Carlos Blanco’s Guide to Seeking Capital for Your Startup

Many entrepreneurs do not know how to properly match prospective investor profiles according to the stage of their startup, even though the investor community has spent years explaining the various investment phases.

First Things First

First and foremost, to be as effective as possible in obtaining capital, it is essential to identify what stage your company is in.

The initial phase is the investment made by the founding partners, always in proportion to each one’s ability. Investors want to see that entrepreneurs are fully committed to their projects.

The next phase (which is more important than people believe) is to get funds from those who are closest to you, the so-called "friends, family & fools.” It is critical to get support from family members, former classmates and co-workers.

Accelerate

When securing the first professional investors, it’s important to select carefully who you approach for capital. Here is where doubt begins to creep in: Do I contact all investors or select only those that have synergies with my business? This is the question that many entrepreneurs ask me, and as a good Galician I must answer "it depends.”

The reality is that you never know who will end up investing in your company and contributing much more added value than you might expect.

Consequently, in my opinion, from quantity you get quality. It is advisable to contact the maximum number of prospective investors, selectively starting with the most active business angels and experts in your business vertical.

How to Recognize the Real Deal

Many entrepreneurs tell me that often investors say they are actively investing, but in reality it’s all talk. To find out who is serious about investing, the most relevant data to ascertain are:

• Typical ticket size
• Preferred stage of investment
• Current level of investor activity
• Sector preference
• Geographical limitations

For this, I recommend that you use Guide from El Referente in which you can see all the business angels, investment vehicles and venture capital funds in Spain. To determine whether they are active and what their latest investments have been, I encourage you to follow them on social media networks (primarily Twitter and LinkedIn) and visit their profiles on Crunchbase.

Reach Out

The next step is to make contact. No investor frowns upon a cold email or message via LinkedIn. However, a friendly introduction by a shared connection will be received more warmly than an unexpected cold call or email message.

Keep in mind, a database cannot know whether an investor is at this very moment interested in a particular sector nor whether the investor currently possesses capital to invest, so this you must ascertain for yourself.

Business Angels

I like to distinguish between private investors and business angels. For me, the latter are people who have been successful entrepreneurs in the digital sector. Successful business angels have earned (a lot of) money with their businesses, and they possess knowledge that can be very useful for startups. They know how to scout for and recruit people; have relevant contacts; offer valuable experience; ideas, etc.

You can also seek to secure private investors; for those you don't have to go to a guide or database. You can find them in many places such as investor networks, investment forums, events, on the street, family offices, investor networks, BANs, pledge funds, etc.

Seeking Risk Capital

Now comes another dilemma: When is the right time to contact a professional investment fund?

And, again, the answer is “it depends.” It depends on several factors, such as: the founding team; the business metrics; how "hot" that sector currently is, etc.

Professional VCs (for me, those regulated by the CNMV), are categorized along two lines:

1. Seed Funds (such as Encomenda, BStartup Sabadell, Inveready, Samaipata, Caixa Capital Risc, Seedrocket), and
2. Growth Funds (such as Nauta, Seaya, Kibo, Kfund, All Iron, Axon, Mundi Ventures and The Venture City).

Some growth funds may also invest at the seed stage, usually with minimum investments of €250-300K (such as Kfund), but others like All Iron (which despite having a fund of €120M) can make investments as low as €100-200K.

When to Contact an Investor

Let's get to the important question of when to contact an investor. If the startup team already has a track record of success or they have been key executives in successful companies, maybe the startup can skip a step and contact investors that normally would invest at a later stage.

But in general, when you are still working with the first and early metrics, you can approach a seed VC. Naturally, I recommend Encomenda Smart Capital, where I am a general partner, but there are many others that are doing very well which I mentioned above.

A VC might invest based on a PowerPoint presentation if ample confidence exists in the team—based on previous experiences and track records—and the VC likes the sector, however, this is extremely rare.

Investment funds initially reject over 95% of startups that pitch to them. But this does not signify that rejected startups are bad companies. Rather it is more likely that the startups are not yet ready for a VC or that the fund feels that it currently has deal flow of superior quality.

Growth Fund Capital

If growth is good and the company has already launched its international expansion, then this is the time to go to a growth VC, most of which normally invest between €1M to €3M in Spain.

For investment rounds over €5M the advisable route is to approach international investors. Investigate which VCs have invested in other Spain-based startups and ascertain how much risk capital was invested to know who you should contact.

Carlos Blanco is a highly successful serial entrepreneur and Spain’s leading investor with over 75 investments in enviable, fast growing tech startups and numerous dazzling exits. His many success stories include founding Akamon Entertainment plus Spain’s leading accelerator Conector, Nuclio venture builder and Encomenda Smart Capital. Carlos actively advises entrepreneurs, the local startup ecosystem and scales Spain’s leading early stage companies. Follow his blog for many more valuable insights.

A version in Spanish of this article originally appeared on Carlos Blanco's website and has been republished with his permission.

Updated October 2, 2023.