One sce­nario aris­ing from this innate dif­fer­ence that we peri­od­i­cally encounter in Ger­many, where smaller early-stage tick­ets for strong ideas are read­ily avail­able but larger growth tick­ets are tougher to attract, is the temp­ta­tion for founders to play ›not to lose‹ as opposed to ›play­ing to win‹. Play­ing not to lose can take many forms but it is essen­tially focus­ing on stay­ing alive as opposed to focus­ing on cre­at­ing large suc­cess. This approach is often char­ac­ter­ized by pro­long­ing the cash run­way by sav­ing costs and wait­ing before push­ing the com­pany through to the next stage of its devel­op­ment until investors have com­mit­ted to a large investment.

Although we under­stand this men­tal­ity behind a more cau­tious approach to growth and cor­po­rate devel­op­ment, we believe that in many cases, espe­cially with high-tech, highly-scal­able ven­tures, cau­tion is ulti­mately the much higher-risk strat­egy, as valu­able win­dows of oppor­tu­nity can be missed. In fact, bold­ness in grow­ing a com­pany and demon­strat­ing strong busi­ness momen­tum at an early stage is prob­a­bly the sin­gle most impor­tant fac­tor for cre­at­ing inter­est with ven­ture investors.

The opti­mal way for founders to break through this dynamic, and to develop the trust that when they build a thriv­ing com­pany that investors will come with cap­i­tal, is to engage with many investors from an early stage and to main­tain an open dia­logue with inter­ested investors about the company´s progress. Founders and investors should openly dis­cuss what mile­stones the com­pany needs to achieve for the investor to invest in the com­pany. In this way, founders can build an under­stand­ing of the vari­ety of investors from whom they could attract cap­i­tal and bet­ter esti­mate which ele­ments of the com­pany are impor­tant to those investors.

Pro­fes­sional ven­ture investors have a strong appre­ci­a­tion that build­ing a com­pany is an extremely chal­leng­ing endeavor and that it is impos­si­ble to deter­mine the ideal path ahead of time. Thus, most insti­tu­tional ven­ture investors pre­fer to invest with founders who are will­ing to test the foot­print of their com­pany by exper­i­ment­ing with var­i­ous growth and devel­op­ment ini­tia­tives, fully under­stand­ing that some efforts will not work. In early stage ven­tures there should be no fear of failed attempts rather a deep com­mit­ment to find­ing what works most effec­tively and with open com­mu­ni­ca­tions through­out the process.

One key devel­op­ment which should make it eas­ier for founders to adopt an exper­i­men­ta­tion and growth mind­set is the mas­sive increase in the amount of ven­ture cap­i­tal look­ing for com­pa­nies that are cre­at­ing strong busi­ness momen­tum, even at very early stages. This explo­sive growth in ven­ture cap­i­tal and the num­ber of ven­ture cap­i­tal investors may make it some­what more com­pli­cated to know where to start with fund rais­ing, but it should greatly increase founders’ belief that good per­for­mance will be rec­og­nized and will attract invest­ment. Build it and they will come!

bm|t’s Thürin­gen Startup Fund (TSF) is specif­i­cally designed to act at an early stage and to enable founders to develop the busi­ness momen­tum that will lead to fur­ther, larger-scale invest­ment. So far 33 of the 35 Investee-Part­ners in which we have invested with the TSF fund have received addi­tional invest­ment, and the major­ity have raised larger sub­se­quent rounds with addi­tional insti­tu­tional investors. We are proud that sev­eral of these com­pa­nies and larger invest­ment rounds are high­lighted in our Q3 Fol­low-on Investments.

Your bm|t Team