VC Funding

5 tips for securing funding – Bill Morrow: Angels Den

Posted on March 29, 2011 by VC Funding 0

Bill Morrow, founder of the Angel Network, outlines 5 top tips for entrepreneurs seeking funding from VCs:

  1. Make sure you can explain your business quickly and succinctly. If it takes you more than 5 minutes, then you’ve yet to get it nailed. Back to the drawing-board for you!
  2. Outline the pain that your product or service will solve.
  3. Explain how your business will solve this pain.
  4. Enthuse investors with the opportunity for growth and how you will achieve this – how will your business scale to achieve the 5x + return on investment for your investors?
  5. Set out clearly how you will spend the money that you are requesting.

Morrow also explains how it helps for entrepreneurs to “humanise” interactions with potential investors, where possible. If you can build rapport by indulging in a bit of chit-chat about the cricket or football etc then this helps build relationships beyond business.  After all, you may have to work with each other over a number of years, so its important that you can get on outside of business-talk.

Good advice. Listen to this podcast in full over at Smallbiz pod.

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Crowdcube: A useful funding option for UK startups and fast growth companies?

Posted on March 28, 2011 by VC Funding 0

Crowdcube presents an interesting angle on an idea I’ve been pondering for a while:

“How can we open the door for armchair investors to (partially) fill the funding gap suffered by UK startup businesses whilst providing a more interesting and varied investment opportunity compared to say traditional pension or ISA investment offerings?”

Business angel investor networks are well established, however, these are normally aimed at high net worth individuals (broadly those with income of £100,000+ and/or significant assets) who are willing to write cheques for more sizeable sums than those accepted by crowdcube – in fact crowdcube is willing to accept investment cheques from just £10.

Zopa already provides an innovative peer-to-peer banking exchange for individuals e.g. to pay off credit card debts, buy a new car etc from individual lenders who can lend in small parcels of cash (typically no more than £20 per borrower) to minimise the credit risk. By cutting out the middleman (aka banks), Zopa can pass on cheaper interest rates for borrowers and higher income for lenders – a win-win.

Can Crowdcube pass this on for small business?

The answer right now is I’m not sure. But I’ll be keeping a close eye on it and may well try the service to see how it works.

Here are some initial observations:

  • The site clearly needs more investment opportunities but this should come over time.
  • I like the idea of implementing video presentations etc in the future to give added depth to the pitches (more like the Dragons Den experience).
  • I am unsure about the forthcoming trading exchange for exiting investments as its not really in keeping with the nature of private company investing – its a medium term play at best and short-term thinking is the sort of mentality that’s got us into the recent financial mess. Still, if it gets more individuals interested in supporting small, private companies then this can only be a good thing.
  • I would like to see more on the tax benefits of EIS brought into the investment process – especially given the recent announcement in the Budget 2011 – although the mechanics of applying this in practice could give its own challenges given the low levels of some investments, tracking / admin plus education and support required.

Overall, I think that Crowdcube is a great and welcome addition to the funding network for start ups and fast growth UK companies. I look forward to seeing how this service unfolds over the coming months.

7 tips for start-ups seeking VC funding

Posted on September 23, 2010 by VC Funding 1

I’ve been reflecting on the key business learning points emerging from the BVCA’s excellent recent event Financing & funding the digital age held in Manchester on 16 September 2010.

It was a full day of fast moving panel discussions and keynote speeches that kept coming at a relentless pace until almost 6pm – plenty to chew over hence the delay in penning this summary.

There were so many ideas and tips to unpack that I’ve decided to run a series of posts covering different topics. First up is the comments made on VC funding.

BVCA Digital Age 1: 7 tips for start-ups seeking VC funding

  1. Start building relationships with VCs who specialise and invest in your chosen sector NOW – don’t leave it until you need a cash investment.
  2. Better communication is needed between both the VC and entrepreneurial community. There was much talk from tech entrepreneurs of the incredibly frustrating “long….slow…..No” from VCs (which was tacitly admitted by the VC panelists), however, there was sound advice in ensuring that you invest some time upfront to pick the right VC – this means studying each VC’s objectives for investment (does this fit with your business?), timeline for investment or where they are in the fund cycle (have they made any investments yet, and if so, any in businesses like yours?). This should save much time and frustration on both sides.
  3. Business plans are largely a work of fiction (as things rarely pan out the way you planned them) so don’t go crazy building huge singing-all-dancing plans, however, you still need one to set out the investable opportunity for VCs to get an initial idea. The point was made (and reinforced by an excellent post and VC panellist Nic Brisbourne) that the act of sitting down and preparing a business plan helps entrepreneurs hunker down and concentrate on the business model – how is this great idea actually going to make me and my investors money? Sometimes reality strikes home when it comes to calculating the sales v costs etc. See points 6 & 7.
  4. Concentrate on clearly defining the market need that your product or service will solve rather than how sexy your technology is.
  5. Dawning of microfunding? Lower costs of entry for building new tech businesses brings into question how much cash investment entrepreneurs might need and when? Put another way, entrepreneurs might now be able to reach a much more advanced milestone in proving the business concept using just “family, friends and fools’ money” than would have been possible a few years ago – the point of inflexion has shifted along the timescale – so does this represent the dawning of microfunding and a move away from traditional VC seed funding and the timing of subsequent rounds of investment?
  6. Merits of writing a business plan for startups seeking funding is best summed up by the comment: “Execution focuses the mind”.
  7. Best of all, when you do approach VCs, present your business as “strategic opportunity” rather than a request for cash.
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