Fundraising is hard - but you can do it!

This was going to be a proper rant post. A first time founder’s rant about fundraising struggles.

I had jotted down half a page of anecdotes from the fundraising trail, when a thought crossed my mind.

Do you know why this blog has a 66% open rate and is growing 10% month-over-month?

I suspect it is not because people enjoy reading about my problems. Rollupeurope is a how-to guide on succeeding in the rollup game. Especially when it comes to raising and deploying capital. 

To that end, I am sharing with you two things:

• Actionable tips for maximising fundraising success

• A list of 300+ institutional and high net worth investors who have invested hard cash into serial acquirers (available to our annual subscribers)

For the second bit, we parsed through cap tables of 20 non-sponsor backed serial acquirers of software, industrial SMEs, mobile apps, Youtube channels, vet clinics… and more. 

You are welcome!

Now, in case you'd rather for a sponsor-backed serial acquirer, check out this writeup: The patient capital writing big checks into software HoldCos.

But first, remember: there are no bad rollup ideas!

If you are determined, time is the only thing that separates you from success. 

There are no bad rollup ideas per se. Rollups fail for two reasons mainly: poor incentives and poor execution. Specifically:

• Overpaying for M&A because of rewards tied to revenue acquired / capital deployed

• Too much leverage to juice up ROE

• Too many white elephants because “investors want to see proof points around cross-sell”

• People not caring, or worse, stealing

Examples? How about the biggest rollup of all: loan securitisation. Sure, the market blew up during the global financial crisis. Why did this happen? Poorly structured incentives led to low quality assets being packaged up to look like good assets. Is securitisation fundamentally a bad idea? No. It frees up capital, enabling lenders to issue more loans, ultimately driving economic growth.  

Now, faced with persistently negative investor feedback, what can you do? 

First of all, do not take it personally. If fundraising was as easy as yapping on LinkedIn, your idea would have been taken a long time ago.   

Instead: look for constructive feedback, iterate, improve your pitch. 

However, if you are not able to raise externally, how about buying a business on your dime? You may not even have to put up that much equity. If it works, reattempt the raise off the back of this track record. Or maybe you do it the RCDP way, and bootstrap an SME empire, an SPV at a time?       

Maximise fundraising success with these 3 tips

Number 1), maximise your network. 

Do not reinvent the wheel: humans buy from humans. No matter how good your cold email or elevator pitch, your highest probability prospects are the people you already know. Priority number two should be your acquaintances’ acquaintances. Go through our investor database and tick off the people you know. Then, the people you can get to. Start with that list and perfect your pitch.   

Number 2), secure a lead investor. 

Ideally, a superfan with deep pockets and a thick Rolodex.

People who can sell together with you. People who can say things like “I am putting up $5,000,000 and I’d love for you to come along” to their friends. 

The lead can be a VC firm. Or a wealthy Private Equity veteran. Or your family member. It really does not matter. At the end of the day, you, the founder, will be doing the heavy lifting. Having said that, your quality of life will depend on achieving these three objectives:

• Not having any one super dominant investor. If you do, there is a possibility they will eventually replace you

• Aligning your and your anchor’s incentives regarding equity vesting or returns

• Giving them the social validation they crave (crucial for folks close to / in twilight phases of their careers)

Do you know why Abingdon Software and Heroes (an ecommerce brand aggregator) were able to raise big bucks from the get-go? Because their respective founders (Asheque Shames and the Bruni brothers) leveraged their financial services networks, pulling in lots of deep-pocketed hedgies and PEs.  

Number 3), keep your pitch simple. 

I cannot emphasise this enough. No matter how niche your thesis, in order to get a foot in the door you will need to zoom WAY OUT. 

Put yourself in your prospects' shoes:

• How does this idea improve my portfolio's risk / return profile?

• If I have access to SME HoldCos in the US (Germany, Australia etc.), why should I allocate to a Baltic one? Lower buy-in multiples vs. DM? Uncorrelated risk?  

• What is the exit strategy? Permanent equity… OK fine, however, I would like to have the option to liquidate if I wish to. Absent liquidity event, how do you measure value uplift? 

Here's an example of a great pitch deck: Röko. “A perpetual owner of European businesses with strong market positions in their respective niches and good profitability”. 

A 5-year old HoldCo from Sweden🇸🇪 doing $600,000,000 in run-rate sales. 

Their deck is 20 pages long, including an appendix. Executive summary looks like this:

Tailor your pitch for every meeting. If the audience is engaged, you can build up the complexity as you go along. 

Good luck  👊🏼