WebSummit and Series A....Z

This week was WebSummit in Lisbon, a giant souk for the future of Europe. And this in the city of the former EU Commissioner for Research, Carlos Moedas now the mayor of Lisbon. New generations, new technologies and new energies in what is truly a pan-European event. I am thrilled by so many visitors from South and Eastern Europe. I am fascinated by the many Ukrainians with a fierce urgency of now. I am surprised by all those talents from the USA to India that have chosen Europe as their destiny.

Now to be fair not all 70.000 visitors qualify for the EIC, but even if 5% have a possible match with us, that is great outreach. In three days I gave around 10 pitches spoke to an equal number of news outlets and spoke to more than 100 individual entrepreneurs. Thank you for all this interest, If you missed anything of it please follow me on LinkedIn. These days are often followed by after parties with loud music and no dancing. That is an ideal method to lose one’s voice. And a voice is an essential resource at a fair, to be fair.

In this blog I would like to focus on the mysterious concepts of seed, series A and B (and C and subsequent letters of you wish). Mysterious, they were when I dived into the world of start-up financing, 15 years ago. It is as mysterious as the TRL’s, both being rather elastic scales prone to underestimation and exaggeration. Just to give some examples: a developer of energy turbines from wave energy could be a pilot installation with a seed money round of 800K, however a fintech company was proud to have completed seed round of 9mln Euro’s to finalize its technology for market deployment. ?

When it comes to the EIC cornerstone instrument: the Accelerator, the combination of grant (up to ?€ 2,5 Mln) and equity (up to € 15 Mln-but never a majority of shares) seem to be any of seed, A, B and C or a combination of them. In fairness I strongly advise companies considering applying to first run out a seed round at regional or national level or with an EIT KIC. That is advisable since a typical seed round of 200-800K is far below the EIC averages. The grant part of the Accelerator can be a bit akin a seed round, but it is to solve major technological issues, before moving on the equity.

The equity round has the flexibility to be possibly in instalments, with a serie A type at the call, and follow up round in second or third years, akin a Serie B. these rounds can be linked to achieving specific technological milestones (successful clinical tests, first full test of prototype under real conditions, decision and finalized design for an industrial production line. Technologies matter, as in medical products the clinical tests are a major outlay but manufacturing can be subcontracted to existing facilities. In quantum the CAPEX for a production unit is high, but in biobased materials or batteries they are far beyond the financial means of accelerator funding.

The application for the Accelerator demands careful financial planning, especially in the excel tables of the second stage of application. It requires even more planning in the process of calling of the fund part with the EIB. The planning is not only a result of technology and financial planning but also of a good assessment of the market conditions to raise private capital and the valorisation of the company, but also the imperative that the EIC Fund part can never be the majority of a funding round.

Therefore it is useful to get good guidance on the design and timing of a funding round. The EIB can be a source of information, but beware that it has a double role of advisor and judge. So be open, trust them but do rely also on other sources. You might demand the support of an NCP (usually more skilled in subventions than in equity) or of national promotional banks (also both advisors or investors themselves), or on the few financial actors or consultants with an EIB experience.

Please respond if you have any experience to share on syndication, valuation or any other process from seed to serie A.... either in the comments or by e-mail: [email protected]