Character, personality, and a solid team can matter more than an idea or a product, according to two Luxembourg venture capital firms. What else do VC firms prioritise when evaluating a startup? Jérôme Wittamer and Thomas Goergen share their perspectives.
Startup founders often see fundraising as a mysterious “black box,” said Luxembourg-City Incubator CEO Bastien Berg, moderating a panel discussion during Luxembourg Venture Days on Wednesday. So what exactly captures a venture capital firm’s attention?
Character and personality matter more than a product or an idea, said Jérôme Wittamer, co-founder and managing partner at the VC firm Expon Capital. “Ultimately, we never invest in a plan or a pitch. We invest in a person’s ability to translate that big dream into reality.”
Thomas Goergen, founding and managing partner of Catalpa Ventures, had a similar point of view. “It’s the team that comes first,” he stated.
Remember the big picture
Sometimes, a startup founder can get stuck in the nitty gritty. It’s important for them to keep the big picture in mind. “System thinkers,” as Wittamer put it, understand the market, its dynamics, and how it’s likely to evolve in the future. “They think in systems, not just in very specific solutions.”
For Goergen, it’s key to share a “common vision” with the founders that the firm backs. “They should have a plan in mind, but they need to have this broad vision, and we like to share this vision with them.”
Major mistakes in startup pitches
It takes a lot of time, intellect, and effort to be able to articulate an idea in a simple, personable way, said Wittamer. If a startup founder doesn’t have the ability to convey their idea in a “very crisp and clear manner,” that’s a serious issue.
Getting bogged down in technical details is a surefire way to lose a listener, investor, or potential customer. But being able to tell a story? That’s “one of the most important predictors of success,” added Wittamer. “The best marketers in the world, the best salespeople in the world are able to craft that story and convey it in a compelling way.”
Preparation is essential. “You should know your competition,” said Goergen. “If you’re not prepared, then that’s your fault. So make sure to do your homework.”
And as simple as it sounds, deviating from a pre-defined pitch format can also cause issues. Goergen noted that his firm uses a certain format for pitches: founders get 10 minutes to present, followed by a five- to 10-minute discussion. “If a founder cannot present themselves in a 10-minute session, then they didn’t listen. That happens very often, and people are astonished that it’s really only 10 minutes.”
Overuse of AI for pitch decks: a red flag
Expon reviews some 40 pitches per week. But “the last six to nine months, we’ve really had something annoying happening,” said Wittamer. “That’s the AI pitch decks. They all look alike!”
Using AI to “polish” a pitch deck is acceptable, but that means changing the colour or making surface level modifications. The substance must come from the founder. “It’s you. Your vision, your words need to come through,” he emphasised.
Timing: earlier is better
At what point should a startup approach a VC?
For the healthtech-focused Catalpa Ventures, “we like to have at least a minimal viable product.” Medical evidence, studies, and first steps towards certification under the EU’s Medical Device Regulation are all pluses. “That’s what we would like to see when we invest in a startup.”
But startups can also come much earlier, said Goergen. “You can already contact us when you’re starting your business. If the idea is a convincing idea, we would certainly tell you to keep us in the loop. We can put them on the watchlist, or maybe we even ask them ourselves what happened in the last year.” Taking the time to build and foster a relationship between a startup and VC can be beneficial in the long-term. “My take would be: don’t hesitate to contact us.”
“The earlier the better,” Wittamer agreed. A key piece of advice for founders, he added, is that “if you’re going to get a ‘no,’ get it ASAP. Like, right now, so you can move on and you don’t waste time. So don’t be afraid of asking.”
Like a marriage
But it’s not just a one-way street: founders are also selecting long-term partners when they go to VC firms, noted Berg from the Luxembourg-City Incubator. What should founders be on the lookout for?
They should ask lots of questions, said Wittamer. Understanding the working relationship is key. “It’s like a marriage with a prenup. We’ll be married for five to 15 years, so you want to be sure that you’re going to get along.”
“Founders should also ask us what we can do for them,” concluded Goergen. “Can we open up doors? Are we in the same ecosystem? How can we add value? So, not just giving money, but also giving the right support.”
