(c) Csak on giphy

Some hard truths about your first VC round

Text version of the talk given with Eric Gossart at our Serena Capital Summer Workshop and to MS students of HEC and 42 in 2015.

At Chausson Finance, before joining Serena Capital, I helped early stage startups with their Series A as their advisor, and raised a total of 20m€ from European VCs in 2015. This experience gave me a (vastly incomplete but) vivid first hand experience on what it takes to raise serious series A in Europe.

The goal here is to share what I learned the hard way, so that you can apply it to your own process:

*even and especially us at Serena Capital ;-)

Part I: you should probably bootstrap your company and not care about VCs at all

The canon definition of a startup, by Paul Graham (cofounder of YC) is “a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of “exit.” The only essential thing is growth” (full text here)

The rest is a bit tl:dr, so let’s sum it up: a start-up is a structure that follows a specific structure in order to grow really fast, called a scalable model. The definition of a scalable model is that marginal costs do not grow as fast as revenue (i.e. for a linearly growing revenue, costs must be logarithmic or show an asymptotic behaviour at some point).


  • Acceptable models for startups are (not limited to): marketplaces, collaborative networks, subscription based, SaaS, on demand…
  • Borderline models : pure e-commerce, gaming, pure hardware, content…
  • Not a startup model unless major twists: service companies, digital agencies, shops, factories, apparel/FMCG brands…

Now that we’ve established what a startup is: a VC (stands for venture capitalist) is an investor who does private placements in start-ups. Meaning that in exchange for shares and a bunch of veto rights, a VC provides funding to fuel a start-up’s growth model.

It’s not that simple a business. In France, 57% of the VCs got shut down between 2000 and 2010 because they could not raise a new fund (often because they did not meet the expected returns). On the other side, the top tier VCs produce over 15% in net returns per year.

Although everywhere in the media, VC money is actually a really uncommon solution to finance a successful company, and it comes at a price. A VC-backed company will put growth, not profitability at its core, in order to sell or IPO in 5 years and it is not necessarily the best strategy, especially in terms of financial outcome for the founding team.

Sure, I can imagine how awesome it is to turn out to be the founder of a success story like Criteo or Blablacar but if money happens to be your drive, you’ll have more chance to make money with a company that you own and which generates 1–2M€ per year in dividends. It’s not worse or better, it’s just a different challenge and statistically (in Europe), we have more people who got rich by growing and selling digital agencies or IT service companies than startups. It’s even possible to grow billion dollar success stories: Free (Iliad) and Vente Privée did it with zero VC money.

My point is: the start-up model is glamorous from a distance but most of the time, it’s not the right model for your business because the topic, scope or setup of your company is not right for it. Plus, you’ll discover soon enough that it’s actually a cold, unforgiving ecosystem past the seed stage (more on that later).

Same goes for VC money: you have actually very little chance to get funded past your seed round:

  • About 200 French companies (over 2000-ish who try) get funded by VC for the first time every year. Among these, about 70 are Series A (source here for 2016 — thanks Bartosz, and here for 2014)
  • Raising in the US is statistically not an option (source here)


… If you’re still here, and did not go bootstrap your company with revenue, then let’s talk about what you need to raise a first serious VC round.

→ Go to part II : the six pillars of startups analysis and therefore of your pitch

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