Funding Your Venture
Last week we had our monthly speaker event with Brent Hoberman (www.profounderscapital.com) , Lord Young of Graffham (www.startuploans.co.uk/) and Stephen Welton (www.businessgrowthfund.co.uk) discussing the topic of “Funding Your Venture”. The high profile line-up drew a large proportion of the NEF network: our current cohort, Alumni and representatives from host companies and our sponsors.
It was humbling to hear that even the most seasoned investors can get it wrong. Who could forget Lord Young’s story of balancing whether to invest in an online wine company, or an online auction company. Thinking that the conventional, sensible and credible option was the wine company he turned down a 7% stake in the other… which turned out to be none other than.. EBAY… Lesson learnt: “credible does not equal conventional”
Questions came thick and fast… How do I fund my venture? What kind of investor should I target? When should I go for investment? How much should I go for? What equity will I have to give up?
Here are some top tips from our panel…
1. Perfect your elevator pitch. If you can’t articulate your idea within a crisp, clear 5 minute pitch then you have not clarified your proposition enough, and people will switch off.
2. Don’t take it personally if an investor says no. Always ask why and get feedback.
3. It’s not just about the money. It’s about finding someone who can help you grow your business. So find someone who shares your vision and will be able to help you grow it.
4. Divide + conquer. Consider taking on more than one investor which can leave you more flexible
5. Research your investor. Realise that taking on an investor can be emotional; you are selling part of your ‘baby’. Make sure you know who you are partnering with. Do they support your vision? Can they open the right doors? Are they there in a crisis helping? Or do they sack the CEO? Do they support your vision? Do you get on with them? Finding an investor is arguably as important as finding a partner!
6. If you don’t understand it, don’t sign it. Beware the ratchet clauses in investor term sheets!
7. Get a mentor. This should be someone who understands your vision but is not a frustrated entrepreneur and someone who will only speak when spoken to. Aim for maximum 2-3 hours a month with your mentor
8. If you want money, ask for advice. And if you want advice, ask for money. Talk to investors long before you need the money. Raising money is hardest when you are desperate or running out of cash. And ask for more than you need. Companies which are haemorrhaging money or asking for too little make investors nervous.
9. Consider alternative investments e.g. equity swaps. But be certain there’s no conflict of interest and that you are sure of the investor’s intentions
10. And… as always… Follow your gut
To see photos of the event have a look here: