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