Investors look for “traction” when deciding whether or not to back a business – but what does that actually mean?
This interactive meetup brings together startup founders for a practical discussion on what investors mean by traction, and to share experiences of how best to evidence this to get investors “on the hook”. Together we’ll:
Uncover why “traction” speaks louder than words for investors
Discover the three elements which deliver “traction”
Explore ways in which you can evidence “traction” to quickly hook investors
This facilitated meetup will start with presented content to spark a conversation but will include time for you to ask specific questions and to share your experiences too. You will also have the opportunity to hear about resources that make it quicker and easier to raise investment.
We meet via Zoom – with cameras and microphones on – to share as a community. This is about you getting the answers you need – and offering support to those on a similar journey to you. Bring your questions, be generous in sharing your experience.
A Zoom login will be provided after you register and in a reminder email before the event. Places are limited to ensure a good interactive experience. Please book early to avoid disappointment and, if you can’t attend at the last minute, please let us know so that your place can be offered to someone else.
Hatty Fawcett, founder of Focused for Business, has been raising money for businesses and projects since she was eight. She has worked in three startups and raised £250,000 for her previous business (a marketplace). In addition to raising investment herself, Hatty managed some of the investments Kelly Hoppen made when Kelly was a “Dragon” on the TV show “Dragons Den”, making business angel investments. This gives Hatty a unique perspective on raising investment, with practical experience of having raised investment herself as a founder, but also understanding what angel investors look for when they back a business.
Hatty is on a mission to make it quicker and easier for founders to raise early-stage investment. Her vision is to see a level playing field when it comes to raising investment. In the last 12 months, Hatty has raised over £1 million for her clients, with individuals raising between £10K and £350K.
Hatty is a Regional Manager for Angels Den, a Talent Spotter for The Startup Funding Club (SFC) and works with all the main crowdfunding platforms. She is committed to giving founders the clarity, connections and confidence to attract a range of investment offers so that they choose the right offer for their situation.
What people say about Hatty
“Hatty’s meetup was like a one-stop shop for all the information I needed . Succinct, clear and full of ideas.”
“The Meetup was a very beneficial experience. It made me rethink our whole launch and fundraising strategy.”
“By the end of the Meetup everyone was contributing and helping each other. It was energising and motivating.”
“Hatty brings clarity and focus to the complexities surrounding raising investment.”
“It was useful to interact with the others and it’s reassuring to hear others’ stories of fundraising.”
“Hatty is a fountain of wisdom when it comes to raising investment.”
“Hatty’s tone and enthusiasm are very motivating.”
So you want to raise funding for a startup? To succeed, you’ll need to speak the language of investors. Investors will ask “how much traction have you got?” Knowing what traction is, and being able to demonstrate this, makes it quicker to raise funding for a startup.
So, what is traction?
Traction is another way of investors asking for evidence.
Funnily enough, investors don’t throw money at a question mark. They don’t back ideas or hunches. They take a calculated risk.
By backing a startup relatively early in its development, investors anticipate being able to make a significant return on their investment as the business grows. But backing a startup too soon, is risky. It’s all to easy to lose money. Investors want to make sure their money won’t be lost on expensive mistakes that don’t actually grow the business. That’s why investors are fixated with traction.
When an investor asks “what traction do you have?” they are really asking for evidence. Tangible evidence that proves a business is poised for growth.
Demonstrate traction to raise funding for a startup
Traction boils down to three things. You can think of it as an equation:
First you have to create a product or service – not just come up with an idea for a product. Investors call this first product you Minimum Viable Product or MVP. It might not have all the functionality – all the “bells and whistles” – you intend to add to your product over time but it must offer enough to solve a problem that customers’ experience.
Step two is to prove customers love your product. This might just be a handful of “beta” customers, people trialling the product and able to explain why they like it. Does it save them time? Money? Or allow them to do something they’ve never been able to do before? If so, you are creating value. The best evidence of customer value is not just people using your product but people paying to use it. Investors love paying customers.
Once you have MVP and paying customers, you are out of the starting blocks. It can, sometimes, be enough to raise funding for a startup but if you can complete the traction equation you will “hook” investors faster.
Completing the traction equation means showing you can multiply the number of customers using your product in a predictable way – that you can grow your customer base with a proven marketing machine.
Proven means proven – not guessing! You will need to know exactly how much you have to spend on specific marketing channels in order to recruit a predictable number of customers. You could say investors are looking for a proven formula:
£XX,000 spent on Y marketing channels = Z new customers
This takes trial and error. Lots of experimentation and tweaking to reveal the winning formula. Ideally, you want to prove it works every time and can be repeated again and again. That is the Holy Grail as far as investors are concerned. Rather than you having to search for investors, this will have them queuing up to back your business.
Achieving traction isn’t something that happens overnight. It takes focus, persistence and a series of “test and tweak” experiments. What’s missing in your traction equation? What experiment could you commit to today to move closer to traction and raise funding for your startup?
Achieving traction requires focus, persistence and motivation. Startup Masterminds: Traction is a group of likeminded founders, committed to achieving traction so they can raise funding for their startup. The group meets every other Tuesday for a focused hour of discovery, sharing what works and committing to test and tweak experiments that move the needle on the traction dial. If you would like to be part of this group, download the brochure
Startup founders are resourceful and move quickly but sometimes that haste can work against them. They make mistakes. When it comes to raising investment for your startup, there are plenty of mistakes you can make that may cost you dear!
Mistake 1: A brilliant idea is all you need to raise investment for your startup
This is the most common mistake of all – and an easy one to make.
I made this mistake. The first time I raised investment for my startup I had a brilliant idea, a wire-framed web platform and a well-considered business plan and forecast. I was skilled at getting meetings with investors. We had great conversations. The people I spoke to gave me really useful feedback. But they didn’t invest, and they weren’t going to. Not at this stage. It was too soon.
I hadn’t built the platform. I didn’t have what investors would call the Minimum Viable Product (MVP).
I hadn’t got my first customers. I hadn’t got any revenue.
I hadn’t got what investors call traction.
It wasn’t that the idea wasn’t good. It wasn’t that I wasn’t capable of building the business it was just too soon for an investor to get involved. They needed more evidence, more proof it would work.
It took me four months to realise this. Four precious months.
When the penny dropped, I invested my life savings and spent just two focused months building the platform and recruited my first customers. Then I raised £150,000 in a week. That’s the difference traction makes when you are raising investment for your startup.
Mistake 2: You just need a beautiful pitch deck to raise investment
I’ve seen a lot of very good pitch decks. You can tell a lot of work has gone into producing them, but nine times out of ten those pitch decks won’t help in raising investment for your startup because they lack the key information all investors need to back a business.
There are two common mistakes with a pitch deck. Image is prioritised over substance – it looks good but doesn’t give investors the information they need. Or there is so much content in the deck that investors can’t see the trees for the wood. They are overwhelmed and left wondering what the opportunity really is.
Working out what investors need to know to back your business may feel like a game of smoke and mirrors but there are actually seven key pieces of information (The Seven Essentials of a Successful Pitch) that allow you to raise investment for your startup.
You need to present this key information logically. It’s all about positioning the opportunity. So, stop worrying about what your pitch deck looks like and focus on getting the message right.
Mistake 3: If I speak to everyone I know I’m bound to find investors
It’s very common to think investment is a numbers game. The more conversations you have the better. Someone will invest eventually and, if not, they’ll introduce you to someone who will.
Like all mistakes, there is some truth in this. The problem is that believing raising investment is about having lots of conversations often leads to founders mistakenly sending out endless emails seemingly asking just about anyone for money.
Do you respond to random requests asking you for money? Do you think “I must have this” when someone pitches to you on a subject you’re not even interested in? No? Nor do investors.
What is more important is reaching out to the right investors. Investors who are interested in your stage of business, your sector, your type of market opportunity. It’s about targeting.
Save your voice and use it for the conversations that really matter. Take time to do your research and find the right investors (or work with someone who can make the right introductions).
Mistake 4: It’s easy to get investors on the hook when raising investment for your startup
Serious investors get a lot of opportunities across their desk in any one week. You need to make yours stand out. That’s about getting the positioning right – for sure – but it’s also about making sure you stand out as a credible founder.
Your aim is to build a relationship, establish your credibility and gain the trust of an investor before you ask for money.
You don’t (usually) ask someone to marry you on the first date, nor should you ask for money the first time you contact a potential investor.
Think of your investor outreach as a dance, if you will. You need an investor to notice you, spot how good a dancer you are, to ask you to dance and then to thoroughly enjoy the process of dancing.
Don’t try and reveal everything all at once. Give them enough to entice them. (I favour sending a one-page executive summary not a pitch deck in the first instance). Leave them wanting to know more. Offer them a meeting to allow you to start a conversation. Build the full picture of your business over a series of documents and meetings.
Relationships are built over time. Allow time for your relationship with an investor to flourish. Don’t rush it. If you do your investor outreach right you’ll know when is the right time to ask for investment – and it, if you’ve done your job properly, it will be well-received.
Mistake 5: I don’t know exactly how much money I need to raise – but I’ll work it out as I go and take whatever I can get
What is the right amount of money to raise? It’s an interesting question. Raising too little could mean you have to go through the time-consuming process of raising investment again, sooner than you want to. Raising too much investment could mean you sell more equity than you really need to at an early stage (and probably at a higher valuation than you might like).
A common mistake founders make when raising investment for their startup is to cost the activities or projects that need to be completed and aim to raise enough to cover that.
It’s perfectly natural to start by thinking what will it cost to… launch a new product, recruit some new staff members, carry out some marketing campaigns.
The trouble with this approach is it has you thinking only about what things cost. It doesn’t consider the amount of time such projects take to complete. Time has a cost too. Every week or month it takes to complete a project you also need to cover your monthly outgoings – or what investors call your burn rate. You need to ensure you have consider how long a project will take and factored in your burn rate costs as well as the project costs.
Another problem with thinking only about costs, is it ignores the bigger picture. It is almost certain that you will need to raise more investment. It is easier to raise investment if you have achieved significant milestones in the business and moved the business on a stage in its growth cycle.
For this reason, it can be better to think in terms of milestones when raising investment for your startup. Think about what would be the next milestone that demonstrates your business is succeeding. It might be attracting your 1,000th customer, achieving revenue of 6 figures or entering a new market. What constitutes the right milestone will vary from business to business. The point is you need to think about it now and ensure you raise enough investment to get you to that milestone. Give yourself enough runway to reach the milestone.
Thinking in this way will not only help you determine the right amount of investment to raise but it will also help you sleep easier at night once you have raised because you will have bought time to focus on the business, rather than be distracted by another investment raise.
Mistake 6: I don’t need to talk about valuation – it’s all about opportunity
Founders who don’t think they need to be clear about their valuation from the get go are delusional.
Raising investment is an exchange of value.
First you have to be clear about the value you have already created in your startup. This could cover all sorts of things – it might constitute assets in the form of technology or a strong brand that you have built. It might be intellectual property (IP) or it might be your approach to capitalising on a market opportunity.
No one is going to throw of money at a question mark so you must be clear about what you have created.
The second thing to consider is that you don’t get something for nothing. If you want to raise investment you must be clear about what you are offering in exchange.
So many founders don’t know when to introduce the topic of valuation into their conversations with investors. Some founders seem nervous about putting valuation into a pitch deck for example. However, you must. Not doing so is like offering a product and not indicating its price. Without a valuation investors can’t work out what the opportunity is worth to them.
Worse than that, not mentioning valuation undermines your credibility with investors from the get-go.
Mistake 7: I don’t have time to raise investment I’ll get someone to do it for me
It is true that raising investment for your startup is time consuming. It can even feel like a distraction from your real job of growing your business. It is tempting, therefore, to look for short cuts, cut corners or even to get someone to do it for you.
If you delegate part or all of the process of raising investment to someone else you lose on two levels. You can’t be certain how your business is being portrayed to investors (and what commitments you might be held to) and you miss out on the opportunity to meet investors, get to know them so you can be sure that an investor is a good fit for your business.
Rather than get someone else to do the work for you, find an adviser who can guide you through the process of raising investment and support you in unlocking investment. Be wary of advisers who talk a good game but have not actually raised investment themselves. There are a lot of people who will offer advice – some of it contradictory – which can leave you more confused than when they started.
Generally it is good advice to learn from someone who has raised investment themselves. Someone who knows first-hand what it takes and who can support you through the process with a proven methodology, insights and resources. This will make it quicker and easier to raise investment.
It is a wonderful moment when you raise investment for your startup. Investment can unlock so many opportunities for growing your businesses. It is definitely a moment to be celebrated. However, don’t make the (ultimate) mistake of thinking it’s the end of your journey. Really it’s just the beginning of the adventure…the adventure of growing your startup to the next stage. Enjoy the journey!
Discuss your funding options
If you would like to discuss your funding options, you can book a Funding Clinic with Hatty Fawcett (who raised two round of investment for her startup) here:
Lack of investment is one of the biggest barriers to startup growth. Now more than ever. If you have developed your product, launched your business and want to understand your funding options booking a Funding Clinic is a good first step.
What is a Funding Clinic?
A Funding Clinic is an opportunity for you discuss your investment requirement in an informal but focused 1-2-1 with startup funding expert, Hatty Fawcett. A Funding Clinic will demystify the process of raising early-stage investment and outline your options.
Each clinic lasts 30 minutes and, after an initial discussion about what your business has achieved to date, will provide practical, tailored advice on the funding options open to your startup. You can expect frank, no-nonsense advice which gives you a clear, honest picture of your funding options and what you need to prepare to raise investment. You will leave with clarity about your next steps to unlock investment.
Funding Clinics are conducted via Zoom video conferencing. All you need is an internet connection and a laptop/computer with a webcam and microphone to take part.
Who are Funding Clinics for?
Funding Clinics are designed to support startups and early-stage businesses who have launched their business and developed at least one product. They are most suited to startups looking to raise between £75,000 and £1 million of seed (or pre-seed) funding. It may well be the first time you have raised investment – that doesn’t matter.
Typically, the founders Hatty Fawcett works with are aged between 40 and 60. About 60% have had a successful professional career but have left corporate life to create their startup, a further 25% are serial entrepreneurs.
“If you are a startup needing advice on virtually any level of the business, Hatty is the person to talk to. She clearly has a wealth of knowledge spanning from the basics of starting a business, building and articulating a value proposition, through to raising investment for your startup. I started having conversations with Hatty on her Funding Clinic and found her to be both incisive and attentive. People who have real experience in fundraising – and are actually good at it and willing to share in their experience – are hard to come by, and Hatty is one one them. Moreover she is a thoroughly pleasant human being.” Manish Patel, Interim CEO at Jiva.ai
“I spoke in detail about funding options and Hatty put us in contact with several useful organisations. I would recommend Hatty’s expertise to anyone who has a start up idea or a fully functioning business.” Robin Dolton
“Hatty is a true professional and a breath of fresh air in this sector. I felt very comfortable in sharing my new business app idea with Hatty, and it was inspiring to receive external validation from an expert like Hatty. Hatty’s advice helped spur me on to take the next steps in realising my idea.” Valerie Lothian
“Hatty gave me clear, concise and invaluable advice on how to improve my e-commerce presence and grow my business.” Becky Lewis
Booking your Funding Clinic
Funding Clinics are free and in heavy demand. Funding Clinics must be pre-booked (via Calendly). Once booked, please make every effort to attend. If exceptional circumstances occur and you can’t attend please use the Calendly link to either re-schedule or cancel the Funding Clinic (or email Hatty) as soon as you know you can’t attend. This allows your Funding Clinic to be re-allocated to someone on the waiting list.
After booking your appointment, you will receive a reminder email with a Zoom link. You will also be given the opportunity to complete an online assessment which gives you a snapshot of how an investor sees your business, and provides pointers on areas you could improve your investor readiness.
If your internet browser does not display the booking form, click here to be re-direct to the Calendly booking page.
A free 60 minute, live and interactive webinar presented by experienced crowdfunder Hatty Fawcett, Founder of Focused For Business. You will discover:
How to select your crowdfunding platform to attract the right investors.
The 7 essential elements of a successful investment pitch.
The secret of crowdfunding (that no one tells you) which is key to success.
How to set your crowdfunding target to ensure success.
The inside track on how to off-set risk to attract serious investors.
This interactive webinar offers a good opportunity for you to ask your specific questions about crowdfunding and to hear how others are approaching crowdfunding. In uncertain times it is reassuring to hear how others are approaching funding challenges and to learn from the experiences of others.
All you need to join this webinar is an internet connection, mic and webcam. A login link will be emailed prior to the webinar.
BOOK YOUR PLACE NOW Click on the “Select a date” link below to see all available dates and times for this webinar and to reserve your free place:
(If your browser does not display the booking form, click here to be re-directed to an Eventbrite booking form).
Come ready to participate! Hatty will share specially prepared content, but there is time for you to ask your questions about crowdfunding too. You will also learn more about resources that make it easier to succeed at crowdfunding, such as Crowdfunding Accelerator.
Places are limited to ensure a good interactive experience. Please book early to avoid disappointment.
What people say about this webinar
“A very informative webinar that gave me a much clearer understanding of the different types of crowd funding available and which of these might be most suitable for my business”
“I learned the amount of preparatory work that is needed before you launch the crowdfund campaign. It was a good overview.”
“Hatty is a fountain of wisdom when it comes to crowdfunding.”
“Hatty is a great teacher! The rich content of the webinar kept me interested and helped me understand how crowdfunding fits into various financial offerings.”
“I found your webinar to be extremely helpful and would rate it 10/10”
“It was useful to interact with the others and it’s reassuring to hear your stories of fundraising.”
“I found the webinar useful and, as always, your tone and enthusiasm are very motivating. You would be a great person to work with because of your know-how.”
Hatty Fawcett raised £250,000 through crowdfunding and angel investment for her own business venture. She learnt the hard way what it takes to raise investment and now speeds up the process of getting investment for startups and early-stage businesses. Hatty runs Crowdfunding Accelerator an eight week programme designed to make it quicker and easier for businesses to prepare for crowdfunding. She regularly speaks on crowdfunding and is an active blogger on the subject of raising investment. Hatty is also a Regional Manager for Angels Den and is a Talent Spotter for The Start-up Funding Club.
What people say about Crowdfunding Accelerator
“Hatty is a great teacher! The rich content of the course kept me interested and helped me understand how crowdfunding fits into various financial offerings. This course has given me confidence on how and when to organise a campaign.” Sue Frost, Co-founder Curamicus
The Crowdfunding Accelerator was an excellent way to explore the concept of crowdfunding in a real hands-on and practical way which resulted in having everything I needed to proceed.” Claire Timbrell, Co-founder The MacGuffin Project
“Hatty was a fantastic coach helping us create a short pitch, ensuring the delivery of key investor information in a simple but effective way” Gill Hayward, Co-Founder, YUU World
“Hatty made the daunting process of accelerating my business a simple, outlined and structured process. As a company we have gained direction, professionalism and valuable information through her insights”. Arun Thangavel, Co-Founder, Hollabox
It’s that time of year. The time for new year resolutions and, for your typical startup founder, re-visiting the business plan. Whether it’s about budget setting, a quick check to ensure plans are on track or a more root and branch review of what needs doing, many of us will be setting out what we want to achieve this year.
A lovely time in many ways. A sense of anticipation,
ambition and identifying opportunities. And who doesn’t love a clear road map
with identifiable milestones and steps for action?
But will action follow? Will you flounder when the going gets tough? Allow yourself to be distracted instead of work on that “tricky” project? Do you even know what the priorities are or is there a sense of overwhelm that leaves you confused and demotivated, unsure where to start? Perhaps you will even blame others for your inaction – “there’s no budget…”, “I haven’t the right team to progress this…” “We don’t know the implications of Brexit yet…” Procrastination seems the easier path.
I know some who don’t even write a plan. What’s the
point? You know you won’t look at it again, and why would you set yourself up
to fail anyway?
You see my point? A business plan, just like a set of new year resolutions, isn’t enough on it’s own. You need motivation, accountability and practical help when things don’t go to plan. You need people to walk – or run – alongside you on the marathon that is running your startup. And I don’t mean just anyone. You want someone who has “been there, done that and got the t-shirt”. Someone in the same situation as you, who shares your experience because they have been through something very similar.
Being with other startup founders and business owners who generously pool expertise and experience, creating a space where everyone learns, improves and grows their business. This isn’t about networking or a talking shop. This is about focus. Focus on the challenges of running and growing your business. That focus is rewarded with honest feedback, grounded insight and the best mix of challenge and encouragement. What’s more, it works for all business owners, all year round, not just when you are a startup founder re-visiting the business plan!
Jason Kirk, Founder & Director of Kirk & Kirk, explains
“Sharing problems and discussing approaches and potential solutions with the rest of the Board is an extremely productive process.”
Jason’s business faced exciting strategic
opportunities but, as if often the way, not everything could be done all at
“We have made significant progress with the help of the Entrepreneur Board these last months, with some important decisions being made.”
The round table discussion works because the group is hand-picked. All members of an Entrepreneur Board have businesses which are at a similar stage. They may be in different sectors but their growth ambition is similar – and so will many of the strategic and operation challenges they experience. The magic happens when you hear how someone else tackled the issue you’ve been having sleepless nights about. In fact, you not only hear, but see what’s possible for your business.
Sue Frost, CEO & Co-Founder of Curamicus, found the “magic” encompassed a range of things
“I’ve gained peer support, helpful suggestions and tips from other entrepreneur business owners in this confidential, business like and friendly forum.”
“This monthly discussion with a hand-picked small board of diverse entrepreneurs cut through toenable me to not only see the change that was needed, but to feel differently – positively – about embracing those changes.”
It is the trust that builds between business owners that is key to change. It allows us to be honest. It encourages us to have those frank “warts and all” conversations that rarely happen at networking events.
“I love the honesty of the Entrepreneur Board community.Things aren’t always rosy – there are ups and downs in business. The Entrepreneur Board is somewhere you can express your frustration and get perspective and practical advice to move forward positively.”
If you are a startup founder re-visiting the business plan, don’t let the process stop with a casual review. Build in support for the journey ahead and find yourself a group of like-minded startup founders who will hold you to account, challenge you and encourage you to be your best. If you would like to see for yourself how an Entrepreneur Board works, you are invited to experience a free taster Entrepreneur Board. During the taster you will meet Hatty Fawcett, the Entrepreneur Board facilitator and chair, connect with the other business owners attending, and see a live demonstration of an Entrepreneur Board in action!
Startup Founders share their experience and suggest where to look for a co-founder
It is relatively easy to build a product and launch a business – although it may not feel like it when you are in the thick of it! It is a lot harder to find a co-founder for your startup and build a strong management team. And yet it is people who turn a product (or service) into a business using their skills, prior experience, contacts and industry knowledge. That is why investors place so much emphasis on co-founders and team when investment in your startup. If you can find a co-founder and build a strong team experience says your startup will raise more money.
Why do investors
back co-founders and teams?
Investors know how important the founders are to the success of a startup. Yet it is rare for one individual to have all the skills needed to build a business. A mix of skills is required – technical, sales and marketing, operations and an eye for the finances. Investors also understand the stresses and strains starting a business puts on you. They would rather see that strain shared. Then if one co-founder is having a challenging time, the other co-founder can help take the strain, re-motivate their colleague and help get things back on track. And what if –heaven forbid – the founder gets ill or falls under a bus. How will the business fare then? Investors seek to protect their investment and offset risk – that is why they back co-founders and teams, not just one founder.
It’s not just
investors who recommend building a team – founders do too!
Startup founders also seem to prefer having a co-founder or team working
with them. When I raised investment for my (previous) business, the lead
investor met each member of my team and wouldn’t invest until he had – and I
really benefited from having a team. They kept me going when the going got
Lindsay Trombley Co-Founder and Co-CEO of Ruley sees other benefits too
“Finding the right business partner is pure gold. It’s amazing when you find a cofounder who shares your vision, with whom you see eye to eye (even though you might not always agree on all the details), with whom you can resolve disagreements without drama, and whose skills and strengths complement your own.”
Joel Burgess, Founder and CEO of Nutrifix doesn’t currently have a co-founder and, even though his business is progressing well, he says
“I certainly see value in having a cofounder – especially a technical co-founder.”
“I’ve taken a “if it feels right” approach rather than hunting down a co-founder. It hasn’t worked.”
What should you
look for in a co-founder?
As with all partnerships, think about what you are looking for in a co-founder.
Graeme Risby, CEO & co-founder of HiyaCar, recommends looking for
“Somebody with different skills to yourself but a similar vision and outlook on things.”
Another Founder I spoke to (who preferred to remain anonymous) and who
parted company with his co-founder explained
“My co-founder and I had too similar a set of skills. Seeking a co-founder in future, I’d try and find someone who’d better cover my areas of weakness.”
Where do you find a
A good place to start is with your network of friends and former
colleagues. If you’ve worked with someone before you will know first-hand their
strengths – and weaknesses.
Elizabeth Townsend-Rose, President and co-founder at Agora had worked with her co-founder before
“We worked together at a previous startup and consequently had a similar perspective on where we see opportunity. We also have a shared understanding of how we work, and how to run a business.”
She went on to add
“Getting along with someone is different to being able to work well with them. It helps if you have worked with someone before and been in a stressful environment together.”
So put the word out, ask around and let people know what you are looking
for. Be open to finding your co-founder almost anywhere. A chance conversation
I had with a friend in the pub led to him joining my startup and Lindsay Trombley
confessed she met her co-founder at an NCT class – certainly an unexpected
Extend your search
for a co-founder beyond your immediate circle of friends and colleagues
There are a range of online networks – be that Linkedin or more specialist
networks – that help you widen your search for a co-founder. You might like to
CoFounders Lab – designed
specifically for startups to find co-founders, team members and advisors
Founder to Be – focused on
finding tech co-founders, designers, marketers and developers
There are a lot of events designed specifically for founders and
startups and these can be good hunting grounds for finding a co-founder. General events can be found on EventBrite but
more focused opportunities include:
Universities also offer opportunities for finding co-founders, particularly
if you are looking for someone with specialist technical or business management
skills. The first start up I joined was after doing an MBA. A fellow student
asked me to join his startup.
Keep your eyes and
ears open. Finding a co-founder can lead to surprising discoveries
Once you adopt the mindset that a co-founder could
be found almost anywhere, you may be surprised just where you can find a
Graeme Risby explained he and
“bumped into one another at my local (very small) village fete in Kent one summer (after not seeing each other for 15 years)”
On a previous occasion, some 20 years ago, Graeme also remembered he
found his co-founder when they
“worked part time together on the meat counter in Waitrose, whilst doing weekend work & studying A levels”
Elizabeth Townsend-Rose reconnected with someone in the basement of
Loulous, went to dinner with them the following week and proceeded to hire them
So, if you are currently struggling to find he perfect co-founder, keep
the faith. Remember it only takes one chance conversation and you could be on
This quick online assessment gives you the lowdown…
Raising investment is time consuming. Networking to find the right investors, pitching to them and answering all their questions – let alone closing the deal – all takes time! So, it pays to know if your business is “investor ready” before you start looking for investment – saving you time, money and energy.
Focused For Business offers an independent online assessment that profiles your business from an investor’s perspective, creating an Investment Profile Report which:
details the strengths – and potential weaknesses – of your investment deal as an investor see them
benchmarks your business valuation against other startups’ valuations
highlights whether you are “investor ready” and what you should focus on if not.
How does it work?
Step 1: You complete the online assessment which takes just 15 minutes.
Step 2: Once you have submitted the assessment, you will receive an Investment Profile Report that explains how ready for investment your business is. You can then book a Funding Clinic with Hatty Fawcett to discuss your funding options.
One of the fundamental questions at the front of most founders’ minds – and the most frequently asked question – is “What’s the best way to fund my business?” As part of Global Entrepreneur Week, Hatty Fawcett of Focused For Business asked ten founders who have raised investment for their businesses to share the pros and cons of different funding options.
A quick question to ask, but a complex question to answer.
And, of course, it depends: On the stage of your business; your objectives for
the business; your reasons for seeking investment; and the speed at which you
require it. It will also depend on what you are willing to offer in exchange
for investment. Will you sell shares in your business, for example, or are you
looking for a loan which will eventually be paid back?
Bootstrapping – a good way to get the business off the ground
Bootstrapping your business usually means funding your business with your own money to get if off the ground, and then continuing to fund it with revenue generated by the business itself. When I started my first business, I wasted a lot of time talking to potential investors explaining why they should back my business. At the time, “the business” was little more than a well-crafted business plan and financial forecast. I remember the moment when the “penny dropped” and I realised no one was going to invest in my business until I had actually created it and it was earning some revenue. That meant investing my own savings to get things moving. I had to put my money where my mouth was.
A big advantage of starting your business in this way is
that you are in control of the business. It puts you firmly in the driving seat.
When it comes to the direction you want the company to take, the key decisions
are down to you.
Tim Martin, CEO of WorkInConfidence, who bootstrapped his business puts it very
“You do it because you have to. It means you can build value before funding and get it [the business] going.”
Always assuming you have some money you can invest, there are some disadvantages to this route. Tim found
“You are often unable to make key decisions, such as spending more on marketing.”
So is bootstrapping the best way to fund your business? Be aware that a lack of money can slow down the speed at which your business grows.
Bank loan or Start-up
Loan – a helpful cash injection to achieve an important milestone
Even a bootstrapped business will probably find there comes a point when you need a cash injection to achieve an important milestone. It might be that you need money to pay for tooling for product manufacture, or you need to purchase materials or premises in order to start generating revenue. If so, might start-up loans and bank loans be the best way to fund your business?
Jaya da Costa, Founder of Pause Cat Café, saw a number of benefits in going for a start-up loan.
“It gave me the opportunity to maintain my own vision for my business and was a quicker option. I was asked to complete a business plan to gain funding, which has been very useful during the set-up and also since opening.”
One drawback of this route is that you will have to pay interest on the loan which, as Jaya highlights
“The repayments can take a big chunk of your cash flow especially in the early stages of your business, try to negotiate an interest-only period to help with this.”
Angel investment – investors bring not just their cash but their skills, experience and contacts too
Business angels (high net worth individuals who have very often run and sold their own businesses) do not expect an immediate return on their investment. They don’t ask for interest or dividends but want to see any revenue generated by the business put back into the business so it can grow faster. What is more, business angels bring not just their cash when they invest in your business, but also their skills, expertise and contacts too. They may also have useful sector knowledge which can help you grow the business faster than the cash injection alone would suppose. They often act as mentors and can provide practical help and hands-on support. Could business angels be the best way to fund your business?
Sue Frost, Co-Founder & CEO of Curamicus, discovered many benefits of this investment route
“We were fortunate to find business angels with a wealth of business experience in particular areas who were willing to share with us for the benefit of the business. The best business angels can become key people in your startup team.”
Jason Lowe, Founder & Director of FYB London, echoed
“As well as the capital investment, the most valuable advantage [of accepting business angel investment] is having an experienced business mentor to work with. They help you avoid common potholes and provide an outside view on long term strategy for scaling the business.”
One of the challenges of raising investment from business angels, as Sue points out, is the time it takes:
“This route to funding can be very time consuming as [business angel] groups meet probably only once per month/quarter and they only see a handful of startup pitches per meeting. We found angels within these groups can be looking for specific kinds of businesses such as entertainment apps or traditional retail businesses [and this may not coincide with your business sector]”
Jason also pointed out that with business angel investment, although you benefit from mentoring and practical advice, you are also relinquishing some control in your business. As he put it,
“You may have to compromise on some of your ideas and plans to attract investment.”
It’s important therefore to find a business angel with whom you are aligned in terms of the strategic direction of the business. It also helps if you build good rapport, openness and trust.
Angels may be more patient than banks in getting a return on
their investment but they will expect a return so you do need to offer a clear
“exit”. Typically, this will involve selling the business in a 3-5 year time
frame so that the business angels can sell their shares at a profit.
Crowdfunding – a good
way to raise funds but also to test product demand and build brand ambassadors
On the face of it, crowdfunding could be the best way to fund your business. The media is full of stories of businesses raising phenomenal amounts of money in remarkably short time periods. And crowdfunding brings other benefits too:
For Kellie Forbes, Co-Founder of YUU World, crowdfunding
proved a brilliant way to market test a new product and boost sales
“[Crowdfunding provided] amazing feedback regarding the new product. That’s been insightful. We know we have a desired product, but we now realise there is another way to deliver this – as an add-on option rather than a bespoke product. It was feedback by via the crowdfunding campaign that has caused us to re-think this decision. We have a better product as a result.”
Peter Ramsey, Founder & CEO of Movem, has done
crowdfunding twice and he agrees there are benefits to crowdfunding above and
beyond the money raised
“Crowdfunding gives you a lot of exposure…I know that our shareholders talk about Movem all the time, so there’s an unknown amount of network effect going on there. But that’s the biggest benefit, the exposure.”
Kellie Forbes also sees PR and marketing exposure as a big
upside to crowdfunding
“Our sales are up almost 20% which is thanks to the crowdfunding campaign exposure.”
Crowdfunding is not a quick route to investment.
There is a lot of work done behind the scenes to ensure a successful crowdfunding campaign. James Courtney, Founder & CEO of Lux Rewards, explained
“For early stage startups, it is very difficult to get viral spread like Monzo etc. managed to. Realistically you need to bring 50-80% of the raise through your own connections or angels.”
“Crowdfunding isn’t as simple as just ‘making a video’. Months of work go into a pitch, and even before then you have to be pre-raising and getting momentum. My advice would be to be realistic on the amount of money you need. Raising £500k might sound glamorous and you might be pleased that you’ve got 3 years of money in the bank, but it’s considerably harder. Only raise as much as you need.”
Venture Capital – the
holy grail of raising investment?
For some founders and entrepreneurs, venture capital (VC) investment feels like the holy grail of raising investment. VCs typically manage a fund made up of other people’s money. The funds can be large which means VCs are in a position to make big investments, and cash-starved founders may be tempted to see pound signs in front of their eyes. Perhaps this is the best way to fund your business?
VCs are also generally very well connected and, like
business angels, they want to see the businesses they back succeed.
Rajeeb Dey, CEO of Learnerbly, found he benefited from his VC’s network by being
introduced to one contact who became CTO and another contact with very specific
skills whose advice helped them develop proper, scalable systems. As Raj put it
“I’d [recommend VCs for their] connections and expertise…as well as potential business development connections.”
VCs are unsuitable for the majority of startups
As a general rule, VCs are looking for businesses which offer not just fast growth but exponential growth. They are often focused on particular sectors and industries, and have a preference for companies that disrupt the status quo, not just “me to” products. As a general rule they don’t invest at “seed” stage but will wait until the business has proved the market and is ready to grow. For all these reasons, VC funding is not the best way to fund every business.
VCs manage other people’s money, so they have to be ruthless in managing the investment. This drives a different agenda and a certain amount of governance and bureaucracy.Raj at Learnerbly put it this way
“The amount of governance increases – ie monthly board meetings in our case – I doubt it’d be so frequent had we just had business angel [investment]. That said, I’m actually finding these meetings useful…it’s something to schedule, prepare for and ensure you are aware of the reporting/governance requirements VCs may have.”
Harinder Sandhu, Founder of EmpowerRD wasn’t comfortable
with “overbearing beaurocracy” and loss of control. She described her situation,
“I hadn’t appreciated the level of control the VCs would look to exert – they had a specific mould they were looking to shape each company into. I decided to execute a break-clause I’d baked into our contract to cut short the funding and therefore the VC’s equity stake.”
Thomas Beverley Co-Founder at Fy also felt
uncomfortable with his situation
“The VC will typically be operating [on the basis that] ‘one-in-twenty of my investments are going to be huge; 5 [will provide] ok returns and 15 [businesses will be] write-offs mentality’. [As the founder] they obviously want you to be successful but they have 20 bets to your 1 so [motivations] aren’t entirely aligned. Therefore, they might push you to do irrational things post investment.”
The consensus with regards to Vc investment is, before
you take the money, make sure your motivations and expectations are
aligned. Taking references can be a good
way of ensuring this
So, what is the
best way to fund your business?
There is no one best option when it comes to funding your business. The best investment for your business will be the option that is right for your stage of business, your ambition for growth and what you are willing to offer to investors in return for their investment.
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.
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.
“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.”
Another founder, who wished to remain anonymous, was clear about his lowest point – but also about the surprising benefit that came from that
“Early on in our development, we had a conversation with someone who had decades of experience in our particular sector. He challenged us on every single point of our proposition, expressing a serious amount of doubt on our ability to pull it off. We left the meeting shattered, but then we took a lot of the feedback on board and pivoted to a much easier product to launch. It ended up being valuable feedback, despite the pain.
Having a true sense of our purpose has been our North Star. Committing ourselves to this goal (rather than a particular solution) has allowed us to adapt and pivot when it was required.”
Six things you can do today to keep motivated
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.
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.
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.
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.
Remind yourself why you set-up your startup. Get back in touch with the passion and vision that had you start this journey.
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.
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