Dear hustlers, founders, operators and visionaries,

Most startups seek venture capital funding at some point. Yet, the relationship between the “founder community” and VCs is ambivalent. And although there is plenty of material how to “structure the best pitch deck”, tangible advice from within the VC community to founders and insights about their inner workings are rare.

Today, we sit down with Henrik Grosse Hokamp, Partner at VC firm Revent. Having raised multiple venture funds and accompanied dozens of startups across various funding stages, Henrik is an expert in articulating what VCs are looking for in a startup. Henrik’s clarity on the investment dynamics and incentive structures of VCs was impressive, and helped us see them as neither good nor bad, but an investment choice suited for only a particular type of business model. Exclusively for our newsletter subscribers, he has shared additional insights below.

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Is venture capital right for your startup?

What you will get out of this episode

In our interview, Henrik shares:

• Which business models are suited for a venture capital investment

• How to judge if a VC is the right partner for your startup

• What elements to include in a successful pitch to a VC

• The most common mistakes founders do when preparing a financing round

• and much more!

Our main take away’s

1. Acknowledge venture investing as niche: Despite all the hype about venture capital, it is a very particular asset class and it’s risk-reward profile only suits certain types of business models. Think carefully whether VC investing is what your business needs to become successful.

2. Articulate your market opportunity: Investors aren’t just looking for big markets; they’re looking for opportunities to disrupt. Present a clear vision of why now is the time to enter a particular niche and what makes it ripe for disruption. VCs look for founders who can recognize a societal shift and capitalize on it.

3. A team’s right to win matters: A strong team isn't just skilled but also has a unique insight or industry experience that sets them apart. VCs seek founders with a “right to win” based on past experience or unique perspectives.

4. Build competitive tension in fundraising: Speaking to multiple investors gives you leverage to secure favorable terms and reinforces your startup’s momentum in the market.

5. Focus on your passion, stay true to yourself: It’s not about closing a financing round, it’s about building your business. It will be a long and hard road and you will spend a significant amount of time on it. Choose wisely which type of financing you seek and from whom.

Additional material on the topic

• Great Series A pitch deck template to copy and adapt to your case.

How to reach out to Henrik

• LinkedIn

• Revent

Exclusive from Henrik

If you were to equip a founder with a brief checklist on whether his or her company is VC-backable, what would this be?

• Is your business model highly scalable? Can you demonstrate how it could grow rapidly to achieve over €100M in revenue?

• What are your competitive moats? Explain how your product, technology, team, or network effects make it difficult for competitors to replicate.

• Be honest with yourself: Are you prepared to handle the intense stress that comes with building a hyper fast-growing company?

How should a first-time founder derive a valuation for his/ her startup when they have no idea where to start?

• Start with market norms: Early-stage valuations often follow industry standards. For example, pre-seed valuations can range from €3-10M, seed from €8-25M.

• Plan for fundraising needs: Ensure your raise provides at least 24 months of runway while keeping dilution within the industry average of 15-30%.

• Know your leverage: Valuation isn’t just about metrics; it’s also about negotiation. Strong interest or unique assets can give you leverage to negotiate higher.

What is one thing that everyone knows about VCs but nobody talks about?

The power of FOMO: While VCs focus on high-growth potential, they’re often driven by the fear of missing out. Interest from other investors can quickly build momentum.

Any resources (Blogs, Newsletters, Podcasts, Books) you can recommend to learn everything about raising funds?

• Y Combinator’s Startup School: Free, high quality insights on starting and funding a company

• Secrets of Sand Hill Road by Scott Kupor: A valuable guide on how VCs think and how startup funding works

Talk to you next week! Until then, connect with us on LinkedIn, X, Instagram and YouTube!

🫶 Melanie & Christian

Each week, a lot of work goes into the Follow the Gradient project to help you navigate this crazy jungle called entrepreneurship. Help us grow this community and we’ll make sure that you or your project gets a shoutout in the weekly newsletter!