The best way forward for successful venture capital funding in Europe

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You have therefore opted for European venture capital to develop your SaaS.

For some European SaaS founders, self-funding and start-up gives them the capital they need to scale their operations. Take Hotjarfor example, a website analytics platform that received no outside funding and reached $25 million (€23.5 million) in revenue before Content Square acquired it in 2021.

However, for most early-stage and seed-stage SaaS founders in the EU, VC-backed funding streamlines their path to a successful IPO or exit, but it’s not always easy to acquire. . European venture capital firms play a vital role in supporting founders on this journey by sharing local market insights and identifying growth opportunities across the EU. If you’re planning on taking the VC route, here’s what you need to know.

How to Get VC Funding in Europe

With all of the above information in mind, here are the steps SaaS founders should take to acquire VC funding in the EU.

Make a VC shortlist

An early-stage European startup will likely seek a European-based VC to lead their early funding rounds, as they better understand the challenges of building fast-growing startups in Europe, can dedicate more time to startups in the same time zone, and provide more networking opportunities across the EU technology landscape.

Like you evaluate your financing optionsconsider the following variables:

  1. Funding stage: What funding stage is the company focusing on? If you’re a start-up or startup, you’ll want to partner with a venture capital firm equipped to guide you through your first steps to market and help you grow.
  1. Focus on the industry: While many serious venture capital funds strive to diversify their portfolio, you need to make sure your potential venture partner understands the nuances of your specific industry and how your SaaS fits in the market.
  1. Past offers: A proven track record of successful exits, IPOs and overall growth is a must when looking for a venture capital partner. Is it transparent about the types of investments it makes? How has it helped businesses similar to yours? If you want more personal information, consider contacting the founders of its listed portfolio companies and asking how their experience has worked with their current VC partner.
  1. Connections: The VC-founder relationship doesn’t start and end with a funding round – having an integrated network of industry professionals is just as important. A well-connected venture capital firm can bridge the gap between securing future funding, hiring talent, and building market awareness for your SaaS.
  1. Location: “Out of sight and out of mind” isn’t just a clever twist. Most VCs like to invest locally, so European startups should look for VC partners located in a similar time zone. Being able to reach your investors quickly, hold quarterly face-to-face meetings, and work on the same schedule will ensure your business stays on top of the game.
  1. Shared vision: Alignment between your VC partners and your leadership team shouldn’t be negotiable. Before signing a contract and cashing the check, ask yourself the following questions:
  • How involved do you want your VC partner to be in your operations?
  • Do you have a similar vision for your company’s product roadmap, or are there forks in the road?
  • Do you want to take a conservative or aggressive approach to growth?
  • How invested do you think your potential VC will be in the success of your business?

Get your financial records and SaaS metrics in order

Inaccurate financial and SaaS metrics reports are major red flags for venture capitalists. Without a verifiable track record of their company’s performance, SaaS founders have no way to validate their story and prove their company’s ROI to potential investors.

To keep your financial records up to date, try treating your monthly finances like a software release. At the end of each month, you must:

  1. Go to your CRM and run a report for what you should have booked.
  2. Reference your financial spreadsheet and make sure the bookings listed in your CRM match what your finance department has accounted for in their general ledger.
  3. Go to your GL and make sure all those reservations are set. Even if you lose €50, find it and fix it.

Running this process monthly gives SaaS companies accurate insight into their current financial and business health. The only glaring problem is that this process is not easily scalable. As your business begins to grow, you will need to make additional financial hires, perform regular spreadsheet maintenance, and ensure that business bookings, income changes, and expenses are updated. day 24/7.

Source: Shutterstock

Eventually, you’ll need to trade your spreadsheets for a FinOps tool that removes all of the manual steps listed above. Investing in a dedicated financial operations platform that sits between your CRM and GL ensures that all of your financial records stay up to date.

Identify venture capitalists interested in long-term partnerships

In your attempts to raise capital, don’t fall prey to venture capitalists looking for a quick cash grab. Unfortunately, many venture capital funds keep early-stage companies on the bait and hook by issuing a meaningless term sheet to fake exclusivity. Until you follow the legal process and the money is wired to you, you are not beholden to any venture partner.

Keep in mind that venture capital isn’t just about raising money, it’s a partnership. In addition to money, you need to make sure that the company you choose will help you with legal, talent, sales, marketing, and product advice if needed.

Make the VC pitch

At some point in your VC journey, it will be time to give your presentation. And while a carefully crafted sales pitch and founder story is helpful, venture capitalists want to know that an investment in your business will ultimately result in a profit.

To help you validate your business performance, SaaSOptics created this specifically for SaaS founders. The checklist includes actionable templates to help you implement consistency in your financial operations, so you can move through audits quickly, make smarter business decisions, and build trust with potential investors.

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