S2 - I'm in Love with a Little Piece of My Big Pie

[Music] Welcome to the iMac iStart Podcast. Here we will dive into technology and innovation and discuss how entrepreneurs can grow their tech startup into a scale of. Welcome fellow entrepreneurs and welcome back to the iMac iStart Podcast. I'm your host Marta Van and today we're having a captivating episode with the title. I'm in love with a little piece of my big pie. 20 minutes studio of UrgentavM are three phenomenal guests who have not only taken a slice but also are baking their own pies in the vast landscape of entrepreneurship. We have Isabelle Tensstedt, the dynamic force and partner at Cedar Fund, Team Clamans, the visionary and financial mind behind Dio and Chris Fenderberek, a driving force behind the iMac iStart Future. What is Future Fund? Future Fund is a new Funtanitative, closely linked to the iMac iStart Accelerator. We're aiming to invest in late-seed to Series A, B, Rounds and companies that are part of the iMac iStart Accelerator. It's a new Funtanitative that started together with Rutjansis, who is obviously not here today, but who has been working on this initiative for the last couple of years. Who has also guest already at Podcast? You have been in multiple boards because of your previous investment, jobs and roles as well. The last couple of years I've been supporting start-ups mostly with Funtanitative and M&A, but previously, like Isabelle, I've been working for BMW for 7.5 years, investing in early-stage technology start-ups, whereas part of the job, I guess, we took court mandates and a number of early-stage technology companies. Team, I just said you could only see a Vogue of Dio, but actually, I think you started 7 or 8 companies already, and you did it serially, but also parallel to get it actually with what you're doing all the jobs. That's correct, I think I've been an entrepreneur throughout all my career, as from the time that I left university. Indeed, I think almost the 8th company we're running now. In the beginning, it was more serial entrepreneurship. Most important company I did back then was Mobileife. We were active in custom implants, in the healthcare sector, doing hips and shoulders. We were acquired by materializing in 2015. And after that, indeed, I went into parallel entrepreneurship, doing multiple companies and start-ups at the same time. But at this day, converging again into one in an active role at Dio.care in it. And mostly in the healthcare sector. Yeah, I think most of the initiatives both in consultancy, as well as in medical implants, as well as in technology, I have been active in the healthcare sector, with a few exceptions along the way. Alright, super, thanks a lot. Isabelle, you're currently working at Cedar Funds, but you also work together with Chris previously, also in investment. Yes, we were together at PMV, and so a few years ago, we went all boat or own way. And so I joined Cedar Fund to specialize in pre-seed funding, very early stage in tech companies still. And so in that way, we have quite some close contact with IMAC. As a lot of our portfolio companies, I've already done the IMAC trajectory, and we invested, for instance, in Newman, and other really nice companies of the portfolio. On how to look towards VC, how to look to an investor, or are you looking from the investor side itself? I think it's a combination, because we are obviously investors, but I think it's personally very important to also explain to founders what they get into, when they get a VC on board. And so for me, it's part of the process to explain in detail how VC works, what are the expectations, and what you get into your marriage, basically, because investing with founders, you get a relationship, what you get there, and how you can work together. And I think that only works if the founders and know what they can expect from an venture capitalist. You set investing in an early stage now, this is something which is sometimes a bit ambiguous, because some people say early stage like I start, some people say that that's very early stage, early stages when they already make money, for example, what is in your opinion early stage? What I call the pre-seed seed phase where I'm in, it's really the part where you have two or three founders, maybe a first person on the team, but mostly not. You have a working proof of concept, and you have maybe a client or two, or at least some proof of concepts, contracts with clients. And there's almost no other VC's going to that space in Belgium. So it really aligns a lot with where actually an I start company typically, somewhere after their first investment. So mostly the I make companies go to the program, then we are quite ready to invest, and I think if I hear Chris, he would come in round after us, basically. So what we are trying to do is actually write the winners from the I make a start portfolio. And so typically where we start investing is in companies that have early signs of product market fit, meaning they have some initial customers. There are some signs that they can scale up that number of customers with limited resources in a way and help them bridge the gap often from the seed to series A or series B. Where again, where we've seen that for the last couple of years, investors have shifted their attention to more later stage, where there has where the gap for early stage funding or between seed and series A has become or dried up to some extent for a while. And that is a gap that we're trying to fill with the new fund. So in the companies which you started, do you kickstart yourself and then quite fastly went to external investors or how did it. I think we experienced quite a lot of different setups with the different companies I have been active with. We in the in the beginning phase of my career, we mostly had industrial investors on board, so not venture capital. Worked a lot with business angels and private investors as well, of course to a smaller amount of investments and more into a personal contact or connection. It's only since 2021 with the okay or that we got the first venture capital on board also starting out first on a more lean matter, taking it as long as possible with with our own means and the money we were generating from other activities. I think I experienced quite a lot of the different setups in getting funding. Let's go to the first part, which is about ownership. So of course when you actually have external people, external good angels could be VCs and so on. You're giving away some of the ownership of course of your company, typically a founder or founders or at that time discussing a bit like, okay, but if we have someone externally actually giving away some of the ownership, at the end you need them, of course, obviously to scale and to grow. And there is always attention there. How did you tackle that within your own companies or how did you have this discussion with your co-founders? Yeah, obviously it's always attention fielding between the investor and the founders where the founders do not want to give away too much and where the investor often wants to take more than what the founders had in mind. It depends obviously on what you bring in at. It's usually not only the money, definitely at early stage where it's also about the connections that the founder can bring or the experience that investor can bring on board with the company to make you grow faster. In the end it's making the balance in between what you can do on your own and where you could get with the external money and obviously if the external money can bring you somewhere faster or further it might be worthwhile to give away part of the company. Is there a bell but also the typical discussions which you then see with founders where you say, okay, you have the discussion about how much actually want to invest and what happens with equity and so on. For me and the founders that work with know that I'm not a big fan of huge big rounds and why? Because for me fundamentally what is important for us as a preceding investor is to protect the founders against too much delusion because basically for me two things are important founders always have to keep a meaningful stake and also have to be in the money. What means that you should be capital very effective and like starting with smaller rounds proving your concept that way you don't give that much equity away because that's also part of looking at it if you only do a small round and you can be extremely effective with that round you can grow fast and then at some point you can decide to do an extra round but at that point you will have less delusion. Last year I already know the trend there have been massive equity rounds of several million euros rounds up to 10 million were like quite normal. I think it was kind of a vanity matrix because that puts that stake the being in the money part. So if you can raise that money at a huge valuation your delusion will still be okay. The founders will keep a certain share of the company which can be if the company is sold positively can be quite interesting but founders sometimes forget that there is something as liquidation preference. What does that mean if we see invests there is almost always what it's called standard the less aggressive one is a one time liquid preference that means if the company sold the money goes back to the investors first. If you have raised 10 million euro the first 10 million euro that you get from a buyer will go to the investors which will not be happy because at the end it's only a return one time. But that means if even if you have still 50% of your company, if then something happens and you can only sell your company for 9 or 10 million, which is not so bad, you will have nothing as a founder. And today I think there is a situation where quite some founders raise very big grounds even at a good valuation or not in the money. And then it gets a very stressful discussion between founders and investors because we know today as a founder you don't have any value left. And so that's why big grounds are for me quite dangerous and even if raised at good valuations and can be very negative for founders. Yeah and I agree on that in the sense that you have seen the latest years that a lot of big grounds are brought in kind of a marketing message like an achievement. And the bigger the round the better, where it's all about what money is actually necessary to bring it to the next milestone. And the more you can do it incremental like I usually did throughout my career as well up till now. Yeah the more you can bring us from step to step and not overshoot in that sense. I totally agree that the founder should have a significant stake also basically to not fall down into kind of an employee in his own environment. So it's important that you know as a founder where you're still working for and that's easier to manage when you do it incremental. I think there also the employee reference is very important because what we sometimes see in pre-seed startups is that the founders went to pay themselves a salary which is quite high. But what they don't always realize is that they just trade in a little money now for shares of the company because if you pay yourself a higher salary. Well that money needs to be raised and you need to give equity for it. And of course there are like things you just need to pay house and rent that's true. But there you really have to decide as a founder what you really want and understand that a salary now that's quite high means much less equity. And that's also often the difference on the timing you start your company. I've seen it as well when I started my first company at the age of 23 that's totally different in reasoning on what you should pay yourself. You don't you don't have children yet. You don't need a house to pay and that's totally different when you start a company on the age of 35. Well there are a lot of fixed costs already in your life which you take into account. That's also the reason why at that time we chose to start a consultancy business first to bring in that money in order to pay ourselves. Not to indeed have external funding needed in order to pay ourselves. But to put that external funding really in the product and the development of the company. It's a good practice then to start as soon as possible with kind of a renovation committee together with some of the investors to actually have someone discussing about income. Is that something that you expected the founders to themselves? We don't yeah I think it's it's overkill in a small company to start with a remuneration committee. But it's in discussion we have very openly with founders and we put it now in a term sheet. So it's part of the deal and so it's a very clear and transparent discussion. I think generally this is something that is discussed at the board level as soon as companies have a board. Whether you then need to set up a separate remuneration committee or not depends a bit on the size where I like the founders. Basically can draft or come up with their own plan or not or whether they need other people to help shape that plan. These kind of things but it's ultimately at the board level that you try to give direction to essentially how are we going to allocate or spend the money that has been raised in the most efficient way to attract and to retain talent. Is the risk of having more but smaller rounds of funding that you maybe more often have a discussion about the valuation of the company? Yes of course and it has a downside as well of course because it also takes away time and effort from your founders because it will be the founders who will have to lead the new funding round. So at a certain point in time you could also end up in having a yearly fundraising when you get a little bit bigger which means it's getting into a full time job. So it's keeping the ballast in between board on what time you basically want to extend your runway with the next funding round and where you want to bring the company the next time. I think it's indeed a very difficult balance because sometimes raising a small round can go extremely quick. If you want to raise a big round it mostly takes a lot of more time from a small round can maybe take sometimes in one or two months. A big round will take six to nine months you will go to other funds you will have need much more context to find the right person. You will have more due diligence so that's also something to take into account. However it's not useful to have yearly rounds so even with a small round you have to be very proactive to manage your spend so you can even with a small round be at least 18-24 months. If everything goes extremely well it's raising at that moment will not take that much additional time so then it's not negative. If it goes slower in fact you should be happy that you didn't raise more so and you just have to continue to be very careful with your money and don't spend it too much. I think one of the work rounds that we applied a few times already is basically working with the convertible because that avoids that you have to take that into the discussion of the valuation at a certain point in time so that at least you can postpone it to the next round and have that time in between valuations a little bit longer. If there is a need of let's say annual or or or very short term fundraising that's true but at some points the investor also wants to know when there is no rounds what's the valuation and going to be so at some point always and yeah. Yeah, you will end up at the valuation anyway but it can postpone the exercise for for let's say six to 12 months once. If I can interrupt I think in the ideal world you're always trying to raise just enough to hit the next value inflection point and typically that is well 18 to 24 months it can be less long if at the seed stage I guess but at least trying to optimize for that. I think the the complexity that we have nowadays is that the funding environment is constrained to micro economics and that kind of puts companies in in a situation where they need to choose between at this new concept that has been floating around for the last year or so between default the life or default investable meaning that companies can choose to be default the life meaning probably need to hit break even as soon as possible so that they can have an option to wait before raising new funding or can just be self sufficient at some point and not to raise any more VC money or in the other end they can choose to be or need to be default investable meaning that they need to hit certain metrics in order to be able to raise capital in the current environment. So whilst a couple of years ago it was a quote unquote relatively easy for some companies to raise money or raise in an up-round it's with limited progress to some extent the conditions have become a bit more strict to get to get access to capital and that is something that funders need to take into account that it's probably going to take longer than six months to raise money nowadays and they need to be prepared for that. Is it also because the amount is growing because more and more companies are currently being started or is only an economical reason why there is a big difference. I think for starters if you look at market economics and if you talk about valuations which then again has an impact on the investment rhythm on some of the VCs is that valuations are governed by interest rates which have increased for the last year or so. That has then put VCs in a motor where they put more emphasis on sustainable companies on companies that have interesting unit economics that are not just able to burn a lot of money but actually create create value and that has an impact on actual demand and supply supply in the market. I think in the pre-seed phase what happened a lot in the period of 2020-2022 is that a lot of business angels appeared which were looking for higher returns on the was a period where in the bank you had to pay to keep your money on the bank. There were these really great stories in the news about founders being very rich and investors earning a lot of money. It attracted quite some capital from angels who are maybe not equipped to deal with the risk of pre-seed. A lot of companies were not market ready and got funded that way. Those investors now retreated which is a pity as well because their conclusion is pre-seed doesn't work. It's just a full-time job that you have to get in your fingers and know how to do. Now there is a whole class of people who don't trust it anymore because they had bad experiences going in at the worst possible moment from pricing point of view. Do you see a big difference if you are investing in an early stage or later both of course you invest money but also the support which the companies need is completely different. Is that also the na of the investment firm the VC is completely different because of that reason or is it mainly about having another way to actually calculate risks which are involved. For me you need like if you are a pre-seed investor you really need other skills and other way to work with founders than if you are like series of people. or even BC investor. As of series A, you can work much more on data because you have track records. If you're like a preceding investor, it's much more working closely with the founders, trusting them, discussing roles with disabilities, how to scale. You also need much more insights into the whole general market, how the world is evolving. Will this product find this place in a rapid changing world as we live today? That's more a focus. Before I did series A and B investments, there is much more about professionalizing, getting the right teams, getting a structure. When you grow from two, three to hundreds, FTEs, that has a whole kinds of different challenges. We are just before, we are mostly helping in the face where the company grows from two to 20. I think there's also an economic reality with regards to VCs and how much support they can give. So at the seed, early stage phase funds are typically limited, only a limited amount of partners within the fund. They basically can support tech portfolio companies with their own experience, their own networks, etc. But as soon as you go to more later stage VCs, we have typically a couple of a hundred million or more assets on the management. They have sufficient fees to actually being able to spin up a platform services team within that firm that can support founders with recruitment, with even setting up development shop, marketing, etc. So there is a bit of a difference in the skills required at the very early stage and at more later stage. But there is also an economic reality behind it. I think at the same time, and I think both is a well-in-missile experience that in the past, you see a clear difference in the skills you need at the early stage, because it doesn't mean that if you would recruit a senior executive from a big company, that they can perform well or can do the same in a very small company. So you need the right people at the right time in the life of a cycle of a company in order to efficiently scale up. In that scaling, that funding part as well, the team is very important of course, but is it more important in the beginning where you actually rely to a few people or where actually is the balance, because I can imagine that the further your scale, the easier it is also to actually to attract additional people. How hard is the team evaluation point in investment round? Yeah, for us it's the most important point. So we have to believe in the team because you're the only ones who will do it. And the market is for me the second point because it has to be big enough, but we are not yet mostly at a real product solution fit. So this comes from the team, and of course we will not invest if there is not as strong hypothesis, but at the end it will most probably change. But the team is important and then also the capacity of the team to make the good hires, because I think that's the most important decision that founders make is hiring. And then you can make the mistake from what Chris said to hire somebody with two experience and in fact not enough boot on the grounds. However, you cannot hire somebody who just starts its career and has no experience at all because you cannot train them because you don't have the skills because you hire somebody. The first hires are the ones you lack as a founding team. And so that's the most important decision and you also don't have much money. So you have to attract people who are highly skilled with lots of motivation. So yeah, and that's great. You can't afford to make the wrong choices in that early stage, because indeed you have limited means. And basically, that initial team very early stage, the founders, but later on the first hires, where you usually build your company upon and that's usually the people who grow with you as a company that might form your later middle management as well if you find the talented ones. And if you have to let go wrong choice in that early stage, it's way more painful than if you have to do it later on when you're already 25 people. The impact on the organization is way higher. The time you might lose as well to find someone new and build it up again might be too long for that limited funding you have in the beginning. And when the company is bigger, you have already people who can do the job and can train younger motivated people. And so then you can keep your FT costs low. But in this first phase, it's quite difficult. Well, I think the people or the founders and the initial team, they define the culture to a large extent for the rest of the life cycle of the company. At the same time, unfortunately, this still often, we still often see challenges or issues between co-founders, right? The way companies is set up with a number of people that know each other, not necessarily have worked with each other. And then along the way find out that there's not a match where that one works harder than the other, and which leads to some initial friction. So we see it quite often that the initial founding team is not necessarily the team that will ultimately drive the company forward. Unfortunately, remember, that's still a couple of years. There's something which you can actually pinpoint quite fast that there is a misalignment between co-founders. Sometimes, yes, sometimes like if you speak to founders individually, then you sense that there is some tension, even though they have obviously an incentive not to be completely transparent about it, because they're afraid that it might impact their joy or choice to invest or not. Although it's almost a contrary, right? It would be better if we knew and that we can try to determine if we can somehow solve that and can find a clue next to it, maybe for one of the people. Rather than investing in the company and then at the first board meeting, you get basically bad news and you see people open account of worms and let that there are so many issues that you need to deal with, so that will backfire. So it's better to be transparent about it and see if you can find a solution. Yeah, I think that's something also which is quite natural that it happens and for several reasons. I think first of all, when you start a company, you need lots of different skills and the skills you need at every phase moves quite quickly. So the skill when you have to find your first client, it's totally different and when you already have 10-20 clients and you have to industrialize the process. So somebody can be very good at the first phase but not having this kind of process skills. Same with CTOs, some can be very good at making based code, but if then they have to have a team of developers that they are more like a coach, that's also something very different. So it can also be a quite natural tension and you mostly see at some point, even like that there are no founders left leading the company that they are more like getting to investors for that in a much later stage because it's just different skills and that that's okay and that we can just find solution for that. I think as a founder, it's also about recognizing what you're good at and what not and in an ideal situation, you have co-founders who can cope with the part you're not good at and you have a lot of complementarity in between the team. Obviously if that's not a case, if you have two co-founders which are both very well in the technical part but don't know anything or do not like the sales part, you have to recognize that as early as possible and attract new talent to cover that part. You were always in the year, currently in CFO, co-founder and CFO role, were you also always in this kind of CFO? No, no, no, no, not at all. No, in the first company I started, I took a front office role, I was in sales a lot, interacting with the customers, traveling throughout the whole of Europe. Whereas my co-founder was taking care of the back office of the technical part of product development, the R&D. So there we had a complementarity as well, but my role was completely different than it is today. Whereas now I have shifted indeed more and more into a back office role, taking care of the numbers and the legal part. Whereas my co-founders are then more about the product development and the sales we are three now on the other end. And that's because you started to understand the numbers because of experience or. Yeah, I think that's the red line throughout all my entrepreneur endeavors that it always has been about the numbers somehow, whether it was in front of us or today in back office, that's always been the part where I was most passionate about and taking care of. And that's also part of evolution in life, obviously. And the first 10 years, it was pretty easy to travel every week once your personal life evolves, that also changes. So that also might impact the role you're taking up later on. And did you always have co-founders which are in the same period of their life? Yes, yes, yes. We always have been I think one year, one year age difference with most of my co-founders. So usually same generation. To admit, I always had co-founders where I worked with for years before. That's definitely an advantage because you know each other in work circumstances both the good and the bad. And that's also important to survive the eventual bad afterwards. It's definitely an advantage, but it's not always always possible, of course, that co-founders have a huge history together already. If you are in a situation where you're with two co-founders or multiple and they have a different vision on how to invest there, where to go try to bootstrap for it or try to go for it around, what are the tips to try to demine such a potential discussion or fight or whatever? I think it should be based on some financial plan to see then what are the consequences. Honestly, I'm not. not such a fan of financial plans in that early in a company, but trying to put it into numbers can help to see especially what it would mean. If you have to raise that much, you have to get to that kind of revenue. How many clients does that mean? But then also seeing what for spend is that, is that how many salespeople do we have to hire? Is that possible? Do we think that we can hire like limiting the risk that many salespeople? And so to put it more in a formal way, I think that's important. However, I don't see that much this discussions between the teams. Maybe they don't show it to investors, but mostly it's quite clear because it's also depending on a little on character if people are a little more cautious or more aggressive. Probably they already have discussion internally before they go to investors. They were like, "Do we indeed want to have additional money? Do we actually want to give away some of the equity and so on?" Yeah, it's also a discussion we mostly have when we go in as mostly the first investor and then we go to follow up rounds. So it's a discussion where we also participate. I think honestly, it also depends a lot about attraction in the market. So for me, there is only one good reason to raise a big round is if you see that the market is evolving so fast that you have to take it now. We just haven't happened that much, but that's the only reason why you could say, "Now it's the time and we really need five salespeople directly if we want to win and we think we can find them, the good ones that can be very productive directly." I think the discussion that we see more often is where the company comes at the stage where one of the co-founders feels almost redundant and so that their role is that they don't have much value to add anymore, that they maybe feel like that they want to start a new company and that they seek liquidity for the value that they created at that point. And that you have one or more remaining co-founders that want to further scale up in the choose for like a path that is more venture capital intensive than just trying to keep the company afloat. So I think that that happens more and that the example that you gave indeed happens, either this is the discussion before we actually see them or it almost happens at the foundation of the company where maybe one of the founders wants to bootstrap and the other one has a clear, super ambitious idea or vision about the company which requires a material amount of capital to achieve that. For example, when founder wants to exit before the other one then of course that means that you actually are going to try to raise money where some of it will be used to buy out someone which means you can't use that money of course to further scale the company. What are typical situations which are happening at that moment? Yeah, I think it's a matter of course of properly providing context to investors as well because it can sometimes it's a sign of an issue in the company so that founders don't get along that one wants to stop. But if it's really about one recognisance for himself or herself that they don't have a role to play anymore and that it could actually simplify the capital in a way to get rid of that person then it can become an opportunity for an investor to increase their share in the company. So it's not necessarily a bad thing but it needs to have that discussion with proper context and proper motivation why that is happening. It happens more as of Series B it's more accepted and it's used, it happens a lot that there are some investors know that there should be some liquidity for the founders even if it's the onboard and also maybe for like already stated investors as us to exit so that happens but I think it should be indeed very clear and investors should know why and it would happen. Comes back to the transparency which was already set at the beginning during the but I think that that's something which you also have to learn as an entrepreneur that it's not a fight with an investor so it's a partnership which you start where it's best to be transparent from the beginning as well but in the beginning it's something which you have to learn as well and it's a world which you don't know from the beginning where you have to start talking in other language because there are a lot of slang and abbreviations which you don't at Tagalog and get all this kind of thing in the beginning I didn't know what the hell it was. I think there are quite some important clauses and we were talking about this relationship between founders and I think almost every week I tell to at least some founders that when we do a term sheet and we have the lever agreements they are quite shocking for founders in the beginning because it's of course at some point that you know that your shares can just disappear basically. But I always explain you have to read this because these levers are agreements honestly I've only seen them used by founders between themselves to find a solution when for one person party doesn't work anymore. I've almost never seen it used by investors so I think everybody, all founders that are listening should be reflecting on that. It works well for the moment between co-founders and most expect like it will continue but I think we all know that experience that sometimes it is a little a different way and at that point you have to find a way that everybody is happy to separate and that's where lever clauses come in and founders should really have this reflection and I think also with each other this discussion early on. Yeah and there typically also if one of the founders which is more knowledge about it than the other one so it's also there sometimes there is a friction as well. Maybe indeed something which you said in the beginning that also the rules for example on next hit on how the every series investor has a different rule and write and so on but that's also something which is maybe even more important than sometimes a cap table or how the shares are so I think that's also something where we have to educate maybe entrepreneurs like maybe it's more important to actually be better in those rules than in the exact number of shares which you have for example. And definitely the more the more of these funding rounds you do the lesser the cap table actually reflect what will happen at the time of exit so it becomes less and less important what that actual percentage is in their own paper because indeed things like liquidation preferences taken if you have to take a downround it might be an anti-dolution protection as well with your investor which might have an impact on the eventual shares you still having and also it does not necessarily have to be a one-on-one reflection on the percentages which go to certain investors what's actually in the decision that can be done on board level or on shareholder's level as well. The title of the episode is I'm a lot with a little piece of my big pie but it's also about the rights of that little piece how I was right so over there. Yeah and I guess the ability to be able to grow into your valuation and we talked about it in the beginning of the podcast but if you raise a large amount of money it comes with a lot of responsibility as well and not every founder realizes that because you can raise a lot of money but it also means that if you need to raise money again you need to grow into your valuation by that time and that has become significantly more difficult the last couple of years than three, four years ago so you can get into a situation where you get almost in a standoff between the startup and the investor because the investor invested at an inflated valuation the company raised a lot of money spent at money during a couple of years they need to go to the market again but they will not be able to get what to attract the same valuation and then it becomes a discussion what you do then. Is it a recap of the cap table? Do you down-route are you going to attract new investors at a lower valuation or are you able to attract new money from the existing shareholders at a reduced valuation etc. So it's something that people should reflect on and as I always say dilutions should never be a surprise right it is something that you need to plan for and that you can keep under control as long as you hit your business plan the only thing you cannot control is the macro environment. So when multiple zerg are going down that is something you need you cannot control per se but it's something you need to factor in that can happen and that you're ready to deal with that and then meaning either becoming default alive again or default investable. Do you have some tips for founders on how to think about the valuation to make sure that the gap between how they actually see it and how an investor sees it is not too big what are the points to look to? Well the early stage is relatively simple it's more art and science right so both start to bend in the west are trying to optimize for dilution and so an investor wants to get an as large a part of the pie that they can possibly get without actually hurting the company and on the other hand you have the the founders that want I want to reduce the dilution that they take as part of the round and like if you take that point and you have a number of the amount of money you raise you more or less like I can say you can calculate what the valuation is and at that stage like realistically the company is never worth that that amount of money has just a result of a dilution optimization between a number of stakeholders and obviously if you go into series BAB or even later then you can actually back some of that valuation up with multiples on error or an EBITDA eventually. maar voor een hele langer tijd is het meer van 8 en dan zijn het eenvordelijk. Dat is ook waar je startt. Het is een feestbal dat we alle alle comprenten opnieuw hebben. Dus ik heb een fixte amount aan het investeren. Ja, en het is om de lard te stijden, ook die termineer van een competition. Dus als je het startt en je hebt één investeert dat je een investeert, dan je hebt een mercy al die investeert. Als je een hele bus van investeert dat je een investeert, het is een hele andere game. Maar dan, je moet nog steeds het betekent dat je nog steeds een soorten dat je een groente dat een falleering van een extra van een een een een een een een iets dat mensen iets meer of je een of andere geeft. Ja, een energie. En een energie dat een heel erg ruimte is tussen percentages, die je kan basiclijk een gegeven moment van de comprenten, als het zo heel high is, het is gegett meer en meer difficult voor de founder om het eigenlijk te werken, op de volgende milestone, die ik nog steeds de volgende tijd nog steeds niet wil, maar ik wil de geeft van 50% van de comprenten op de woon, omdat je weet dat er een beetje van de andere van de rem is als het zo. Maar op de andere hand, als het zo'n geeft, is de woon, de pressure om de expectatie te lopen voor de rem is een gegeven moment van de rem. En je kan het nog steeds in een andere rem in de rem. Ja, ik denk dat de andere termen nog steeds niet wil. We zijn echt in favor van de rem in van de rem. Als je vraagt, die estos girl best кар de platers naar puigen, vangen, chỗ, zoals het, kan je vinden. Dit is veel losk İ.'Vieker for aan dat brief ten keek. De k treffen van kort gewaarde tijdens de feit van de vangen van een heel veel valuatie, maar je hebt ook alle andere consequenten. Dat is nog steeds belangrijk voor vangen van de ondersteer. Dat valuatie is echt één part. Goveren is een andere, een intelligente en lichtpreft. Ja, ik denk dat als ik als ik als eerste starte, ik denk dat ik niet zo'n effect in het verantwoord is. Dat is ook een in de bord. Het is niet alleen iemand die een van die money is, maar het is ook iemand die helpt in je en in je company, dus als je een selectie tussen investeren, je zou niet het voorgeven, en ook wel. Dat is misschien meer belangrijk dan een part van die money. Wat is dat? Kris, je hebt ook een pointje dat je de focus op je werk is om even te breken. Hoe veel is dat? Je moet even je werk even op je werk, of dat nog nog steeds op je werk is? Ik ga terug naar dit verantwoordend en interessant concept. Ik heb deze term "defaultaldelei" en "default" investeren. Als je niet een een nieuwe bank op je werk is, of niet dat favoriete termen, dan je moet je al een andere schoogde schoogde hebben. Maar je moet in bank breken, dus dat is de moeilijkste schoogde. Als je het ook nog steeds aan de helptie hebt en dat het een meer VC-money voor de ondersteer is, dan je moet nog steeds de periodeisde groef over dat periode even te breken, als als het groef is, als het nog steeds aan het ondersteer is en dat je niet een heep van de money voor de ondersteer is om te beperken. Maar het is niet dat de devaultaldelei is een precondition voor de devault investeren. Maar het is al een bank op je plan, hè? Als je voor alle andere reasonen je niet het niet meer voor de voorkomte, dan je moet een plan om de money te worden, als je de company op je werk is. Ik denk dat het ook een sector independent is. Of als ik een geval op de andere company als je actief in de helptkeer in de voorkomte, het meer logischer en meer accepte, dat je het langer te beperken aan het ondersteer is en niet beperken. Deze deel van de valuing is eigenlijk in de strategiek-valu of de product, die er een actie voor een groot player in de sector is. Waarom als je meer en meer te worden in de consulten, zie je de business meer en meer belangrijk, dat als je als mogelijk is, je je profitee is. Maar laten we het een beetje refrisen? Als je een start op je start is, dat is niet een precie van, hè? Dat is een heel harde eventuele start op. Maar als je het niet hebt, je moet dat een soortes precie van je start op je start is, dat je een jaar van je start is, je moet niet meer vrouwen van investeren om dat precie van het precie van het verantwoord, omdat ze nog steeds een groot betrokken voor ze voor een groot investeerd investeerd is. Het kan wel even een paar keer te laten zien, het kan wel een paar van jouw existeren, dat is een gemakkelijkheid. Maar bij het end van de dag, de company moet het een een paar keer te ontwerpen, en als ze er niet langer te ontwerpen, dan moet je er andere andere issues aan het handen, dat is wat ik in het shortste tijd, de valuweer, ook dat, is er ook een centrum, maar in de longterm, mensen moet nog steeds een verantwoord van de company. Het is niet iets dat je kan ernaar te ontwerpen. Je ziet een groot deel in deze voor de software, het word het hard voor de company? Voorzorg hardre company is er typisch meer capital intensive, het was een harde hardre company in general. Ik denk dat het een heel moeilig e-zicht is, dus het is definitief een deel, het is misschien ook meer persoon dat je deel moet vinden om de way te minimeren, de verantwoordige in de gegeven momenten te ontwerpen voor de verantwoordige company en eventueel de extening in de company. Ik denk dat is een valuweer, voor een voorzichtige rol voor de funderen, dat is wel een actie van de mensen. Ik denk dat je het heel hard is omdat je dat tijd niet de manier van de manier moet payen, maar natuurlijk je kan ook gevoelig door de verantwoordige optiezen. At een point je kan doen, maar ik weet in België nog steeds een beetje treken, en het is ook niet het geval van de capital waar je veel van de verantwoordige deel is. Wat zijn de beste deel van de deel in deze? Ik denk dat het voor mij is belangrijk voor de companyen om de funderen te echt te doen en als een bord van de investeren te kunnen helpen in dat reflectie, maar het is echt de funderen die ik om te zien om deel te doen. Voor het vooral, ik denk dat ze echt om deel te weten wat zijn eigen strengen en wat ze deel, of wat soorten die je want als deel is, en de eerste deel van deel van deel van deel zouden zijn, potentieel zijn die mensen die je kan motiveren door deel van deel, omdat er een lichtvangere funderen zou zijn. Het belangrijkste is voor mij dat deel van deel van deel van deel moet worden, als een actie van deel van deel is, dat is in, en dus het moet worden compensatied bij een low salary, zoals de funderen doen. Dat is de eerste die moet echt hebben een strategie, zoals "Wool we want to give?", en een reflector. De investeren kan helpen in dat reflector, maar het moet zijn van de funderen te zien om deel van deel te zien wat is de strategie hier. En dan dat je het gezet van die mensen die je het geeft, is echt omdat het een capaciteit en deel van de funderen zou zijn, en dat is de reason waar je het wilt blijven. Ja en dan ook, dan zou je het gezet van de funderen, maar ook mensen die echt kruis van zijn en die van deel van deel een eerste, misschien een additional salesperson, we gaan echt echt de difference maken en dat je ook want te kunnen, voor een jaar, dat ze het geeft de company om het later te laten hebben. Ja, ik ben een salamzaam, de opzicht van de plan en de deel van de deel van de funderen, zoals de reason van het manier, die in de verantwoordelijkheid die het vervoudde is, dan is het een verantwoordelijkheid als een verantwoordelijkheid, dat is niet verantwoordelijk. exchange. en in. gaining early jobs, meer vangen en verdrijding people, als met rely encouraged zo goed voor de union en jongens want je moet voor de laatsten te pakten onder oplaus en wil je een important muur naar d Pakistan aan goed teeth in de groep van headlights als een tool, als een reward, als alie en je weet de mensen, en je moet regelen, dus dan is het zo belangrijk. Maar als je het een lichtkoop van de koevounder is, je moet er heel erg klaar op. Als deze stokoptie is, zal ik het bestellen. En wat zijn de KPIs? We willen het voorzien te beperken dat we dat persoon niet zijn. En dan moet je er heel erg klaar in de beginnemen en reguleren te gebruiken. Want wat je niet wilt is dat equiteit. Dus een van de equities die niet meer in de company hebben, je kan niet in de eerste fase van de company hebben. Ik denk dat de stokoptie is natuurlijk iets dat is heel populair en in de U.S. en in Silicon Valley te vertrekken en reteen. People, especially in retention mechanism, omdat ze niet voor een competing California kunnen. Wat we ook zien, is dat de stokoptie of de stokoptie van de stokoptie is heel close naar de maturity van de market. Dus de meer de stokoptie is de market meer competition. Het is om een attract talent te bereiken. Het is meer belangrijk in een stokoptie van de plan om mensen te gebruiken door de stokoptie. Dus als ik het goed zou, het probleem met België is 2-fold. Deze is het een cultuurstukende van de zee. Een veel mensen preferden alleen een versleer en een bonus. Er houdt dan geen stopoptie van dat meer of meer niet meer in de manier in vijf. the 10 years. So there's a bit more education, maybe on our part as well to explain to people what it means and what the benefit is. And maybe they also need to see some more successes in the market. People can actually make a lot of money from having those stock options so that you can see that it actually works as an instrument. And then secondly, which is also a big problem again is that physical situation in Belgium with regards to stock options is pretty bad. I think was index ventures that did a survey or did a report on the stock option plans in Europe, I think last year or two years ago. And Belgium ranked as the last in the entire list. Which is a bit short-sighted I think. But it clearly shows that there is an issue that we need to or that the government actually needs to solve. My understanding is that there has been some changes proposed by Van Beteheim but they haven't been approved yet. But there is physical uncertainty which is obviously not helping if you want to defeat people to take risk. Was the big difference between Belgium for example which was lost and the country which was in the first? I think primarily it's the moment of taxation. So in Belgium you pay taxes at the moment that the options are granted to you which maybe a bit contrarially or in contrast is actually a good thing for some people, especially if you get your options very early on. And if you assume that the company becomes a huge success then the tax rate is probably the best of all countries. But overall in most countries you actually pay a lot of taxes at the moment you actually get all that money in your hand. Even though ultimately the tax rates or the how to say the money you need to pay then is a bit higher. People generally feel that that is better because they don't take any risk along the right and when they actually get the money they pay taxes like they typically do. It doesn't help indeed if you want to retain the beginning of your company. We actually have already lower income. You want to say okay you can options but you have to pay 10,000 euros now. And yeah I've options. It's also younger people at that early stage which are definitely take a hurdle in getting those options. It's often a gift which is not perceived as a gift. There is another option that sometimes happens which is not ideal for younger people but is that some people co-invest in the round. It's of course a big cash out at that point but still it could be for small amounts and I think it always gives a nice feeling to investors that some people of the team are like putting what for them or big amounts into it. I like to see that and it's really nice ownership. I've seen it in one of the companies which I go far that indeed that that both people from the US but also people here locally would actually cost them additional money. But then of course you get a cat table which is very very a lot of people at which moment do you try to put these people in a separate stack for example. Is that an important one or is that actually just an administrative concept? I've never seen real problems with it. It's more complex to get the signature so I think if it's you know it would be typically if you go to a serious A or at some point where like the legal costs weighted or like people start to leave the company then that they are not so easily to find for the signatures but basically I think it's sometimes more problematic not necessarily with employees but if you have a number of smaller business angels that you have that discussion upfront about potential grouping at the latest stage and because what I've seen is that when friends you get to a serious A or a serious B that all of a sudden they they start to feel that they lose control a bit and then they can become a bit difficult in the process and that is something that you want to avoid. I think now it's quite common in Sherwell's agreements to put like a grouping clause that as of a certain threshold these investors get grouped anyway I think that's quite fair. Other ways to have incentives for people you want to maintain or but I also have seen is that for example there is a next round that actually options go to the founder for example to make sure that although they lower in shares they do have some incentive as well. I think that's more a solution for another problem that was the problem of delusion and not being in the money anymore but because for me fundamentally when we agree in round to create options it's really for employees and key persons to retain and motivate them. And did you can do top-ups for founders but also employees the problem again is that it's not physically neutral so it comes at a cost to basically compensate for prior delusion which is obviously a pity and currently I don't think that there is an easy solution for that. Any other tips or things you really want to share to the audience about these topics? I think sometimes I think people think that we have an extremely difficult job. I think it because you said there's a lot of jargon floating around but at the end of the day it boils down to a lot of common sense. I think people again they should talk, they should talk to people that have some experiences in this field that have done it before to investors and their founders so that they don't make some of the mistakes that they maybe have made. I don't think it is useful for every founder to try to read every blog on the internet because there's a lot of and I bullshit to be honest on the internet as well. It's not always as practical so it's better to speak to people that have experience in the field and get support where they're required. I think it's also important for founders to really ask questions to their investors and like in discussions about terms just ask why do you want this and go for full transparency and try also to understand the point of view of the investor and then you can come if both point of views are clear you can come to a real good solution that works for everybody but asking questions is important. But probably indeed it's in the stage where you actually invest that you know that you have to educate these founders as well while in in in in in next-range other VCs they expect for example to fund you already know of the earlier the legal support and so on and so. That's why it's important to have a good seed investor that helps you also what's important for the founders to realize is that the earliest investors like I make like we do we are very close in payouts so once you go to series A B in fact the financial incentive for founders and the the earliest investors are very aligned so they should also use the knowledge of those investors to negotiate later. Do you have any hints or yeah I think I think it's it's all about not being afraid for for that part of the pie it's it's yeah we we set out a lot throughout a lot of the endeavors in the end it's always better to have a small piece of a large pie and to have a large chunk of a cupcake yeah so in it all depends on where you could go with with with your own money and where you need the external funding of course and there's there's no sense in getting external funding if it's not needed to grow the company but if you want to generate growth however whatever happens you will need some some investment and you will need some external money and there's no sense in in basically putting down your feet on the last percentage because of the sentiment alone. And the big part of the pie sometimes looks like a Pac-Man but that's not the way to look at it. You said don't look too much to block some internet because there is also a lot of bullshit over there under any books or a podcast which you think can actually help person personally when I was in the first big investment round I read the book The Finder Dilemma which I really like because it really talked about choosing about growing your company or actually choosing about having control and it also explains a lot of the slang which you need to know in the investment round but maybe there are other books as well. Yeah there are plenty of books that's kind of the problem as well right so you have trying to remember the name of the book there's a good one on. Yeah. The deal terms from that felt which is really good. Yeah that's very clinical you know you have all the terms and it's really discussed what's in it for the phone and what's the investing. Yeah there are some some obviously some some good blogs on variety of topics right so one that I'm reading probably most often nowadays which is a bit against what my cup of tea is basically on sales and marketing is from Dave Kellogg who is an excellent blogger like is an XCMO and with a lot of practical advice on marketing sales but also metrics nowadays. Some of the VC funds have some quite some good material on that help you to digest some of these topics I think I mentioned in next ventures on are they have a specific handbook in fact on on a increased stock option plans and how you should set it up and how to calculate it and a number of tips which is very on the topical for this discussion I think yeah and podcast or this one I guess that people should look I should listen to. They're already doing it because they are at the end of this episode so anyway that's why we do the tips and the other. Alright so super Chris team Isabelle thanks a lot for the talk. Thanks to you thanks for having us.