154. Johan van Mil, Co-Founder & Managing Partner, Peak - What does it take to raise capital today for an early stage SaaS?
Sep 3, 2024
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Johan van Mil, Co-Founder and Managing Partner at Peak, shares his expertise on raising capital for early-stage SaaS companies. He discusses the importance of team dynamics and resilience for investors, highlighting key criteria used to assess software startups. Johan reveals common deal-breakers and red flags he encounters during evaluations. He also explains how to create urgency in fundraising and what founders should prioritize when choosing investors for successful partnerships.
Investors prioritize the founding team's quality, resilience, and adaptability, which are essential for navigating today's complex market challenges.
Startups must present clear financial projections and realistic pathways to profitability to successfully attract capital in a competitive fundraising environment.
Deep dives
The Evolving Landscape for Startups
Starting and running a company today presents significantly more challenges than it did four to five years ago. Entrepreneurs must demonstrate unwavering dedication, resilience, and the ability to adapt to a complex and rapidly changing environment. Factors such as economic fluctuations, the evolving regulatory landscape, and technological advancements complicate the navigation of the market. Consequently, founders need to engage deeply with their work and continuously lift themselves up through the difficulties they face.
Insights from Seed Investment Strategies
In evaluating seed companies for investment, the most critical factor is the quality of the founding team. The synergy and complementary skills among team members greatly influence a company's potential for success or failure. Investors look for founders who possess both industry expertise and a deep understanding of the pain points they aim to address, as firsthand experience is invaluable. Additionally, resilience and adaptability in founders have become crucial qualities as markets and economic conditions shift, making it essential for teams to navigate challenges effectively.
Defining Seed and Pre-Seed Stages
The definitions of pre-seed and seed stages reflect the maturity of ideas and products within startups. Pre-seed companies typically consist of founders exploring initial concepts with minimal market validation, focusing on developing a minimum viable product (MVP). In contrast, seed stage companies have established some market presence, demonstrating product-market fit with initial customers. Understanding these distinctions helps investors assess where to engage and how to add value to companies at different growth phases.
Balancing Growth and Profitability
For startups seeking investment, it's vital to balance ambitions for growth with realistic pathways to profitability. Founders should aim to raise capital with clear financial projections that cover at least 18 to 24 months, allowing time for product development and customer acquisition. Additionally, having a contingency plan is essential for adapting to unforeseen market challenges. Investors favor scenarios where startups can prove healthy unit economics and demonstrate the capacity to pivot and adjust strategies as needed.
In this episode, we chat with Johan van Mil, Co-Founder and managing partner at Peak, a venture firm specializing in seed and pre-seed investments in software companies and marketplaces.
Johan shares insights from his journey as an entrepreneur and investor, diving into what makes Peak’s investment strategy unique. We discuss the approach to evaluating seed investments, including the crucial role of team dynamics, resilience, and investor-founder fit.
These are some questions that are answered in this episode:
What criteria do investors use to assess the potential of early-stage software companies?
What are the most common reasons deals fall through during due diligence? How can a company proactively address those potential issues?
Sometimes deals die right away - What red flags or “deal-breakers” are you seeing more often when evaluating startups now?
How can companies build a competitive fundraising process that creates urgency and drives better terms from investors?
What should founders consider when choosing investors to ensure a successful partnership?
Tune in to catch all of Johan’s insights on what it takes to raise capital today for your early stage SaaS.
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