7 STEPS — Start-up Journey at BackBone Ventures

Start-ups often wonder about the decision processes at a venture capital firm…

from first contact to the transfer of the funds. This post will show you some insights about that process within BackBone! The life of a start-up always starts with an idea. This idea is turned around, adapted and nourished and after a while something like a strategy and a first product results and maybe even first clients are on board. At a certain point, the team must decide whether they want to grow with their own cash flow as before (called bootstrapping) and keep all shares for themselves, or whether they want to kick the game up a notch by getting external funding. One of the parties they can go to are Venture Capitalists (VCs).

Once suiting partners for venture capital financing are evaluated, the “get in touch” process starts. Here direct intros are very appreciated as they support the quality of the idea and the team by the introductory party, which is more difficult to verify with “anonymous” incoming mails. Personal meetings, be it at events or fairs, are valuable as well, as potential funding partners can attach a person to the ventures and get more feasible intentions than from a single pitch over mail.

So, what happens at the BackBone office once you hit that send button?

Our hello-Mail is maintained on a regular basis, all incoming messages are dedicated to the responsible person, for our deal flow Philippe is the man you have to convince in a first step.

First the idea must fit our focus, geographical & industrial: D-A-CH & Israel, innovative ICT, FoodTech & disruptive technologies in general. Also, the scope must fit: Seed to Series B and an MVP should be in place.

Secondly, we take a deeper look at the venture. Areas like the team, the product and its underlying technology, the market which will be tackled with its characteristics and the current competitor situation. Furthermore, the financial outlook with its reasonability and the roadmap of the next steps, are analyzed. If already available, the terms of the current round are interesting factors too. “We are looking for the gold nugget, that distinguishes an idea from the others.”

Third, a first call is set up, so we get to know the people and the story behind the deck. Do they have the drive and the ambition it takes to accomplish the goals they set? What’s their motivation? Are there maybe any red flags you can see already?

Fourth, additional documentation must be provided, data rooms established, and the ongoing information exchange starts on both sides. At this time, the project is usually assigned to one partner, who pitches the case for the team for first internal discussions. If everyone is convinced and there is no veto, we pursue.

Fifth, the so-called due diligence starts, where every insight, assumption and hidden fact is evaluated and analyzed. Plus, first workshops with the start-ups are planned.

Sixth, our investor network is activated. We strive to syndicate the round with an optimal mix between industry or technology insiders — it’s rarely possible to have all the necessary know-how in-house. Like this we bring additional value to the table besides money. The investors are being pooled so there is only one shareholder in the start-up’s cap table from the BackBone side. Usually the syndicate takes an observing or a managing board seat.

Finally, with all shareholder and investment agreements in place, the funding round can be closed. The start-up’s capital is increased — assuming there were no showstoppers and red flags in any previous steps. This is where the adventure officially begins and we usually set the date for the first post-investment workshop, tackling the most urgent goals, their potential stumbling blocks and assessing the best leverage for future support.

From here on, we all sit in the same boat.