WHU alumni Sebastian Hasebrink and Marc Pohl (both BSc class of 2010) founded the start-up Junique, an online shop for art from around the world, in 2013. The idea from Sebastian, Marc and co-founder Lea Lange was to end the shortage of affordable art in Europe’s homes and to provide young, talented artists from all over the world with a platform. JUNIQE has been online since January 2014 offering the designs of international artists in wall art, fashion, home textiles, and other products.
Besides a great deal of hard work and dedication, the young entrepreneurs also naturally required a sound financial basis in order to put their idea into practice. It was only in June 2016 that they successfully concluded a round of financing totaling EUR 14 million for their company JUNIQUE. Sebastian and Marc talk to us about how they succeeded in financing their company.
As a young start-up, you are at first largely unknown. How do you find suitable investors and how, indeed, do you make the first contact?
At the beginning we wrote to a lot of business angels in our Berlin circle and in the WHU network. The network then continues to expand automatically as you speak with relevant people, remain in contact and your name is passed on. We also used our existing contacts to other founders besides those to potential business angels. Obtaining a recommendation (or intro) to potential business angels or investors that you don’t yet know is worth its weight in gold. Cold calling achieves nothing. It’s always a question of who knows whom. In our case it was ultimately a mix of friend & family money and two business angels that we used to launch JUNIQUE.
Start-ups usually go through several rounds of financing. What does the sequence of this type of financing process look like?
The most important thing is to allow for a lot of time and to start planning early on. We always approached investors well in advance in order to make initial contact and to explain our business thoroughly – you usually notice very quickly whether an investor believes in the market, the model and the team. This made it easier to draw up a shortlist of investors who were directly relevant for us to focus on – the better we knew the investor, the greater the detail we could go into.
Over the course of time (this can be up to six months) more and more investors drop out – business planning, the timing, the ticket size or the valuation expectations are not right – and you are left with two or three interested parties. If you can then reach agreement on the basic terms (valuation, volume of the round, etc.) you sign a term sheet with the investor, which is generally exclusive. You usually work on two fronts in parallel during the final phase – first, on due diligence, and second, on the articles of incorporation.
The final step is an appointment with a notary lasting several hours, at the end of which you can, you hope, drink a toast to success.
It is undoubtedly tempting to accept what appear to be exceptionally good offers. How can you recognize a respectable investor and what can founders expect from investors besides financial resources?
The purely financial component of the offer of course plays a role. But you shouldn’t forget an investor’s reputation or name. On the one hand, it rubs off positively on your company and, on the other, major, well-known investors have an impressive network that can help to organize future rounds of finance.
When you think about the investors you bring on board, the question about what collaboration with the investor will be like is definitely an important question, too – and everyone has their personal preferences. We fortunately often knew other founders who already had experience of investors and who were thus able to share their opinions with us. It was especially important for us that an investor would let us do our own thing, i.e. trusted us. At the end of the day, we founded the company to take and implement our own decisions. At the same time we took a very close look at whether investors knew a lot about our market and could give valuable advice. All these elements then make up an overall picture that we took as the basis for our decisions about who we wanted to work with.
JUNIQE is an art start-up and you trade in the works of young artists. However, your investors so far do not come from the world of art. How relevant is a common background for companies and investors?
It was always very important for us to gain investors that could bring added value as a result of their experience in the market in which we move. It’s true that we have no one from the art market. Nevertheless, we still have investors on board who are very important for us in terms of content. Two examples: CEWE is one of Europe’s largest printers and therefore knows the production side of the business in great detail. Secondly, we were able to gain an investor in the shape of Highland Capital Partners Europe who has accompanied “Photobox”, an on-demand photo printing company, through to exit with great success.
At the end of the day, it is however very rare for an investor to be a completely experienced market expert. After all, start-ups very often open up new markets. It is much more important for investors to have proven their success in scaling up similar models, for example in the area of e-commerce.
What three tips would you give to other start-ups about investors and rounds of financing?
1. Start talking to investors early on to give yourself time to build up a relationship. Get to know investors at time when you don’t yet “need” anything from them. If you are under the pressure of time when you first make contact, it will have a negative effect on your negotiating position. You will be much farther if the moment has come at which you are starting to completely concentrate on your fund-raising.
2. Don’t lose your nerve even if things are beginning to get tight. Investors often experience “FOMO” (fear of missing out) as soon as the first promise of finance comes in. This makes it all the more important to find an anchor investor as early as possible. You’ll see how this significantly strengthens your hand with other backers.
3. Act confidently and never relinquish control in the final phase. Once you have reached the stage of negotiating term sheets and actual conditions, you will have to juggle with different sets of interest and assert your own as best you can. This is part of daily business for investors but you will perhaps be experiencing it for the first time. Have good advisers on board and always remain in the driver’s seat.