How to navigate the challenges of fundraising. Interview with Carlos Espinal, Seedcamp

Seed investor & partner at Seedcamp, mobile tech lover, blogger and photography enthusiast, Carlos Espinal leads the startups’ experience from the initial investment to Seedcamp Academy and beyond. Prior to Seedcamp, he was a VC at Doughty Hanson Technology Ventures, a London-based early stage investment firm, an engineer for the Advanced Communications Technologies group of the New York Stock Exchange, as well as a network security consultant for the professional services division of Baltimore Technologies.

Carlos brings a good mix of tech & VC experience with a keen operational eye to the Seedcamp team and he recently published “The Fundraising Fieldguide”, a book that equips ambitious founders with the know-how they need to successfully raise money. Published in 2015, “The Fundraising Field Guide” aims to decipher the secrets to raising capital and therefore provide those ambitious founders with the right information to take their company to the next level.

Carlos will take the stage at How to Web Conference 2015 to officially launch “The Fundraising Field Guide” in Romania and provide an overview of the common challenges faced by entrepreneurs when going through the funding process. Meanwhile, we talked with him about investments and he was kind enough to share his personal experience with us in the interview below. Enjoy!

26279o_1a2nhqsks8bnb58ab4stf16kl56 (2)As partner of Seedcamp, you’ve invested in 170+ companies to date. What are the things these successful startups have in common?

A huge part of a company’s success or failure comes down to how a company’s team operates. If there is lots of destructive conflict, usually one or more founders leave eventually and destroy shareholder value along the way. However, companies where founders have a complementary relationship and can provide positive ‘conflict’ (the kind where better outcomes come) tend to fare far better.

What is the first piece of advice you give to early-stage startup founders looking to take their products to the next level?

Firstly, a true-to-earth passion and desire to understand their customer’s needs, and secondly, a commitment to iterate ceaselessly in the pursuit to live up to the promise you make to your customer via your product.

A book that does an amazing job of walking through this from a non-startup-tech-lean point of view is “Let My People Go Surfing: The Education of a Reluctant Businessman” by the founder of the Patagonia clothing company. I highly recommend it.

What are the most common mistakes that startup founders out there make?

On the prior point of teams, a critical mistake is not to discuss and include reverse-vesting provisions in the early founder agreements. This can lead to large losses of equity early on as well as very nasty disputes. We’ve drafted a document to help founders with that very exercise of having these conversations early, which can be found here – http://seedsummit.org/founders-collaboration-agreement/.

Secondly, on the previous point of being customer-centric, some companies can lose touch on the connection to their customer: how they choose, how they decide, and ultimately what needs they have that they’re expecting your company to satisfy.

You’ve recently published “The Fundraising Field Guide”, a book that you’re going to launch this November on the main stage of How to Web. Why have you decided to publish it and what’s in it for the startup founders out there looking for money?

The fundraising process has always been shrouded with an air of mystery, not necessarily intentionally (although some investors do take advantage of that), but mostly because it’s not an activity where many engage in frequently. My desire to write the book was to provide founders with a field guide to navigate these early challenges. For those that read it, the hope is that a lot of the challenges they’ll go through in the future will become more clear, thus affording them better choices.

What are the biggest challenges startups struggle with when fundraising? How can they overcome them?

Geography is unfortunately still a factor when it comes to fundraising. Whilst in my book I cover other mechanisms by which to solve and work within your given geography, the easiest thing to do, as a founder, is to find yourself an international investor that can open doors abroad or move to a geography that better suits your company’s strategic or financing needs.

How do you advise them to deal with rejections?

Rejections, whether they are professional, romantic, or political in nature are always painful. However, through rejections, in particular ones that provide you with detailed feedback, one grows and improves. So accepting rejection, as a growth path, can be a huge win, once you get over the obvious emotional toll it can take at first.

When should a startup refuse an investor and how should he tackle this?

There are two circumstances when a founder might consider passing on an investor:

  1. When offered a toxic investment
  2. When you don’t get a good feel for the investor’s value add vs. their value detract.

Two blog posts that can help on the matter in more detail are:

When is the right time for a startup founder to ask for money? How should he evaluate the amount of money he needs?

This is a huge question to address in a short interview and would perhaps be better suited for a workshop. I’m looking forward to talking more about this in Romania! In summary however, a founder is almost always reviewing financing options all the time, even if merely from friends and family to start. Regarding the amount, that’s a very case-by-case question, however, one thing is for sure: founders should look to raise enough capital to demonstrate progress, for raising too little too frequently will starve you of the necessary traction that impresses future investors.

You’ve been coming to Romania for some years now, attending How to Web Conference and mentoring the startups in the Startup Spotlight competition & mentoring program. How do you see the evolution of the regional tech ecosystem over the past year?

Romania has grown immensely over the past years due to its human capital. We’ve had a successful Romanian company exit via UberVu (sold to Hootsuite – http://inventures.eu/romanian-ubervu-acquired-by-hootsuite) and we’ve invested in several Romanian companies recently as well. Things are on the up and up for the Romanian tech scene! I’m looking forward to meet more companies in the near future!

Did you notice any characteristics that CEE tech startups have in common? What would be the advice you give them?

CEE tech startups have lots of technological innovation, drive, and global ambition. The only advice I have is to continue to drive and push towards being the global powerhouses they’re capable of!

HTW 2015 Facebook Cover

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