Do you not want companies to realise their full potential, beyond the early trade sale opportunity?

Abso­lu­te­ly we want eve­ry­one to reach as high as their abi­li­ties allow them to! A unicorn would be fan­tas­tic! A lot of what we say should be prece­ded with “until pro­ven otherwi­se”. As we belie­ve in data and sta­tis­tics, we assu­me the median type outco­me as the place­hol­der – UNTIL PRO­VEN OTHERWI­SE. I.e. once you have evi­dence that you can do bet­ter and reach hig­her than the typical/median case, then rai­se the bar! But you need to pro­ve you can walk until you try to run. And until you have pro­ven your abi­li­ty to run, you should stay on a rou­te whe­re run­ning is not man­da­to­ry.

Why are you so negative?

One rea­son is our per­so­na­li­ty – we are all “glass is half emp­ty” people, so we look at eve­ryt­hing from that angle. But we don’t intend to be nega­ti­ve or jud­ge­men­tal, we are simply ana­ly­tical and fact dri­ven and we belie­ve in sta­tis­tical math, not fai­ry tales. We are ult­ra-curious and we always want to unders­tand. When we ask ques­tions people have no good answers for, some people take it as a nega­ti­ve. Sor­ry, then we clear­ly do not have an align­ment in the basic phi­lo­sop­hies and we are not meant for each other.

You talk a lot about “start with why”. What is your own why?

The ove­rarc­hing hig­her cause for us is about making the who­le star­tup com­mu­ni­ty awa­re of an alter­na­ti­ve to the ste­reo­ty­pical “how to rai­se as much money as pos­sible” thin­king (which results in having to tell a real­ly bold sto­ry to pump valua­tions up, and eve­ryt­hing that forces you to do). We want to help build more success­ful star­tups, which reward the foun­ders and inves­tors for the risk-taking. One cor­ners­to­ne of that is the accep­tance of basic facts such as sta­tis­tical pro­ba­bi­li­ties of success in dif­fe­rent sce­na­rios. Hence we favour a ratio­nal approach to risk and fun­ding, as on ave­ra­ge the sur­vi­val rates are much bet­ter when your plan does not depend on win­ning-the-lot­te­ry type odds.

Should I plan to be a unicorn (like everybody else, and what many advisors are pushing me to do)?

(People who have alrea­dy done seve­ral exits at tens of mil­lions – you can skip this part)

If you want to make an infor­med deci­sion you should unders­tand the odds – some basic sta­tis­tical math. What mat­ters are not paper valua­tions on which money has been rai­sed, but rea­li­sed exits whe­re foun­ders and inves­tors recei­ved money back. So lets look at some exit facts:

  • Median exit value in tech­no­lo­gy com­pa­nies in Nor­dics hovers around 12-15m€ (disclo­sed exits - public com­pa­nies have to disclo­se mate­rial tran­sac­tions, so lar­ger deals tend to be disclo­sed). The­re is a lar­ge num­ber of non-disclo­sed exits that are typical­ly less than this.
  • In the who­le of Euro­pe the­re are only a few >250m€ tech­no­lo­gy exists eve­ry year (half a dozen or so).
  • Trying to build a unicorn takes a lot of time (>10 years) and mul­tiple invest­ment rounds, resul­ting in big chan­ges on cap table. Mar­kets chan­ge, people chan­ge, pre­fe­rences chan­ge, tech­no­lo­gies chan­ge…
  • The­re are hundreds of com­pa­nies who have rai­sed money at Unicorn valua­tions, but only a few which have been bought (or IPO’d) at Unicorn level
  • Your odds of get­ting a Unicorn exit are much MUCH lower than your odds of hit­ting a hole in one in golf (regard­less of your HCP)
    By all means dream big and set the tar­get high, but learn to walk befo­re trying to run. How about being worth 10M first, and then deci­ding whet­her you want to rai­se the bar or not.

You don’t need to be unicorn to be a success

What do you mean with an “early stage trade sale”?

Tra­de sale = someo­ne big­ger than you buys your com­pa­ny out­right. For the buyer, your company/it’s busi­ness are a nice comple­men­ta­ry add-on to what they alrea­dy have (they have a brand, cus­to­mers, chan­nels, sales­people etc – but they have a cri­tical hole your com­pa­ny could fill)
Ear­ly Sta­ge = this refers to the sta­ge your busi­ness is at, not to the calen­dar age of the com­pa­ny. The sweet spot is that you have found (at least v1.0) of your product/market fit and demon­stra­ted suf­ficient proof of it wor­king in real life, but you have not yet built “real” busi­ness of it.
In essence, in an ear­ly sta­ge tra­de sale the sel­ler sells a reci­pe for growth for a buyer who belie­ves they can do the baking of that growth based on that reci­pe.

What gives Gorilla Capital knowledge of the things you talk about ?

We have been the­re our­sel­ves. 

Goril­la part­ners have foun­ded com­pa­nies, sca­led them (up to 100m€+ tur­no­ver) and exi­ted them. We have wor­ked hands-on with star­tups for 10+ years, of our 2 funds we have to date inves­ted in 50+ star­tups (+ our own per­so­nal angel invest­ments). We have scree­ned thousands of star­tups, ana­ly­sed clo­se­ly hundreds and wor­ked hands-on with 100+. We have an ana­ly­tical mind so we have seen what works and what doesn’t. Eve­ryt­hing we belie­ve in is based on eit­her our own first hand expe­rience, or objec­ti­ve data avai­lable to any­one.