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
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.”
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.
“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:
Grab a paper and pen (or a spreadsheet if you prefer)
Write down 5 different groups of people within your network (e.g. friends, family, former employers…)
For each group, write the names of 5 people within each group and their contact phone number
Pick up the phone and dial the first number
Open the conversation “Hello. I wanted to tell you about an exciting new business which you might like to contribute to…..”
Make it fun/ make a game of it – set yourself little targets e.g. I will speak to three people before my next coffee…
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.
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
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
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”)
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
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.
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.
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!
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
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
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
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.
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
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
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
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
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
Ian talks about the importance of personalising
things where ever possible
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
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
right pitch to the right person will release the money.”
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
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
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!
************* 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