Season 3 - Fundraising

Episode 1 - Putting ideas on paper – July-August 2020

Romain Payet — Now we were seriously ready. We had each accumulated loads of information and contacts. And together, we had put together a dream team who shared our entrepreneurial vision. So it was time to put all our ideas on paper to advance to the next strange: a first round of fundraising.

This allowed us to establish three things. First, we could set out a timeline, starting in the second quarter of 2020 and running all the way up to the launch of our first train. This included all the stages that we foresaw having to go through in the months and years to come: buying rolling stock, designing the interior of our trains, future hires, different rounds of fundraising, and so on. In short, it was a sort of agenda for the first part of Midnight Trains’ life. Clearly, we were aware that it would evolve and change depending on how things went, but it made for a very helpful exercise.

Starting from this timeline and having already analysed in depth the economics of the railway industry, which we told you about our previous series, we came up with an even more precise budget. This took into account several components, including the various hires mentioned above, as well as the best time to find them. In a sector that moves at a rather slow pace, it wasn’t necessary for us to recruit certain sorts of people too far in advance. It would be a waste of money, as certain employees would have nothing to do for months, or perhaps years.

This budget allowed us in turn to work out that we needed around €20 million. Then, thanks to the various phases in our timeline, we figured out that we needed €2.5 million for the next 18 to 24 months. Why such a short time period? Because, generally speaking, financial backers rarely hand over all the money necessary for a project in one go. They’ll fund periods lasting between a year and a half and two years and decide to reinvest based on the results of their previous investment.

Based on all that, we came up with a 50-slide-long presentation that provided an overview of the project. Broadly speaking, it included our vision for the company and the wider market, the problem we wanted to solve withMidnight Trains, how we were going to do it, what we’d already done and the teams we’d worked with (Adrien, myself, external engineers, designers, etc). We felt like we were ready to launch our first round of fundraising.

Adrien Aumont — Before properly launching, we had a final series of questions that we wanted to ask Jean de La Rochebrochard, essentially a human control centre for launching startups in France. “Could the project fall within the scope of a VC (venture capital)? If so, which ones in the EU would be able to consider us? If not, do you have any advice as to the kinds of investors to target?”

Following this email, we quickly organised a video call which, from our side, only served to confirm the direction we were heading in anyway. Except that, as always seems to happen, things took a surprising twist. After a dozen or so minutes, Jean announced that Kima Ventures, the fund of famous businessman Xavier Niel, within which he was managing partner, would invest €150,000. What’s more, his very influential boss had signed off the investment himself. I’d never received investment as quickly as that in my entire life, and this gave us hope that if Jean was interested, others would be too.

However, we were a bit taken aback when he asked us to send him another presentation summing up the project, one that was much shorter, with eight to ten slides maximum. In the world of investment funds, it’s customary to present projects in as brief a fashion as possible. Except we weren’t presenting software or a smartphone app. We were launching a train business, something which would involve a lot more storytelling than more, let’s say, traditional businesses.

But we did what Jean asked of us and sent him this marketing document. Jean in turn sent it to his network of investors, mostly made up of investment funds and business angels. For those who aren’t familiar with this world, the former are businesses whose employees are tasked with investing money given to them following rather particular rules. The latter are individuals, some more professional than others, who invest their own money in projects they believe in.

Jean sent his email on August 6, 2020. Despite the fact many people were on holiday at this time, which was shortly after the end of lockdown, we had replies. Many replies, in fact.

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