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Many founders are starting to feel the consequences of the timid funding climate and are increasingly wondering how they’re going to be able to continue to fund their startup with VCs looking the other way. The future of their company is at stake, and they face potential risks of having to fire sale the company they have spent a part of their life building.
At Hexa, we firmly believe that if you've built a valuable asset, it would be a missed opportunity to abandon it solely due to the current economic challenges. We want to provide founders with a fresh path forward, providing their companies with a fresh direction and a second chance at success - essentially granting them a second life.
Thinking beyond the traditional VC model
Venture capital is a game of home runs. Only 5% of companies invested in by VCs are outliers, driving 80% of the total return. As a founder, you've signed up with a VC to be a part of these outliers, but statistics show that the vast majority won't achieve this level of success. Especially in today’s macroeconomic context, many VC backed companies, flush with recently raised capital, are likely about to meet a hard reckoning.
Specifically, early-stage founders who are at the pre-seed to Series-A and have raised their first round(s) of funding in the last couple of year. If, as a founder, you've built a great asset but, due to the macroeconomic context, it is no longer VC fundable right now because you're not on your way to building a great 'home run,' then you've got two options:
- M&A - The most popular path taken by founders. If the company can’t get funding then founders will go the (distressed) M&A path and try to rapid sell the company. But this is never an ideal option for founders, especially not today where founders are being forced to sell their companies at big discounts. Indeed, at this stage valuation levels are overall low (often acquihires) where VCs get (part) of their money back and founders are offered a financial incentive to stay and get a very low return from the sell.
- Path to breakeven - Other companies will try to reach profitability. But this is challenging. It usually involves making significant changes to the team and/or the product, which requires a considerable amount of effort and time. Plus, if the breakeven point is not achieved, it is important to acknowledge that no one at the table initially agreed to this outcome. VCs will push for some sort of an exit and founders, who might have wanted to go big, will see the situation as a failure.
Most founders signed up for hyper growth because they are attracted to building innovative companies with limitless ambitions. Going the M&A and breakeven route is for many founders just a way to move on. But that could end up taking years to do when they could be making more of their time. What if there was another alternative
The second life alternative
At Hexa, we want to give founders another path. If you don’t want to go the breakeven and M&A routes because of the potential hurdles described above - then we want to give founders the opportunity to turn it around. In many cases, this will mean that founders will make the decision to hand over the reins of their company so that they can focus on what they initially set out to do: to build a homerun.
The type of companies which would benefit from this second life alternative and our help would be early-stage companies that have already raised early-stage funding (Seed, Series A), who are generating recurring revenue with low burn in sight and have reached the first signs of product market fit but who are no longer “VC” fundable because of slow market traction or lower than expected growth, or other similar reasons. We will focus our efforts on B2B SaaS companies in France and Belgium, as those are our areas of expertise and geographical locations.
The second life strategy will require injecting some money, some leadership talent, potentially bringing in new teams, providing strategic guidance and… a lot of energy. The goal is to find a successful way forward for the company, to give viable businesses a chance to grow into their full potential. We’re not here to buy a distressed asset and milk the cow - our goal is to do everything we can to restore the company's path to success.
Why do it with Hexa
Investing money in a company is a straightforward enough process. The key to making this second life strategy work is doing it with the right partner, who will not just inject money and give strategic guidance, but who will truly change the trajectory of the company for the better - and who will do it with the right team of experienced people who know how to run successful companies.
This is where we come in at Hexa. We bring with us more than 10 years of expertise building and growing +35 companies in Fintech, Web3 and Future of Work. We’re highly experienced on how to build efficient teams and have access to a huge network of talent with our strong footprint in Europe and US.
Crucially, with Hexa, key to our model, is our team entrepreneurship philosophy. The fact that our founders don’t build their company alone but they have from day 1 a team of operational experts who build alongside. A core team leveraged to fully work operationally on the projects from customer segment, pricing billing, product, GtM strategy, Business model etc.
And we’ve already done it once in the past. In 2019, we partnered with Yousign and went beyond our startup studio model. Yousign was co-founded in 2013, had raised some funds, but wasn't on a trajectory towards hypergrowth. First and foremost, we were convinced the digital signature business was just in the early days of a coming booming decade. And when reaching out to Yousign we realized that we could be a great partner for the second stage of the company’s life. With a bit more money and, some new talent and good strategic advice, Yousign could soon become a European leader in the eSignature space. So, we invested in Yousign, bought half of the company's shares, and brought our product and marketing expertise to the table. The results? Yousign was in a great position to raise money again and in 2021 raised a 30m Series A, and is now regarded as a European leader in the eSignature space.
What’s next
We believe that the time is now, and we are looking to partner with individuals who are interested in deploying this strategy within Hexa. We are looking for individuals who believe that providing B2B SaaS companies with a chance for a "second life" is the opportunity they have been waiting for.
Founders, investors, partners: if you recognize yourself while reading this or if you are curious to learn more, please reach out! We will treat all inputs with strict confidentiality.
