You might have seen our press release or read about it on other media outlets, such as Tech.eu, EU-Startups, Gruenderszene.de, VC-Magazin, Deutsche-startups.de or Wan-Ifra: we just raised our second financing round. It’s a major milestone for the development of Labiotech.eu as it will allow us to continue investing in amazing content, launch new products and grow our team. But how did we raise our second round? Let me tell you 😉
(You can also read how we raised our first round)
Step 0: Deliver what you promised
Our previous investors believed in a plan when they first invested in our company. To make them believe in your vision again, you’ve got to show results. We worked hard to achieve more than we promised in terms of both users and revenues, which made things a little easier.
Step 0′: Network throughout the year
Fundraising is a constant state. It’s obviously more passive when you’re not actively raising/in negotiation, but you have to network constantly and meet people who could invest one day. You must also keep nurturing the connections you already have, as these are the ones that are more likely to invest as they’ve been following your story for longer.
Step 1: Prepare your plan and documents
Although this step was very challenging first time around, it’s easier now. You already know how to develop a plan you can deliver and which documents you really need. But as our startup grew and as we wanted to raise more money, new challenges arose. The due diligence, when investors check your financials, is getting deeper, the requirements on budget planning are increasing, the complexity of planning resources increases etc. So we worked hard to make our company files more professional.
Step 2: Test your fundraising strategy
In theory, it always sounds great but once you pitch your strategy to mentors, the team or your investors, you get a better feeling of whether it will work out or not. Most of the people we talked to liked what they saw and gave us valuable advice on how to improve it by spotting some mistakes or asking the right question. We went back and forth on our plan until it was solid enough to present to potential new investors.
Step 3: Talking to your existing investors
Your existing investors are your best friends when it comes to fundraising again.
First, you need to convince them to reinvest. This is the best sign you can show to the rest of the world that they are happy about their investment. Our good results made this easier. Four out of our six existing investors decided to invest again, while the other two didn’t for external reasons.
Second, as they believe in you and have seen how you work, they are the best positioned to recommend another investor to join the new round. Plus, they usually have a large network of investors that they have already co-invested with. We were very lucky to have WestTech Ventures as lead investors as they are very well connected. They made the intro to our new lead investor Wille AG and two another business angel. Then, we just had to convince them… easy-peasy
The beautiful city of Zurich is where our new lead investor is based
Step 4: Following up with previously interested investors
During fundraising, you always talk to a lot of people interested in your project, but there are so many reasons for a person to not invest at a specific time. It can be because they’ve already done too many investments that year, because your development was too early, because you’ve not had any revenues yet, because, because, because. We reached out to everyone we talked to in the first round, and that’s how we convinced two more business angels to complete our second round.
Step 5: Negotiate the terms
Once an investor is interested in investing, it’s just the beginning of the journey, known as due diligence. That’s when investors check everything about you, your company, your team, and basically everything else, to reduce the risk of the investment. After a few weeks, once everything is fine, you’ve got to negotiate the terms of the deal, known as the term sheet. It’s a one-page document that contains the most important parts of the deals, including the valuation of the round and the voting rights. Once your new lead investor has signed the document, you can go back to your existing investors and your new potential investors to see whether they agree too. If not, you have to negotiate again until everyone agrees. It usually takes 2-3 months until all the term sheets are signed and you can move on.
Step 6: Clear the legal stuff
This is where the lawyers enter the game. They use the term sheet to write a detailed and legally valid shareholder agreement. It’s usually very complex and long, ours was almost 100 pages long… This document is then sent to the lawyers of all the investors until everyone is happy and an appointment at the notary can be arranged.
Step 7: Sign at the Notary
As for the first fundraising round, this is the easiest step, you just meet at the notary and bring your nicest pen. For a reason that I still don’t quite understand, German notaries have to read every single word of what they make you sign. So a 100-page contract takes 4 hours… Once it’s signed, you take a nice picture altogether (or actually only with the ones who like to listen to a notary talk 4 hours):
This is when the fundraising becomes official, meaning no one can retract and the investors can transfer the funds to the company.
Step 8: Party
The whole fundraising took just over 6 months from the first contact to the final signature. This took a lot of time and effort, and we are very proud of the outcome, and new investors joining us. So we have to celebrate with everyone, and well… All the beers are ordered for the first week of October where we will welcome friends and connections from Berlin to join us at our office and have fun all together.
Step 9: Execute
The hardest part is to come, we have to deliver what we promised. Our existing and new investors will bring us their support and experience to make it happen. On the frontline, our incredible team will work hard to make Labiotech.eu the most exciting biotech news outlet. But first, let’s party on October 5th 😉
UPDATE: the party was great fun even though a storm blocked the whole city transport
P.S. If you wanna join, shoot me an email at philip-at-www.labiotech.eu
PP.S. We’re gonna hire in the coming weeks, make sure to check out our join us page or to follow us on social media