Raffaele Terrone, Co-Founder Scalapay & Carlotta Siniscalchi, Partner at Emergence Capital (Masterclass Edition)
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Fundraising is an incredibly complex and nuanced topic to cover - but we have invited two great guests to try to untangle it from an investor and founder’s viewpoint. Here with us are: Carlotta Siniscalco, a Partner at Emergence Capital based in San Francisco and Raffaele Terrone, an Italian entrepreneur and co-founder of Scalapay, a successful buy-now-pay later fintech company.
EPISODE TRANSCRIPTION
Camilla Scassellati (00:00:28) - Hi everyone. Welcome to another masterclass, you have Camilla and Ines together for the first time in these masterclasses for Made IT podcast. The topic for today, which I know is very important to a lot of you, is fundraising. So I'm sure you're all focused on it and curious to hear some secrets from our guests. The challenge with a fundraising masterclass is that fundraising is such a nuanced topic. There's a lot to cover, but we have invited two great guests to try to untangle it for, from both an investor and a founder point of view. So let me just give an intro to our guests because they deserve, a moment of recognition. The first guest is Carlotta Siniscalco.
Camilla Scassellati (00:01:27) - She's a partner at Emergence Capital. She is based in San Francisco. In case you don't know it, Emergence Capital is known for investing in early and growth stage enterprise cloud startups. They've invested in companies like Zoom Box and Salesforce, which you'll all know about. And Carlotta is the firm's first female partner, and the firm has an 18 year old history. So it's quite an achievement. And at Emergence, Carlotta invests in early stage enterprise software, and she also has a keen interest in FinTech. She is living in the US and being Italian, she's very passionate about helping immigrants and other underrepresented founders build iconic technology companies and is also a fierce advocate for women in the venture capital industry.
Camilla Scassellati (00:02:25) - And our other guest, we, who I'm sure many of you know, is Raffaele Terrone. He's an Italian entrepreneur and the co-founder of Scalapay, a very successful buy now, pay later FinTech company. Raffaele served as the CFO of Scalapay from its founding to August, 2022. And over his tenure, Scalapay became a global success with over 200 employees, over 600 million raised from investors like Tencent, willowy, capital Holdings, tiger Global, and FA Capital, and having achieved unicorn status. So more than a billion dollar in valuation being, I would say the first Italian startup to ever do so. Raffaelele is a mentor and advisor to several startups in the FinTech and e-commerce industries, and is helping them navigate the challenges of scaling and fundraising. So welcome both. It's such an honor to have you on. I think we have the perfect guests to cover this very complex topic.
Carlotta Siniscalco (00:03:30) - Thanks for having us.
Raffaele Terrone (00:03:31) - Thank you for having us. Hello everyone.
Camilla Scassellati (00:03:34) - And, if I may add just a couple points. As you've heard, both Carlotta rap bring an incredible baggage having led invest, sorry, from an international standpoint. , so Carlotta, of course, is based in San Francisco, so she knows the American VC environment. And as you heard, also Raffaele raised capitals mostly from international investors. So we really want tobring this international aspect to the start, to this masterclass. And, I think we're ready to get started with our questions, but before I do, so, I want toremind you all if this is, your first masterclass, that there is a chat system on your right, which I see some of you using and saying hi. So hi everyone. But also please use it to ask questions. You can post a comment with your question and we'll make sure to read them at the end of the masterclass.
Camilla Scassellati (00:04:26) - So it's really your chance to have a direct interaction with both our guests and ask all of your fundraising questions. So please don't be shy, use the chat system, but we do have some, questions for Carlotta and Raffaele ourselves. So we're going to start with those. And we want to start by talking about what you think the process to attract VC investor is. Do you think, I know there's many schools of thought, so do you think it's best to start reaching out to VC funds cold once you're ready to raise? So head down, work on your idea, and when you feel like you're ready for outside capital, start spamming investors and trying to find the right one to work with. Or are you more of an advocate for cultivating relationships early and keeping potential investors apprised of your progress as you go so that when you are ready to start raising, you already have that first point of, contact and Carlotta? Maybe we'll start with you since you are on the VC end and we want to know what you like to hear from founders.
Carlotta Siniscalco (00:05:30) - Yeah, for sure. Well, first of all, thanks, thanks again for having us. very excited to be here. , before answering your question, I'll just make a quick caveat because I think the answer really depends on, what type of investor you're, you're thinking about. So from my perspective, I am a lead investor. That means that I typically write the largest check within a round, and I typically lead series A or series B rounds. So when you are a lead investor, you have a different relationship with the CEO than, for example, maybe some of the smaller investors that might not write such a big check. So from my perspective, in order to be excited to lead around, I really need to know the person and know the company for a while. I, you know, the metaphor that I often, talk about is you, you wouldn't choose to get married in, in two weeks with somebody.
Carlotta Siniscalco (00:06:26) - So you shouldn't choose your investor in two weeks either. It should be a long relationship. I typically take between 12 and 18 months before making the investment to get to know the person, and, and cultivate that over time. Now, you obviously can't do that with a hundred people, so you have to choose a small subset of ideal lead investors that you want to keep in your loop and, and cultivate those. And then you can be more opportunistic about other investors, maybe sending them, you know, putting them on a drink campaign, sending them some emails, and keeping them in the loop that way. I know not everyone thinks that way, but given that I need to have this sort of high conviction when I make the investment, there's no other way to, to, to really make the investment work in the absence of, in the absence of that deep relationship.
Camilla Scassellati (00:07:14) - That's very interesting. Raffaele, from your point of view, as a founder, what has worked Beth best for you when you were trying to raise capital, and especially you did attract some of the most, recognized investors globally. So what was the strategy there?
Raffaele Terrone (00:07:31) - No, and, I tend to agree with, with what Carlotta said, and we have a cap table of, you know, with Scalapay pay of, over 50 investors now. So not all of them deserve the same attention otherwise, you know, we'll just be doing, investor relations and not taking care of the business. but you know, you, you need to cultivate this relationship because it changes over time. But especially in the early phase, investors invest in, people rather than business. You can always spiral, pivoting, you know, your, your, your business and, and change the, the, the direction over time. But you know, people, especially in the beginning will not change and, and drive the growth and success of, of the business. So if you really want to, to make a difference and, and convince the right investors then to get to know you rather than, get to know what you're doing that, that will come.
Carlotta Siniscalco (00:08:26) - Sorry, sorry. Add just one thing, just thinking about your question that you a that you asked, even if you do decide to, to, you know, not do this, so if, if, if you do decide to do the, the outreach like, you know, bunch of emails sent out, I will suggest don't go cold. Do not find the best pattern, find a, a warm, a warm introduction of some sort with the VC that you're looking to get in to get in. Two best ways to do that. One is find another entrepreneur to introduce you, ideally an entrepreneur they already invested in. Or just find a friend, find a city investor, find someone that they went to school with. They're a lot more likely to respond to you than just getting a cold email. Yeah.
Camilla Scassellati (00:09:06) - Yeah. And I think we have a question just on that, on how to build relationships. But before I go there, I didn't want to ask you, Carlotta, what is, so when you're looking at those companies that you might follow and just have that relationship with, what is the right way to approach you? So what works, as you said, like is it always through contacts? Is there a way to write the email that works? Like what do you want to hear in that first outreach from a startup? Because I know that like, that's what a lot of people think is like, how am I going to get into the door?
Carlotta Siniscalco (00:09:38) - Yeah, well, first of all, yeah, so the, the how matters a lot. So ensuring that you are, you did a little bit of work to find the most influential way into me, cuz in a way, you know, that's, that's kind of indicative of how scrappy you are. What's your mindset? Are you able to, yeah, maybe you, you come from a totally different geography, but you're able to find a couple of people that we have in common and you're able to send a very compelling pitch to them that they can easily forward onto me. These are little like emotional intelligence, cues that I actually think translate into driving a, a successful business more generally. So that's, that's the how, the, the way in. And then in terms of content, first of all, like make sure that I'm the right investor for you. I can't tell you the number of b2c, the number of consumer pitches I receive every week.
Carlotta Siniscalco (00:10:31) - It's not that hard to go on my LinkedIn and see that I only invest in enterprise. So that's, that's step one. Just make sure that the content is relevant. And then, I, you know, also keep in mind that every time you send me a like an an update, an investor update, some people choose to do that via email. I'm, I'm evaluating you. So if you send me an investor email that has spelling mistakes that is messy in the way it's formatted, I'm going to think that that's how you run your company. Versus if you send me an investor update that has like a link to a page or that has, you know, very clearly tracked KPIs, then I'm going to think, okay, this person is running a very tight ship. So even these little details matter a lot and that these are the signals that I cannot track over time to get a sense of how good you are as an entrepreneur.
Camilla Scassellati (00:11:22) - And, and s is going to dig, dig deep in our next round of questions on that, on how to approach a pitch. And, but very helpful just to hear that even the first soft intro has to be tight. And I do, want to send this as a message to all the founders listening to us. That's such an important thing to get right from the start. And like when you try to do too much and maybe do it without thinking that actually you're sending the wrong message out in the investment community is, is never good. But, one, one aspect, as we said, like your international experience, I think is very interesting. So Raffaele, do you have any sort of tips on how founders can build relationships in the investment community? And as I said, in particular for Italy based founders looking to cultivate relationships with international investors, I'm here in San Francisco for a conference called Smau that is, built to sort of organized to create a bridge between Italy and Silicon Valley. And I saw a lot of startup founders being here trying to get that intro to American investors because they want to grow in this market. So what's the right way to do it?
Raffaele Terrone (00:12:37) - look, I mean, definitely that's, that's a good path to be, to be directly there and try to, you know, probably on a cold approach, but in person, you know, meet, meet these, these investors. But I think also, you know, if you're Italian, there must be some other Italian who has some international experience that knows some investors that can make an introduction. So definitely could work if you are, you know, an Italian founder, Italian based. And, you know, maybe talking about my, my experience, the way we attracted international investors was more on, the fact that we could build the product that was international because, investors don't really like, , you know, country risk. and Italy Alto know it's 65 million people probably on our tech side is still borderline, you know, it's not the US where you can just rely on a single market.
Raffaele Terrone (00:13:29) - So the fact that you can actually prove that maybe you are in Italy and then you're growing to, to France, Germany, you know, you have a pipeline of, opening new markets that definitely could attract, this international investors. For, for our case, you know, we funded the company in 2019, and then in 2021 year after foundation, we went to France in our second market. And that was really the deal breaker that opened to the, you know, big investors like Tiger Global. And then Tencent before we had some international investors, but were more on the, European side UK and the Australian side, simply because, I mean, that's another relevant point because, you know, the founding team actually was either foreigner or Italian living, abroad, like, like myself that I spent, eight years, you know, back then was eight years of my professional career in, in London working investment banking.
Camilla Scassellati (00:14:22) - . Anything you would add for Italy based startups looking to attract investors like yourself or American investors?
Carlotta Siniscalco (00:14:30) - I think the biggest one is the one that affiliate talked about around the, the country risk. Like, I will not invest in a company that is only operating in Italy. and there's, you know, there's kind of two ways to think about this, on the enterprise side at least. So in the enterprise world, you can sell a product to, you can sell a product from the top down, so you can have a local sales team that's on the phone or emailing people trying to convince them to buy something. Or you can have a product led growth approach. It can be something that's kind of distributed, maybe free at the beginning, or people can sign up for them themselves, and then it kind of bubbles up to the, to the top. It's almost, you know, like it does, it sells itself in a way, it's a lot easier for international investor to develop conviction around a company that sells bottom up in a different country than top down, because bottom up, you don't need necessarily a super localized sales force, so you have a little bit less country risk. The investments that I made that, that we made as emergence that were, that are outside of the US are mostly product led. , but in the absence of at least a few important customers outside of, of Italy, it's very hard for, for international invest for American investors to decide to take a deeper look into the company.
Camilla Scassellati (00:15:52) - And, and yeah, maybe to build on that, do you see, sort, sort of, are there key differences between, the fundraising process that you see happening in Europe, maybe through other investors that you know, or startups that you know that are growing there and the way American companies do it? Is there something to be aware of?
Carlotta Siniscalco (00:16:15) - so I'm, I'm, I'm not a European investor, so I can't really opine, but I, I can almost tell when a company made their pitch for European investors versus not. , one thing that always, that I always, you know, I notice is European often, I, I don't, first of all I'm making generalization, okay? So, this might not always be true, but often European companies will have an exit slide in their deck that tells me, okay, this is, you know, in, in three years, in four years, we're going to sell this company for 300 million, 400 million to this other acquirer. I don't want to see that in the us. I want to know, you're going straight to I p o I want to know, you're thinking, okay, I want to build a five, six, $10 billion company. Cause the market is bigger. So I, I need to believe that you are, you have that sort of ambition.
Carlotta Siniscalco (00:17:04) - My opportunity cost as a US investor is to look at another company that's based in the US that has those, that type of ambition. So I don't want to know that you're thinking about selling, you might be thinking about it, but don't tell me . So that's the first, the other is it, it, it, I I've noticed that a lot of companies coming out of Europe have a, a high focus on IP and, and really kind of explaining the, the technology of the product, which is one of the advantages that, you know, Europe has, the talent is really exceptional, but it's kind of lighter on go to market. It doesn't go into as much detail into, okay, you have this great product, how are you going to sell it? How good is the pipeline? Like, give me the proof points that it's not just a great idea, but it's starting to have product market fit. These are the two biggest differences that I noticed between pitches that are made for European investors versus US investors.
Camilla Scassellati (00:17:59) - Anything you'd add on that, again, from your experiences? The European startup
Raffaele Terrone (00:18:06) - Look, I think in, in a case was also a matter of, speed. in, in the process. The, the fact that we got, you know, investors mostly outside of, of Europe is because during, process we were pitching our ideas and, and where we were. And we got a lot of challenges from, from European investors and, you know, mostly probably Italian, where, you know, we, we, we don't have any, any meaningful fund, uh , from, from Italy. , while I, I don't want to say that it is a, is a better thing because, you know, maybe, you know, Italian or European funds went more, you know, went deeper on the, the diligence process to, you know, to assess potential risk, et cetera. But then in a world where, you know, and I'm talking especially, you know, 20, 19, 20 and 21 where there was so much capital and, you know, rates were close to zero, so they had to invest this money, the fact that, America and whatever non-European investors were just faster in deploying capital, that definitely give them, you know, a preference in, in, in choosing them.
Raffaele Terrone (00:19:13) - And, and the other factors is also that, they, they see more the potential. I don't want to say that, you know, now you go back to only cash flow how it is the company today. But, you know, the, the fact that, we were showing, you know, the classic metrics like, you know, your cut your L T V and see where you're going, the customer acquisition base and where you are today, where you can get, next year. And in two years, it was, very important for us. And, you know, some understood it and some others did not. And, and probably is the result of, of our cap table.
Camilla Scassellati (00:19:49) - So. Okay. Lots of important lessons here that I would write down if I were a founder, and especially, Carlotta, what you said, I think is very important. If you have a great technology, and we heard it from gli, so I feel like we can repeat it for for another time, that's not enough. Like make sure you have a go-to-market strategy and you come, even if it's, of course, if it's a seed, seed and you have just an idea, I think investors are more open to just hearing your idea. But even if you're starting to go post seed, just, just, even if it's just an idea of how you're going to go to market and achieve product market fit, don't forget that that's a key, key part of the story, and not just the engineering or the tack behind it. , so yeah, that's definitely a message I would take home, but in us, over to you.
Inès Makula (00:20:38) - Yes. Carlotta, you touched briefly upon this, you know, about how to approach an investor and some of the things that you shouldn't be doing, which is obviously a very fundamental part because it's the first approach. How would you say, that a founder should select the VC founders to approach, so not the VC founders, sorry, the VC funds, and how important is it for founders to really understand the investment thesis and portfolio of a potential investor? How can they really tailor their approach accordingly?
Carlotta Siniscalco (00:21:11) - Yeah. , so, you know, this, the, the, the market has shifted right in the last year and a half. So I'll, I'll start by saying that if two or three years ago, entrepreneurs had a lot of choice in terms of where to direct their, their attention. Now the market is unfortunately for entrepreneurs, like a little bit less founder friendly in that there's a little bit less capital available rates are higher. So, this idea of like choosing my, my, you know, might not be as relevant as it was a few years back. Now, with that, you still have to decide where do you start? You want to raise funds? Where, who do you start reaching out to? so if I were a founder, this is how I would think about it. I would start with a very long list, ideally starting with looking at who funded companies that are similar but not competitive to what you're doing.
Carlotta Siniscalco (00:22:07) - , and then I would cross reference that with your network, again, like undoing a investor entrepreneur relationship is really hard, is much harder than divorcing. So if you bring an investor on board that you don't like, good luck, you're stuck with that person, you're stuck with that fund for 10 plus years. So ensuring that like they have a good reputation, that they haven't done anything wrong in the, you know, to other founders, I would spend a, a disproportionate amount of my time there. If I were founder with that, then you can start narrow it down even more in terms of, okay, they have some sort of published investment thesis that's relevant to what I'm building, and therefore if I reach out to them, they're more likely to respond back to me. so that's kind of the order of operations that I, that I would think about.
Carlotta Siniscalco (00:22:57) - , I wouldn't necessarily go out of my way to try to kind of fit a square pack in a round hole. Like if my company is, you know, I don't know is doing something and then VC has a thesis in something that's different, I wouldn't try to like fit my vision into them. They can smell that from very far away. Like right now, every pitch that I get is ai, even if clearly the company was started four years ago, it has like no AI component whatsoever because we published an AI investment thesis, you know, two, two months ago. So I, it's
Inès Makula (00:23:29) - An easy buzzword to put anywhere, these days in, like any project AI learning . Yeah,
Carlotta Siniscalco (00:23:36) - Anything. Yeah. If your
Raffaele Terrone (00:23:37) - Domain is, is not ai, you get 50% bp on valuation, they say
Carlotta Siniscalco (00:23:42) - . Yeah, I mean, you know, I don't disagree with that, unfortunately. , no, that's, so that, yeah, so that's it. And then the last thing I'll say is start reaching out to the people you care about less. So when you have that list, order it by like the, your dream investor should be at the bottom. And the one that, you know, if you rejects you, you can sleep at night, should be at the top because pitching is a muscle, no one is born great at that. Like really nobody, it's just a matter of practice, practice, practice. Seeing what questions you get from investors, practicing your answers to them, practicing your presence, practicing your, the way you, you say you know what parts of the presentation you emphasize and the more you do it, the better you get at that. So, you know, don't, don't leave, don't start with the one that you care the most about, cuz you'll probably suck
Inès Makula (00:24:32) - At the beginning. Yeah. This is actually a great, great tip to kind of do your training with the ones that you're least interested in so that you can be much better for the, for the one who, the one, the fund that actually matters. , Raffaele in, in your experience, how many funds do you think should be on this list? Like, how many investors should a founder approach on their first round on average? Because obviously there's a lot of nos, so, and you know, some get hundreds of no’s, some get a few no’s, but like on average, how many would you say?
Raffaele Terrone (00:25:06) - Look, I I don't think there is a magic number that you can say, you know, for, for your, you know, long list that, Carlotta suggested and actually for your first round you end up also only having angels. And especially in Europe and in Italy is, is quite common to see a proceed round only with, angel investors. It make it more difficult, certainly. , but yeah, another point that I agree with Carlotta is, go with your list. Start with the ones they are not really core to you also, because these ones, you know, if it goes well while you have an investor, if it doesn't go well, it's a great feedback session for you. You learn a lot from them, you know, what are the mistakes, you can understand what you can change. And then you arrive to the last investor that probably, you know, it's your, it's your core investor, we follow the feedback learned from your previous pitches.
Raffaele Terrone (00:25:58) - Maybe, you know, you, you pivoted also the business or you changed the pitch with some slides and or you know, the message you wanted to, to, to communicate it. But look, ultimately it's a matter of, finding one lead investor. And ideally if it's a fund, it's, it's better because even investing myself when, you have one lead investor, you know, that lead investor has done some diligence year round, will likely will likely get, oversubscribed. So all of a sudden, you know, from maybe, you know, challenging yourself or you don't know if this company's going to be successful, you find that, investor and then, and then all the others will, will, will likely come. , and, and sorry, maybe just one more thing. this is for the, the first round going forward. And you know, from what I've experienced with, with Calipe, the approach actually changed and we were very, very selective because we didn't want to go to a list of, let's say, under funds because then the funds start talking and maybe you hear some rejections. So actually we were very selective and we created this sort of, fear of missing out. And actually there were funds hearing that we were in a fundraising process and they were approaching saying, you know, why you actually did not approach us. We want to invest and we, this was very powerful. But of course, you need to have a product, you need to have some revenues, you need to have traction. And on your first round, I would, I would not recommend.
Inès Makula (00:27:25) - Yeah, there's no formal in the first round unless you've like funded 10 companies and exit and done 10 exits before. , actually something that is is quite interesting because after having interviewed, you know, over a hundred founders, we've heard so many of them say, you know, that they had, negotiated for months, you know, created this relationship with funds only at the very last tent to think that they were going to close. And at the very last minute it didn't go through. So how important is it to play, let's say two lead investors until the very, very end, would you say
Carlotta Siniscalco (00:27:57) - Kata? Yeah, it's essential. Like never put all your eggs in one basket, you know, if the, the, the conversion from term sheet to closed and money in the bank should be a hundred percent. It's very rare if that that doesn't happen. So once you have a signed term sheet, stop shopping, like, yeah, actually most term sheet have a no shop, clause. So you can't actually go out and, you know, once you have committed to that, you can't go out and trying to get a better deal. But before then, definitely have as many leads as possible. And yeah, play that to get better terms on the term sheet ultimately, you know, so that is, I I would very, I would try not to be naive at all in that process. even if you feel like warm and fuzzy feelings about a specific fund, always have a plan B and plan C because, you know, stuff happens. And here in Silicon Valley, we had Silicon Valley Bank crashing a few months ago and companies that were trying to close a deal that week had their rounds falling through. And so if they were running out of cash and they didn't money, they needed money run away, they needed to go with somebody else. And those that didn't found themselves in a pretty tough spot.
Inès Makula (00:29:13) - Yeah, this is something super important because you can hear, you can almost, you know, be 99% sure that you're going to close and things can fall out at the very last minute. So kind of bring in, you know, have, have more than one option, as you said, not all of your eggs in one basket. And what would you say are,
Raffaele Terrone (00:29:32) - Sorry, I'm sorry. Sorry. Maybe one thing to add on this, cuz you know, when we did our series B, actually probably we were one of the last, let's say, lucky company to, to close in time. But 2022 has been a year of, you know, even term sheets being either renegotiated if you were lucky or completely trashed. And they, they were investors saying, look, we signed the term sheet, even losing the reputation because, you know, once you sign the term sheet, even if it's non-binding, et cetera, a fund is committing to that investment. And us founder, you're also committing and don't shop around. But there were so many, I don't remember, I don't recollect the number, but there were so many term sheets either renegotiated or trusted because the market condition changed. So definitely have multiple options, ideally before term sheet so that you have a, you know, several term sheet and if one gets renegotiated, go with somebody else.
Inès Makula (00:30:26) - , thank you. And, another question is, obviously you're going to get a lot of rejections, you're going to get feedback from, from pitching from, you know, presenting your startup, before or even after the meeting. What can a founder do to say, you know, maybe turn that no into a yes and not give up at that minute? Like, is there a way to, you know, to maybe, you know, re rekindle or is it a no no, like from your experience, how do you overcome, you know, objections from investors that don't, where you don't look defensive? Because it's, it's an interesting challenge between either you look defensive, but very convinced of your idea, or you're like, yeah, okay, I'll change this, I'll change this around. And then you're not convinced about, very convinced about your idea. So what's your feedback from both of you, maybe starting with Carlisle down this?
Carlotta Siniscalco (00:31:15) - Yeah. , so it's hard, lemme start there. and it's hard because unfortunately many VCs are kind of, especially early stage, you're kind of playing a numbers] game. So you're seeing so many companies every week, and, and you're on, you're investing in a super tiny percentage of them. So you don't really, even from a process perspective, you have to have heuristics, right? You have to have some sort of mental model that makes you say no or yes pretty quickly, and then move on to the next thing. To give you a sense, I look at five to seven, I speak to five to seven new companies per week, and I invest in one per year. So you do the, you do the math on that. That's, that's a very, i i, I can't spend three hours on one of these five to seven companies. There's just not enough hours in the week.
Carlotta Siniscalco (00:32:03) - So, I would say if, if you hear or no from an investor, I would take there, I would try to get as much feedback as possible and craft an answer to that and work the answer into the next pitch that you go, that you do. , if the concern of the investor is something that you can answer to with numbers], then that's the one case where I say, where I would say yes, you could say, Hey, maybe you're not seeing the data from the right perspective. I'll give you an example. If I email you and say, you know, Ines like, great, great idea. Unfortunately, I'm really worried about competition. There's another 800 pound gorilla out there that has more money than you, that has a better product than you, and I think they're going to win. If you can respond back to that and say, you know what, check out my win rates against this specific competitor that you're concerned about over the la the last four quarters. Look at how they're going up. Look at the feedback that I'm getting from customers. Like, okay, that's, that's a fair, that's a fair point. And so you're showing me my answer. You're not telling me, showing me with numbers] that I can get behind anything else, honestly does sound offensive. So I I would not waste your time with that.
Inès Makula (00:33:18) - Do you want toadd anything else Raffaele to this?
Raffaele Terrone (00:33:21) - Yeah, yeah, yeah. I mean, a few points here that we kind of mentioned before, but you know, the fact of cultivating relationships actually helps because, you know, I'm surprised to hear the number of car lotto pitches versus investments because, you know, you, you, you as investor, you will receive so many, so many decks, and if it's another one, you know, a call, email in your inbox, probably, you know, you'll not even open it. And that if there is a way to get there, then we'll, at least we'll give you a, a higher rate of opening the, the deck or getting, getting, a first call then, then it's your job to, to get investment, done. But, I really think an important factor is listening here, that sometimes, founders forget, and listening, you know, you, you need to listen to, to understand your product and market fit.
Raffaele Terrone (00:34:11) - So before coming with an mvp, before, you know, going to, to revenue or raising money, you really need to listen as many potential customers as possible. And, investors in a way, there are different type of customers. So by telling them what you're doing, you know, you don't need, you don't even need to be scared of, you know, somebody saying, you know, they, they're going to copy your idea because I mean, it's, if you're really committed, then you know what you're doing. What matters in the is, is execution. But then by getting these early feedbacks, you can change a bit what you're doing, you know, still having your, your idea, still having, being sure of what you do and look might be the case that the investor is, is wrong. you know, how many investors, looked at Scalapay pay back then and, did not invest, and, and they regretted it, you know, got so many emails in in the following years, or even myself, I looked at, you know, from an invest investor perspective, I looked at, several opportunities and then, I missed them.
Raffaele Terrone (00:35:12) - And, and, and I'll regret it in the end, you need, one investor that says yes, and, and you get the round done.
Inès Makula (00:35:20) - Yeah. And another thing that I would add, just because I think it might be something that a lot of maybe Italian startups do, because I've seen investors comment on this, is do not send a VC fund or an investor an NDA like this is, I mean, this is, I'm just disclaiming it because they're not going to copy your idea. I, but I thought of it because you said, you know, about copying the idea, but I feel like there's quite a lot of people who might do this. So just f y i, if you're doing it, do not, because they're seeing, as Carlotta said, so many different peaches. They're not going to send sign NDAs here and there, and no one's going to copy your idea. So just a little side note. , and Carlotta, another question I have for you is, how would you say that founders can effectively communicate their vision and value prop proposition to international investors? In, in your case, obviously US investors, when, you know, they have a different cultural background, different business practice, again, specifically maybe to Italy, to the us are are there any suggestions that you have?
Carlotta Siniscalco (00:36:17) - Yeah, so in general, when you're trying to explain something to someone who speaks a different language, literally you have to see the world from their eyes. So the step one is do your research and speak to other founders who have raised money from international investors to see what is it that, in my case, like American investors care about, what are the most common, objections or questions that they bring up to businesses like mine? So, so you start there, like, I, I, I can't emphasize enough how imp how important that is. That's your job to do it. It's not my job to try to squeeze my, you know, try to see things from, from your point of view, step one. Step two is, prepare talking points that address the most common concerns of international investors. So going back to what Raffaele said earlier, in my case, the biggest one is go to market risk.
Carlotta Siniscalco (00:37:12) - So if you are a company that's operating in Italy only, you have to explain to me how exactly you're going to go after other geographies, what the, and there needs to be a lot of thoughtful detail around that. It can just be, oh yeah, we'll hire a person here, will hire a person there. Cause that, that is my biggest concern. So you have to help me de-risk that concern as much as possible. so that, that's kind of how, how I would think about it. and, and try to get, again, as much feedback as possible. Start with folks you don't care about and ask them, okay, what could I have done to communicate this better? What's your nber one concern? and craft a better message every time you pitch.
Camilla Scassellati (00:37:54) - And maybe a follow up question to that, just because I know that you're a woman in vc, and I don't know if how many female founders we have listening, but if you're a female founder and you're getting into a room, and often, unfortunately all of the investors in front of you are men, is there, like, maybe this is a bit stereotypical, but is there a way to come across as confident as like the next founder that's going to come in that's, I don't know, I feel like female founders sometimes get flustered by that dynamic. So is there an advice that you have?
Carlotta Siniscalco (00:38:27) - Yeah, so I think the, the, the, there are two, two parts to that. One is how can you show up, speak in a way that is perceived as confident by the audience that you are talking to? And that is how do you, and then the second is, how do you feel confident? Because those are often diff different things. Like that's, that's part of the reason women are perceived as less confident. And even, even if sometimes it's just a way, the way they speak, it's just maybe they're less assertive, maybe they speak in a softer way. So, I would, I would just very much focus on getting feedback again from, other, from audiences that are friendly and help you understand, okay, this is where you sound a little, not sure of yourself. This is where you could lean in a little bit more on your product vision, and, and try to practice as much as possible.
Carlotta Siniscalco (00:39:25) - , I do, I will say that the, the, it's always going to be harder if you are a woman and you step into a room where there are no other women listening to you kind of know that people like it is going to be a little bit harder because they are not seeing the world exactly through your eyes. and that's the unfortunate reality of things. And if you can try to get into a room that has a woman listening to you, that has a woman investor, even if it's just a principal or an associate, it matters. and that's part of the intelligence, you know, groundwork that you can do when you reach out, who, when you decide who to reach out to
Raffaele Terrone (00:40:06) - or Cam, I feel the less confident here.
Camilla Scassellati (00:40:10) - ,
Carlotta Siniscalco (00:40:12) - Welcome to our world, Raffaele
Camilla Scassellati (00:40:14) - . That's not true. Raffaele. , so we had, a whole other section of questions where we wanted to ask you about the different types of round that exist, and I feel like that could be an entire other masterclass. But to s it all up in one question, Raffaele, I know that as you said, like with Calipe, you raised money almost up to the last big wave, and you said you were one of the last lucky startups in that sort of capital inflow. And now of course the world has changed a little bit. It's harder to raise money, investors are more risk averse in, sectors that are not ai, but . , so again, but, and especially in Italy, I know that you also mentor a lot of Italian investors. So from your point of view, what type of round should a founder try to raise right now? So what type of structure should they go after? Is there anything that you recommend in the current environment? I'm thinking like a convertible versus a safe versus an equ, a price equity round. Is there anything you you'd just comment on?
Raffaele Terrone (00:41:15) - Yeah, sa safe and, and convertibles, I would say help you in in conditions of market uncertainty where, you know, there are price fluctuations and you don't fix, evaluation early on. You know, you put a, let's say a discount up 20% on, on, on future valuation and, and you get away with it. So right now is, is is quite more common, but also in, in difficult moments. Like during covid time with Calipe, we actually did three convertibles before our series A. So all, excepting of the engine round, the, let's say the mid rounds, you know, the, the bridge rounds in between, they were all, all convertibles because we were in the middle of covid. And, it was easier for us to race with, with a convertible, putting a cap with evaluation cap on, on that convertible, but still in otherwise a discount on the, on the valuation, if the company was not actually growing, we were lucky, we were good.
Raffaele Terrone (00:42:09) - So we always apply the cup, but otherwise, you know, the discount will, will help you to, to get away with it. , another factor which is important is also the jurisdictions and, and which kind of investors you want to attract. for instance, you know, talking for, for the UK there is s e i s and e i s schemes basically helps you to have some, some tax benefits on investments you make. Or in Italy, there is a, a startup in nova. So you need to also learn what kind of, where is the company, what kind of investors you, you want to have, and what benefits they, they might have investing in your company that will help you, to, to define whether it's is, is equity or, convertible or safe.
Camilla Scassellati (00:42:51) - Okay. Great. And I know we, I finally see that, a lot of our listeners put in some question and we have a round of rapid fire. , so maybe as we, we go with the rapid fire and the challenged areas, quick answers. So we have 15 minutes to then answer some questions from the audience.
Inès Makula (00:43:07) - That's exactly very quick answer. So we'll start with Carlotta. What would you say is your proudest moment as an investor?
Carlotta Siniscalco (00:43:15) - , so I recently, turned down a company after spending a good amount of time with, with her, with the C e O, and, I got a really touching written le thank you note, thank you letter from her, even though I did not invest in her to be clear, thanking me for having shared with her all my diligence materials and all my, all the research, all the thoughts that I, that I put together on why I couldn't get comfortable, market risk and, and, her go-to-market strategy. , which, you know, made me feel a little sad about how low maybe the bar is for other VCs that she had spoken to, but made me feel good about even having helped her a little bit in her journey.
Inès Makula (00:43:56) - Raffaele, what is the most exciting moment in your career?
Raffaele Terrone (00:44:01) - I, I think when we closed our series A in, early 2021, and, you know, we got finally a decent office before we were somewhere on the outskirt of Milan in a flex office meeting rooms in, in different spaces because, you know, basically we, we had no money. We could not afford even, even a good office. And, you know, from that moment, actually we could guarantee, you know, a safer future for the people working with us and their families, until then was really a huge risk. As I mentioned before, the company was built during Covid, and Italy, apparently around the beginning was, was the country, you know, together with China the most affected with, with Covid, and then the competition of international competitors coming to Europe. So we're really not, you know, those things were not making me sleep at night. And the fact, you know, of closing that series A, which was bringing Calipe to an international, my microphone drop an international and a safer, you know, outcome, that, that really made me, made me proud.
Inès Makula (00:45:07) - , Carta love at first sight with a startup idea or a founder. And if you can tell us who the name of the company or the founder,
Carlotta Siniscalco (00:45:15) - Unfortunately we don't have favorites, so all my children are loved equally.
Inès Makula (00:45:22) - Okay. Okay. , and Raffaele, the feeling after you closed, you know, that first round of funding for Scala, just talking pure, pure feeling.
Raffaele Terrone (00:45:33) - you know, that's, that's funny that, you don't really have a feeling, you know, you never realize, when, when that happens, you know, every round that we closed, we moved on, we put the capital at work. And it's interesting, even when we closed series A and series B with, kind of exponential valuation versus previous round with, significant primary and secondary tracks, you know, we should have opened at least a bottle of, you know, Prosecco to, to remain Italian. And, we did not. So probably not, not really a feeling.
Inès Makula (00:46:05) - One thing to remember is to celebrate some of the milestones. No, you were super busy and you had to, you had to carry on. , Carta, what do you look for in a founder in terms of personality traits?
Carlotta Siniscalco (00:46:17) - So most important is crazy drive, and it's someone who will literally drive themselves through a wall to get whatever they want done, most important one. The second is, I want them to have unique insights. So there must be something unique about the way they see the world that's relevant to the product that they're building. And last is they must, they must have a growth mindset. I can't, like, this is so important. And the reason is the type of CEO you are at a C stage company, it's very different to the type of co you need to be, to be the CEO pub, the publicly traded company. You have a series D company, you have to grow with the company, and either you're, you, you are someone that likes to grow or you're someone that doesn't like to grow. And that idea of like growth mindset, someone who's willing to be wrong and go and, and teach themselves new things is absolutely essential.
Inès Makula (00:47:08) - Last rapid fire question for Rapha is, what is kind of the, the hardest a the hardest aspect of being a startup founder?
Raffaele Terrone (00:47:17) - , good question. I think it really depends where you come from, but I would say definitely money, especially if you're a first time founder or, you know, second time of a not successful fir first, first startup and so on. Looking in my case, , I left what's called, a Golden Cage, which, which is, you know, the word of finance in, in London, you know, Goldman Sachs, et cetera, investment banking to undertake the entrepreneurial role. So at some point, I was really even struggling to pay my rent and had to ask, loan to, to my father. when, you know, in the beginning there was no money we, we Scalapay in Scalapay pay, but then definitely was rewarding. But, but what I want to say, you know, to to all of you, listening is really don't worry about risk. You know, money can be a component, but the risk that you take, you will be, appreciated. even if it's an unsuccessful attempt, because, you know, what I thought was, if Scalapay is not going to be successful, I'm pretty sure that many fans will see what I've done with, Scalapay pay. And, you know, maybe I'll secure a job in a, in a vc, if I don't want tobe entrepreneurial again. So definitely if you have an idea, and if you're motivated, try it, and the risk will definitely be rewarded somehow.
Inès Makula (00:48:32) - I actually read an article that said that if you're a startup founder, even if you don't make it, so even, you know, if things don't go well, you have much better chances of a better job promotions faster and higher salaries. So actually, even if the worst case happens, it's, it's, it's not bad to go back into the job business with all the learnings that you have. We're going,
Raffaele Terrone (00:48:51) - I, I, I have examples. So it's, I'm telling this with confidence because you know that there are people around me that actually tried failed, and now there are successful, you know, principal directors, partners in, in relevant PC funds.
Carlotta Siniscalco (00:49:04) - I, I could not agree more if when I look at new companies, when I look at a lead that comes in, if the founder is a failed founder from before, I'm more likely to say yes than someone who has never started a company before.
Inès Makula (00:49:16) - That's some a mentality that I, hopefully one day Carta, you'll come back to Italy as an investor and you'll have, because I feel like failure, we talk about it often on the podcast, is not as seen maybe the same way in Italy, but hopefully things will change. , but we're going to open up the, the floor to question. So we have the first question coming from Marco Ga Gata. , he's saying, I'm starting a B2 B2C business, and pre-ID seed is hard to finance, especially if you don't have traction or a developed product yet. Many say they want to invest in the team, but I haven't always found this hypothesis true. How would you advise me to proceed?
Carlotta Siniscalco (00:49:52) - I can, I can start. So, generally speaking, I would try what, what, at this stage, you need to get to an m mvp to a minim viable product that should not, and I don't know the details of what type of B2C business you're trying to start, but that shouldn't be something that takes a ton of money, unless you're doing something, you know, very kind of biotech or, or, or something that's very deep into the tech stack. , so I would suggest raising the absolute minim amount you can, and I'm talking, you know, if you're, if you're based in Italy, like few tens of thousands just to pay your rent literally for, for, for you and your team for the next few months and, and, and focus on that, don't think about raising anything bigger than that. and then once you have a, a, a minim product that you can start to test in the market, then at that point you can think about raising your next little, your next little round of funding. And ha think of this as a series of milestones that each derisk the journey towards having a full-fledged, you know, company.
Inès Makula (00:50:57) - Perfect. We have a second question coming from Ma Martha Dyna, what are your thoughts on working with third party fundraising advisors at the early stage round, especially for sole founders? I'm already seeing Carta, you know, saying absolutely not, considering fundraising is such a, a time consing activity and running the company at this stage is even more time consing. How to best balance both?
Raffaele Terrone (00:51:18) - And maybe, maybe I'll take this because you mentioned, cam as an advisor, I'm, I'm not technically an advisor. I invest in every company, you know, I'm working, working with, you know, I don't really work, I don't get paid. I'm actually, you know, putting a ticket and getting the benefit of, the, the, the extra. I mean, look, even with Calipe, we had some advisors and, and some of them can be helpful, especially if they're very senior and you know, you need to convince them to come in the company, but most of the time, you know, if, the ones really helpful are the smart money. So investors who put money and then they can give you network introductions, they can help you with business plan, et cetera. And I think, you know, in general is work more than than an advisor. There are some exceptions, of course.
Carlotta Siniscalco (00:52:04) - Yeah. And, and I say specifically when it comes to fundraising, if someone emails me about a company and they're not the ceo, O I have zero response rate. I don't even respond because if you're the CEO of a company, you're looking to raise money and you're asking somebody else to message me, that means it's not important to you, the fundraising process. So it's, it's, it's really not the right thing to do and it, it also, what fails is that you don't get the feedback back directly on why, investors are saying no. And that's an essential part of the learning process. Go back to growth mindset. If you're willing to outsource that, you're not the right fit for me.
Camilla Scassellati (00:52:41) - I think
Raffaele Terrone (00:52:42) - That, that, that, that I was the cfo, but I I was still doing with
Carlotta Siniscalco (00:52:46) - Yeah, yeah. I mean, founding team, lemme put it that way. Like if it's just a third party, you know, sometimes you got a, like a mini investment banker or I'm someone that doesn't work for the company that, that that doesn't work. Yeah.
Raffaele Terrone (00:52:57) - Yeah.
Camilla Scassellati (00:52:58) - And something to add, maybe, and maybe you can add to this too, again, having interviewed so many founders on the podcast, it is normal that fundraising at some point becomes your almost full-time job because it's such an important part for the founding team, either the CFO or the C e o, often we hear you get, you dedicate yourself to that and often many investors want tosee someone that's dedicated to fundraising and really putting a lot of time in it. So I think it's, normal that it takes a lot of time.
Carlotta Siniscalco (00:53:32) - Yeah, yeah. Not because we, you know, we want to say, we want to see, oh, we are the most important people in the world, so you should pay attention to us venture investor. But it's because we know that the reality is that in order to become a successful company in the future, you need to be able to continuously raise larger and larger funds. So it's just another muscle that you as a c o, as a cfo, you, you need to have. And if you don't have it at the early stage, you're definitely not going to have it when you have to go out and raise hundreds of millions of dollars from much scarier investors than we are.
Raffaele Terrone (00:54:04) - Yeah. And, and maybe, you know, also on, on, on the Scalapay experience, we did five round so far what we called Angel Pree seed series A and series B. The first four were done internally, so all of them, not a single advisor, only the series B, we got an investment bank, but more than the investor approach was for the, you know, managing the, data room, the due diligence process, answering the q and a. When we got the term sheet for the confirmatory dd, the first part was done entirely by us. And that was simply because, you know, as you said, it takes a lot of time. And when we did this, our series A, we disappeared, complete, we disappeared. I mean, the, the CO and cfo, we disappeared completely from the company for two months, and we could not afford that because we still wanted to, to, to run the company. So for us, only for our series B, we got an investment banking helping us with the processes.
Inès Makula (00:55:00) - This is where having a founding team of more than just one founder, I mean, it can happen. There is a lot of successful just solo founders, but this is maybe when you really need, you know, to be two or three in the team. So somebody can take this burden, not burden, but you know, it's a huge responsibility and you have to take, you, you have to take a step back from your day-Today activities. There is a great question actually coming from a Augustino, which he says, people don't, a don't speak about this enough. When should, should someone not raise? People tend to be too focused on the money unless on product running a business. Do you have anything to comment?
Carlotta Siniscalco (00:55:35) - If you don't have product market fit, don't raise. If you don't have and series, I'm talking series A. Okay. Okay. So if you feel there is, you haven't found a perfect alignment between you build something that people desperately want, don't raise, shrink your team, keep iterating Stalin until you feel like you built something that people just really want. And that at that point raise because you have a bottleneck and you can continue to grow to grow your company. But, I mean, and right now you kind of don't have an option because if you don't have product market fit and the series A, you're just not going to be able to raise anyways. but I like this question because it's, you know, sometimes people think of, oh, you're successful because you raised a lot of money, but that's not the case. You're successful because you built a product that a lot of people want. That's fundamentally different.
Raffaele Terrone (00:56:30) - Yeah. And, and, and the capital just helps you to, to, to go faster on something that already, already works, but if you don't have it, yeah. Wait and, and, and bootstrap or, or just raise the, the, the, the
Inès Makula (00:56:44) - Rico Ayana has a, another good question. In early stages, let's saye, what do you think about founders, founders that are currently not working full-time on a startup? I feel like this happens quite a lot in Italy, maybe more than in, in the US where the risk, you know, people are just tend to go all out. But what are your thoughts on this?
Raffaele Terrone (00:57:02) - I, I think, I mean, it could be fine before you raise money. I mean, from the moment you raise money, you need to quit and full, fully commit because it's also a waste of time because, you know, investors think more than on, money, multiple, you know, our, your i r you know, your return that you get and the fact that you are delaying the, the launch of the company full-time. You know, it's basically investors could have put money somewhere else and, and, and made a, make a better return on the phase where, you know, before investors give you money. And, and, you know, that's what, what happened for, for our case. we all had different things. And when money came in, you know, in mid 2019, everyone left what they were doing and we committed full or lean on, on the company. But sometimes, you know, without mentioning the name, I invested in a company where the founder is still having, you know, a very senior job somewhere else. And, and I'm very upset with this person because I'm like, what are you doing? You know, gimme the money back until you quit your job.
Carlotta Siniscalco (00:57:57) - Yeah. In, in the us that wouldn't fly in the us. the way it typically works is that the, the founding team starts working on the idea at nights or in the weekends for a few months while working full-time, and they start iterating, and then as soon as they're ready, they quit. And then they, they, they, they start fundraising. You wouldn't be able to raise, precede round if you're working part-time.
Inès Makula (00:58:22) - Yeah, there's a lot of, I think there, it's quite, you know, the opinions are different. Some people really see it as like, if you didn't, you know, put all the risks, yourself, why should I even put $1 in your company? So again, you, you might find some people that will, but you know, it's, it's, if you've committed and you've went all in, you probably are com you're more convincing. we have a question from I, rap Carlotta, what advice do you have for founders on storytelling versus metrics traction when pic when pitching?
Carlotta Siniscalco (00:58:54) - I have, I have a lot of thoughts on this. I could do a whole session just on this. Storytelling is essential. People will remember how you make them feel, not what you told them. So even if you have the most beautiful set of metrics, et cetera, if you don't stitch all of them together with a story, it's just not going to be memorable. so I actually highly, highly suggest talk about advisors. Like if you, if there's a place to spend a little bit of time with advisors is get someone who's really good at telling stories and get them to review your pitch and see what they think. , it's important to marry that with data. Of course. It can't just be some, you know, fluffy story that is not rooted in, in some numbers]. And I am the type of investor that will really dig into your numbers]. For example, if you tell me, oh, my market is 3 billion, I will ask you, okay, how do you get to that bottom up show? Walk me. Exactly. So you, you have to be really, really crisp on that. but it's essential. Yeah. I, I highly recommend, investing some time in it.
Raffaele Terrone (00:59:59) - Yeah. Yeah. I think, I think you said it all.
Camilla Scassellati (01:00:01) - Yeah. And working in communications is my other full-time job. I can say. , as, as Carlotta said, put a lot of effort into that storytelling because when you pitch, especially if you're deep in the tech stack, I think sometimes you tend to get very technical. And then at the end, somebody walks away and was like, I don't actually remember what this technology does because you didn't give me like, as we said, like a go-to-market strategy. How you going to apply it? What is an anecdote? Why did you create it? So have the story behind the idea pretty strong because people don't remember, when it's too, too technical. Although you think that investors get very in the weeds, but even Carlotta, who's in the weeds is telling you that a story is important. ,
Inès Makula (01:00:42) - Yeah. Practice. Practice. I would say this is one of the key lessons that came out, of this, out of this masterclass. Thank you, Carlotta. Thank you Raffaele. Thank you for everyone who asked their question, who was listening. , it was super insightful. And we, obviously are going to publish this on our podcast so you can all re-listen to it. And if you want to reach out to Ra Carta, I don't want them to maybe spam your LinkedIns or not, but you know, you can always try and maybe you get a response. But thank you.
Carlotta Siniscalco (01:01:11) - Thank you for having us. Thank you.
Camilla Scassellati (01:01:13) - Thank you. Thank you so.