As one of the most successful fintech startups in Switzerland, Advanon closed its second financing round in January 2017. Phil Lojacono, CEO of Advanon, came to the Swisscom Pirates Hub to share some of his most important learnings on how to attract investors.
„Build a story“
It is very important that you don’t just focus on your product – you need to tell investors where this idea is coming from and build a story around it that you can tell. Especially in early stage investments, VC’s invest in teams, not in products. The product will change in so many ways, things will go wrong, but the team is key. Investors need to be convinced of you as a person and of your story, you need to make them believe that your team will create the next unicorn.
„It takes time“
Closing financing rounds will most probably take much more time that you initially thought. In the beginning, it seems like everyone is interested in your business, everyone wants to see your pitchdeck and connect you to the best people, it goes back and forth from meeting to meeting – and all of a sudden someone tells you it’s actually not an interesting investment opportunity for them. This takes a lot of time. Expect at least 9 months from the point that you start talking to VC’s until you close your financing round and make sure you don’t run out of money during this time. You need to have a Plan B. And C. And D.
„Financial planning is needed although it’s worthless“
When we did our first financial planning, we tried to be as realistic as possible and went to a business angel, who told us that what we did was not a VC case. Asking what a VC case was, he said that we need to have a hockey stick growth, growing exponentially after a certain point. So we just adapted our planning, increased the numbers – and there it was, the VC case that the investors were satisfied with. After one year we actually achieved our first, realistic planning but were far from achieving the latter. Financial planning is needed although the result is worthless. Don’t be realistic, be overoptimistic.
I’ve seen many startups who, when it comes to attracting investors, feel they’re lucky to even have the opportunity to talk to investors. That’s not how it is supposed to be: You should understand that investors are your partners and that you’re on the same level. Both sides have something to offer, there is no above or below. We always gave them the feeling that there are other investors who are interested in order to make them compete.
„Don’t look for an investor, look for a partner“
Investors are not only here to give you money: We get way more than money from our investors, we profit from their experience, network, they open doors for us. You can build very helpful partnerships with them that go beyond investing money. If you have different comparable offers, put a lot of emphasis on how the potential investors did it with other startups: Call startups that the investors worked with and find out what type of investor you’re dealing with. In hard times you don’t want someone who is only interested in money but someone who is sitting in the same boat as you.
„Valuation is not everything“
We experienced huge valuation differences: Some VC’s valued us 2,5 times higher than others. Initially you might think you’re going for the higher one. But actually, having a high valuation can be pretty great at this moment, but in the long run, a lower valuation can come with better terms. You get a lot more flexibility, things can go wrong and you’re still on track. If we closed our financing round with an extremely high valuation and we couldn’t manage to achieve very high KPIs within the next year, we wouldn’t be able to close our next financing round since we would need an ever higher valuation for that one. That’s why we chose to go for a fair valuation that we feel comfortable with.
Founded by three former Google employees, Advanon enables SMEs to prefinance their outstanding invoices easily, quickly and transparently. SMEs can have their customer invoices pre-financed by investors on the Advanon online platform and receive their cash within 24 hours. Companies than therefore customize their short-term financing according to their business needs and avoid long waiting times, while investors receive access to a new asset class.
Advanon was among the five winners of the Swisscom Startup Challenge 2016 and after the challenge closed its second financing round including an investment of Swisscom. The application period for the Swisscom Startup Challenge 2017 is open again. Apply now!
Pia Schneider is an Open Innovation Developer at Swisscom’s Pirates Hub – in a team that is scouting startups for potential co-creation projects. She is responsible for the communication activities in and around the Pirates Hub and blogging about like the Swisscom Startup Challenge, the Kickstart Accelerator and all the current hot topics in the startup ecosystem.
Pia Schneider, Startups, Communication, Tech