Early-stage European founders are heading into 2024 with one thing at the top of their to-do list: fundraising.
A recent Sifted survey of 107 European startups found that 51% need to close their next funding round within the next six months.
65% of respondents said they’re already out knocking on the doors of investors.
A number of founders have even contributed their own money to a funding round, or plan to, in response to pressures in the market.
Fees to investors
34% of respondents said they paid fees of some kind, connected to the funding round, to their investors.
It is a common, but perhaps little talked about, practice for startups to pay the legal fees of incoming investors. For our respondents, that ranged from £3k to £200k.
But other costs covered by startups include EIS and SEIS fees (the UK schemes which provide tax incentives for early-stage investors), due diligence, investment and shareholder agreements, as well as a fee to attend an investor’s accelerator programme, SAFE issuance and crowdfunding platform fees. Those fees ranged from 1% to 12.5% of the money invested.
One respondent said they were even asked to pay a management fee that covers their investor’s attendance on the board.
Time taken to raise
Just eight respondents said it had taken them over a year to raise their last round. Most were on the road for a lot less time: 39% raised in under three months; 35% raised in under six months.
46% had raised less than six months ago. 26% had raised between six to twelve months ago, while just 28% had raised more than a year ago.
Two thirds of respondents had both angels and VCs as investors already. Just 10% had raised from public funds.
Most (72%) raised from new investors, while just over a quarter (28%) raised their last round solely from existing investors.
A majority (57%) said their valuation had gone up at their last round — although it’s worth noting that 75% of respondents said their startup is at the pre-seed/seed stage, where valuations have in general held steady in 2023.
Founders getting involved
21% of respondents said their startup’s founders participated in the last round of funding.
Some said they did so because their startup is very early-stage, “therefore it was a must to have the founders front and centre of the funding round”, commented one.
Others said they did so in order to “build conviction” and “show even further commitment”.
One startup’s founders matched funding contributed by investors.
Pressure to raise again
Just 3% of respondents said their company wouldn’t need to close its next funding round for two more years. 21% need to close a new round within three months; 51% need to close a new round within six months.
65% of respondents are currently fundraising.
Most (94%) plan to raise from new and existing investors. Just 6% plan to raise solely from existing investors.
VCs are the top target for fundraising founders, followed by angel investors. Corporates are on the hit list for just a third of startups.
