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    Central European Startup Guide
    Central European Startup Guide
    Central European Startup Guide
    Ebook111 pages1 hour

    Central European Startup Guide

    By Andrej Kiska Jr.

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    About this ebook

    After clearing up what a startup actually is, this guide will look at the startup investment cycle, describing what angel, seed, and Series A investments in Central Europe look like. The third section will then give tips on how to approach an investor and negotiate a term sheet without losing all your hair, your startup, or both. The concluding section will tackle one of the least understood and most complex topics in managing a startup: employee motivation & equity.

    LanguageEnglish
    PublisherCredo Ventures
    Release dateSep 13, 2018
    Central European Startup Guide

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      Book preview

      Central European Startup Guide - Andrej Kiska Jr.

      Central European

      Startup Guide

      by

      Andrej Kiska Jr. of Credo Ventures

      Andrej Kiska Jr. Copyright © 2018 

      To the teams of Credo Ventures and Benson Oak as well as all the startups for teaching me all I know, Irma for giving me the idea for this Guide and Geri for making it readable.

      Table of Contents

      Section I.

      Introduction

      1. What is a Startup?

      Definition of a Startup

      So how many startups does our region really have?

      Section II.: The Startup Investment Cycle

      2. Investing in Startups—How Does It Work?

      The History and Evolution of the Investment Cycle

      Why Does an Investment Cycle Exist?

      The Investment Cycle and Investor Role Overview

      3. Fundraising in Central Europe

      The Investment Cycle in Central Europe

      4. Valuations and Investment Sizes

      The Right Investment Size

      Valuations

      Choosing the right partner

      5. How Venture Capital Looks in Practice: The Credo Ventures Case Study

      The Team: What Are Its Members’ Roles Internally?

      External Roles: How Does the Team Help Its Portfolio Companies?

      How Do We Look at Investment Opportunities?

      Section III.: Fundraising

      6. Five Mistakes to Avoid When Approaching an Investor

      Your Startup Doesn’t Fit the Investor’s Criteria

      You Cold Call Potential Investors

      Your Introductory Email Doesn’t Contain Relevant Information

      You Have Hired an Advisor

      Your Startup Doesn’t Make Sense

      7. Fundraising: From the First Meeting with a VC to a Term Sheet

      Before the First Meeting

      During the First Meeting

      After the First Meeting

      The Terms

      8. Term Sheet Guide, Pt. 1: Introduction to Term Sheets

      What a Term Sheet Is

      Why Focusing Too Much on Valuation Can Damage Your Startup

      9. Term Sheet Guide, Pt. 2: Convertible Loan

      Definition of a Convertible Loan

      Why and When to Use a Convertible Loan

      Terms You Can Find in a Convertible Loan

      10. Term Sheet Guide, Pt. 3: Equity Investment

      The Terms

      No Lawyers

      Random Remarks

      11. Why Not to Fundraise in the United States

      The Art of Self-Promotion

      The Reasons for Higher Investment Size

      Don’t Take Seed / Series A from a Blue Chip U.S. Fund

      When to Go to Silicon Valley

      12. How to Build a Financial Forecast That Will Look Attractive to Investors

      When to Build a Forecast

      What to Avoid

      What to Follow: The Approach of Series B and Beyond

      How to Build a Forecast for Your Series A

      Section IV.: Employee Equity

      13. Why Employee Equity is Important to Your Startup

      Advantages of Employee Equity

      Right Communication is Key

      14. How to Structure Employee Equity in Europe

      Four Steps to Set Up Your Plan

      Notes

      Citations

      Section I.

      Introduction

      Six years. Thousands of business plans. Yet the same questions.

      When I first started investing in technology companies in Central Europe six years ago, I didn’t even know that the word startup existed. Or coworking space. Or accelerator. Or unicorn. Sure, we were the first backers of AVG Technologies (one of very few companies from Central Europe that went public on the New York Stock Exchange and surpassed a billion dol ar valuation), but nobody told us we should call AVG a startup or a unicorn.

      A lot has changed since then, even in our region. Sometimes it feels like everyone has a startup. There are plenty of coworking spaces, accelerators, blogs, and mentors. Even success stories show up every now and then.

      Yet when I listen to entrepreneurs pitch today, I can’t help but notice some sort of . . . uncertainty. Yes, everyone in the conversation throws around the unicorns, startups, and non-participating liquidation preferences. But how many really know how to differentiate between a startup and a small and medium-sized business (SMB)? Or when to ask for a seed investment and from whom, or how to negotiate a term sheet? Our startup community seems full of buzzwords imported mainly from Silicon Valley, but do we really know what those buzzwords mean and how to apply them to the realities of Central Europe?

      Thanks to all the bloggers, entrepreneurs, and investors willing to educate our ecosystem. I have a biweekly blog as well, and I fully understand how difficult and consuming such work is. The goal of this Guide is to support that effort: I have compiled a few of my blogs to help entrepreneurs find a lot of resources in one physical place that should aid them in navigating the murky waters of the Central European startup ecosystem.

      After clearing up what a startup actually is, we will look at the startup investment cycle, describing what angel, seed, and Series A investments in our region look like. The third section will then give tips on how to approach an investor and negotiate a term sheet without losing all your hair, your startup, or both. The concluding section will tackle one of the least understood and most complex topics in managing a startup: employee motivation and equity.

      This book has no ambition of becoming a complete guide to the startup ecosystem. I’ve only tried to address a few topics that I’ve noticed entrepreneurs continuously struggle with over the years. There are many more to cover, and I hope to do so over the upcoming years. If you feel something is missing from the Guide, or you disagree with me on any points, please get in touch at kiska@credoventures.com. After all, the investors should learn as much from the startups as the startups learn from the investors.

      Andrej Kiska, Partner at Credo Ventures

      1. What is a Startup?

      I am sick and tired of the word ‘startup’. It seems like everyone and their mother has a startup today. I might even start calling the grocery store next door a food startup.

      This is a quote I have been

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