Capital Day Raising Money in Today’s Climate 24 th May 2013 Rose Lewis, Partner @roselewis
Oct 21, 2014
Capital Day Raising Money in Today’s Climate
24th May 2013
Rose Lewis, Partner
@roselewis
Never been a better time to be an entrepreneur.
• Global market opportunities.
• Tech is cheap(er), it works.
• Access to resources is high (not necessarily in this country).
• Support for start-ups is high.
More money available
• Accelerators
• Crowdfunding
• SEIS/EIS
• Angel investing – better than a bank
• City meets Tech
• Grants – tsb
• Corporate Venturing
You could also do this !
5
So it should be easy to raise moneyright….?
Only
2%of those who submit business
plans/applications get funded.
Why?
Business Plans are rejected because…
• Lack of skills/ credibility in the management team - No unfair advantages.
• No Market opportunity- “reinvented the wheel”.
• No proof of concept- “Ali G pitch”.• Business Model Not scalable.• Forecasts based on unproven assumptions.• Business Model too complex to execute.• Inadequate financial returns (10X within 3
years?)• Lack of trust.• No clear exit route.
• All solvable maybe?
You can whine all you like that….
• Its easier in US, they have a bigger appetite to risk.
• They back business plans with million £ valuations.
• The UK is rubbish, there is no money, we don’t take risks!
So, why do so many Start-ups find it too hard to raise ££ ?
The number 1 reason why start-ups find it hard…
They target the wrong sources of money at the wrong time
Sources of Money
Difficulty Level of Raising
Investment
Sources of Money
Most of you start here
Scale Quickly with Capital to get to an Exit.
To do this they look for:
• Technology Businesses
• Market Potential of $100 million
• Ability to make 10 X return
• And they want traction – you need to have achieved several key milestones. Most start-ups just don’t have that at the start.
VC’s Have Big Ambitions
So Where Should You Start ?
• Right at the bottom of the pyramid
• Easier to raise investment from your Mum right?
Difficulty Level of Raising
Investment
Facebook started this way:
• His college friend funded it first of all.
• Then Peter Thiel (angel investor).
• Only then did VC become interested and even at this stage, many of them passed.
• If they had tried at the top – they would have failed.
• And we wouldn’t have the biggest IPO in history.
So to Successfully Raise Money You Need to Start at the Bottom
• It’s easier – you have to prove less.
• The early rounds validate your business which makes it easier when you get to the top (FB).
When should you raise money
www.growthaccelerator.com
CAPITAL NEEDS
TIME
SEED Pre Revenue EARLY GROWTH
SUSTAINED GROWTH
HIGH RISK
LOW RISK
Co-investment Funds
Business Angels
Formal Venture Capital
ExitIPO/Trade Sale
PRE-SEED
Friends, Family, Neighbours
When you have actually done something
We are not risk takers so we want you to have de-risked the proposition.
Team Market
Product Returns Potential
Milestones / De-risking
• Team – proven – you have done it before, you have sector experience.
• Product – its built/mvp; trials with customers, contracts.
• There are current exits in the sector that are similar.
How do You Find Your Investors Then?
Plan Plan Plan
• Do your research. • Plan your strategy – sector, size.• Profile your investor.• Ask people to help.• Network. • And do something more than just write a plan.
Tips for Success
• Raise money at the right time • Raise money from the right people • Network Intelligently • Seek Advice