Want to win over European investors? Remember these 9 tips

Ten years ago, I was a network engineer at Vodafone, dreaming about my future. Today, I am the proud co-founder and CEO of Preply, a global marketplace for online language learning that connects 40,000 tutors teaching over 50 languages to over 100,000 students every month.

European investors

As a company, we can credit our success to many factors: an incredible team, a great product and many hours of hard work. But we wouldn’t be where we are today without capital. Preply raised $1.3M (nearly €1.16M) in 2016; $4M (€3.30M) in 2018; and $10M (approx €8.26M) in 2020. Our European investors are just as diverse as the languages we teach on our platform, ranging from Polish and German to British and French.

I’ve learned a lot along the way. Today, I’m sharing nine things every entrepreneur should know, do and think about as they begin the exciting-yet-stressful fundraising process.

Toughen Up

Fundraising isn’t for the weak of the heart. You need thick skin, no questions asked. Your company will be under a microscope and picked apart from every angle. And most of the time, you get an answer “No.” Sure, it stings. Yes, it would be best if you thought about why an investor decided to pass. But you cannot let rejection stand in your way or distract you from your ultimate goal. When you’re no longer afraid of being turned down, your mind will be clear, focused and, most importantly, positive. This will help you keep going, which is the only option if you want to succeed. Finally, sometimes the word “no” can mean “maybe” when the timing is right. Don’t burn bridges or swear off ever reaching out again.

Don’t Be Defensive

You can’t have a meeting with an investor without facing a barrage of questions. It’s critical that you reframe your perspective on questions — tough questions — and think of them as a gift. You are most likely meeting with smart, seasoned professionals who talk to different companies day-in and day-out. Take every single question as an opportunity to learn, gain a fresh perspective and view your business in a new light. Maybe you’ll take it a step further and make a life-changing adjustment to your business that will ultimately pay off. No matter what comes out of it, you should write all of these questions in one document, which you can then turn into a super helpful Q&A to share with future investors. This, my friend, is an asset. Trust me.

Remember: You’re Not That Special

Sure, once in a while, you get such an innovative service or one-of-a-kind product…but that’s rare. Most of the time, a company builds upon something that exists but is improving how it works. Not to mention, there are more startups than ever before. The market is flooded with entrepreneurs with big dreams. So why is your idea unique? It sounds harsh, but you must give this serious consideration. You can prepare all the presentations, financial plans and SWOT analyses worldwide. But they don’t mean anything if you haven’t crafted a succinct statement about why they should invest in you. This must be articulated in a brief-but-brilliant way. Can you explain why your business is different in one sentence?

What’s Your Story?

So much of the fundraising process is focused on the financials. Fund + raising that makes sense! But what really moves the needle is good, old-fashioned storytelling. This is particularly important during the seed round when there are no numbers to share. You don’t have any meaningful data yet, so it’s really about the product and early customers. When you’re raising on Series A/B/C, it’s mostly about data, your cohorts, your retention, your growth rate, etc, and how you look against competitors. Whether you’re raising $1,000 or $1,000,000, you need to craft a compelling narrative that demonstrates your company’s value and brings it to life. For example, do you have any anecdotes about how your product has changed someone’s life?

Location Matters

Geography is crucial for many European investors, even in a remote, 24/7 digital world. Let’s say you want to raise from German investors. In my experience, you can raise those funds better if your company is in Germany. Conversely, we have heard from many US investors — especially those in Silicon Valley — that it would be challenging to work with us since Preply is not in San Francisco. It makes sense: their core network is there. Think carefully about where you want to be headquartered. Then, start thinking about secondary offices: Are they in cities with a vital startup scene? Does that city have a developed ecosystem? Preply opened its second office in Barcelona because we knew that to attract top talent, we had to be in a desirable location.

Don’t Play Hard to Get

The moment has come: you finally have a term sheet from a potential partner. You’ve discussed the opportunity together,r and now it’s formallybeingn sent over. You need to make your move. But if you take more than two weeks to answer, chances are you’ve already soured the relationship. When you’re slow in responding, you’re signalling that you’re second-guessing bringing this investor on board and still seeking other alternatives. You’ve come this far, so don’t blow it.

Warm is Better Than Cold

Let’s face it: funds are busy. They receive endless emails and phone calls. So how do you get through? A warm introduction from a credible source. This is why networking is so critical. Let’s say you have an industry peer with a substantial relationship to a fund you focus on. Your chances of getting a reply are 10x better if that person makes an introduction rather than if you cold-called yourself. Fundraising is about building and leveraging solid relationships.

Find the Sweet Spot

Be very conscious of how much money you’re asking for from the get-go. Research the fund and look at past investments they’ve made. Personally, I always start raising smaller amounts. Why? Because you could get a “No” from someone who would actually say “Yes” to a lower figure. Start small, build interest, and when there’s enough of it on the table, you can increase the round and return to the valuation question.

Don’t Name Drop

Did your parents ever tell you not to gossip? In the startup world, keep your fundraising activities to yourself. Don’t talk about other investors with the investor who’s right in front of you. It’s poor form. The moment you expose who you are talking to, there may be unexpected situations and dynamics happening behind-the-scenes that you’re not privy to. Own your conversations, keep them private, and, most importantly, do not mix them up.

In the end, fundraising isn’t only about raising funds. It’s about learning from the entire process: preparing your data, crafting your story and answering tough questions. After all is said and done, your business strategy will be stronger than ever, and you’ll be even more capable of leading your company to success.