Project Sponsoring - AgileBusinessAnalysis/01_TEAM GitHub Wiki
In most start-ups' journeys, there comes a point in time where external financing, or venture capital, is required. Venture capital can be described as equity financing that is provided by so-called institutional investors, managing a large institution's fund or their own pool of capital. Thus, venture capital can be supplied by business angels, private investors, corporates, limited partnerships or venture capital firms. Raising venture capital can be beneficial for many start-ups, as additional financial resources may accelerate growth as well as give a competitive edge in the market. However, it is essential to match the start-up's stage of development with suitable venture capital sources. For example, early-stage start-ups with no prior experience in obtaining venture capital are most often better off leveraging local early-stage venture capital firms or angel groups. There are several stages in venture capital investment:
- Start-up stage: Newly formed companies, no significant operating histories.
- Seed or early stage: Companies with promising and validated concepts that have not achieved break-even.
- Growth stage: Companies with proven business models, already profitable or clear path to profitability.
- Late stage: Companies that are relatively mature and profitable, seeking to raise more than $10 million.
- Buyouts and Recapitalizations: Mature technology companies, stable and profitable.
As Wisely currently is in the very beginning stages of company building, it can be considered to be in the start-up stage of venture capital investment. In this stage, most of the company's development is funded with the entrepreneurs' own funds additionally to investments from angel investors. Angels can be described as wealthy individuals, family members, or friends that invest in a company. Angel investors often are the most common starting point regarding first-round funding and mostly amount to less than $1 million. Angels fund companies that are still conceptualising and that have limited records concerning customers and revenue.
The process of raising venture capital is rather rigid. The start-up must prepare appropriate documents, develop lists of venture capitalists, schedule meetings with potential investors, as well as negotiate closing documents and teem sheets. Firstly, start-ups prepare the business plan/investment memorandum, financial projections, management presentation, and due diligence package. Once developed, the start-up has to identify venture capitalists that invest in firms that are active in a similar industry. As most venture capitalists are flooded with requests, most of then only accept meetings by referral. If successfully referred, an initial meeting with potential investors is set up. Then, if the venture capitalist is convinced, it will make a formal off to invest, providing a preliminary term sheet. The term sheet will then be negotiated and executed.
When analysing Swiss, German and Austrian start-ups that are active in a similar space as Wisely, namely dating, following venture capitalists might be considered in future investment rounds:
- SV Stars Venture Capital
- Partech
- LG Capital
- Rocket Internet
- eHarmony
- pd ventures
Angels:
- Max Finger
- Benjamin Krause
- Markus Ertler
- Daniela Klenke
- Jost Schwaner
The next step for Wisely would be to prepare the following documents:
- Business plan/investment memorandum
- Financial projections
- Management presentation
- Due diligence package
Then, the documents can be sent to potential investors and meetings can be scheduled.