Fundraising during the time of crisis

Fundraising during the time of crisis

The economy is in the bad shape and the things may only get worse. Fundraising during the times of crisis can be challenging and fundraisers will look for ways to respond to the crisis.

We have to accept that the world has changed as we know it. We need to adapt to the new normal. For starters, rather than panicking, you should consider a rational way to respond to the crisis.

 

Technology as a turning point

 

You are probably working from home and adapting to the new way of working. The first thing you should accept is technology. Try to get comfortable with technology and use it for your advantage. 

Start fundraising over the phone and organize a video meeting. Now is the time to put in place online communications channels and marketing.

Connect with donors. Facilitate direct contact from the people in your organization that have influence with donors. Their influence comes from the positions they hold and the fact that they are not paid to raise money. That means, above all others, leadership volunteers and Chief Executive Officers.

The perfect time to have a call is now during the crisis. You want to make sure your donors are doing alright and you want to show concern and appreciation.

 

Be attentive to your donors

 

There are lots of ways you can cut the costs of fundraising. For example, you can stop prospecting for new donors and telemarketing efforts. You can also try to eliminate thank yous to donors.

However, you have to keep fundraising. Whatever the economic condition, business goes on. You can’t treat loyal and responsive donors like statistics. And you can’t stop building your donor database.

The only defensible, businesslike way to respond to an economic crisis is to recognize that fundraising requires both continuing investment and ongoing care.

Don’t stop talking to your donors, just because the world is shaken. Past experience shows some donors never forgive the charities that don’t reach out in times of need. In the article at Philanthropy, people who work in fundraising, technology and other businesses have shared their stories.

 

Consider fundraising online

 

Online fundraising does not represent salvation during the time of crisis and yet billions of dollars have been raised online. Fundraising online has multiple benefits for nonprofit fundraisers, most of them having little to do with money.

It could attract younger supporters, and reinforce appeals sent through the other channel. Enhanced investment in online communications will pay many dividends, reinforcing near-term fundraising efforts and laying the foundation for a more prosperous future.

You can organize a virtual event and have peer to peer fundraising campaigns.

The nonprofit reaches out to loyal supporters and asks them if they want to participate in the fundraiser. If supporters are willing to participate, they then set up their own online fundraising pages (with the nonprofit’s help). These individual pages link up to the nonprofit’s main peer-to-peer fundraising page. There are also plenty of other ideas on how to launch online fundraising.

The key takeaway of this article is to stay persistent in your fundraising and don’t forget about your donors. Have a meaningful conversation with them and express your concern about the current situation. Your donors will appreciate you more and remember you in the future.

Digital disruption impact on business in the new era

Digital disruption impact on business in the new era

We live in disruptive times. Digital disruption impact on business will face uncertainty. Technology has changed the way we work, shop, sell, our economy, day to day factors such as transportation, right down to the way we live in society. With the new era, comes a new disruptive technology that will change the way we live or how we think.

A wave of innovation disruption is happening faster with companies going out of business faster.

Especially, now that we have all different technologies suddenly converging – IoT, robotics, self-driving cars, AI, Big Data and analytics, 3D printers, nanotech, AR, VR, quantum computing, bioengineering and blockchains. The immediate impact of blockchain technology may not be apparent for the non-technological eye; however, it could improve existing systems within society at large.

This digital disruption impact on business is, therefore, changing lives on many fronts. It is changing the value propositions for a business.

Moreover, a common example is an e-commerce as a digital transformation in business. Disruption in commerce means a radical break from the existing processes in the industry. A recent study by Accenture showed that industry leaders expect up to 40 per cent of incumbent businesses to be displaced by digital disruption by 2020.

The global financial sector could be worth US$26.5 trillion in 2022 with a CAGR of 6%. There are still financial institutions that do not have an app or a website to meet today’s market demand. Therefore, the businesses that put customers first, are those that win the prospects.

What are the most disruptive technologies or trends between now and 2022?

 

The answer found at Quora, by Thomas Kutschi,  VP Alliances at Infonova, a leading-edge BSS vendor.

To change the world within the next 1-5 years the technology has to be mature already and in the early adopters’ phase. This limits it to a few “un-revolutionary” technologies. A few that come to my mind:

Distance education: education is still seen as an on-premises activity. This will largely change. The technology is there, providers of education are ramping up their efforts to tackle this market and users start to adopt it.

E-Commerce: A significant part of purchases are already made via the web, but this is going to increase and conquer a new customer segment.

Non-linear media consumption: linear TV is still king in the living rooms of today (and it is there for good, just less important) – but non-linear VoD, Time-Shift etc. will be widespread with availability of broadband.

Home automation: This might probably take longer. Moreover, five years from now it will be normal to live in a fully “automated” and remote-controlled living environment.

Big data: We are currently only talking about this, but the impact will be there five years from now. That said, big data will evolve with tailored solutions, mass-customization, personalised offers and ads.

Internet of things: More and more sensors or actors will be internet-connected.

Cashless payment. Either via plastic, NFC, mobile, whatever – we will see less cash circulation 5 years from now.

Recycling: A lot of very expensive and valuable material goes to waste. Garbage is put into a hole in the ground or burned. New technologies for separation of garbage and re-winning material out of it will hit the street and make your garbage a big business.

Digital disruption impact on business

Business meetings shifted to video conference. Digital technologies are in use in the day-to-day of every company. In addition to that, businesses who have trouble switching to digital communication are rare.

Moreover, the sudden switch to technology and digital communication affects companies at all levels. Changes the channels of communication with customers and suppliers. And even the tastes and dynamics of the market change in a profound and surprising way.

A real case study example of disruptive technology transformation is a company WW (formerly Weight Watchers).

According to Which 50; In response to COVID-19, the company moved 30,000 face-to-face meetings — impacting a third of the company’s members and the bedrock of its business — into the digital realm. A month later, high satisfaction ratings from its customers demonstrate the success of the venture.

There are many examples of companies who adapted the new change quickly without any difficulties. Online meetings performed easily through the video calls with the app we already know such as Zoom or Microsoft Teams. Online payments are also possible through e-commerce and communication between teams through Slack channel, popular in the tech community.

In summary, the digital disruption impact on business already resulted in a sudden change in the way we do business. How we communicate with our partners or customers. It also changed the way students learn in schools and are prepared for the new era of digitalization. Meanwhile, Fintech companies offering short-term financing to cash-strapped businesses are slammed with online enquiries for help.

Valuing tech startup company

Valuing tech startup company

Valuing your tech startup company is crucial when you are planning to sell your company, but also when seeking investment. However, the question is how do you value a tech startup company? The answer to this question is rather the art than a science. There is no right answer, the company valuation depends on the investor’s decision and how much they are willing to pay.

To determine the value of your business, financial experts and investors will mostly use the following methods.

Multiple of Earnings

This refers to the average monthly or annual profits adjusted to not include one-off factors such as exceptional costs or one-off purchases. This will give you a good idea of immediate future profits. To get the valuation, multiply this number between three and five, but don’t be too optimistic if you’re only a small company.

Moreover, this is a very good tactic for companies with a solid track record of successful and profitable margin.

A look at Apple’s P/E ratio over the years reveals that the company’s price/earnings ratio has a positive correlation with its price. In other words, the P/E multiple is one of the signals that traders use to determine opportunities whether to buy or sell.

For more detailed valuation methods, take a read at startups company valuation guide.

Asset valuation

For start-up companies with promising ideas but no actual businesses, the sensitivities can be a lot higher. For example, a start-up company that needs to invest $50.0 million to build a business that could be worth $1.2 billion with a probability of 5% and completely worthless otherwise. Its estimated value today would be $10.0 million. But if the probability of success were to fall by just half a percentage, its value would decline by more than half.

It is no surprise that the share prices of start-up and high-growth companies are typically far more volatile. When compared with companies with mature businesses, a tech startup company can be unpredictable.

To calculate your asset valuation, take the value of your assets and subtract your liabilities. This method of valuation usually produces the lowest valuation. Have in mind that this method does not take into account the potential for future earnings.

That said, there is no single point valuation for a tech startup company. However, the already mentioned methods could help with the overall strategic company valuation.

Discounted cash flow

Discounted-cash-flow valuation, although it is a well-known method in finance, works where other methods fail. The core principles of economics and finance apply even in uncharted territories, such as startups.

A discounted cash flow model takes into account all the factors that could affect a company’s current and future performance. There are also factors that impact the DCF model such as external and internal. For the internal factor consists of most of the data that a financial analyst has to consider. However, the external method will include the impact of competitors and market growth.

Moreover, McKinseys recently argued, in their article (Valuing high tech companies) that it might feel positively retro to apply DCF valuation to hot start-up technology companies, but it is the most reliable method.

Cost-to-Duplicate

As an example, take valuing tech startup, the cost-to-duplicate a software business might be high. Let’s see it as the total cost of programming time that is gone into designing the software. For a tech startup, there could also be the cost of research and development, patent protection and prototype development. The cost-to-duplicate approach is often seen as a starting point for valuing startups.

After all, it is based on verifiable, historic expense records. However, the problem a lot of tech founders will see here, is that it doesn’t reflect the company’s future potential. Moreover, the cost-to-duplicate method does not include intangible assets such as brand value.

So, physical infrastructure and equipment may not be the only thing that matters, in fact, the actual net worth lays in intellectual capital and relationship.

Technology businesses are quite often valued based on the number of customers/subscribers, the stickiness or customer retention and the uniqueness of the IP, patents or technology platform that has been built.

When valuing a tech startup, oftentimes, the potential synergies that they provide to a buyer and the current market sentiment are factors that come to play the same as the revenue the startups have.

Remember that valuation is a starting point for indicating the value of your business. For more read on how to value a startup, check out the Early-stage company valuation guide.

3 Ways Startups Can Survive

3 Ways Startups Can Survive

There is a lot of uncertainty about how COVID-19 will change the startup investment climate. 500 Startups, a leading global venture fund and seed accelerator decided to survey its investor community. The following facts of the impact the current pandemic has on startup investment activity. Only venture capital firms (40%) or angel investors (35%), said that the Covid-19 health crisis will have an impact on early-stage investment activity. The majority of investors suggested that Covid-19 will hurt investment activity in 2020. Nevertheless, in this article, we will share advice on how startups can survive a period of uncertainty.

The survey showed an increased interest in investing in sectors such as healthcare (46%), remote work solutions (42%), logistics (32%), and productivity software (28%). Many venture capital firms are also offering resources and guidance to startups during these tumultuous times.

Despite the current situation, It’s important to note that there was a record number of VC funds raised in 2018 and 2019. The majority of those funds are still in their active investment period. That said, many may continue to make investments for the rest of this year and into 2021 (Source: Pitchbook). In the past two years, we’ve noticed historic levels of active seed.

That includes and Series A funds, which means it’s not all negative news for capital availability at this point. In other words, startups can survive this period of uncertainty.

Source: Pitchbook

However, investors must now navigate market changes on a global scale, which may impact investment activity. Nevertheless, VCs now have to not only meet founders remotely which means that they also have to make decisions remotely. That itself could contribute to the slowdown in investment. That can continue for the next two to three months. So how can startups survive?

Decrease costs focus on needs

To prepare for a downturn in investment, cut the low-hanging fruit. Unnecessary costs and spending should be evaluated and eliminated at this point. While many startups may have already mapped out 2020 plans, investors are suggesting that now is also a good time to reevaluate operations to reduce costs. Besides, investors are suggesting that startups should reduce cash burn.

At times of uncertainty, startups need to question the activities and decide which are critical in the current moment. It may not be easy to see when the next revenue will arrive. It is a good idea to dedicated cashflow to required operations expenses that keep your business going. For activities that you wish to have, consider to put on hold until the situation clears out.

Moreover, don’t forget to check for the government to help and initiatives.

Take advantage of what is available in your area and feasible for the long term survival plan. The recent news is that the European Union is launching a new initiative to support venture capital and growth financing in Europe. The European Scale-Up Action for Risk Capital program will provide up to €300 million to increase the investment capacity of VC and PE funds. The aim is to trigger investments of up to €1.2 billion to support scale-up companies.

When you ask for government support, it often requires a lot of administration. Don’t back out, instead, think of your business and how your employees and customers will thank you.

Focus on your customers

You already know the value your customers bring to your business. Now is the time to keep them occupied and focus on consumer needs. Think of why your customers like your product and what experience they have. Your products should revolve around them. Keep in mind any changes that might have a negative impact on your consumers’ experience. Right now, your startup should fit in the market and gap in the market. Continue to measure your KPI that shows consumers satisfaction in your product or service.

It is important now more than ever for startups to become a running business and generating revenue. Nevertheless, think of the cost for a business to win new customers and users. If you have to choose between being aggressive with your pipeline or serving current customers, work on keeping churn rate low. That said keep growing your base, and re-investing in the areas where you’ve experienced success. Think of tending to an existing garden rather than planting new seeds.

Besides, many investors are suggesting that startups make customer retention and closing any open deals a priority in the short term

Be transparent

Be open with your investors, advisors, and those closest to your business. Investors are there to support you through challenging times. If you are running low on your cash reserves, but your burn rate remains high, investors and advisors need to know the situation. Be proactive about asking for help if you need it. You’re not in this situation alone, as it is likely your investors and advisors are dealing with the same circumstances.
Now is the perfect time to be transparent and keep open communication with everyone involved in your business.

Your business will go through unprecedented times, which can bring new levels of stress and busy-ness. Try to remain positive and confident in your business. If changing circumstances mean you do have to reduce your staff, operating costs, or partnerships, do so while looking for the bright side. The world may look different in 6 months and the smart, strategic moves you make now may pay off when the dust begins to settle.

Startups post-pandemic future

Lastly, according to a survey from Pitchbook, investors are playing the wait and see tactic. In the meantime, others are planning to scale back their bets this year. That said, startups can survive the crisis, despite the circumstances.

The social isolation has set some conscious or unconscious limitations on employees’ productivity. Whereas, more tangible problems like dysfunction of supply chain and disrupted demand are easier to analyze. However, as the real-world implementation of digital innovation and tech-based platforms has come through as the real hero, it will be exciting to witness how entrepreneurs and startups practice digitalization in post coronavirus pandemic.

Leading Venture Capital Investors

Leading Venture Capital Investors

In the chart above, leading venture capital investors are shown. The chart also shows the number of early and late-stage rounds led by the most active lead investors in the venture world in 2019 as a whole. Big accelerator programs like Y Combinator, TechStars and 500 Startups, among others, invest in dozens or hundreds of startups per year. Even though accelerators typically invest a de minimis amount of capital and often co-invest alongside syndicate partners, they’re traditionally listed as the round leaders because they originated the deal.

Between its primary and franchise operations in China and India, Sequoia Capital continues to be one of the most prolific investors on the planet. The firm has been on a fundraising tear, disclosing $3.35 billion in dry powder secured for funds aimed at growth-stage investments in the U.S. as well as venture and growth-stage investments in China.

Most active in Central & Eastern Europe and Southern Europe

active in central and eastern europe and suthern europe
atcive global investors by VC deal count

In the chart above, we show the number of early and late-stage rounds led by the most active lead investors in the venture world in 2019 as a whole. Big accelerator programs like Y Combinator, TechStars and 500 Startups, among others, invest in dozens or hundreds of startups per year. Even though accelerators typically invest a de minimis amount of capital and often co-invest alongside syndicate partners, they’re traditionally listed as the round leaders because they originated the deal.

Between its primary and franchise operations in China and India, Sequoia Capital continues to be one of the most prolific investors on the planet. The firm has been on a fundraising tear, disclosing $3.35 billion in dry powder secured for funds aimed at growth-stage investments in the U.S. as well as venture and growth-stage investments in China.

active venture capital investors in Suthern Europe
active venture capital investors in central and eastern europe

Leading venture capital investors by sector in 2018 were:

500 Startups (124) in software; Alexandria Venture Investments (28) in pharma & biotech; Elevation China Capital (7) and Atlantic Bridge Capital (7) in IT hardware; SOSV (27) and Keiretsu Forum (24) in healthcare devices & supplies; Keiretsu Forum (16), Alumni Ventures (13), F-Prime Capital Partners (13), Plug and Play Tech Center (10) in healthcare services & systems; Shell Ventures (6) in energy.

500 Startups

In the recent 500’s article, the company explained the process of picking the startup investment. In this article, they explained the opportunity assessment as a foundational rule for VC. Moreover, the first thing they would invest in is smaller bets. A cross-functional team is another valuable factor in the investment process.

In other words, it is not enough to have a skilful engineering team without a marketing or project person. Further, it is always best to have a cross-functional team to be successful. Typically, every VC would look for a product that sells and that is solving customers’ problems.

Additionally, the product that the company owns needs to have a scalable solution to go to market. Investment process requires step by step preparation and presentation from a startup looking for investors. Your business needs to have a good understanding of the investment journey. That being said, you need to walk your team through all the stages in the negotiation process.

Startup Ecosystem in South East Europe

Startup Ecosystem in South East Europe

South East Europe offers a surprising potential for startups. Startup ecosystem in South East Europe is alive and well. There are more than a few unicorns potential in this region. Therefore we need to consider political factors influencing the business environment. We provided you in the last chapter with a brief overview of the business environment in South East Europe. With this in mind, we already covered the economic and government hurdles, but what can entrepreneurs do to endorse ecosystem?

We’ve covered that the lower entrepreneurial tradition and greater difficulty in private financing have limited European technology startups. Moreover, there are good ideas and venture capital seeks companies with the potential to put their money.

The largest ecosystem in the region belongs to Bulgaria with more than 3,000 startups. The development cycle of the startups in the region seems to be that of a large number of seed and smaller early-stage startups. However, only a handful of successful later-stage startups emerge later with the development of the whole start-up ecosystem. In general, there are not that many scale-up companies in the region since most local startup ecosystem are still quite under-developed.

The most problematic for the startup ecosystem in the region is lack of investment funds. There are huge disparities between the needs of the startups and the funding available to them. In more developed ecosystems, public funding would at least aim to bridge the gap (Slovenia and Croatia are attempting that), but fiscal constraints in most countries prevents them from having much impact.

Country reports for Startup Ecosystem

Slovenian startup ecosystem has developed fast in the last six years. According to the PitchBook Report on Startup ecosystem, there was a significant increase in funds raised by startups leading to 100 million € capital raise in 2016. Slovenian startups are most active in cryptocurrencies and ICO. In 2016 more than 70% of funding came from VC funds and most of the funds came from foreign investors. Slovenian projects are the most successful on Kickstarter crowdfunding initiatives. The most general data shows that Slovenia gets 10 new companies every year per 1000 people. Although this makes 30% more than the EU average, Slovenian startup ecosystem is still underdeveloped.

The Slovenian government generally supports the startup ecosystem but with relatively low measures. Most of the public support is unfortunately attributed to basic research in the government and higher education sectors, not applicative research and development in the business sector. To sum up, the Slovenian government has proposed some measures to support the startup ecosystem. Measures include increased access to capital, raise the level of business talent activation and implement comprehensive support programmes. Those are just a few measures that need improvement to be implemented more efficiently.

Startup Ecosystem in Croatia

Croatian ecosystem remains hamstrung by a chronic lack of risk capital. Although Croatia invested massively in the entrepreneurship support ecosystem, much of this investment failed to have a direct impact. Moreover, in cities Rijeka and Osijek, incubators are beginning to turn to startups and act as hubs. The local government in Zagreb failed to provide support to startups for a long time. Lack of publicly funded support infrastructure motivated private initiatives (like ZIP, Impact Hub, and Hub385) to fill the gap and meet the demand, which they succeeded, to an extent.

It is hard to determine the most successful industry and field of interest for the startup ecosystem in Croatia. Moreover, industries ranging from automotive to agriculture come to a very wide field of interest. One of the key competitive advantages of the Croatian ecosystem is skilled and affordable engineering talent. One interesting point is that – while tourism represents a very big and important part of the overall economy, it doesn’t feature in the startup ecosystem. Government in Croatia has little or no impact on the startup ecosystem which led to underdeveloped ecosystem compared to other countries in the region. In the short- and mid-term, the Government should focus strongly on bridging the critical market gap in the availability of risk capital (early-stage in particular) by setting up a range of equity-type financial instruments.

Serbia Startup Ecosystem

Serbia holds the 47th place on the World Bank’s Doing Business list and the same position for ease of starting a business. There are a number of newly registered startup in the past years. Since there is only a rough data available on a number of startups, the total number of early-stage companies in 2016 was 42,450 from which more than 1,000 were in IT. Considering the conditions in Serbia are not as favourable as some other parts of the world, a survival rate of startups is 10%.

There is not much official communication between the government of Serbia and the startup ecosystem. However, the new political minister has announced to focus in the years to come in the IT sector and innovation. More time is necessary for Serbia to grow its first generation of entrepreneurs with a global mindset, which will then act as mentors and potentially angel investors, while also serving as a bridge between Serbian ecosystem and the rest of the world.

Bosnia & Herzegovina Overview of Ecosystem

The startup and venture ecosystem in Bosnia and Herzegovina is growing, but it is still underdeveloped, unexplored and undocumented. First accelerators and incubators were documented in Bosnia & Herzegovina in 2008. However, they have not received public interest until a few years ago. One of the Venture Capital funds comes from USAID’s Partnership for Innovation that helps young market newcomers improve their IT skills.

Incubators and accelerators, as well as foundations often collaborate with each other. Therefore, incubators exchanging not only information and knowledge but also their domestic mentoring network. In conclusion, there are no obstacles to collaboration between stakeholders, except for lack of information. Moreover, the existing startup ecosystem in BiH has great perspectives to develop further in the next 10 years. However, the government should work harder on creating a business environment that will bring investment into the country.

Kosovo Startup Ecosystem

Kosovo experienced lower economic growth of 3% as discussed in our previous article on the business environment in South East Europe. The startup ecosystem in Kosovo has notably developed a good infrastructure for startups. There is a number of institutions in Kosovo that are active ecosystem. Moreover, the institutions, donors, supporters, universities and other relevant actors more or less collaborate with each other, with certain goals and projects in mind.

On average, 48 % of Kosovo’s firms survive beyond the first five years of operation. Innovation Union Scoreboard value for the country doesn’t exist, nor does the Global Innovation Index score for the country. There are very few private research institutes that have employees with PhD degrees. The vital actors of the ecosystem depend highly on international donor funding, which is one of the biggest challenges and risks for a stable environment in the country. To sum up, the government should focus on providing the necessary financial means to support the establishment of tech parks. With additional financial resources, the community would be stronger and more competitive.

Montenegro Ecosystem Overview

The startup ecosystem in Montenegro is in an early stage of formation. However, many conferences, events and workshop on digitalization were organized in the previous years. A big part of such activities is possible due to cooperation with NGO Digitalizuj.Me. Part of their strategy is developing and boosting the startup community, by organizing workshops and competitions such as startup weekend and hackathons. All traditional and digital media are highly interested in reporting about the startup ecosystem and high-tech development. The biggest obstacle is the nonexistence of local investment opportunities and hardly any support from the government.

Government support, changes in the education system, and a more vibrant network of VCs, angel investors, and mentors are still lacking in order to help the startup ecosystem. IT talent in Macedonia is solid and very competitively priced (median salary for senior engineer is approx. $1000/month according to the STAT Office RM 2016). This gives an opportunity to be competitive on a larger scale. However, entrepreneurial education is almost non-existent and a “communist” way of doing business still seems to dominate the landscape. Macedonia is currently behind in terms of startup activity. Stagnation, mixed with brain drain might lead the country to slow growth. However, the country could be attractive to digital nomads and international entrepreneurs due to a low cost of living.

Albania Overview of Startup Ecosystem

Albanian startup and Venture Ecosystem is infantile and in its early stages. I would classify it in the discovery and action stage and just the beginning of the startup stage. Identifying with others who also challenge the traditional notions of success and acknowledge the potential hazards that lie ahead is often all that is needed for the entrepreneur to tackle the path that they hope to pursue.

In general, Albania is behind the so-called active startup ecosystem. Countries low market size, lack of capital, and other support institutions, led investment to become a high-risk proposal. In 2015 the government developed a strategy with the main aim on investment and policy measures to improve the ICT infrastructures. There are government-run resources, such as research programmes, accelerators and incubators. These projects, along with their counterparts coming from academia and the private sector are not optimally effective. Therefore, they are not receiving the support and funding they need to thrive.

Summary

Software is frequently the industry of choice for startups in the region. However, there is also an interesting development in hardware. Further, hardware incubators that act in the region include incubators Reactor in Osijek, or Katapult in Zagorje, Slovenia. Startups from other industries are rare – but the potential for their development is large as a lot of R&D is implemented in research institutions of the region.

Finally, there are some specific industries that have interesting potential in the region apart from software and ICT. The energy segment and tourism seem to be two such industries with more financing than other industries and good potential for growth in this region based on its natural resources.

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