Exclusive Data on Startup Funding in Germany, Austria and Switzerland with Equidam

ABOUT THIS EPISODE

This time we do not interview an entrepreneur or investor from GSA, but we speak to Daniel. His startup equidam helps to value startups. He shares exclusive data with us on the GSA startups.

"We helped to value more than 130.000 startups."Daniel Faloppa, Founder and CEO equidam

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"A lot of news around is just about the best startups. This gives entrepreneurs the wrong impression on the valuation of what is possible."Daniel Faloppa, Founder and CEO equidam 

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"One of the central questions of entrepreneurial finance is how much is my startup worth?"Daniel Faloppa, Founder and CEO equidam

The Founder

We hear from Daniel Faloppa (https://www.linkedin.com/in/danielfaloppa/), originally from Italy, but set up equidam (https://www.equidam.com/) in the city of Rotterdam in the Netherlands. This time we talk about startups and their valuation.

Daniel is originally from Italy, but his studies also took him to Glasgow and Rotterdam, where he set up his company.

"Valuating startups is really a dark art."Daniel Faloppa, Founder and CEO equidam

The Data 

Find the graphics with the exclusive data on our blog post on medium.com/startuprad-io  

Welcome to start up bread and that I own your podcast and Youtube blog covering the German startup scene with News, interviews and live events. Hello and welcome everybody. This is Joe from start operator. I oh your startup podcast and you to block from Germany, bringing you again another interview, this time not with an entrepreneur from Germany, Austria Switzerland, but we will talk about Germany, Austrian Switzerland. At first, would like to welcome Daniel, who actually resides right now in the Netherlands. Hey, how you, dean? Hey, yeah, thank you for thank you for having me. Doing, doing very well, fairly close by to Germany, so I should be okay. Yeah, and I do believe if you speak that you can understand a lot of German and the other way around. Yeah, yeah, however, like I'm originally from it Telli, so my dudchess like enough toward that a coffee and and my German probably even worse. And we discussed it before. But the very important question here. You, you're living in Rotterdam. is their good Italian food around? No, it's getting better. It's getting better over the first like you know, I've been here almost ten years now, but but yeah, I mean it's impossible. It's impossible. Okay, glad we got that out of the way. I'm you are here because you are the founder of Aquidam, a company which helps entrepreneurs, especially entrepreneurs, to give a fair valuation to their startup, start up idea, very early on especially. But before we do that, of course, as always, down here in the show notes, you will be linked. Your linked the profile and...

I went through it and I've seen you. You did quite a lot of international studies, like Padova. How is it really called? UNIVERSTCA DEG Lee study that you saw? Did IT PADAWA? Yeah, all right, tell it such a beautiful language. Sorry for about ring that. You've been also in Glasgow and I assume you ended up in Rotterdam because you have been there at Erasmus University. Rate. Yeah, yeah, so I come from a small village close to the border with Austria actually, even though that's also an Italian speaking village. So No, no German speaking then. And then, yeah, I studied economics and management in in Padua and then didn't exchange semester in Glasgow, the University of Glasgow, which is actually a very nice university with like some some very big names as professors, which was was pretty awesome. And then, yeah, I came to Rotterdam for my master in finance and investments in two thousand and thirteen, so quite a bit of moons ago. But yeah, studied a bit all over the place, always finance and and kind of trying to bring it. You know, rotter down when I came here, was the was the fourth best university in Europe for for finance. So that's that's kind of what what brought me to the the flat lands. Yeah, Lands Very nice and can you give us like a ten thirty second pitch why people should go to Padua, because I've been researching it a little bit in on the Internet. I've never been there, honestly, but it looks very, very nice. Yeah, but buttherways a nice little cities about two hundred and Fiftyzero people with like sixty thou students or sources. Very...

University centered, let's say, but very historical. I think you know a few monuments to see. Yeah, definitely a very nice little Italian city to see. And when I see this right here, it's not too far away from Venice and if you travel from Milan to Bologna, like I did. Logical stock would be Padua and then Venice. So, guys, here is your next trouble idea, after taking again a detour. Sorry, guys, I'm the King of theaters. I know here I'm we already know how you ended up in Rotterdam, but I see you've been doing a few stops. Before you started equidem you set it up originally in the Netherlands and Rotterdam right. Yeah, yeah, directly out of ever city. Really. Before that, I like I had an internship with a with a small company, interesting. It was the Italian importer of a TVs and scooters for certain brands. So under completely unrelated but definitely an interesting, fun experience. And then, yeah, I quit them, through the through the study, seeing rotternum. Okay, and now the interesting question. How did you up end up evaluating startups? Because my understanding is you had some background from finance. Of course, it's also an interesting topic. I've once seen a book called the dark side of valuation, start prerevenue startups and stuff like that. I do believe it's interesting, I do believe it's a great idea, but I'm not sure what attracted you there enough to say, Oh let's say here in the flat lands and set up a company. Sorry for everybody from the Netherlands. Very...

...sorry. Would see that they funny terms, very flat. They know it's very flat. The yeah, right, how does somebody end up in invaluation? It's like it's one of those topics that, if you tell it at parties, you know, people like kind of go talk to somebody else, you know. So the so like in general. We have the headline of the interview, but but it's true. It's true. The the so, when I was like fifteen or so, I was really into like programming and things like that, and when I came afterwards, I did decide to go study finance and not like computer science and those things. But when I was studying here in Rotterdam, we were I was really thinking, okay, a lot of this process can be automated with, you know, with proper data on a website and and have it as a as a doit yourself solution. So we started actually with a blog. We started with the blog that was talking about entrepreneurial finance, trying to help entrepreneurs with the topics of finance, because entrepreneurs they you know, they know a lot about their own field. They know a lot about, you know, maybe management if they if they come from business, but not strictly speaking, about finance. And so we really thought there was a there was a gap to feel and through the blog we basically iterated the idea and this question of valuation always came up from from all sides. You and obviously it's a central topic in entrepreneurial finance, is the the valuation of the of the Startup, when the company raises capital and so on. And you know, we kind of said like okay, with the with the computer background, with a lot of data, we can definitely make this into a solution and and see where it leads us. You know, in terms of life, really like what he did. They're basically you testing the waters. You did not do like any survey or something for your...

...idea valuation. You just put out a block and always lead toward where there is the most interest, which I personally find very interesting, very novel approaches for his art, Contel, I think it was. It was a bit of a mix, because I do believe that, you know, the calculation itself is super interesting, like finding out, you know, the actual value, of course, is what you try to do on the stock market all the time. But on the stock market the margins are so thin. You know, the the every every stock is researched by by thousands of people and it's very difficult to you know, to to innovate much, to bring a lot of value. But I think on the private market, at least when we started, you know, it's but also now like it's a it's a dark art, as you said right as you said about the book, it's a dark cart that that is super interesting to explore with data. Is Super Interesting to explore in a in a leveraged way, I believe. So, yeah, that's that's how I got into this racket. And how did you acquire your first clients? Yeah, so we did like an incredibly sort of extreme application of that theory of if you're not ashamed of your first version, you didn't launch fast enough. So our first version was was up in two weeks. It was like what would now be a square space website with a google form, with the Papal Link and, you know, a lot of menual process in the back and we started testing it with a bit of advertising, a bit of adwards campaigns, and also we were working very closely with crowdfunding platform here in the Netherlands. And of course they had all these entrepreneurs that wanted to, you know, to risk capital on this platform and they they didn't have the resources to you know, to do a proper valuation with evaluator. But at the same time they all had these ideas of there was...

...this guy with that with a whiteboard and and he drew a pair of glasses on the white board and he was he wanted a valuation of two and a half million in twenty thirteen. So the platform really had a need to you know, Colm down this disover optimism from from companies, and that's where we fit fit in at the beginning. And now we talking about value as of companies. My understanding is, would you also have on your website that he helped more than a hundred and thirtyzero startup companies to get a valuation? My understanding is that your your biggest market is Europe. You second biggest market is the US and then there's some markets like Asia, Middle East, Africa South America, where you also do some work, but basically it's not your main market. So I would be first before we talk about that. I will be first curious. What did you learn so far in the last nine years evaluating startup companies? Do the founders get crazier or the investors? That's a good question. So I like a lot of things have changed, I think, over over nine years in the in the startup environment, especially in Europe, but I think all over the world. They both get crazy, I think in different directions now. So entrepreneurs like you, you always have, you always have optimism. That's what fuels entrepreneurs, right, and that's like very well and good. But when does it become, you know, over confidence, and when does it become even even more than that? So that's that's always the question. And you do have sometimes, like you know, people that are super convinced that they are going to be the fastest growing company...

...in history, which is fine, like it could be, but statistically is not gonna be right. So there's a very, very, very small chance. And and so you know. So there is there is all that part investors on the other side, like we started with, very much and sophisticated investors. I think at the beginning, you know, a lot of people coming from real estate, a lot of people coming from traditional investments in in maybe more traditional companies, and they didn't. They didn't get the startups, they didn't get the valuations. For sure, they didn't understand them and they didn't understand, you know, scaling, Hyper Scaling, software margins, you know, sauce, sauce, risk return profiles and and so like. You know, a lot of a lot of people were just low bowling valuations for for a very long time, not because of their fall just, you know, they didn't know. And and I think like that has finished pretty much now, like now that we're seeing, like you know, in my opinion, the the peak of valuations is because because people finally understood the model of software. But yeah, things have changed a lot. As we said in the beginning, we will end up in a German speaking startup, seeing you prepared a few weeks for this awesome and, by the way, once again, exclusive data here. And but I would first like to get room out out of the way, because my understanding is that a lot of people, especially here in Germany, talk about, Oh yeah, they're always bigger valuations into us. Are they higher? Because I just talked on another podcast to somebody who does professionally evaluate companies and he said, yeah, two guys serial...

...revenue with the computer in a garage working on an that year it's one to two million US doll those valuation. Yeah, yeah, it's true. It's definitely true. Like like the that is a discrepancy. The question is, is it an unfair discrepancy? You know, like the main deferencies with the with the US and Europe, are a market difference, a huge like the US is a huge single market pretty much that a software company can conquer basically from one office. Pretty much. Where Europe is is a lot of different markets with different regulations, with different you know, we cannot even hire a cross country without without a lot of complications and and so there is much more potential, maybe from from a US standpoint, for the startup to grow much bigger. The Ma market is much more developed, much more act if much easier to sell companies that much higher valuations and you know, and and okay, the capital is also more available, but that's, I think, less and less true, like it was really really true at the beginning, five or six years ago. Now I don't think that's the that's a discrepancy, that that justifies all that difference in valuation. So yeah, valuations are still different. But is it? You know, if a company is based in Germany, the Netherlands, the UK and you know, and it has the same scaling opportunity of a company based in San Francisco, would the valuation be different? Yes, but not by that much. You know, I think the main difference is the difference in opportunity and the difficulty in achieving that large opportunity. That that makes the valuations different, and the costs, of course, right. So, so there's also an incredible difference in costs, for for salaries, for for a lot of things, from from Europe to the...

US, which means they do have to raise more money, they do need to have a higher valuation in order to, you know, justify also the the incentives for the founders. Right, when we talk about evaluation of two million for for a prerevenue and two people in a garage that are just getting started, that valuation is not really based is not really but it's based on the company itself, but it's also based on we need to give the found as enough equity to have incentives to bring this company to success in the future. And you know, if we in that, if they need a million and we take eighty five percent of the company. These guys are gonna be working for Google in three months, you know. So we're basically wasting that million. So we give them a higher valuation, a bit because of lack of math of this big opportunity, but also because we want them to have the right incentives at the beginning. That sounds pretty good. Just guests made? Can you make that? How much would it be here around the Germany? Two guys a computer, two computers in the garage and pre brevity. You. So it's super difficult to say. It's super difficult to say. I think, like you know, we're not that far off, like definitely in between the two million and and the half of that, like you know. I think. I think those are the evaluations discrepancies right now. It's not as huge as it used to be. It used to be like easily, you know, ten times that. Like somebody in Europe was raising at six hundred K for the same round they were. They were raising at six million. Pre money in the US now as much as much different. How we get to the interesting part. Let's talk about Germany, Austrian Switzerland and what you've learned there. Disclaimer, I don't know the data up front. I just he prepared something for us and of course, if you got down...

...here in the show notes, wherever you watching this, wherever you listening to this, there will be a link and they you can see all the data. Plus, if you listening to this on our radio station, you can scan to cover code and there will be a Qr Code that prints is straight through our medium block. Yeah. So so, like what what we're doing a little bit with our data is to try to go against the hype a little the a lot of the startup news that people see around is about, you know, the best startups, and so I think a lot of founders kind of live with impression that they can, they can raise five hundred million after six months, and you know that's because like maybe one start up or two startups have done it. They made the news a whole lot. With our daytime, with all the startups that that go through us, maybe we have a little bit of a less biased view on these things. And so, for example, something that that surprised me is like, if we look at rounds in Germany, from zero and a million euros, the companies are on average from two thousand and twenty. So they are two years old, and we're looking at the past year of data gathered on Aquidum. They have, on on average, two twenty five founders and two employees on top of those founders, right, so there is already something. There is not the to two people in a garage, and so, you know. And when instead, when we look at funding rounds from one to two point five million, the companies are on average four years old, so between three and four years old, and and they have seven point five employees, right. And then when we look at funding rounds like between five and seven million, we have instead fifteen employees, you know. So this is like, I think,...

...a little bit different compared to, you know, the what's up story that they were forty people and they sold to facebook for what was it four billion now, sixteen billion at the time. And and I think it's quite interesting to see that. You know, like the vast majority of companies is like normal companies that take normal time, let's say, to to hit these moistons. That's definitely an important point here. So you only hear about the most extremes, the like the top out lies here, and it's not too bad if you don't do it as long as you are, if you can survive. And, as she said, like the the the biggest, like the bigger money comes in like two years after you founded, four years after you founded, end so on and so forth them. So basically you have to have a long prep and, as he said, you have to be pretty enthusiastic about that. Yeah, yeah, and the thing is, like there were there were some strange statistics on on these things over the years. But, for example, even like there was a big study in in France about fun communicated funding rounds now, and they double checked all the press releases with the data that came out in the Chamber of Commerce after a couple of years, and what they found is that the press releases are overstated by, you, on average, twenty percent. So and this is not even only the valuation. Even the amount of capital is overstated, which I thought always you know, okay, this must be the only certain number in the world, is how much money they actually raised in this round, right, but even that is overstated by on average twenty percent. And then pair to that the fact that all the people that don't have a funding round that is worthy...

...of a pr they probably are not gonna even end up in a database, right, they're not going to end up on crunch base or deal room or or whatever it is. So, you know, when you do those averages, like you get to really buy as picture and you know, and I think for a lot of for a lot of founders, biased in the wrong way, you know, like so, yeah, I think quite an interesting phenomenon that happens in this industry. And my understanding is you have to have a few employees before you can even raise millions. And my other understanding is that you that you have that you have to have something to show, because nobody will say Oh yeah, do you look Nice? Let I'll give you a million. I give you a million yours. That, yeah, just doesn't work like that. The I mean that's the average, right. So, and that's the strange thing about looking at average is is that you know, yeah, you can be that company that raises without anything because, you know, we saw, for example, a company had a key patent in the in the technology of a large pharmaceutical company and obviously they were like for people, prerevenue and they sold the company for I think ninety five million euros. You know. So obviously dose thing happen. But I think it's you know, it's good to look. It's good to look at a bit broader data than just assume that everybody raises without so the actual data is much more conservative, quote unquote, than the PR that you see on magazines, let's say. Okay, what I take now out of it? If you get some press releases, the money is twenty percent less, the valuation is twenty percent love, well on average, and you have to be there two years...

...to raise million amounts. And you, as as my personal feeling is as well, also state that you mostly the headlines are grapped by the positive outliers. As you said, like a handful people. Ninety five million prerevenue. I don't think a lot of people would buy a pre revenue company for any price. And then ninety five million. Well there there has to be reason behind it. But also the time it's called to strategic price. Yeah, yeah, exactly, exactly. Yeah, so definitely have something. What we what we always advise people to do is, you know, taste the waters right like, speak with a few investors that maybe are not your your your top picks for your funding ground and understand what where the market is at with with this type of things, because just by looking. What a lot of people do is that they look at the press, they look maybe at some databases, maybe they look at some crow funding platforms, because they have public valuations, but they don't realize about you know, they don't realize this bias. And investors they get, you know, they get pitched a hundred companies a day. They know where the where the market stand, and they know, you know, the specifics of a company that needs to ways at this moment in time because it's a competitive process. Right. It's not like you don't need to fit a checklist, you need to be the best in in a group of companies. Right. So, until you ask, you pretty much are never going to know where you stand in that, in that group of companies. And two thing is usually don't learn it. There is a big information bias in favor of big asymmetric information, I you believe is the...

...right word, in favor of the investors. And basically that's why you are here, is my understanding. Yeah, yeah, so, so we are here for the information and for the knowledge bias because, aside from not having the data, a lot of founders don't even have the knowledge on how to calculate valuation and how to do this type of things. On the other hand, we do serve like both sides. So about ten percent of what we do is actually by sides or investors and all the platforms and all those people. So we always trying to we're always trying to find out what's a fair price for for the company, and that's, you know, has a bunch of assumptions. Like you know, there should be multiple buyers, should be a liquid market and things that that. So it's very difficult to say what's a fair price, but that's what we strive for in in what we do. You've mentioned crop handing platforms would public valuations. What do you say? Are The valuations on crowdfunding platforms? All they high? Are they on average? Are All they on the lower end of what you would expect? Yeah, that's a good question. Right. So how do you answer that question? Right in it if the returns are more or less in line with the risk that people are taking? Right and like have we like now we're starting to have actually maybe enough data about the first years of crowdfunding because the startups have have evolved and some have managed to to catch out, and I from the fact that you know, nobody talks about it. I guess like's not. Is Not the all sunshine and rainbows there, you know. So it's a good it's a good question. Then the other question is, are the startups overvalued or are we just not picking the right startups in in the crow funding platforms, you know, but like, yeah, overall it seems that...

...like some, some startups have been very successful on Crowf and and they raise capital on on crowfunding platforms. So, you know, especially, I think, in the UK, a lot of them have made the news because that's also the most developed market for for equity crowdfunding per se. So it could be, you know, with the right selection, it can and it can be profitable as a portfolio, even adjusting for the risks. So yeah, I mean in what we do, we help a lot of funding platforms and I don't think the valuations are much different in, you know, the ones that we help compared to the ones that we don't help. So it seems to be to be fairly fair. Yeah, okay, you talked about helping and we're now recording for more than twenty five minutes and you did not pitch your services yet, which I correctly appreciate, but can you tell us, like to make the thirty thirty minutes full, tell us a little bit about what people could expect on your platform and of course, as always, there will be linked down here in the show notes where you find the link to act with them. Yes, yeah, thank you. No, no, but the I think like what people can do. The the the reason to go and Acquiim is that you're either planning a funding around or you received interest, you received more or less an offer and you want to you want to give a counter, and what you do is that you can come on Acqu them you feel in some simple information about the company, you fit in your financial projections, and then the platform calculates the the value of the start up with five methods and it prints a pdf report that you can use when negotiating the valuation with investors, you know, or when you making a counter for for investors. So That's how about ninety percent of our customers use USEAC with...

...them. Yeah, okay, and for everybody would like to learn more or reach out to you, you can go down here in the show notes. And I have one funny question, because you talk such a lot about funding and stuff like this. Are you guys currently open to talk to investors if they approach you, and of course I know you have a total propavaliation for yourself made dound right. We know how to how to put the right numbers now, not at the moment. Not at the moment. We're like. We're currently, you know, happy with our with our situation, but it might be, might be this year, depending on a lot of changes on the market and all investors who like to reach out to you directly down here in the show notes, there also you link the profile. Only thing left for me. Thank you much, Milli grads. You hope the best for you and maybe we'll have you back in some time and we talk about recent developments. But pleasure. Thank you. Bye Bye. That's all. Fuls find more news streams, events and interviews and www, dot's start on red that I oh remember. Share is Carey on.

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