Ask the Investor

Ask the investor

Business Angel, Bernd Krczal

We often receive questions from start-ups about how they can communicate with investors. To help them better, we would like to hear a first-hand opinion. Thank you, Bernd Krczal, for allowing us to discuss some of these questions with you. This way we can help start-ups prepare their contacts with investors.

Ask the Investor – Business Angel, Bernd Krczal


How do you prepare for an investor meeting?

May I ask you to give us a short intro on yourself, your background and why you are investing?

My name is Bernd Krczal. I have a college degree in Business Administration. I started my own business with colleagues in the online business back in 2000. I had been working with that company for 16 years in total. After 10 years we sold the majority stake to a large corporation and I stayed on board for another 5 years as CFO. Then I left the company. I decided to share my experience and my capital with other start-up founders. I founded my own investment business braincap.

Investment Focus and how to reach him

It is nice that you have experience from the start-up side as a co-founder as well from the investor side. Would you let us know about your investment focus? When you are looking for start-ups, which investment criteria are important to you?

I go in early stage. Earlier than most other investors. When I am convinced of the founder team. The investment focus is in my knowledge area (online media, financial services) on the one hand. I am not fixed to any industry. It is more steered by my feeling. Can this become big? Is the concept ground-breaking? Moreover, I am an impact investor. When I think that the world needs this start-up, then I consider an impact investment.

When you say early stage, what exactly do we mean? Is this about the ideation phase, prototype status or minimum viable product launched?

Well, I can allow myself to be completely flexible. I do not have to follow self-inflicted rules. If I invest in the ideation phase, however, I have to be really convinced that they can pull it off. Moreover, we need to meet on the valuation, of course. I do not exclude anything here.

Are there specific communication channels or is there anything ideal for you on how you want to be approached?

If there is an introduction of anybody we know in common, that is ideal, e.g. anybody who has been working with the team or who knows the team from somewhere else. But this is not necessarily a criterion. People have contacted me via linkedin or at a conference. Of course, it helps to get a warm introduction.

Investment Process

Let us say you are interested in a start-up and you start discussing with them: What’s the type of documents and information that an ideal candidate would need to have prepared?

The first step is the pitch deck, and this should be as concise and transparent as possible. It should be self-explanatory. After a short introduction and a first call and reviewing the information submitted, we go into detailed talks with some feedback rounds. Then we talk about transaction structure and we discuss the term sheet. Then there is due diligence, but this is not long at early stage. The most important thing for me is the discussion.

The documents need to be short and precise. I do not have that much time to read through long elaborated documents. I remember a recent start-up that had real old-style business plans of 30 pages. You do not want to read so much in that phase. You want to have material very concise and to the point. They need to have worked out the topics that are really important for my investment, which are relevant to an investor.

Do start-ups need to be able to answer every single question in depth? Is it a showstopper if they cannot answer a specific question or is there room for discussion?

There are a few basics like the long-term USP. Moreover, you should be able to improvise and say at least something about it. Sometimes they just have a rough idea at the beginning, but at least they need to have a good idea and be able to express that. A certain level of education and depth of knowledge and opinion needs to be available.

Startup Valuation

Valuation is always a tricky topic. Are all valuations the same at early-stage or are valuations individual? How do you go about the valuation of an early-stage start-up?

It is very much individual and there is no fixed rule on how to get to the valuation. Basically, founders should have an expectation on valuation like? I would let an investor in for a maximum of 15%. This gives you automatically the valuation. The investor has the same expectation to go up to a maximum valuation of e.g. 700.000. The valuation depends on the potential the company has in my opinion and how much confidence I have that the founder team can execute. When these two expectations meet, we come to an agreement.

Of course, there is another influence here which is the competition, like other investors who would invest in this start-up and other start-ups out there I could invest in. This makes a difference. Moreover, start-ups compare with each other. When they learn from other start-ups their valuations, this influences their own valuation expectation. As an investor I am also influenced by what I learn which valuations other investors accept. So we compare a lot. To sum it up: It is an individualised process, a lot about market dynamics and comparables and there is no objective valuation, it is a subjective opinion based on what I see.

Equity or Convertible Notes

We very often discuss convertible notes as an instrument. How do you see this instrument and under which circumstances this is good for an investor?

When I participate in a seed round, I prefer to get an equity stake directly, not a convertible note. The convertible note is best suitable for short-term bridge financing between two financing rounds. Here the instrument is really suitable to avoid an intermediate valuation discussion which should just take place at the next financing round. Then the third party (investors of the next financing round) fixes the valuation. A convertible note before the seed investment helps the founders avoid the valuation discussion.

From the founder’s perspective, if they are that early, it helps them to buy time. But most investors would not prefer this instrument. It is also subject to negotiation, but it is not preferred by me. Between rounds it makes sense. In my opinion, the convertible note takes away the premium that an early-stage investor would get for believing in that company that early on as opposed to investors coming in later. Therefore: not a desired instrument before the first seed investment.

Tips for startups on how to deal with investors

As a concluding remark, would you recommend something to start-ups on how to reach out to investors?

I have two main tips:

Establish a personal relationship with the investors. It is an individual who is going to decide on whether to invest. So you need to convince the potential investor that it is a good idea to invest. This personal confidence in your skills, resilience and endurance in hard times is very important to build.

However, do not try to convince anybody. This looks like a contradiction, but it is not. You have to be convinced of what you are doing. You tell your story and then the investor jumps on it or doesn’t. It does not matter. Listen to the feedback carefully but if the person thinks that you are going to fail, it does not matter. Look for another investor.

Thank you so much for joining in today, Bernd. We value your opinion on the whole process of how to address investors. I wish you good luck with your existing portfolio and that you will be addressed by the ideal start-ups in the future!


How do you prepare for an investor meeting?