Bastian Behrmann is the eLab Berlin Location Manager and has been involved and working in the Berlin startup scene since 2016. He coaches and guides all of our participants while on the program as well as getting them connected to important founders and investors in the local startup ecosystem.
After working in the Berlin Startup Scene for the past 4 years as well as serving as a coach and advisor for aspiring entrepreneurs at eLab, I’ve often been asked to give my 2 cents on the best practices for finding startup funding.
When you’re new in town it can be hard to navigate the startup landscape, so my first tip would be to always check out the new Startup Map Berlin. Here you can easily discover the entire Berlin startup ecosystem sorted by startups, investors, accelerators, corporates, and industry fields. It’s a great overview and always growing!
If you are still in a very early stage and haven't registered your company yet, then it makes the most sense to start looking into state funding first. EXIST and the Berlin Startup Stipendium are the most common and may be very welcome money to start off with.
In order to get funding from either you'll need a team of two or three founders and a university professor that supports your idea. Do you need help researching relevant universities and faculties? Then a great tool for this is the Hochschulkompass (University Compass).
However, there are also several other sources for funding such as the state-owned Credit Institutes: KFW (Kreditanstalt für Wiederaufbau) or IBB (Investitionsbank Berlin). Luckily, there is a database of all the support that is available.
With some luck, you might also be able to win a prize in one of the many Gründerwettbewerbe (Startup Competitions). Here is an interesting article about the top startups and competitions in 2018. It is written in German, but the list of the competitions, starting on page 52, might still be useful.
A newcomer in the scene is also the Berlin Founders Fund (BFF) from Silicon Allee who plans on supporting 15 founders a year with €24,000, equity-free.
All of these sources come with the advantage that you don't have to give away any company equity and you can keep the whole or some of the amount. The reason behind these types of funding is to help startups drive innovation and create more jobs. Since the German economy is poor in natural resources, it is heavily dependent on and values innovation and human capital.
Another or the next step for securing funding might be to aim for an Angel investor or an incubator program. Angel investors are often also entrepreneurs that made an important exit and acquired some money which they now would like to invest in promising startups. The advantage is that they often come with a lot of experience and a great network in their industry field, however, be sure to look for Angels that fit you.
Tienko Rasker from Leapfunder always stresses that not all Angels are for you, so make a list of what your ideal investor should look like and then try to go to relevant events where they might be. Also, on every second Friday, Leapfunder holds a secret investor roundtable (invite only) that is worth checking out. Plus, their investor readiness session every Wednesday is very insightful.
Another way for start-ups in the orientation and seed-stage to find funding might be an incubation program that is mostly operated by larger companies. To participate in the program, the startups usually have to apply with a business idea as well as a prototype of the business model and a team. The report is in German, but you can find a great overview of the existing programs at STARTUP ÖKOSYSTEM REPORT BERLIN 2018.
If your startup is more advanced, which means already founded and in a post-seed phase, an accelerator program might be the way to go for you. Accelerators are mostly financed by established companies that are looking for innovation in their business field. Like incubators, they are mostly designed as a short-term program where start-ups can apply.
Many start-up founders think that the best way to get quick money is through VCs, which might be true, but before you jump into one be aware that the business model of a VC is to sell in a relatively short time frame. Make sure that this is the direction you would like to go in with your business because if you take on a VC you not only give up some of your company equity but also some control over your strategy.
Lastly, here are some important tips I learned after talking with several Angels, VCs, and programs:
- Have a great pitch and a clear pitch deck
- Demonstrate that you know your industry, your field, the market fit, and the business model
- Have a great team with the right skills that are 100% committed to the project
- Go out and network! Face to face is always better ;)
- Pitch as much as possible
VCs are scared to miss out on the next big thing but are also scared of investing in the wrong company. Therefore it is important to know that:
- VC talks to each other...as a matter of fact, that is almost all they do!
- Grow your network, be professional and nice
- Build your reputation by putting yourself out there as a speaker, advisor or even write a book, etc.
- Having prior investors helps (again because they talk to each other)
- It helps to have a mixed founder team with varied expertise