A big, if not the biggest, part of the Marc Impact Programme is its mentors. Among the most prominent is Elias Maier, who has seen all sides of the startup process, with experience as a founder, a VC, and now an operator working alongside founders every day
Elias is one of Marc’s Masterminds, where the most advanced founders are coached. What makes him somebody to listen to is the combination: years of scouting startups for Hitachi Ventures, Hensoldt Ventures, StartGuide, and InsureTech Fund NY, paired with day-to-day operator work alongside the founders of Munich Innovation Labs, ImplantScan, and Iyvee Labs.
He has seen hundreds of pitches from the investor’s chair and knows what actually happens after the money lands.
Do you even need VC money?
Elias’ main advice is to play a different game. According to him, the main question a startup should ask right now is whether they should even be fundraising. “Honestly, that is the number one. Whether they are actually building a venture capital financeable startup. Maybe it’s a side project that makes you some extra money, but you don’t need to grow.”
He explains: “The VC is looking at buying a lottery ticket and wants to make a billion-dollar exit because they need to triple their fund’s value. That’s what they are looking for. But the startup founder, maybe they’re not as interested in the one billion exit, you know? Maybe having a solid salary and a decent exit at a couple of million is already enough.”
For Elias, that’s where the conflict resides, and why much of the advice given to startups – build, get funded, exit – fails. “You have the return-driven fund on the one side and the founder who wants to build something real on the other side.” To avoid this, a founder should ask themselves where they want to be in five or ten years, establish a long-term vision for themselves.
Losing control
When asked how a founder could figure out this vision, Elias has the answer ready. “When you get a new VC or angel investor on board, you’re going to have to report to them. You are no longer your own boss. You have sold away shares, and thereby a controlling stake in your company.”
He continues: “that means that someone has voting rights. So you have to ask yourself: in 5 or 10 years, do you want to own 100% of something small – in venture scale terms – or a smaller part, like let’s say 20% of something much bigger, but with much less control.”
This doesn’t mean there’s no case to be made for outside investment, of course, Elias says: “If you are in a very narrow market with a lot of competition that is growing quite crazy and seeing all your customers going to the competitors, then you’ll need to hire 10 salespeople, and you will need VC money, because those salaries don’t pay themselves.”
Then again,” he continues, “maybe you have a product that is working quite well in a niche, and you don’t necessarily need to hire right away, you can grow slower and more organically, so you don’t need VC money.”
A more active stance
How you determine this can also be based on product and execution, Elias says. “There are founders that are sitting in the corner and they would rather talk to 50 VCs and try to cold message them instead of actually going out, making a list of 100 potential customers, and proving they have traction and market demand.”
This direct approach isn’t popular, says Elias. “A lot of founders get stuck on this, they find it cringey or something, but instead of talking to customers and trying to get some real validation whether the market needs something, they’re going to a VC hoping for a miracle that they will give them cash because the idea sounds so great.”
However, this way of thinking is a trap in and of itself, says Elias. “VCs are really looking for if this person can execute this business in a way that is so much faster than the competition and so much better at serving the customers.” That’s the bet that VCs make, to make sure their LPs, their investors, are kept happy.
Exploring the market
Elias explains there’s a fundamental misunderstanding on the part of founders on how VCs work. According to him, if you want VC money, you need to solve the VCs’ problem, in Elias’ words, “Hey, I need to find a generational bet that can turn into a one billion company.”
So, if you decide that you are a company that needs VC money, how do you convince them that you’re that winning bet? Elias has some practical advice, mainly around proving traction by doing customer discovery. “Instead of wanting to build this huge platform, with this feature, this feature, and this feature, maybe try to solve the smallest issue first by understanding the customer.”
He explains: “Make a list of even just 20 people and ask them open-ended questions about what their problem is, deeply understand their problem, and then try to find the one thing you are solving for them.”
“Then,” he continues, “try to find commonalities among these 20 or 100 people: which group would come to you and buy always? Would they come to you again and again because you’re just so good at solving this one problem that they have? Try getting one of these core customers to pay you any amount, it doesn’t matter, as long as you’re getting money for it.”
With that traction, you can either convince a VC, or decide that maybe you’ll do it without them. Either way, you have more options than you had before.
Marc Masterminds
For more from Elias Maier and our other mentors, join Marc Masterminds program. As for Maier himself, he’s excited to join founding teams as a founder’s associate, a right-hand-man for founders.
