Not all European tech startups select to take funding from VCs. Many determine to finance with different strategies: crowdfunding, grants, funding from household or private cash.
Some say that their option to forego VC funding – for now at the very least – means they are not on the hook to supply the sorts of hypergrowth that VCs search for. And so they can as a substitute focus purely on constructing a sustainable enterprise – some with greater than 200 staff.
Listed here are six startups in Europe which have chosen to pursue options to VC and the way they did it.
Fundraising sources: private cash, grants and crowdfunding
The sustainable footwear ecommerce firm Wildling Sneakers was based within the German city Engelskirchen in 2015 by couple Anna and Ran Yona. Earlier than beginning the corporate, the couple had no expertise in making footwear or operating a enterprise.
Anna invested all her household’s cash into product improvement earlier than getting a € 150k state-supported grant, which was poured into producing the primary 1,000 pairs of sunshine footwear for Wildling’s 2015 crowdfunding marketing campaign. By way of the marketing campaign, Wildling raised € 75k and was capable of arrange ecommerce capabilities.
“Absolutely the benefit was and nonetheless is that we will make selections relating to investments in initiatives and enterprise improvement based mostly not on the monetary ROI [return on investment] alone however equally contemplate the environmental and social prices throughout the course of, ”Yona says.
Within the seven years for the reason that firm was based, Wildling has grown to a workforce of 266 with a turnover of € 32m for 2021, 35% increased than the earlier yr.
Yona believes that if Wildling had raised exterior capital it could have been tougher to give attention to sustainability all through the availability chain earlier than pondering of income. And their distinctive funding method has additionally served as a intelligent advertising and marketing device.
“Being clear with our prospects about the truth that we’re self-funded from the start has solely strengthened the bond between the model and our first buyer base and has nourished the understanding of doing enterprise in a different way,” Yona says.
Funding sources: private cash
Guillaume Moubeche began Lempire in Paris in 2018 with simply $ 1,000 in financial savings. He was sure he wished to lift enterprise capital ultimately however then discovered that the corporate’s B2B SaaS merchandise had been getting cash from day one. He is since been solely bootstrapped, which he says “was one of the best resolution ever.”
“I used to imagine that fundraising was the important thing to success. However then, as we continued to drive extra prospects and get their suggestions on how profitable they grew to become utilizing the device, I understood that there is one other approach of rising a worthwhile enterprise, ”Moubeche says.
Lempire has targeted on a lot of completely different merchandise: Lemlist, an e-mail outreach platform; Lempod, a LinkedIn automation device offered in 2020; and Lemverse, a digital workplace for distant groups (nonetheless in beta). The corporate made $ 10m in income in 2021, up 200% from the earlier yr.
Because the starting of the yr, the variety of staff has grown from 25 to 55. However in keeping with Moubeche, that is nonetheless not as quick as corporations fueled by enterprise capital.
“We see many corporations that needed to speed up their development fee after fundraising,” he says. “They needed to rent lots of of individuals on fast-forward to put them off after a couple of months.”
As a substitute, Moubeche says not accessing gobs of capital has pressured him to be scrappy and inventive about constructing a enterprise.
“To me constraints power creativity. Not having sufficient capital is a good way to focus solely on the issues that matter. For us, it was our prospects’ success. Elevating cash from traders would have made us lose this creativity and power us to spend cash sooner than we should always have. ”
Funding sources: private cash, working revenues
The Berlin-based startup Hypofriend has developed a web-based homebuying platform that helps prospects discover and finance their properties. It additionally matches prospects with a mortgage adviser to assist them discover a mortgage choice from their 750 accomplice banks.
The corporate was based in 2017 by Nick Mulder, Chris Mulder and Pavel Jurasek and has since grown to a workforce of 70. As a substitute of attempting to lift a seed spherical early on, Chris Mulder was capable of lend the enterprise sufficient cash to maintain the corporate operating within the first yr.
“We weren’t satisfied that elevating cash would speed up our enterprise in the long term, however would moderately create constraints and finally dilute our possession and have an effect on our motivation ultimately,” says Nick.
In 2020, Hypofriend broke even and has since reinvested the surplus income in firm development, primarily within the type of software program. And gross sales have elevated: in 2021 revenues hit € 6.6m – a 100% enhance on the earlier yr.
“Till lately, the main target of the funding neighborhood has been ‘develop in any respect prices’, one thing that’s not according to our philosophy,” Nick provides. The corporate has little interest in elevating enterprise capital however is taking a look at different financing alternatives to speed up development.
Sweden’s Modular Finance
Funding sources: working revenues, early VC
Swedish fintech startup Modular Finance was based in 2013 by Petter Hedborg and Måns Flodberg. The corporate has developed a subscription knowledge and software program service.
Earlier than getting their first product available on the market, Hedborg and Flodberg determined to lift € 200k from Ceremony Ventures.
The funding “was primarily about getting a well known identify and exterior claimant [on the board]. The cash was by no means actually used, ”says Petter Hedborg, CEO of Modular Finance. “Additionally, if we had raised extra money, it could have been laborious to construct the tradition we now have right now.”
The corporate now employs 36 individuals and has an annual recurring income of over € 90m with a 47% income development.
Funding sources: working income
The Lithuanian startup Omnisend is an e-mail and textual content messaging advertising and marketing automation platform. It was based by Rytis Lauris and Justas Kriukas in 2014 and is now utilized by greater than 70k retailers.
Bootstrapping in Lithuania is extra frequent than in different extra VC-focused international locations however a yr after Omnisend was based, it obtained funding within the type of convertible shares from one of many nation’s largest seed traders.
Nevertheless, as a substitute of constructing the investor convert the short-term debt into shares, the founders reserved the fitting to pay again the preliminary funding. Once they grew to become worthwhile the following yr, they paid the traders again and haven’t taken VC funding since.
“We’re not taking a look at VCs or exterior traders whose pursuits can typically differ from what’s finest for our prospects,” Lauris says. “This mannequin works for us as a sustainable enterprise mannequin as a result of it permits us to make one of the best resolution for the group and handle our staff.”
The corporate has grown its headcount by 40% final yr and it now employs greater than 180. Omnisend was additionally listed within the high 100 of Europe’s 1,000 fastest-growing corporations by the FT.
Having achieved profitability Omnisend, just isn’t seeking to elevate fairness and particularly not now.
“Elevating capital modifications the values and administration of the group, and may introduce extra competing pursuits. Furthermore, in the meanwhile, when the market is unstable or declining, working from enterprise capital is de facto not sustainable, ”Lauris says.
Funding sources: working revenues
Swedish SaaS startup deBroome was based by Eric France in 2017. It is a model administration startup with prospects resembling Ericsson, Microsoft, Storytel, Axfood and Blocket.
The corporate employs 17 individuals and had a income of 5.9m SEK (€ 555k) final yr however is to date not worthwhile. In line with France, that’s due to the prices of increasing the enterprise.
“Operationally, we’re already worthwhile, however we’re financing growth and new merchandise that create a loss,” France says.
And though deBroome is contemplating elevating € 10m over the following yr, France thinks that elevating cash earlier might have resulted in specializing in the improper issues.
“It will have meant much less stress round funds however pointless give attention to the improper KPIs. Probably it could have led to faster development with increased staffing however with the plain threat of administration assets going extra in the direction of traders and staff-related points, as a substitute of a give attention to growing the merchandise and purchasers, ”he says.
Mimi Billing is Sifted’s Nordic correspondent. She additionally covers healthtech, and tweets from @MimiBilling