Mountain bikes, cargo bikes, or modern urban bikes: Biking has become more popular in recent years, and not just because of the mobility revolution. The e-bike and pedelec market is really booming. Three founders have launched a new electric drive system and a new gearbox so that, in the future, we’ll be able to get from A to B on two wheels with even more ease and comfort.
As technically skilled experts, they had a detailed plan for their product right from the start. Owing to their many years of professional experience, the three founders had already built an extensive network within their industry. They also had the right contacts for potential investors. Finding a financing partner was the easiest task.
A much more difficult one, especially for the technology- and development-focused founding team, was drafting the investment agreement: What terms should they insist on? Where was there room for negotiation? And where should they accommodate potential investors?
"The more clearly the start-up and the investor have defined their common goals and their cooperation, the faster and more efficiently TheVenturer can get on board."
It was at this ideal typical point in the negotiations that TheVenturer came into play. Our specialty is working out the details of both the letter of intent and the participation agreement. The aim is always to strike the best possible balance between entrepreneurial freedom for the start-up team and verifiable security for the investor. There is a lot of room for negotiation between these two poles.
This also applied in this case, where the handling of the IP played a particularly decisive role due to the highly innovative nature of the idea. The founding team wanted and needed to be sure that the know-how and thus ultimately the idea would remain securely protected and that the rights would remain with the founders despite the investors’ financial commitment.
At the same time, it was important to direct investors’ somewhat excessive expectations regarding the intensity and frequency of reporting into healthy channels from the outset of the negotiations. Excessively tight schedules and an overly high level of detail in ongoing oversight processes can significantly hamper product innovation.
Here in particular, it was important to make investors understand that excessive demands would impinge upon the founding team’s time availability. The lack of time for product development would jeopardize the company’s success and therefore also the investment.
"This shows how TheVenturer puts give and take into practice: While the Indian investor team ratcheted their high demands down to a manageable level, concrete interim goals were agreed with the founding team at the same time."
The goals meant the investor could keep track of developments via milestones. With this commitment from the founding team – to reach each agreed milestone – the investors could be sure that the funds they invested were earmarked and invested sensibly and not as a shot in the dark.
The founders, in turn, gained certainty through their commitment that the investors’ funds would actually be transferred on the agreed date. This structured reliability of a secure cash flow is a key advantage for founding teams: They can keep their heads clear to fully concentrate on further developing their ideas and production development.
Another distinctive feature of this case was the intensive discussion about how different cultures perceive things differently: in India, there are different customs in business life than in the USA or Germany. This meant that both sides had to remain flexible and adapt their ideas. Here too, TheVenturer was a valuable asset as it could offer diplomatic skills and make dedicated efforts to find the best possible solution for both sides.