Source: Zag Daily

At the recent Micromobility Europe event, Zag Daily moderated a panel discussion focused on the question of what it takes to raise capital in today’s micromobility market now that the industry has reached a greater level of maturity compared to a decade ago. The panellists shared insights on what aspects raise green or red flags for them, and what can make the difference in successfully securing funding.

The panel members were Peter Vest, Senior Investment and Asset Manager at EIT Urban Mobility; René Wiertz, Founder and Managing Partner at Fundracer; and Thijn Van Helvoirt, General Partner at No Such Ventures.

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Wiertz emphasised the need to tailor a fundraising pitch to the stage a company is at. “f you’re raising money for a seed round, you won’t usually have the metrics to show so you have to sell the story. If you’re raising for a Series E, you will have the metrics and so you have to focus on the facts. The stage you’re funding for is essential to get your story right.”

Van Helvoirt expanded on this theme, stating, “A mistake many founders make, which I think is lazy, is they assume that in a very early stage the only thing that matters is vision,” adding that founders need to demonstrate to investors that “you don’t just have a vision but that you’re genuinely interested in the answer to what will make your company work.”

Vest warned against becoming too focused on valuation in the early stages. “Don’t be too afraid of losing a few per cent in the early stage. Revenue builds valuation. Valuation does not build revenue.”

The importance of commercial metrics

All three panellists agreed on their reluctance to back business who cannot demonstrate genuine commercial traction, with revenue – and the type of revenue – of paramount importance.

Vest stated, “You could have recorded €1 million in revenue last year but if €500,000 was from grants then that’s a different story compared to €1 million of commercial revenue.”

Van Helvoirt concurred, saying, “What I want to see is that a company that’s already generating money is projecting future growth based on the type of revenue they’re already collecting today.”

Wiertz warned that a significant red flag is a pitch built on projections, without evidence that execution of the plan is feasible. “A deck full of renderings by a team that has never built a company or built anything – that is definitely a red flag for us. Anybody who has built a company knows how hard it is and how much persistence you need.”

Points of differentiation

The panel explored the factors which make a micromobility company stand out from the crowd. Innovation has its place, but isn’t everything – Van Helvoirt highlighted that distribution and execution are crucial factors, arguing that founders need to demonstrate an ability to get their product to market, and achieve successful scaling.

Vest emphasised that, for EIT Urban Mobility, business fundamentals must be in place, alongside innovation. “If you’re on top of all the basics, then you can add something where you stand out compared to the rest of the market. For us, that other thing must be related to innovation.”

On the topic of innovations investors like to see, Wiertz pointed to technology adoption, such as the increased use of IoT, ABS systems and other examples which are commonplace in the automotive industry.

What investors don’t want to see

When asked about the products and pitches the market no longer needs, the panellists offered a range of viewpoints.

Wiertz said that the launch of another e-bike brand isn’t likely to spark interest, without a genuinely unique feature or proposition.

Van Helvoirt returned to his earlier point, that a point of differentiation doesn’t necessarily need to be a completely new product, but stronger execution is a positive.

Vest focused less on products, and more on the fundraising process, saying that he has little patience for non-binding agreements such as Letters of Intent and Memorandums of Understanding.