When it comes to growing your startup, attracting the right investors is always a challenge.
Finding the perfect investor requires a lot of time and energy, even more so if you’re overseas. For example, raising an investment round in the United States is entirely different than in Germany. And after you’ve secured investment funding, the long-game process of investor relations still requires your careful attention.
As an illustration, let’s take a look at how PreciTaste – based in both Munich and New York City – found Cleveland Avenue and raised their Series A round in the U.S. We’ll also take a look at the challenges and hurdles they’ve overcome in ongoing investor relations.
PreciTaste is a FoodTech company with a focus on operational optimization for the foodservice industry. The startup provides Vision AI solutions for use in industrial kitchens and sets the standard in operational AI. PreciTaste was founded in 2012 with headquarters in both Germany and the United States.
The founders of PreciTaste achieved their competitive price point by utilizing German engineering to cater to the U.S. market, and the company has been building on that revenue ever since. After nine years in business, PreciTaste decided to find investors and scale their company.
Earlier this year, PreciTaste chose to participate in the U.S. Market Access program with German Accelerator, which was introduced to them by their investor Cleveland Avenue. The main reason for their participation was German Accelerator’s strong mentor network, which they felt could help them during their transition period from a bootstrapped to an investor-funded company.
How to Successfully Attract U.S. Investment Funding
The U.S. market is full of venture capital (VC) firms looking to invest in startups with high-growth potential. However, it’s important for your company to attract the right pool of investors. As a FoodTech company, PreciTaste chose investors who had a strong background in restaurants and who would support them in the long run.
“Don’t settle until you find the right partners, and if you find one, chase them relentlessly. The right partner will give you all the acceleration you need. However, choosing the right one comes after having some interested investors in the first place.”
Hauke Feddersen, VP of Operations at PreciTaste
“Present your startup as a bet the investors would like to take,” mentioned Feddersen. “They want companies which can explode ten times or twenty times, so it’s important to ensure your company can grow significantly with investment support.”
Second, to find investors in the U.S. market, your company has to clearly define the market you want to explore as a first step.
“Networking is also an important element in this equation,” advised Mingu Lee from Cleveland Avenue, one of the investors of PreciTaste. “You should find ways to position your company in front of the right targeted investors.”
In turn, investors – when searching for new opportunities – look for certain attributes that make your startup stand out such as unique vision, strong commitment, and the right mindset.
“PreciTaste has demonstrated to various large brands that it can deliver technology solutions which improve their business,” mentioned Lee. “They are much further ahead than any other competitor and with their first-mover advantage, PreciTaste’s potential is unlimited.”
Once you’ve created a pitch deck that covers these factors, it’s time to get out there and present your company to potential investors.
Feddersen notes that one of the most important aspects when pitching is to listen. Actively pay attention to the investor in an early pitch when they give you recommendations. While you shouldn’t necessarily pivot your pitch or solution based on every tip, this guidance should give you a clearer vision of where to target your pitch.
It’s also worth remembering that whatever may have worked in your past experience might not work as well in a new market. If your fundraising background is in Germany, the norms of pitching won’t be the same in the United States.
As a result of their targeted pitch, PreciTaste raised US$24 million in Series A growth funding. The startup also acquired a number of strategic partners through their investors.
“Don’t just consider the monetary value of a round, but also what partnerships the investment might bring you.”
Hauke Feddersen, VP of Operations at PreciTaste
How to Successfully Manage Investor Relations as a Startup
Raising a round is one thing, but what’s next?
First, it’s crucial to maintain effective investor relations for the long-term health of your startup. Carrying that out requires specific leadership skills in order to manage your investor relationships.
“Once the investment was in, everything started to change rapidly,” explained Feddersen. “German Accelerator and the intense mentoring with our lead mentor, Jens Weitzel, has been extremely beneficial for us – and for me personally – in guiding us through this transition process.”
Whether in investor relations management (IRM) or team internally, it’s essential to provide a clear and concise communications strategy about where your startup is going.
“When a startup gets a big investment round, it needs to set clear goals what to do with that money. Communicating these goals to the team and getting everyone on board is key to achieving them.”
Jens Weitzel, German Accelerator Mentor
“To balance the communication between Germany and the United States, you have to pay attention to the minute details,” said Weitzel. “First of all, send the right person who knows the company well to find out the needs and decide whom to hire first – this could be a junior sales exec or marketing associate, or a sales or business development lead, whatever the circumstances call for.”
When it comes to communicating with their investors, PreciTaste keeps a laser focus, by clearly illustrating how their service brought new efficiencies to the food service industry, and acting on any commitment that delivers on their promise.
A piece of advice that Feddersen gave about managing investor relations is to have a tie-breaker present in most discussions. When an unbiased third party gets to listen in and provide input, discussions will more often result in a win-win situation for both sides. For PreciTaste, they’ve made their investors a part of their strategy discussions.
“If you have your investors involved in your business strategy, it won’t be a problem,” mentioned Feddersen. “It’s a collaborative process after all, and we want to make sure we get the best ideas in the room as part of our strategy.”
Successful IRM not only depends on good communication but also on the right recruitment and leadership decisions. During the U.S. Market Access program, PreciTaste benefited from business mentors who helped with tackling the challenges of investor relations and upgrading the company as a whole in terms of leadership, strategy, product, and pricing.
“To scale your business further, create a culture within your company where everybody is eager and incented to drive the company to success,” mentioned Weitzel. “Those are the skills of leadership you need.”
Key Lessons Learned from PreciTaste’s Funding Journey
The PreciTaste team learned a number of important lessons through their U.S. fundraising journey. Some of their biggest takeaways included:
- Provide clear priorities and strategies to your investors
- Demonstrate to your investors that the startup’s resources are being used effectively
- Ensure investors understand you can’t do everything at the same time
Feddersen emphasized the last point is of particular importance. “The limited time you have must be devoted to what you think will have the most fruitful impact, and it’s not always just your biggest customer,” said Feddersen.
Another major lesson learned by the PreciTaste team was how helpful potential investors were. Even if they decided not to invest because it wasn’t the right fit for them, their willingness to share their advice and network was extremely valuable for PreciTaste’s process of finding the right investors. It also helped them see investors as partners and choose them for their network and expertise rather than just for the money. If you have a partnership mindset with your investors, their insights into the market often help your startup scale to levels you wouldn’t have achieved on your own. A well-connected investment firm can also introduce you to other essential business partners or major prospects.
Finding the right investors – and maintaining a good relationship with them – is a challenging task for any startup founder. The hurdles are even higher if you’re a German entrepreneur trying to raise a round in the United States. By ensuring your startup is investor-ready and adopting a partnership mindset with your investment team, you’re already well on your way to fundraising success.
Ready to expand to the United States and raise your first (or next) fundraising round? Sign up for the U.S. Market Access program with German Accelerator and get the mentorship you need to scale your startup in the States.