Felix Haas, co-host of the Bits & Pretzels Festival, a successful founder, and investor at Munich Startup, talks about angel money, venture capital, and what founders should know about startup financing. Having invested in over 100 startups, the startup expert has countless tips up his sleeve.
Let's be honest: What do most startups do wrong when looking for investors? Why is that?
Many startups only start looking for investors when they urgently need capital or even run out of money. This is the main mistake I see. What I recommend instead: It's much better to maintain a constant dialogue with investors and build genuine relationships. Of course, this takes time, because good relationships should be nurtured, but the constant dialogue is worth it. The clear advantage: By the time the next funding round comes around, you'll already know each other. This makes things much easier!
The second mistake I see time and again: Many founders find it difficult to view investors as equal partners; they get too caught up in sales mode. This doesn't go over well with many investors, because they want to be brought on board as partners.
And then comes my final point, which I observe very frequently. Many founders blindly and sometimes very stupidly approach many different investors at once, some of whom aren't a good fit for the company or have completely different funding models. As an investor, you naturally notice this, and word gets around, because the scene is small and everyone knows each other. This then creates the impression that the founder has no idea which investors are a good fit, and this is more of a negative "signal" emanating from the startup.
In addition, of course, it's a huge investment of time for the founder, which is more or less wasted. You can avoid this waste of time by starting with proper research, listening to the community, and networking.
Why should I, as a founder, bring an angel investor on board?
It's clear: every angel investor has an extensive and often very valuable network, which founders don't normally have easy access to. Such a network brings incredible added value and allows you to move forward much faster and more purposefully.
In addition, angel investors usually have experience with at least one company they've founded, and have been more or less successful with it. As a founder, you can then naturally leverage this experience and gain valuable tips. This way, you don't have to repeat all the mistakes, but can skillfully and purposefully avoid some of them.
And then—last but not least—another major added value I see: Angel investors are usually well-connected in the world of institutional VCs and have their own experience. This means they can also act as sparring partners for founders when the startup is ready to take the next step.
Many founders are afraid of letting investors take over their "baby" too soon. What's your take on this?
Fundamentally, a financing model using debt capital is just one way for a company to quickly raise money and grow. If you, as a founder, have too many reservations about this, you don't have to use such a model. Bootstrapping is definitely an alternative worth considering, and one I've seen used successfully time and time again. It may take longer, but it means you remain completely in control. But even if you, as a founder, decide to bring in investors and are unsure, there is also the option of regulating the investor relationship through appropriate protective rights. That is entirely legitimate. Good founders usually protect themselves and ensure that they remain in the driver's seat and that the investors cannot block too much in case of doubt. In my opinion, entrepreneurial freedom should be restricted only minimally – otherwise, it becomes difficult for you as a founder.
If I want to bring in an investor: How can I best prepare myself as a founder?
As a founder, it's crucial to build a network. Those who manage to immerse themselves in the scene that's important for their own company or industry have a clear advantage. It's also helpful to talk to fellow founders and learn about their experiences. Many startups find themselves in a similar situation and have already experienced similar situations. It's therefore a good idea to use the tips for finding investors, negotiations, and deals. Both of these things work very well if you know the right events and attend them. I myself attend a few selected events throughout the year, and so do most of the investors I know.
Why I think this is so important is relatively simple: At Bits & Pretzels, for example, we have more than 300 investors on-site this year, who are very easily accessible for founders. Of course, it's ideal if you make the effort to find the right investors in advance and contact them to schedule meetings. And even if that doesn't work out, I advise everyone to be proactive and approach investors on-site at events.
At Bits & Pretzels, we strive to create the best opportunities to make it as easy as possible for founders and investors to find each other. For this purpose, we have our Startup Pitch or the Startup Exhibition, which are popular with investors, and the matchmaking area for targeted meetings. There are also special presentations by investors – for example, on the Academy Stage on the topic of "Finding Investors." With Holtzbrinck Ventures, which manages more than one billion euros and has already invested in 160 startups, the topic will also be presented in Germany by one of Europe's largest and most experienced VCs. Investors who come to Bits & Pretzels are usually very open to discussions, as they know from experience that many good founders are present. To facilitate scheduling in advance, there is an event app that I recommend every founder use.
A personal question: Why do you invest in startups? What appeals to you about them?
I consider it an incredible luxury to be able to work with other dedicated and interesting entrepreneurs and be part of their growth. Sharing knowledge, networks, and opportunities is incredibly satisfying. And overall, I've achieved a well-above-average annual return with the startup asset class—which is certainly a nice benefit.
About Felix Haas:
Felix Haas is co-host of the Bits & Pretzels Festival, founder of numerous successful startups, and business angel in over 100 European and international startups. He lived in Silicon Valley for over two years and enjoys spending his rare free time flying.
More information on the topic of “finding investors,” which startup founders absolutely need to know, is available this year at Bits & Pretzels at the Startup Academy.
