Invest Early-Stage or Late-Stage - What’s the Challenge?

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Venture capital has two choices in funding startups. 

They can go for early-stage companies or late-stage companies.

So, which stage to focus on?

The risks are higher for early-stage companies, but the valuations are lower. Any meaningful acquisition typically leads to a successful investment outcome.

Later-stage companies come with less startup risk, but valuations are typically high. The company must sell for a substantial valuation to give the investors a return.

As the rule of 5 tells us, a good investment requires an exit of 5 times the post-money valuation.  Later-stage companies often come with $20M to $30M post-money valuations which means they would need to exit at $100M to $150M to be a successful investment.

Early-stage startups simply need to launch and grow reasonably well. 

Later-stage startups need to become the leader in their category as acquisitions usually focus on the leader and not the various followers.

In conclusion, the early-stage company comes with high risk for startup failure but an easier time to reach a successful investment exit.

The later stage startup has a lower risk for startup failure but a more challenging time to reach a successful investment exit.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.
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On this episode of Investor Connect, Hall welcomes Gustaf Brandberg, General Partner at Gullspång Re:food. 

Founded in 2020 and headquartered in Stockholm, Sweden, Gullspång Re:food makes enduring investments in entrepreneurs solving the food system’s structural problems for generations to come. Portfolio companies such as Oatly, NICK’S, Planted, Motatos, and Stockeld Dreamery are all driving sustainability shifts in the food system, and Gullspång Re:food backs them with capital, contacts, and competence. By applying systems thinking, they invest in solutions addressing the underlying problems of the food system as opposed to its symptoms. Their investments seek to reverse the food system’s pressure on our planetary boundaries while ensuring an ethical foundation for everyone.

Gustaf is a tech guy turned food system investor on a mission to support the sustainable transformation of the most fundamental system for human civilization. In 1996, he co-founded and ran a software consulting firm helping companies scale from zero to becoming global leaders of the internet era. After 14 years, he joined his family office Gullspång Invest, as a tech investor (with Klarna being one of their investments). After attending a program at Stockholm Resilience Center, Gustaf realized the urgent need for a sustainable shift in the food system. The following year he invested in Oatly and NICK’s et al. In 2020, he co-founded Gullspång Re:food with a 100% focus on backing entrepreneurs developing sustainable food system solutions on a global scale.

Gustaf shares what excites him in the sustainable food industry, and discusses its evolution. He advises investors and entrepreneurs and speaks about some of the challenges they face.

You can visit Gullspång Re:food at www.refood.vc, and on LinkedIn at www.linkedin.com/company/gullspangrefoodinvest/.

Gustaf can be contacted at gustaf@refood.vc and gustaf.brandberg@gullspanginvest.se, on LinkedIn at www.linkedin.com/in/gustafbrandberg, and on Twitter at www.twitter.com/gustafbrandberg. 

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For more episodes from Investor Connect, please visit the site at: http://investorconnect.org  

Check out our other podcasts here: https://investorconnect.org/ 
For Investors check out: https://tencapital.group/investor-landing/ 
For Startups check out: https://tencapital.group/company-landing/ 
For eGuides check out: https://tencapital.group/education/ 
For upcoming Events, check out https://tencapital.group/events/  

For Feedback please contact info@tencapital.group   

Please follow, share, and leave a review.

Music courtesy of Bensound.