Road to Series A: Why You're Not Getting Funding: Valuation Too High, Investors Not Exercising Pro-Rata, and More

About this episode

Simon Schmincke from Creandum took an unconventional path into the venture capital world. As a former Rocket Internet employee, he became an investor through an "unfortunate coincidence" and is now a General Partner at Creandum. His proximity to founders and practical experience make him a valuable conversation partner when it comes to understanding typical funding mistakes.

The Series A Challenge: What Founders Need to Know

The path to Series A has become rocky for many startups. Schmincke explains the fundamental requirements that must be met to even have a chance at a Series A. This isn't just about numbers, but about a holistic evaluation of the company.

Particularly relevant for founders who completed funding rounds between 2020 and 2021: Many startups were overvalued back then. Schmincke provides concrete strategies for how founders can still successfully close a round today despite this starting position.

When Your Lead Investor Stops Playing Along

A critical problem arises when the lead investor doesn't exercise their pro-rata rights. Suddenly, founders find themselves "alone" facing their next funding round. Schmincke explains how founders can master this situation and still save their round.

The right timeline for the fundraising process is crucial here. Founders must plan strategically and know what matters in the different phases.

Story Testing and Valuation Development

A common question: Should founders test their story with investors they don't actually want as partners? Schmincke gives a clear assessment of this "just for fun" strategy and its risks.

Equally important is the question of valuation development across different rounds. How must valuations evolve to keep existing investors satisfied while bringing new investors on board?

The Right Balance Between Growth and Efficiency

VCs like Creandum look for a healthy balance between product development, burn rate management, and team building. Schmincke explains what balance convinces investors and how founders can optimally manage these different areas.

Junior vs. Senior: The Hiring Strategy

A classic dilemma for founders: When do I hire junior employees and when do I absolutely need senior expertise? Schmincke provides practical guidance on how founders can find the right balance without ending up with employees who are either too inexperienced or too expensive.

The decision between junior and senior depends on various factors: the current company stage, available resources, and strategic goals. Founders must learn to make this trade-off systematically.

Founder Coaching and Scaling

Creandum actively coaches its portfolio founders to grow with their companies. Schmincke shares insights into this coaching philosophy and explains how founders can master all challenges on the scaling journey.

Rocket Internet's Role in the German Startup Ecosystem

Schmincke also reflects on the role that Rocket Internet played in the German startup ecosystem. This historical perspective helps understand how the landscape has evolved and what lessons can be drawn from it.

For founders currently on the path to Series A, Schmincke's experience offers valuable orientation. His direct, practical advice helps avoid typical pitfalls and significantly increase the chances of success in the next funding round.