The Pre-Seed Angel Fund for SaaS Startups

A few days ago I had lunch with some friends, all of them softare and Venture Capital veterans, who I all know from the early days of the 21st century. Some of them were founders or CEOs of portfolio companies, others VC fellows and co-investors.

And no, this gatherng was not triggered by the current crisis but, needless to mention, we did spend some time mingling about the “bad old tmes” of the post Sept. 11 and Neuer Markt aera.

Beside the realization of what an old man I became, having been around in this industry for almost 20 years, I wrote down a few much more interesting recollections from those bad old times.

It became rather quiet around some well recognized companies. They almost disappeared from the radar and came back on stage a few years later going puiblic.



many others continued to be very
presentand remained active in the market. After all
they did not find their way out of the crisis and dissapeared forever.

Why did some survive and some others did not?

While numerous, allegedly well financed, startups drove against the wall, a small group of companies also disappeared from the radar, apparently went into some kind of a stealth mode, but only to come back a few years later going puiblic on the German stock exchange.

For Enterprise SaaS companies indices represent a fairly good mirror of  the target marktes condition. Unfortunately a lot of less experienced 2001+ founders were far to optimistic in their planning, anticipating recovery within 8 – 12 months. The reality however was, that none of the short upticks introduced a sustainable recovery. It took more than two years until Enterprises eased purchase and innovation restrictions. A very similar situation in 2007/8 with the proliferation of the financial crisis. 

When the crisis hit the German startup market, some of the founders and managers have already been quite senior, experienced executives with lots of miles on the clock.They had gone through some crises before and kept in mind that things can easily turn out to be much worse than anyone would anticipate.

While many founders were most concerned about the supposed “bad message” to the markets if any prudent undertaking would become known to the market, the experienced guys had no shame to annouce short time work, head count reductions, revised release plans, and cost cuttings. Some even went into stealth-modes in order to ensure financial survival without the dependency on fresh money from investors. 

Listen to those who have gone through the mega crises of 2001 and 2008 as entrepreneurs or investors. I am sure they have some very valuable advice for you.

Be bold, don’t hesitate to contact them and invite them to one of your crisis management meetings.

take such words with caution


“Don’t panic, stay calm and watch the development.” 

“Prepare some actions, and keep them ready in case things get worse.”

Such crisis prooven people in your inner circle will help you  revisiting your 2020 business plan along the lines of historic figures. Don’t be affraid to present a revised business plan to your board and shareholders. Many of them have gone through several crises with their portfolio companies and they will appreciate you taking immediate actions. It is dangerous to only prepare (but not execute) some actions in case things get worse. When will that be?   

Crises are a part of our globalized civil and economic live, they come and go.  The biggest enemy is not the crisis itself, its people underestimating the impact.

pot. Dos


pot. Don’ts

Let me conclude this “memories of the bad old days” summary with some ramdom observations and comments solely as food for thought. Keep in mind that we were talking about crises of the past. Judge and decide yourself to what extent they may apply today and for you and your company in particular. 

Marketing    →     It does not help to battle a global crisis with excessive marketing

These are not the times of marketing KPIs such as lead generation and pipeline velocity. In times of frozen budgets for investments in non essencial software and innovation, acquisition cost will exeed rational, affordable levels.

Be critical to youself and your company when you and your team assess the key question. Are we essential, is our product mission-critical during a crises? The answer to this question shall drive the direction of your crisis management.  

Essential or not, in such times the best marketing activities are centered around  customer reports and how they use the software to resist certain crisis impact. Approach your customers. They will be wise, they will be willing to help. They want you to still be around when the crisis is over.

Sales     →     Don’t beat your head against a brick wall – Cluster your target market

For the moment you may want to divide your target market and focus on those who may be less impacted than other sectors. Enterprises with leading high tech products and manufacturing may rely on – currently broken – large, global supply chains while others, producing (i) digital or (ii) low innovation products may depend less on third party supplies.  

Another crisis tactic may be to temporarily tackle small to medium size, more local business with less decision hierarchies, hence less globally enforced corparate directives. There is a chance that CEOs, owners and managers of smaller business react slightly against the (large corporation) stream and make bold decisions supporting some roll out of your software, for whatever reason.     

Pricing Model     →     Be flexible – pause the typical “three column SaaS pricing” model

If you want to close deals in crises times, innovative, tailored pricing models will be required. Given that most decision makers will have to follow top down directives, they may simply not be authorized to approve any of your standard offerings. 

Consider small fixed price trials, that may at present just cover your cost. Connect them to succesor agreements after a certain period.

Offer special – shrinked wrapped, one off – packages which eventually can be approved under some circumstances (see above essential vs. non essential).  However be cautious with too aggressive, obvious marketing campaigns embracing the crisis situation.

Customer Success     →     Re-visit your customer success management

Its time to take extreme care of your existing customer base. The worst that can happen to a subscription based software company is to loose its existing customers forever.

As a last method to keep your subscriptions alive, you may have to develop specific crisis packages which allow smaller customers with a high risk to (crisis) churn, to pause the subscription. Better a paused subscription than a churned subscription.

Some customers may reconsider churing if you offered them tailored payment schedules. Temporary shifting from one or two year pre-payed to quarterly or less may be another way to battle churn. 

How ill your board and investors react? 

Well, slowing down payment schedules, which will have an impcat on your cash flow, are certainly not appreciated. But after all you need to judge what mssage is the better one:  A lost customer or a customer with a temporary impact on your cash flow. A lost customer is hard to win back. A significant future investment will be required. I would ask myself: Which investment is lower risk? (a) Some temporary cash-flow bridging in a company with very little (crisis) churn, or (ii) a significant post crisis investment in a SaaS company which has lost a large part of its customer base. 

Instead of trying to read the cristal ball here, you should have such discussions with your board and investors right now.  

Funding     →     An external funding event can happen later than anticipated, much later

If history repeats  – and usually it does – the investment pace of institutional investors will slow down significantly. I remember times where we did not invest in any new company for more than one and a half year, but we intensivied the work with our prudent CEOs and founders and provided necessary capital to bridge unavoidable funding gaps.

Community     →     Resist “immoral offers”

German Bio-Tech Curevac announced first clinical tests for a vaccination against Corona/COVID-19.  This morning I read in the news, that “President” Trump is said to have offered Curevac a lot of money for an exclusive vaccine deal with the United States.  Apparently the company rejected as plain as it can be. Thankl You Curevac for setting the moral stage! 

True or fake news. Never mind. Fact is, that this is not the way for anyone to battle the crisis. Take this to heart and communciate with other startups. Exchange ideas, challenge actions, cooerate whereever possible. May this post be the trigger for many comments, hints and ideas, regardless what media you choose.

One Response to Memories of the bad old days
  1. Unser Wirtschaftsminister Altmaier hat kuerzlich im TV erklaert, dass es insbesondere auch finanzielle Hilfen fuer junge Startup Unternehmen geben soll. Ob das nun Hilfe bei Kurzarbeit oder Ueberbrueckungskredite sind, war zu diesem Zeitpunkt noch nicht klar. Ich weiss, dass einige Portfolio CFOs diesbezueglich schon recherchieren. Es waere prima, wenn diesbezueglich noch enwenig Portfolio-Erfahrungsaustausch stattfinden kann.


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