In the Spanish entrepreneurial ecosystem, there is an interesting debate about the role of startup service providers. As is evident, opinion varies depending on who is making the assessment. Moreover, the role of a provider or intermediary encompasses a variety of services, each with a specific value contribution, which further broadens the discussion. In parallel, it is crucial to understand what stage the startup is in, as this will more accurately determine its needs and who can best help it.
The main actor in this plot is the founder or CEO of the company himself. By nature, the entrepreneur is someone courageous, who usually feels capable of tackling many tasks, sometimes even beyond his or her means. It is not common to find founders who fully understand their role and, above all, are aware of their limitations. And herein lies the key to the matter: if you don't know what you don't know, it is impossible to learn it.
Without analyzing in detail each of the areas where it is possible to support entrepreneurs, we are convinced that the role of intermediaries and service providers is fundamental, especially in the financial area. It is in this area that we observe less experience and knowledge on the part of the founders. Therefore, these companies can play a crucial role in helping startups to grow, optimize their finances, access capital and ensure sound fiscal and financial management.
In order not to go into too much detail, let's focus on specific needs within the financial sphere. Probably the most popular is support and advice in the process of seeking financing. But what kind of help do entrepreneurs need when facing this challenge? Much will depend on the stage of the startup, the type of investor they are looking for and, above all, the level of knowledge and experience of the founders.
At LetsfinanceWe receive more than 25 startups a month, either for mentoring, training or help with specific financial needs. From this experience, we identified two key needs that appear in almost every project:
- Preparation of materials: Every self-respecting entrepreneur has a 7-slide presentation designed to present his project in 3 minutes to a Business Angels forum. But this is not enough. The Investor Deck and the financial model with forecasts must meet the expectations of potential investors, who usually have reviewed many projects, and very good ones.
- Access to investors and preparation of the round: Not everyone is born with a contact book full of investors. Moreover, it is not just a matter of having access to them, but of knowing how to interpret their investment thesis, their timing and their priorities.
At LetsfinanceWe have dealings with and access to practically all Venture Capital funds specialized in startups in Spain. And the key question that arises is: How do investors perceive the fact that an intermediary is the one who manages the search for funding? The answers are not unanimous, but there is a consensus that it depends on the stage of the startup.
At early stagesWhere the founding team plays a crucial role in the evolution of the company, it is important that investors are approached by the entrepreneurs themselves. This allows investors to assess the capabilities of the team. At this stage, it is not appreciated for a third party to be the one to make the pitch or send the deck. That said, many funds agree that they have failed to invest in good projects because the materials they received did not meet their standards. This is where intermediaries bring value, helping entrepreneurs to optimize their investment materials, messages and pitches.
At later stagesWhen the project already has some traction and the team has demonstrated its ability to take the startup to the next level, it is not as essential for the founder to directly lead the contact with investors. At these stages, the entrepreneur should focus on the day-to-day operations of the company, leaving the leadership of the financing process in the hands of professionals who can effectively support.
While we said that the key to this debate lies with the founder himself, the attitude of suppliers and intermediaries is also critical. In our case, more than 60% of the entrepreneurs who contact us for help in raising a round receive unexpected advice: they don't need a round; they need to go to market and sell. While this may seem like a shot in the dark, we firmly believe that honesty is the biggest favor we can do them.
