide to Successfully Raising Venture Funding
Venture Investors are often the critical piece to fuel the growth trajectory of a startup from nascent stages through to a mature company.
There's a great deal of value that "smart money" brings to the mix as well – and the edge that great venture investors contribute to can provide the difference propelling good to great. We explore how VCs add value through early stages to scaling the business to successful exit.
VC Value Add Broader and Deeper than Money
For a growing startup, sufficient funding is essential to scale the business and realize product and strategic vision. Outside investors are often the critical piece to fuel the growth trajectory of a startup from nascent stages through to a mature company. While it's straightforward to understand the role financial investments play in the evolution of a business, there's a great deal of value that "smart money" brings to the mix as well – and the edge that great venture investors contribute to can provide the difference propelling good to great.
There are a lot of ways to add value as a venture investor. First and foremost is the ability to identify diamonds in the rough that can become winners over time. Like investors in public companies, the selection process and investment thesis provide a structured framework for choosing which horses to bet on. The quality of initial decisions has to be high to succeed. The difference for VCs is that the time horizons are far longer – anywhere from 5 to 7 years or more – and there are a lot more variables over an extended period that may need to be managed. Consequently, VCs may become more actively involved in contributing expertise, relationships, and connections to provide an extra push at different stages of the company lifecycle.
Making a difference in Early Stages
One of the critical assets that VCs can bring to a company is experience. They may have been founders themselves that have walked in an entrepreneur's shoes and faced the same challenges before – or they are career investors who have seen other portfolio companies navigate similar obstacles. Having seen many of these movies before, VCs can bring knowledge and a big-picture perspective to help a startup team make better decisions. A key factor for early-stage companies is the investor's availability to lend their experience, so startups should be cognizant of whether an investor is not spread too thin. Involvement may or may not involve a board seat, but there should be a way for the team to benefit from the VC's experienced guidance and counsel regularly.
Building from Birth through Childhood, Adolescence, and Adulthood
Growing the business is where experienced Venture investors can be a great help. They can connect startups with potential partners or customers from their own networks, hire and fire a CEO, assist with building out the team with key hires, recommend trusted resources such as accountants, attorneys, or other advisors. Venture investors can also help raise their portfolio companies' profiles through press connections or access to events through speaker slots or free passes.
Negotiating Financing and Exits
A fundamental way VCs can add value is to negotiate additional rounds of fundraising and prepare for an exit. The right investor can help complete the next round of fundraising by connecting the company with its network of other VCs and investors. If there are already interested investors on the table, an investor can help navigate options to make the right decisions. Most importantly, the investor can help to decide when and how to exit. Often, they can provide introductions to corporate development teams at potential acquirers or connect with trusted intermediaries and assist in navigating the negotiations for the final exit.
Momenta Ventures and Digital Business
Momenta is the leading Digital Industry Venture Capital firm accelerating digital innovators across energy, manufacturing, smart spaces, and supply chain. Since 2015, we've invested in over 40 growth-stage startups globally, with 6 exits, including SAP, Husqvarna, and Ublox. Momenta brings practitioner's perspectives to investments like Axino, which helps food retailers digitize and automate their food quality management process while complying with increasingly complex food safety regulations. EquipmentShare, a leading provider of solutions, restores visibility and transparency across construction job sites so contractors can get more accomplished. Recent portfolio exits include the sale of Geli, a pioneer in energy storage solutions and a leading innovator in the evolution of Battery Energy Storage Solutions (BESS) to Q CELLS, and the Volker Wessels acquisition of Parquery, a provider of smart parking solutions.
Find out more about Momenta's Venture team; our investment thesis and opportunities in Digital Industry investing!
Find out how emerging technologies for Digital Industry are driving new models and opportunities in VC investing.
We don't just simply finance companies...
Momenta Ventures is the leading digital industry venture capital firm accelerating digital innovators across energy, manufacturing, smart spaces, and supply chain. We have invested in over 40 early-stage companies. We don’t simply finance companies, we help founders achieve lean, smart, and sustained growth, ultimately leading to a strong exit.