Riding the roller coaster: Motivation for Startup Founders

Let’s face it, running a start-up (or any small business) is a roller-coaster. There are plenty of ups and downs, highs and lows. Maintaining motivation as a startup founder is challenging. You need resilience and persistence to cope when things aren’t going to plan – but also the ability to recognise and celebrate successes when they occur.

Photo by Pedro Velasco on Unsplash

Managing your motivation as a startup founder isn’t easy. Running my start-up, I can vividly recall days when I was as high as a kite with a product breakthrough, a partnership secured or a revenue target smashed. But there were also dark, despondent days when it was all I could do to stop myself giving up and throwing in the proverbial towel. I ranted about how impossibly hard it was, I certainly cried tears of frustration and sometimes just sat, staring into space unable to even summon up the energy for emotion. Perhaps you recognise this?

Many of the startup founders I speak to recognise that maintaining motivation is part of the startup journey – and that you have to dig deep, and look in unexpected places for that motivation.

Founder and MD of Small Pharma, Peter Rands reflected

“At my lowest points the thing I got most pleasure from was reading stories to my daughters before bed, so getting back in time for bedtime became my north star. “

Alessandro Santo, Founder at Last Mile Ventures recognised the frustration of hours of hard work seemingly getting you nowhere but he pushed himself forward by 

“being stubbornly optimistic and willing to show the world that sooner or later I will be right.”

Tom Rogers, Founder at MusicGurus recalled his lowest point was when his co-founder left the business but he kept himself motivated by 

“focusing on short-term, achievable goals such as finishing a product. I also thought about the thousands of customers around the world that love MusicGurus and share our passion for learning music.”

Six things you can do today to keep motivated

  1. Focus on one or two things that you can do, influence or change – and then do them! Being in action, focused on something you can do, distracts you from festering and worrying about the things you can’t influence.
  2. Search out at least one thing (there may be more when you start looking) every day that you can feel positive about. Acknowledge and celebrate that.
  3. Talk to someone you trust about what you are going through. Whether its a founder of another business, a spouse or partner or a trusted friend, share what you are going through. Chances are that they can empathise with the situation, offer a suggestion or put, a more positive spin on the situation than you yourself can see. After all, a problem shared is a problem halved. 
  4. Look at the bigger picture. What is important to you in life – not just in your business. Commit to doing one thing a day/week/month that reminds you that your business isn’t everything.
  5. Remind yourself why you set-up your startup. Get back in touch with the passion and vision that had you start this journey.
  6. Visualise how you will feel when your start-up turns the corner and things are going well. Imagine the feelings of achievement, excitement and – perhaps – pride you will have. All the pain and frustration you feel now is just the aperitif to that main course.

For every “low” there will be “high” coming

Remember, your startup journey is a roller coaster so for every “low” there will be a “high” just around the corner.

Tom Rogers commented on how these “highs” can come from unexpected places

“A most unexpected high came from doing a boot camp in the rain and the mud with our partners from Rockschool (and aching like hell the next day!)”

Of course, you never know when the “highs” are coming – but you have to keep the faith that they will. In the last month I have had two conversations with one startup founder. During the first conversation the founder was close to giving it all up – cash flow was tight, everything was taking at least twice as long as planned and potential investors were sitting on the fence, seemingly unable to make a decision about investment. It was all a waste of time – or so the founder was beginning to think.

Just two weeks later that same founder rang me and was ecstatic, brimming with excitement and enthusiasm again. They had made a product breakthrough, signed a contract with their perfect partner for a trial and the investors had come off the fence and backed them. Like buses, the “highs” had come three in a row!

Next time you are experiencing one of the inevitable lows of your startup journey, remember it can all change in the twinkling of an eye.

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Hatty Fawcett offers one-to-one coaching for startup founders and maintaining motivation, getting business traction and accessing funding are common themes in her coaching. Find out more about coaching

How to kiss frogs and raise investment (or how to network with investors)

A practical guide to networking with investors

Raising investment for your start-up or small business is not easy. It doesn’t matter whether you are raising investment via crowdfunding, through business angels or venture capital, the key to success is your ability to network with investors. In this blog start-up founders share their advice on investor networking and offer six practical steps you can take to start raising investment today.

Sacha Waters, Business Development Manager at Crowdcube explained

“It is perfectly possible to raise £150K through crowdfunding without a lead investor but only if you are willing to network like talking to people is going out of fashion.”

Hatty Fawcett, Founder of Focused For Business, couldn’t agree more.

“The best advice I was given when I was raising investment for my own startup was “You have to kiss a lot of frogs before you find your prince or princess”. ”

And yet, many of us don’t find networking easy – let alone asking people for money. The thought of combining networking and asking for money sends many people running for the hills! Here founders who have recently raised (or are in the process of raising) investment, share how they networked with investors.

Tom Lock, Founder at AP Brands, says there are some important ground rules for investor networking:

“Be humble, but confident, and make sure you are honest.”

Steve Goodheart, Chief Operating Officer at Margin Guardian feels the key is 

“To think long and hard about the strategy you want to adopt before approaching anyone. Consider the stage you are at in terms of pre-revenue, proof of concept etc so you can match-make with investors who invest at this stage.”

Finding investors

When you start to network with investors, both Steve and Tom agreed LinkedIn was a very useful tool.

Reflecting on his fund-raising round, Tom recalls

“No one was safe when we were approaching our network. Friends, family, colleagues, suppliers and customers. We hit the lot!”

Steve categorised investors in a slightly different way and feels tailouring your message for different groups of investors in your network is essential:

“Identify people with funds, people who know people with funds and people who have been through the process of raising funds. They all need a different approach.”

Speaking to investors

As with all networking, it is better if you have a warm and engaged relationship with your investor network before you actually ask for investment.

Tom recalled how he warmed up his network prior to fund-raising

“We sent out a few emails and communications in the run up [to raising investment], saying that we were preparing for a fund raise, which hopefully meant it didn’t come as too much of a shock when we actually asked for money.”

Steve did the same when networking with investors, and made additional use of social media

“We had update chats explaining the business idea in an informal manner via phone calls and LinkedIn communications. We also got the message out there on Facebook status updates before approaching individuals directly.”

When it came to “the ask”, both Steve and Tom had their own favourite opening line.

Steve favoured

“I’ve launched a new business and I’m looking to give you an opportunity to join in at a very early stage.”

Whist Tom’s was direct and to-the-point

“I was wondering if you are looking at investing in anything at the moment”

Thinking about what they’d do differently next time they network with investors, both Steve and Tom had some excellent tips.

Steve recommends being really clear about what you want:

“Spend a lot more time thinking about your approach, in terms of exactly what you require and when before speaking to people”

Tom encourages being realistic about how long raising investment takes

“Start earlier. You can never start too soon. Raising money always takes longer than you think.”

Six Steps you can use to network with investors today

If you are about to start investor networking, the following practical steps will get you focused and ready to work your network:

  1. Grab a paper and pen (or a spreadsheet if you prefer)
  2. Write down 5 different groups of people within your network (e.g. friends, family, former employers…)
  3. For each group, write the names of 5 people within each group and their contact phone number
  4. Pick up the phone and dial the first number
  5. Open the conversation “Hello. I wanted to tell you about an exciting new business which you might like to contribute to…..”
  6. Make it fun/ make a game of it – set yourself little targets e.g. I will speak to three people before my next coffee…

Good luck!

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If you would like help in finding and speaking to investors, register for the practical online masterclass “How to Find and Win Investors” which provides inspiration on where to find investors, a methodology you can use to get their attention and outlines a proven process for building relationships with investors that delivers investment. Find out more about this masterclass.

A good read…to refresh and revitalise your business

I love summer! Who doesn’t? With the (generally) better weather meaning we spend more time outside and holiday time spent with family and friends.

However, I really like summer because it offers not just a chance to refresh ourselves physically (I have written about the importance holidays for startup founders and business owners before) but the chance to refresh ourselves mentally too. Lying on a beach or by the swimming pool is greatly improved if you also have the company of a good book – and if that book offers you new ideas, challenges your thoughts and offers new approaches to try, so much the better! 

It’s all too easy to get in “head down” mode, to be busy working in the business rather than working on the business.

I’ve been doing what I do for 5 years now and I really recognise the need to refresh and revitalise my business and I’m taking a 6 week sabbatical to do just that. Whilst I will be allowing myself some time off with my family, I will also be stimulating my business brain through reading.

To develop a wide-ranging reading list (not too focused on the things I automatically lean towards), I asked around my entrepreneurial contacts and founders of other businesses to hear what they recommend. 

In case you’d also like to do some revitalising reading this summer, here’s what they recommended – and why:

Drive: The surprising truth about what motivates us by Daniel H Pink

Given motivation is at the start of everything, this feels like a good place to start.

The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It by Michael E Gerber

The E myth books have been around for a while but they are still an essential read for business owners demonstrating really clearly why you have to have more than a good idea to make a business work.

24 Assets by Daniel Priestly

If E Myth gets you thinking, then this book provides a methodology for building the components that make a business scaleable and sustainable.

Zero to One by Peter Thiel 

Is another book particularly recommended to me for its methodology for startup businesses. The founder who recommended this has used the 7 point thesis outlined in the book to shape his own startup. The book has almost 300 reviews on Amazon (not all positive) but most seem to agree it offers a different perspective – which is what I’m looking for!

Dear Female Founder: 66 Letters of Advice from Women Entrepreneurs Who Have Made $1 Billion in Revenue by Lu Li

I’m really interested in the particular challenges facing female founders so this book had to be included in my summer reading but, looking at the reviews, I’m expecting that some of the insights will cross gender barriers and offer advice to all startup founders.

High Growth Handbook by Elad Gil

If you are beyond the startup phase and going for growth then this recommendation is for you.

Inspired by Marty Cagan 

Is also for those working through the challenges of scaling. It came recommended to me as “a fantastic book on product and scaling” and looks at the role of the product manager and product teams in meeting customer needs, and developing a product that does this. Its particular focus is on software products. Find the book on Amazon

Another software product focused book – but which came recommended from two different sources – is Accelerate: The Science of Lean Software and DevOps by Nicole Forsgren and Jez Humble. What the person recommending this book liked is that the book uses evidence to create best practise – it’s not just another person’s theory.

ReWork: Change the Way you work forever by David Hansson and Jason Fried 

Is certainly not a new book but in the opinion of the friend recommending it to me it’s “outstanding and important” – and you have to accept the title tempts you to read on!

If you happen to suffer from “long hours syndrome” you might also fancy It Doesn’t Have to Be Crazy at Work also by Jason Fried. Find the book on Amazon

Don’t have time to read a full book?

If, like so many founders, you are struggling to find sufficient time to read an entire book why not try some of these shorter blog posts to stimulate the grey cells instead?

The Do’s and Don’ts of Rapid Scaling for Startups by Bob Sutton
Read the blog

Is Drag Holding Your Business Back by Kevin Sheldrake
Read the blog

Traction Is The Very Heart of a Startup by The Startup Team
Read the blog

Why We All Need to Invest in Female Founders by Sacha Waters
Read the blog

The article on how to value your start-up that got 14K views

About 18 months ago, Crowdcube asked me to write an article on how to value your start-up, which I duly did. It was published and I pretty much forgot all about it.

Imagine my surprise then, when CrowdCube dropped me a note to say the article had had 14,000 views. They were impressed (I think “awesome” was the exact phrase!), and so was I.

Stepping aside from self-congratulatory indulgence, it’s perhaps not as surprising as you might think. Valuing your start-up or early stage business is one of the most important elements of any investment raise – be that crowdfunding, angel investment or a private equity round. Setting the wrong valuation will deter potential investors just as sure as setting the right valuation can attract them.

What’s more, as a young business, knowing how to value your start-up is one of the trickiest elements of an investment round to get right. If start-ups had the stable and predictable revenues of more established businesses, there are lots of clever accounting and corporate finance tools that can be used, but none of these apply when you have fledgling or fast-changing revenue streams.

So how do you value a start-up?

Here’s 6 key pointers to get you started

Be pragmatic

Recognise that too high a valuation will close conversations with potential investors even before they have begun. Conversely,  setting a valuation too low may mean you sell more equity than you actually need to. Start by identifying a realistic range within which your valuation will gain consideration from investors.

Do your research

Conduct some bench-marking research to identify other businesses at a similar stage to yours that have recently raised investment. What was their valuation? Crowdfunding platforms can be very helpful when collecting benchmark data since the valuation is more public than for private deals. Use the data to develop an upper and lower range for valuation. 

Evidence your valuation

Identify “proof points” – things you have already achieved – which substantiate your valuation. The best proof points are things that create value in your business such as having developed a product that customers are raving about, having found a proven route for attracting new customers and being able to show revenues.

Listen to feedback

Valuing start-ups is not an exact science. It’s more of a negotiation. Start by testing your valuation with trusted advisers, fellow founders and friendly investors. Listen to their feedback and use that to get a feel of whether your valuation is in the right ball park – or not!

Be ready to negotiate

Even when you have arrived at a sensible starting point for valuing your business, don’t just expect investors to accept this. You can be pretty sure they will want to negotiate. Be ready with tangible evidence (of other similar investment raises, of your proof points, etc) to justify your valuation. Don’t be afraid to ask potential investors to justify how they arrived at their (different) valuation – be that higher or lower. Use all your negotiation skills to reach agreement

Secure a lead investor(s)

It is easier to settle on a valuation as “definitive” once you have a lead investor(s) ready to invest at that valuation. Once you have secured this, be sure to mention to other potential investors that you have a lead investor(s) backing the round at this valuation. (For tips on how to secure a lead investor, read “How to find cornerstone investors”)

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If you would like further help in developing the right valuation for your business, Hatty Fawcett runs an online masterclass “How to create a business valuation that gets your start-up funded”  which offers a down to earth, step-by-step approach to creating a business valuation for start-ups and early-stage businesses. Find out more about this masterclass

How to get investors “on the hook”

Your business needs investment. You are out there networking and pitching like crazy but despite your best efforts investors remain elusive. It’s a familiar story. How do you get investors “on the hook”? The AllBright Academy, which supports female entrepreneurs, approached Hatty Fawcett, Founder of Focused For Business and an AllBright Academy Ambassador, to ask her advice for finding, approaching and pitching to investors. Here Hatty shares her top tips.

Ten tips for getting investors "on the hook"

Always be ready to pitch

Investors can be almost anyone. When I raised investment for my business my investors included customers, suppliers, professional investors and even people who knew me through a shared hobby. The point is, almost anyone can be an investor, so you need to be ready to pitch at any point.

Approach people you know first – people who see firsthand the hard work you are putting into your business. Why not approach friends, family, employers, suppliers to the business and even your customers. They can help you get an investment round started. It’s a lot easier to attract new investors when you already have your first few on board!

Keep it short and sweet

Professional investors – sometimes called Business Angels – tend to be busy people; it can be difficult to find these people and even harder to get their attention. You will need to have a short pitch (sometimes called an “elevator pitch”) that you can use – in either written or spoken form – to quickly give investors an introduction to your business, giving them enough information to pique their interest.

Get an introduction

It is often easier to get a meeting with a business angel if you have a mutual connection to introduce you. If you have someone in mind that you’d like to approach, use your network (and LinkedIn) to try and find someone that can make that introduction. If you’re not sure who you want to approach, another way of getting started is to reach out to your network explaining what you are doing and asking for any suggestions they have as to potential investors.

Have a short prepared summary

A one-page executive summary of the investment opportunity (not of your business plan) is a key tool in your investor toolkit. Written well, this should give investors the information they need to make a decision as to whether this is an opportunity for them. Whatever you do, don’t send your pitch deck. A pitch deck should be presented and isn’t a standalone introduction to your business, save that for when you actually meet the investor.

All investors are individuals – they have their own particular interests, focus and areas of activity. Professional investors (such as business angels, private offices and equity funds) will often not agree to meet you – or perhaps even to talk to you – until they have seen something of the opportunity first.


Hatty Fawcett

Arrange a meeting

Don’t expect professional investors to back you after just one conversation. They will need to get to know you and your business. This is best done face-to-face so your initial aim should be to get a meeting or a skype session in the diary.

Follow up every lead

Professional investors are busy people. Don’t assume they will get back to you. You need to take the initiative and keep the conversation alive by following up with them. After every conversation, meeting or pitch, schedule time to follow-up with the people you have spoken to and get their feedback on your investment opportunity. Ask if they have any questions or concerns and – of course – whether they are interested in investing.

Keep the story moving

Professional investors back businesses that are going places, so you need to
demonstrate that your business is evolving and growing every day. When following up with a business angel be ready with a juicy piece of new information that demonstrates your business is continuing to grow. This could be news that you have secured a new contract, delivered a key partnership, or the results of a new marketing campaign.

Don’t take “no” personally

Not everyone you talk to will back your business. Get used to hearing the word “no” and moving on. It’s better to know that someone isn’t interested in your opportunity than to waste time talking to them when they have no intention of investing. Move on!

Ask for feedback

Use every interaction as a chance to learn something. Ask everyone you speak to for feedback – even if they are not interested in investing. Their feedback can improve your understanding of how others perceive your business and can help you adapt your positioning, if necessary. Ask for help from the people you speak to too – who do they know who would be interested in this opportunity? Will they introduce you?

Positivity is key

Raising investment is hard work. It can feel relentless and if you have a run of “nos” it can bruise your confidence. Do what it takes to stay positive and keep your energy up – take an afternoon off and do something you love to boost your morale. Then get back to it, refreshed, revitalised and believing good things come to those who persevere!

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If you would like further help in preparing for investment, Hatty Fawcett runs a series of online masterclasses designed to give you the tools and you need to raise investment from crowdfunding or business angels. The masterclasses are focused, practical and confidence building:
How to write an executive summary that attracts investors
How to find and win investors
How to create a business valuation that gets your start-up funded

How to find cornerstone investors

In many ways, raising investment is a confidence game. Not only will investors want to get to know the founding team and the business plan so that they have confidence in your abilities, but investors will look for external validation too. They may hold back on committing to investing until they see that someone else believes in the idea sufficiently to invest in it. Once you have your first investor – or your cornerstone investment – it becomes easier to raise the remainder of the investment. But how do you find your first investor? It can feel like a catch 22 situation! Hatty Fawcett of Focused For Business asked four founders who have recently raised – or are in the process of raising – investment how they went about it.


Where did you find your investors?

It can be a daunting task, wondering where you will find investors but these founders were full of practical suggestions.

Kevin Jackson, founder of Blueprints an investment platform for economic development projects, put it frankly

“All the years of experience and contacts have to be used. You have to go back to everyone. Everyone you’ve ever met – if they aren’t investors they will know someone who is, get that introduction too.”

Shon Alam, founder of Bidweg which offers a new way to exchange foreign currency, also left no stone unturned in his search for investment

“I tried all the standard stuff you would expect banks, business startup loans, family, private equity and crowdfunding.”

Marco Scotti, founder of Figaroo which allows members to book and share VIP tables in the best nightclubs worldwide, talked more specifically about the channels he used to find investors

“I used LinkedIn, I approached personal connections and asked for introductions, I went on financial TV shows, got into the financial newspapers and spoke at lots of events.”

All the founders agreed that LinkedIn was key, as were personal introductions. Ian Dibb, founder of Once I’ve Gone which ensures family members and guardians have access to vital documents, insurance policies and files once their loved ones have passed, put it like this

“A warm introduction really does make things easier, and will normally get you a phone call. It’s then up to you to get a meeting with them.”

How do you opening the conversation with investors?

Personal connections are useful not just in finding investors but in actually opening the conversation with them too. All the founders I interviewed had found key investors as a result of an introduction – Shon and Ian both found Chairman that way too.

Kevin stresses the importance of the phone in making first contact with investors, and he advises against relying on email.

“If you are passionate about your product, pick up the phone and do a good pitch. You will get there. It’s all about people connecting with people!”

Once you’ve made initial contact you will need to supply supporting documentation. Marco recommends

“Be investment ready! That means having a performing deck, a clear “ask” and valuation and being ready to explain how you will use the funds you raise to achieve clear goals.”

Shon agrees and suggests you also need a good dose of resilience

“You’ll need all the usual stuff – business plan, video, meeting after meeting. Tugging your forelock and walking around with a permanent grin on your face, trying to sound intelligent and trying to get investors to understand the concept, what makes you different, etc. etc. etc. Investors balk at anything and everything!”

But whilst the process of talking to investor after investor can try the patience of a saint, Shon urges keeping the faith – you never know when you will have that magical conversation that changes everything. For Shon it was recruiting his chairman

“Our Chair has been great at helping to raise funds. I meet him in Costa Coffee and within 30 secs he said “Yep got it.” – and we haven’t looked back.”

How to overcome barriers when talking to investors

There is no doubt that the constant conversations with investors can feel like hardwork. You will need self-belief, persistence and energy.

I asked Marco what he found the hardest about the process and how he overcame this. His answer was simple and telling

“To overcome the amount of no. You just have to keep doing that”

Shon talks of having to overcome his shyness and to put aside being in awe – or afraid – of the people he was speaking to

“You can get intimidated by these industry leaders, but the goo goo eyes went after the second round of meets and you just accept it as a normal part of the day and business. Don’t be frightened, or they will eat you up! Remember they are only people.”

Ian talks about the importance of personalising things where ever possible

“Any decent investors will receive 100’s of approaches each week from the next ‘Big Thing’, so it’s hard to get their attention. What we have found is that making the connection request on Linkedin really personal to the investor, will normally get the investor to connect.  Focus on getting them interested enough to have a phone call or meeting.”

What Kevin found hardest was understanding exactly what investors were looking for. He started by stressing how quickly the business could scale but it turned out investors were more interested in what the business had already achieved. Getting the story right and stressing the facts of what had been achieved to date was the key to overcoming investors’ barriers.

And finally…Top Tips for winning investors

Each of the founders I interviewed had an interesting – and sometimes surprising – piece of advice to offer for winning investors.

Kevin offered a practical suggestion which led to a surprising outcome. He instigated a weekly investor telephone get-together every Friday at 5pm. On one session he asked each investor to pick up the phone and speak to one contact explaining why they had backed the business and why they thought it would interest their contact. That exercise resulted in an investment of £150K that afternoon. As Kevin put it

“The right pitch to the right person will release the money.”

Marco agreed

“When you clearly present your company, with no ego, just as an excellent investment vehicle, investors will come to you and not the opposite.”

Shon and Ian both stressed that it isn’t just the money that is important. As Shon put it

“It’s definitely as much about the chemistry as about the money. If you can’t get on with your investor at this crucial startup phase, then you are in trouble.”

Ian agreed with Shon

“We have walked away from a couple of investors as we felt that they were not the right fit for the company. At the time it was hard, but we fully believe that it’s the right thing for the company in the long run.”

Finding your cornerstone investment – or your lead investor – takes hard work and persistence but making sure you are “investor ready”, reaching out to all your contacts and making personal requests are three key steps that deliver results. Good luck!

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If you want help in finding investors, building a relationship with them and closing an investment deal then take a look at the no nonsense online masterclass “How to find and win investors”. It provides
inspiration and practical step-by-step advice on where to find investors, how to get their attention and offers a proven process for building relationships with investors that deliver investment commitments. Read more about the masterclass

Sweat equity – is it worth it?

There are lots of reasons why startups rely on sweat equity to get things off the ground but is sweat equity really worth it? The media is littered with stories of co-founders who have split, or business that have run into difficulties, many of which can be traced back to the underlying challenges of sweat equity. However, in those early days when cash is tight, the appeal of sweat equity is undeniable. This blog will open your eyes to the benefits of sweat equity – but also alert you to the most common pitfalls to avoid – so you can decide for yourself whether sweat equity is worth the perspiration!

Sweat equity - is it worth the perspiration?


What is “sweat equity”?

Sweat equity is a non-financial investment that individuals (usually founders, co-founders and directors) receive in recompense for their contribution to a business. Sweat equity is often offered in exchange for work done for free – or at a reduced market-rate – hence the term “sweat”. However, sweat equity can also be offered in exchange for intellectual property rights, “know-how”, reputational association, introductions to key contacts or provision of materials, tools and space.

So what’s the appeal of sweat equity?

Saves cash
Let’s face it, no startup is ever awash with cash so anything that avoids cash burn but still gets things done is bound to have appeal. If salaries can be off-set or reduced by offering shares in the business, or if software can be built for shares instead of cash, who wouldn’t consider these options? In the early days, most startups will consider anything to get their business off the ground.

Provides access to skills and experience you couldn’t otherwise afford
Offering sweat equity can also offer startups the opportunity to attract a co-founder or key employee of a calibre they wouldn’t otherwise be able to afford. Gaining shares in a business that is full of promise has value, particularly to someone who sees their own ability to increase that value.

Aligns objectives and motives
A win-win situation is created as employees with sweat equity work to grow the business, thus increasing the value of their shares as the business grows in scale and success.

But it could leave you wishing you’d taken a cold shower

Ensure you are compatible
Return from equity comes over the long term so, as with any long-term relationship, you need to be sure you and the person getting sweat equity are compatible. Are you sure the person to whom you are offering sweat equity is as committed as you to the project? Will they stick with it through thick and thin? Do they share your vision and passion for the business?

Sweat equity can cause unintended delays
Done well, sweat equity aligns motivations and deliverables but it can have unintended side effects. If, for example, you are offering shares instead of payment for work undertaken be aware that no one can survive without any income. If you only offer shares in exchange for work done how do you expect that person to live and pay their bills? If an individual doesn’t have sufficient money in the bank for basics, they will be forced to work on top of what they are doing for you – reducing the time they can spend on your project. The same applies if you offer sweat equity to a business. If the business doesn’t have revenue to pay salaries they will be forced to take on other contracts which may impact on the time within which your project can be delivered. Are you willing to live with that compromise?

Be certain the value exchanged is clear, specific and measurable
Don’t hand out the promise of equity willy-nilly. Be clear about what you are offering and what you expect in exchange. Clearly, for both parties to feel happy there needs to be equitable value. That will require definition – and specifics. Don’t rely on implication “you have good communication skills and a strong network so I thought you’d make introductions”. Be very clear about what you want “I am offering X% of shares in this business in exchange for introductions and support in closing an investment deal with Y and Z investors”. You might break the vesting of equity into stages based on delivery triggers.

Reach agreement about value – sooner rather than later

The biggest challenge with sweat equity is reaching agreement about fair value. It can be very difficult to value start-ups and early-stage businesses. Traditional models used for valuing businesses don’t work because they rely on stable and predictable revenues which very few early-stage business have! Instead you are left valuing the business based on its market potential or the assets already created by the business. On the other side of the coin, how do you value the time provide by the person being offered sweat equity? Do you value their time – as if paying a salary? Or should you value what that time creates – a working platform, creation of key partnerships, delivery of first customers and revenue?

There is no denying it – valuation is tricky. This can cause the allocation of sweat equity to be postponed – or it’s handled in a conversation and never formally written down. That is when misunderstanding and discontent occurs. Hard as it is, if you want to avoid a cold shower down the line, formalise what is being offered in terms of sweat equity – and get it written down early on.

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If you would like help in valuing your startup or early-stage business reserve a place on the online masterclass “How to create a business valuation that gets your startup funded” 
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How I proved my startup so I could quit my job and feed my passion

Anyone can come up with a “brilliant business idea” but it is quite another thing to put your money where your mouth is, take the plunge, give up your job and commit to making your idea a reality. For many founders of startups, taking the decision to leave your job – and a predictable salary – to commit to building your startup full-time can be terrifying. But it doesn’t have to be. There are steps you can take to prove you have a viable startup which reduces the risk, builds your confidence and makes it easier to attract funding.

David Toscano of Cin Cin Italian Bar & Kitchen did just that and Hatty Fawcett of Focused For Business asked him to share the steps he took to build his successful restaurant business – and what gave him the confidence to give up his profession as a lawyer to follow his passion for Italian food.

Hatty: How long had you been thinking about your business idea before you decided to take the first steps in getting your business off the ground?

David: About 10 years. I qualified as a lawyer back in 2001 but was bored of that career about two years in so I started to look for a way out. I spent a lot of time thinking I was not capable of doing anything else.

“I had always had a passion for food and when a friend left law to go into wine, it gave me that little bit of confidence that maybe I could have a second career in something completely different.”

Hatty: Who or what pushed you to take action in creating your business?

David:

“I just did not want to spend the next 20+ years of my life in a job I did not enjoy or care about. I needed to be putting my time and effort into something I had a real passion for”

Having grown up in an Italian family, food was always central to my childhood and something I had always felt comfortable with.

Hatty: What initial steps did you take and why did you choose these steps?

David: The very initial steps were saying yes to catering parties and dinners for family and friends in 2010, even though I had no chef training or experience.

“I did a lot of research about opening a restaurant and quickly discovered it was an enterprise with a high set up cost and high risk of early failure. Given I had never even worked in a restaurant before, this made the jump to restauranteur feel even more precarious.”

So in 2012, I bought a vintage Fiat van and converted it into a street food van which in 2013 I launched as Cin Cin, an Italian street food and event catering business. I started trading at festivals and fairs, as well as taking private bookings to cater weddings, parties, celebrations; all while still working as a lawyer in London.

“Testing my offering in this way was very low risk because I was not reliant on income from the new business to pay my bills and I had set up the business with my own funds.”

I was also aware that I was moving into a completely new sector that I had no experience in so I had no idea whether I would even enjoy working in food & drink. Thankfully, I immediately loved it!

“I spent 2013 testing the business in various street food and private catering events, doing all the cooking myself and calling on family and friends as staff.”

 I was enjoying event catering and starting to pick up bigger events which meant I was turning some good profit but by 2014, I was sure that I wanted to open a restaurant so started to look for a chef to work with to put on supper club/pop up restaurant events. This was because I wanted to take the food beyond the limitations of the van and make the Cin Cin offering more refined. That summer I met Jamie Halsall, who is now my head chef in the business, and we started putting on supper clubs in Brighton, London and Kent. This step helped bridge the gap between the van business I had started and the restaurant business I wanted it to become.

Hatty: What did you learn by taking these initial steps?

David: These initial steps allowed me to test the development of the offering in low risk scenarios – I was still working as a lawyer so was not reliant on the income from the fledgling business to fund my lifestyle.

“I still approached each event with the aim of making a profit, but at that stage it was more about getting feedback on what customers wanted and expected from a new restaurant and more importantly, their feedback showed me that there was a gap in the market that we could fill.”

Hatty: Was there a specific event or turning point that gave you the confidence to commit working full-time in your business?

David: In Spring 2015, the business had grown to the point where I no longer had enough leave days from my job as a lawyer to cater all of the events I was being offered.

“I was turning down work and was extremely tired given I was using all my leave for events. So I made a plan to quit law at the end of 2015 and chase my restaurant dream full time. I have never looked back.”

Hatty: What influenced your decision to raise investment?

David: I opened my first restaurant in November 2016 with my own funds. It was a small 20 seat restaurant, all housed in one room which meant the set up costs were relatively low. By Spring 2017, we were constantly full so I began looking for a second larger restaurant site.

“I needed the investment because I could not grow the business without it. While there was cash in the business given the success of the first restaurant, I did not have enough to build and open the second larger site so I raised finance through a mix of bank finance and asset finance on the new kit we needed to open the new restaurant.”

Hatty: Did the steps you had taken to prove your business model make it easier to raise funding for your business?

David: Absolutely. As above, I used the Enterprise Finance Guarantee [EFG] scheme to access bank finance because the business did not have fixed assets to borrow against. In order to access that finance, I had to submit a business plan with costed financials to show that this step to growth was sustainable.

“All of the testing of my business model and offering went into that business plan and was a key part of the data that convinced the bank and asset finance agency to lend me the money I needed.”

Hatty: Do you have any advice or tips for entrepreneurs thinking about starting their own business?

David: Lean testing – there are a lot of ways to try out what you think you’d like your business to be without risking your personal finances with a loan or spending a lot of your savings. But just as important is that it’s also the best and least risky way to get feedback from potential customers about whether your business model and offering is actually what people want. Be prepared to listen and adjust your offering to suit the market.

Passion – I worked hard to become a lawyer but never had a passion for it. Working on something you do not care about is a recipe for mediocrity or even worse, failure.

“So if you are going to start a business, make sure there is something within it you are passionate about. That passion will drive you through fatigue, disappointment, and little failures while also making success all the more sweet as you’ll have created something you can be proud of. And isn’t that why we become entrepreneurs in the first place?!”

Do it now – you can come up with a million reasons why you should not to take a chance on starting your own business or pushing it forward. I spent the best part of 10 years telling myself I could not do it. But rather than saying ‘I wish I’d done it earlier’, I have always just tried to grow the business day by day and make decisions for growth as promptly as I can.

“There is no point waiting around wondering whether you could be great at something. Do it now.” 

Read more interviews with Founders

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Does your Startup or Small Business need a Non-Exec Board?

When you first start a business there can be little need for a formal Board. Small teams – indeed the team may just be the Founder – usually develop their own informal ways of reviewing options, discussing issues, making decisions and reporting progress. However, as the business grows, and particularly if you take external investment, formalising these processes and introducing impartial, independent advisers into the business in the form of non-executive directors can be very helpful.

Why would you want a Non-exec Board?

Introducing external directors to a startup or small business brings outside experience and fresh perspectives into the business. External directors – often call Non-executive Directors, Non-execs or just NEDs – are usually experienced, senior business people who have worked in a range of businesses or who may have run and successfully sold their own business. They help founders and business owners by sharing their knowledge, skills and experience of a specific sector or discipline, all to the benefit of the startup or small business.

The benefits of working with Non-execs are well documented and include:

  • Fresh perspectives on strategy and tackling business challenges
  • Acting as a sounding board
  • Objectivity, for example in exploring strategic options or managing teams
  • Bringing specific expertise which allows the business to learn and grow faster
  • Making new connections for the business by proving access to their address book
  • Commitment to keeping the team “on track”
  • “Real life” understanding that can be beneficial in reacting to and solving problems

For founders and business owners – who often work on their own and can feel lonely – such benefits are a god-send.

Is a Non-exec Board always the best option?

Bringing together a Non-exec Board isn’t, however, without cost. It can take time to find the right person with the appropriate mix of skills and experience – and may involve search and recruitment fees if you seek external help with this. Once you have found your ideal candidate they may require a retainer fee for their services. Having a board also has hidden costs in terms of the time required each month to prepare reports, arrange meetings and keep Board members informed of developments.

Are there other alternatives?

If your startup or small business is not yet ready to incur these costs then there are alternatives. Peer Boards which bring together business owners (usually on a monthly basis) to support each other with impartial business advice offer many of the benefits of a Non-exec Board but without the costs and hassle.

Focused for Business – in partnership with The Boardroom – runs specialist Entrepreneur Boards, bringing together Founders and Business Owners of innovative, fast-growth businesses to share challenges and experiences in their own dedicated peer forum. There are a number of separate Entrepreneur Boards – some focusing on pre-revenue startups and others on funded, growing businesses – and there is a particular emphasis on:

  • Launching new products and business models
  • Aiming for scale and growth
  • Accessing or working with external funding and investor interests.

Importantly, the Entrepreneur Boards hold you to account in setting and reporting on actions and deliverables. Joining an Entrepreneur Board keeps you on track and gives you an access to a wealth of experience – just like having a Non-exec Board.

To find out more, book a free online, live and interactive taster session to see a live Entrepreneur Board in action. See what taster dates are available

How to find investors for your startup or small business – three founders share what works

You’ve got a great start-up, the businesses is getting traction or – better still – its showing strong growth but you need to find investors to make the most of the opportunity. You’ve written the business plan, you’ve perfected the financial forecast and you are ready to pitch but who are you going to pitch too? Where are you going to find investors and “business angels” to back your investment opportunity? It’s a question almost every founder and entrepreneur will have asked themselves at some stage.

I interviewed three founders who have either recently raised investment or who are currently raising investment for their advice and tips. Jason Kirk of Kirk and Kirk, Dominic Wong of BoRo Experiences  and Shon Alam of Bidweg were generous in sharing their thoughts.

Finding investors is a numbers game
When I was raising investment for my own start-up (Seek & Adore), I remember the best piece of advice I was given was “you have to kiss a lot of frogs before you find your prince (or princess)”. This phrase stuck in my mind as I fixed meetings, grabbed a quick cup of coffee or attended pitch meetings with investors.  It certainly helps if you enjoy meeting people and it can sometimes help to think of it as a game – “how many new potential investors did I meet this week?”.

Start with people who know you
All three founders agree that the best place to find investors is to start with people you know.

Shon Alam of BidWeg whose crowdfunding campaign for the community-based currency exchange will launch imminently is clear that it is worth talking to almost everyone you know

“The personal route is very much the first route. People that you know will often give you time and even if they do not invest, you are using the time to get your message in the correct order so others can understand it.”

Jason Kirk of Kirk and Kirk who raised £150,000 for his eyewear design company was a bit more selective in his approach

“We approached people who knew our history and background and had previously expressed an interest in our company.”

Whilst for Dominic Wong of BoRo Experiences who raised £100,000 for his eco-tourism business, an informal meeting with a former colleague he knew well bore unexpected results

“Finding an investor was pure luck. I arranged a meeting with a contact who I have an existing, long-term relationship with. I went into the meeting hoping he would be my mentor, and he believed in the business idea so much he offered the money to me. I was overwhelmed and flabbergasted with the way the meeting turned out!”

Relationships matter
Whilst you will talk to many people whilst raising investment, for those conversations to result in investment they need to be anything but superficial. You wouldn’t ask someone to marry you on the first date. Generally, you want to get to know someone, find out what you have in common – and what you don’t – and reach a point where you trust and respect each other before making any lasting commitment. So it is with investors.

Dominic expanded on where the “luck” of finding his investor, seemingly by chance, came from

“I truly believe in long-term relationships. In fact my mentor once told me that the Hindu way of doing things is people first, business second. In other words develop deep relationships and business will sprout from it. It is about being constantly genuine over a long period to gain trust, which in turn makes people know you deeper than what’s on the outside.”

Be open to feedback – and benefit from others experience and knowledge
True relationships are two-sided. You have to give and receive – another useful premise to have in mind as you start finding investors.

Dominic used this as one of his goals when speaking to investors and sought feedback on his business when talking to investors

“Bounce ideas and thoughts off other people. It is really isolating and lonely when you are working on your [business] idea on your own. I found it really useful to take sounding from other ‘can-do’ people to get different perspectives. This helped shape my ideas and crafted the words I used to explain my business”

Shon recognises this too

“People you know will often give you time and, even if they do not invest, you are using the time to get your message in the correct order so others can understand it.”

Jason felt that the best advice came from those he had been talking to for a while, those with whom he had built a strong relationship

“Those with whom we had a relationship of trust gave us honest, open feedback from a potential investment point of view.”

It was a result of asking for feedback that Jason found his investor

“Our investor came quite by chance. I had asked somebody well-placed in finance to read our investment proposal to advise us and he ended up asking to be involved.”

Contact potential investors in a way that is consistent with wanting to build a long term relationship
We’ve all been on the receiving end of “spam” – communications from people who know nothing about us, offering something that we’re not even sure we want to know about. How well do you react to such approaches? Investors feel the same.

Shon was rigorous in trying lots of different routes to find investors and he knows which he would use again

“If I was to do it again, I would be talking to more potential investors, rather than just connecting with them via LinkedIn.”

Jason agrees

“Personal contact by mail or phone is far more effective than blanket, impersonal approaches.”

I’ve written before about the importance of making a good first impression when finding investors, Jason went on to talk about this too. He stressed the importance of standing out – but also of keeping it brief

“We created attractive literature that reflected our brand and our intentions. This helped identify our company and its unique aspects in a sea of companies seeking finance. It is rare that a potential investor will have more than a cursory look at the headlines of your opportunity. Make it simple. If they are interested they will delve deeper.”

Closing a deal requires mutual trust and a fair exchange…
The aim of all your conversations with investors is to create a shared strategic vision, trust and mutual respect. Ideally this should be founded on a sense of equal worth, reciprocal value being offered by the founder and the investor – and yet so often people talk about an imbalance of power between investors and founders. The founders I interviewed certainly felt this.

Jason is very clear on this point

“Finding the right partners and striking the right balance in the relationship from the first meeting is imperative. You are bringing an opportunity and investors are bringing money/strategy so the relationship needs to be balanced or it will not work. Investors try to assume a position of strength from day one to strengthen their negotiation position.”

Shon too is clear that the objectives of both founder and investor need to align

“I set out wanting to put together a team that could give me clear advise as and when I needed it, without holding my hand. Therefore, the people I wanted to work with also had to understand the philosophy behind Bidweg project. That having been said, I also wanted them to have a vested interest – but it was not money at any cost!”

Dominic recognises that reaching a deal with investors is not just about the money

“It wasn’t just the money which would help me, but experience and knowledge in the field. Essentially, I was also identifying strategic and tactical options which would propel the business after the initial capital.”

…and a clear route to exciting financial return
Investors are not altruistic. They expect a commercial return in exchange for their investment. The founders I interviewed felt this was expressed in a range of ways

Jason was clear it boiled down to

““How much money am I going to make from this?” in various forms.”

Shon felt investors were focused on intellectual property (IP) as the basis of value

“Investors wanted to know what IP does it have – but not all opportunities can be protected through IP. It doesn’t mean it’s not a sound business”

Jason felt the best way to close the deal with an investor is to

“Ask the right questions [of investors] and LISTEN to the answers. People invest for all sorts of varied reasons and you need to understand the motivation of the person you are sitting opposite if you are to make your opportunity appeal to them.”

Tips for maintaining your motivation
Raising investment is time-consuming and it can – at times – be soul-destroying. All three founders recognised the need to manage your motivation and energy levels so that you stay positive throughout the process.

Dominic stressed the need to look for positives in every meeting – even if it doesn’t result in an investment

“Hear the positivity in their voice or see their smile when they ‘get it’.”

Jason emphasised the need for focus

“Try to pick and choose where you direct your energies. Make it genuine prospects or people from whom you can learn. Seeking independent help to find finance can be very useful, especially if you are a small business with limited resources.”

And Shon urged resilience

“When you get rejected – and remember investors will find hundreds of reasons to reject – do not take it personally. Move on – if your business is investable someone will invest.”


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Book a place on the online masterclass “How to find and win investors”

A focused, methodical approach to finding, warming up and closing deals with business angels and crowdfunding investors.
Find out more and book a place

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