Do your eyes glaze over when you think about preparing your FINANCE stuff for fundraising?
Trust me, you are not alone!
But without having a strong handle on your numbers, and understanding how your business is performing, you don't have a chance in hell of getting investment.
Here's what you're going to need as a minimum:
1) Management accounts
Professionally produced and up to date. So if you've been putting all those receipts in a big box, or just tracking things on Excel, now's the time to get this sorted. You can do it yourself (I'd really recommend Xero). Or if you outsource, then for goodness sake make sure you really understand the numbers and what your book-keeper / accountant is doing.
2) Key Performance Indicators (KPIs)
These should include not only the critical financial indicators like Revenue, Margins and Profit, but also other indicators that are pivotal measures of how well your business is doing. This will depend on the nature of your business, but can include things like Cost Per Acquisition (CPA), repeat business, marketing effectiveness broken down by channel, customer service measures, production delivery times and quality measures just to name a few.
3) Financial forecast for the next 3 to 5 years.
This needs to be professionally produced, and should show not only your profit and loss, but also your balance sheet, and most importantly your cash flow. You will need to show what your funding requirements are, not only now, but also for any potential future investment rounds.
Once you've got your key information and forecasts, you're going to really need to understand how investors will interpret them, and the kind of financial questions they're likely to ask you.
At Enter The Arena , we help clients every single day to figure out what they need to do attract and close investors and secure finance in the fastest possible time, whilst also growing your army of brand ambassadors.
If you have a business that is solving a real and painful problem for your customers, that is getting great traction, and has great potential for growth...
If you're getting TIRED of not being able to move your business forward, because you don't have the funding you need...
If you want to secure at least £150k in equity finance...
Schedule some time in my diary, and let me help:
Let's do the MATHS on how you can achieve and surpass a crowdfunding target of £150k....
1) Ahead of your public crowdfunding campaign, reach out to your network of friends, family, business associates, customers, fans and followers. Let's assume you have 1,000 in your network, and you can get 5% of them interested enough to talk to you, with 30% of these making an average investment of £5k, then you have £75k in the bag. This gets you to 50% of your target, which is perfect ahead of a crowdfunding launch.
2) Create a fantastic pitch on a leading crowdfunding platform; let's assume 5% of the 300,000+ investors on the platform view your video, and 0.5% of these convert to an average investment of £1k. This gets you a further £150k investment
Total investment secured = £225k and you've smashed your target by 150%.
And all this is possible within 90 days. In just 90 days time, you could have those kind of funds, or way more, sitting in your bank account..
So the MATHS are SIMPLE.
Doesn't mean any of this is EASY!
It's up to YOU to make sure you have a really fantastic investment proposition.
It's up to YOU to reach out to your network, and position the opportunity in a really appealing way
It's up to YOU to close the interest from people.
It's up to YOU to create a stellar pitch deck, financial forecasts and pitch video.
It's up to YOU to keep the momentum going throughout your crowdfunding campaign.
It's up to YOU to get those people viewing your pitch to make an investment commitment.
If you have a business that is already getting great traction, and has huge potential, and you need the funds to help you grow it to the next level..... but you're just not sure how to approach the crowdfunding process...reach out and I can help.
For more tips and tricks for Equity Crowdfunding Success, join my free Facebook Group for entrepreneurs:
If you're an entrepreneur, how much of your own money (+blood, sweat and tears of course!) have you put into your venture so far?
The answer should be, as much as you can possibly afford to.
Why is this?
1) The longer you can go with your own personal funding, the more progress you can make without having to give away equity – so you should then get a higher valuation and give away less when you do raise externally.
2) Investors love it when you have skin in the game. It means you share the risk with them.
3) If you have your own money on the line, it drives you to achieve more, and be extremely mindful of costs along the way
4) When you make your business a great success, the financial rewards to you will therefore be greater.
5) If you don’t back yourself, then frankly, how can you expect anyone else to?!
For more strategy tips, tricks and advice on how to successfully crowdfund, then do come along and join my FREE Facebook Group for entrepreneurs:
If you're an entrepreneur with a reasonably early stage business, you're probably thinking about raising investment for growth at some point in your journey.
You're might already be talking to angels and wealthy individuals about the investment opportunity, or thinking about crowdfunding .
The thing is though, unlike VCs, those people you're talking to have absolutely no mandate or imperative to invest. This means that they’re usually looking for a reason to say ‘NO’ whenever an investment proposition comes before them.
So it's absolutely critical for you to understand where an investor might see risk in your business, and address their concerns up-front. There are at least 99 questions about your business that an investor might have in their head , and I am astounded on a daily basis how many entrepreneurs don't know the answers!
So get ahead of the pack and make sure you're well prepared. Here's a summary of the key areas that most investors will consider:
For a really comprehensive list of what you need to prepare, download this free report "99 Questions To Answer Before You're Ready For Investment" . And if we can be of any support to you as you prepare to go out to fundraise, or in running a crowdfunding campaign, then do get in touch .
Equity crowdfunding is an exciting and rapidly growing alternative way of raising money for business growth, and something that many entrepreneurs are considering for their next funding round. Crowdfunding is certainly an attractive route if you’re looking not only to raise finance, but also get the marketing halo that comes with putting your campaign in the public domain and attracting new investors that become your greatest brand ambassadors.
But let me warn you folks, a crowdfunding campaign is not EASY! Far from it.
Here’s a quick reality check on what’s involved, and how long it's likely to take:
I have personally found having a business coach to be transformational for me over the years, and so worth investing in. For me, the value add is really clear:
Every time I come out of a coaching session I feel refreshed, focused, and ready to take on the world!
Having a business coach doesn't need to cost the earth. You can see someone for a few hours every month, more intensively when you have a pressing need - for example when you're getting your business ready to raise investment - or just when you feel the need to. It's important to find someone who you like and can work well with.
At Enter The Arena , we help busy entrepreneurs successfully crowdfund, as well as getting them investment ready. As part of this, I work with many dynamic entrepreneurs as their business coach - the fact that I've been a successful entrepreneur myself over many years means I often know how they feel and can help give guidance and perspective. But that doesn't stop me needing my own business coach too!
If you're thinking about getting a business coach, particularly if you're at the stage where you need to get your business ready for investment, then do drop me a line and let's have a chat.
Although the statistics for parachute failure are not well recorded, about 1 in 500 fail, and the US Airforce estimates that 2-3% of jumpers will be injured and need help. Wow, sounds risky right? I’m not sure that I’d take my chances and jump right off a cliff, not really knowing whether my parachute was going to open, or whether I’d break my ankle at the bottom. Besides, I’m really scared of heights.
But that’s nothing compared to the risk of starting your own business, where the risks of catastrophe are so much higher. In the UK, 20% of businesses fail within the first year, 50% within three years . Which makes you wonder why the hell anyone would embark on the intrepid path of entrepreneurship.
The thing is, for many of us, entrepreneurialism is kind of in the blood – whether you do that within a corporate environment or out on your own. A love of taking an idea and making it happen, a constant journey of learning and growth, building a business that you always dreamed of, and taking control of your own destiny.
Starting your own business is a massive risk of course. But like parachute jumping, there is great joy and reward to be had on the descent, and there are many things you can do to mitigate that risk and increase your chances of a soft landing:
Consider a tandem jump
Starting on the entrepreneurial journey on your own is hard. I started my last business, Upper Street, with my sister Katy, and was so glad I did. It’s far less lonely when you have someone you can bounce ideas off and you can support each other through the challenges. Plus if you can find partners that all bring complementary skills, your business will get off to a great start.
Sign up with a reputable instructor
When embarking on the challenge of a lifetime, a good instructor can impart their experience and knowledge of how to open the parachute and not get tangled up in the cords like an idiot. Seek out a strong business mentor or seasoned advisors you can call on for specialist knowledge. I’d also recommend joining a few entrepreneurial or industry networking groups or signing up for a business incubator program; the support and learning you get from others will be invaluable. I was lucky enough to get onto the ASTIA programme , and it really gave me the leg-up I needed.
Get some practice jumps in
Despite the prolific media coverage of the teenage start-up success story, the average entrepreneur is aged 40 . The wealth of experience you can gather by working in corporate life or having started or run a business before should not be underestimated. My sister and I had both done plenty of ‘practice jumps’ – between us we had over 20 years of business experience before we started our own venture, and I had also run my own consultancy. The point being that you’re never too old to start a business, and in fact it can give you many advantages.
Study the weather report
You wouldn’t jump off a cliff in gale force wind. Equally in business, you need to get a strong sense that the market conditions are good before you leap. Understand the competition, the gaps in the market, the size of the potential, and whether there is underlying demand from consumers in what you are offering. Do your research! For us, this was a mix of desk-based research, but also canvassing target customer opinion (our friends, over pizza and wine). What are the possible ways the wind might blow so you can calculate where you might land? All of this should be captured in your business plan, and keep on checking the weather report all the time, as the wind can easily change direction.
Check your equipment
To make your business work, you need to have the right people, product, technology and systems. But you also need to take small steps. You wouldn’t buy your own parachute until you really became a seasoned jumper now would you? Work out what is business critical and what can be outsourced. Plan how you can keep things lean and watch your cash until you’ve got more proof points; test things out before you make major investments. We started our business by funding it ourselves and working with freelancers; it wasn’t until we had the proof points we needed before we took on external investment to try and scale the business more significantly.
Check that you have what it takes
Some people are comfortable with risk and like jumping out of planes or off cliffs; some would prefer to go for a nice walk in the country. It is not easy being an entrepreneur. It’s a lifestyle choice; it’s all encompassing. It will keep you awake at night; it will encroach on your family and social life at times. It will drain you of all the money and resources you have, at least for a while, and possibly permanently. And it is really likely that you will fail. But then again, you might succeed! You have to be comfortable with that.
At some point you just have to take that leap. So buckle up, stop talking about it, and get on with it. Remember, you’ll never have all the answers before you get started, but at least try and recognize what you don’t know. Positive naivety is what’s needed, and a very big pair of balls. Good luck! If I’d known then what I know now about how difficult it is to build a luxury design-your-own shoe business, I probably would never have done it. But I’m glad I did.
And of course, a safe landing is only the start. Because you’re then going to ditch that parachute, and enter the war zone terrain of entrepreneur country. Are you ready?
This post was originally published in Apex Women
Offering specialist skills - in a small and growing business, budgets are tight, so when angels offer to help out it's great - this might be in areas like financial strategy, marketing or technology. Geeta Sidu-Robb from Nosh Detox tells me that her angel investors give her access to city contacts she wouldn't normally come across. And I have a good handful of angel investors I've worked with like Richard Nall from The Brand Garden who have provided me with amazing support, it makes all the difference.
Being a brand ambassador - for many businesses where word of mouth is a really important way for new customers to discover the brand, it's really amazing to have an army of fans beating the drum for you. With my previous business Upper Street, where women could design their own shoes online, we made sure that all of our investors were wearing the best shoes! Crowdfunding is a really great way to give your customers the chance to become investors, as they can participate for relatively small amounts of money. And I know that Will King of King of Shaves will agree with me on this, as he's always raving about his 'shaving bond' and how he's built an army of committed fans through this, as well as a great source of finance.
A network for recruitment - Lisa Rodwell from Wool & The Gang tells me that she's often reached out to her angels for contacts either for employees or potential partners, and sometimes asks them to help with the interview process. Great idea.
Support and encouragement - it can be a lonely old place running a start-up sometimes, and it's great to have more cheerleaders on your side to encourage you to persevere. It always made my day when one of our investors dropped me a note to say that we were doing a great job. Please, angel investors, make sure you keep on patting your entrepreneurs on the head!
Having previously successfully crowd-funded for my business Upper Street, the British luxury shoe label where you can design your own shoes, p eople are always asking me for advice on how to best run their campaign, so I've put together my Top 5 Tips which I hope you might find useful:
Imagine a world where women ran half of all companies. Consider the impact this would have on the way business is done, not to mention the social implications as women plough back profits into their local community and the education of children.
Women now start over half of new businesses in the UK . Yet a only tiny percentage grow those business to more than £1m turnover (it’s only four per cent in the US ), and there are still only seven female CEOs leading FTSE 100 companies.
Women are just not scaling their businesses, and it’s a hugely wasted opportunity for growth in the economy, especially when female entrepreneurs generate a better return on investment than their male counterparts.
Lack of access to finance is one of the main issues holding female-led businesses back. The thing is: people invest in people like them.
And with only 12 per cent of angel investors (who back projects with their personal disposable finance) being women, and the venture capital world still dominated by men, it’s not surprising we have such a gender bias.
The answer in my mind is simple: crowd-funding.
Speaking as a female entrepreneur who’s been through the more traditional routes of raising finance, as well as a crowd-funding round, it certainly feels significantly less intimidating to create and run your pitch online than having to present at a testosterone fuelled pitching event, or walk into the fancy offices of a venture capital firm for an in-person grilling from the guys in suits.
It could just the thing that democratises investment for - and by - women.
And for the uninitiated female investor, it’s a lot easier to browse company prospectuses and watch video pitches online from the comfort of your sofa, dipping a toe into the water with a small investment or two, as opposed to putting chunky amounts of money into businesses via syndicates.
Crowdfunding opens the door for female investors in the same way that online gambling opened up betting for those women to nervous to go into the traditional high street bookie.
(Not that I’m directly comparing venture investment with gambling, although the risk factor probably isn’t that different).
Darren Westlake, co-founder and CEO of Crowdcube , tells me that since launching in 2011, 14 per cent of the 262 businesses to fund on his platform were founded by female entrepreneurs; with the number rising to 21 per cent this year so far, demonstrating a real growth in the trend.
And those businesses are more likely to have a successful crowdfunding raise when compared to their male counterparts.
There’s also a rapid rise of female investors drawn to crowd-funding with 24 per cent of Crowdcube's 185,000-strong investor community being female.
My business, Upper Street , allows women to design their own shoes online. We previously successfully crowd-funded a small investment round on Seedrs, closing £230k from 170 new investors.
I was encouraged to see that 36 per cent of our new investors were women, who incredibly put in on average almost four-times as much money as the men.
Women get what we do, and they’re comfortable backing us. I believe that the more exciting female-focused businesses there are on crowdfunding platforms, the more female investors will be attracted, and the cycle will continue.
But are crowdfunding platforms doing enough to make the opportunity appealing for women? I wish I’d seen more female businesses featured on the recent Crowdcube underground advertising campaign in London – all the posters promoting beer companies appealed to… you guessed it, the guys.
Seedrs’ announcement in August 2015 of their strategic partnership with Andy Murray will do great things to raise their profile. But wouldn’t it be fantastic to see a female sporting heroine like Jessica Ennis-Hill investing her well earned millions in fledgling British businesses, and her profile being employed to promote crowd-funding to women?
We owe it to the economy to do as much as we can to help female-led companies scale to generate growth and employment.
I strongly encourage all women looking to take their business to the next level to consider crowdfunding. And if you have a little money to invest? Then check out all the great female-led businesses who are crowd-funding right now – they need your support.
This article was originally published in The Telegraph
In my last post, I ran through the f irst 5 of my top tips for securing investment , based on my experience closing the first round of funding for Upper Street in 2013. So now (drumroll) here are the final 5 tips:
6. Give them confidence in you
Time and time again investors tell me that the people behind the business are the most important thing. They need to know that when things go wrong (and they will!) you have the ability to pivot. So, as captain of the ship, you’ll be seeing that iceberg coming, reviewing your strategic options, making well thought through decisions, and avoid sinking like the Titanic. Show them your skills and experience, but maybe more importantly, be honest about things you’ve tried and risks you’ve taken that didn’t work, and how you have learnt from that. Investors don’t want to work with arrogant entrepreneurs that think they know it all, they want to work with strong leaders who can recruit brilliant teams, build strong and profitable businesses, and be a pleasure to work alongside as board members. And by the way, they love it if you’ve had entrepreneurial experience before, so make sure you mention that up front. If you have a brilliant idea but aren’t able to give them confidence that you’re the right person to take it forward, they may still invest….but it won’t be long before they’re putting another CEO in place instead of you.
7. Prepare your documents
You’ll need to pull together a one-page summary that you can send to potential investors, and a presentation deck of around 10-12 slides. These will both take you absolutely AGES to get right, I must have done at least 10 versions of each before I was happy with them. Show the documents to people you trust, and beg them to give you honest feedback. Thankfully, I never actually had to give a stand-up presentation to potential investors, but I used the structure in my investor discussions all the time – they often want you to send it to them in advance of a meeting, but I don’t think this is right, because slide decks just don’t work without the person talking you through them. They’ll also want to go through your financial model in great detail, as investors think in numbers, and they can see your story through a spreadsheet. I never had to actually write a business plan, fingers crossed you won’t have to either – you’ll know your business plan, and it can be a real time sucker to have to document it. Of course alongside those key numbers you have to tell the story of your business, your strategy, and the resources you need to get there – show the investor the money you need, how you will spend it, and where it will take you. Persuade the investor that this is a journey that they should join you on.
8. Raise the right amount
This is a tough one. We raised £750k, and when I phoned my lawyer friend up who specialises in VC funding, the first thing she said to me was ‘You didn’t raise enough!’. And she was probably right. What’s tricky is that if you’re sensible you build plenty of contingency into your forecasts including a good 3 months of cash float to cover your monthly burn rate. But the temptation is to be more aggressive on your forecasts to excite the investors and secure the funding. And it’s also too easy to forget to factor in all the transaction fees and management fees that can come with an investment deal (yes, I made this mistake, doh). All this can bite you on the bum if you’re not careful, and I have to say the money goes so much faster than you think! On the other hand, you don’t want to raise too much money if it means giving away more equity than necessary at an early stage – you probably want to leave scope for giving away another slice of equity later (albeit at a much higher price you hope), and still retaining majority control of the business. The key is getting a good valuation – be bold and confident about this, and try to lead the negotiations if you can. The better the valuation, the more you can raise without giving away your equity. Sounds like very simple math, but only something I really learnt through actually going through the process…..and in case you’re wondering, yes I do think in hindsight I should have got a better valuation! But then I guess all entrepreneurs want to aim higher don’t they?
9. Do some old fashioned courting
Finding the right investor is just like finding a new boyfriend. In my case, that usually means months of having a really depressing dry spell, and then three come along like buses! But we’re not talking Tinder here; you’re not just looking for a one-night stand. Getting into bed with an investor really is as serious as marriage, so you better make sure that they’re a good match, because you’re going to need to love each other in sickness and in health as you go through the roller-coaster journey of growing your brilliant business. Build your relationship with the potential investor over several dates, and really get to know them (and like them). Make sure you have the same goals and aspirations for the business, and in particular have a clear understanding of the returns that are expected and within what timeframe, as it’s critical you’re aligned. Understand how involved they expect to be, and the influence they want at board level. Do your due diligence…you don’t need to meet their parents or their friends before tying the knot, but you definitely need to talk to other entrepreneurs they’ve invested in. And finally, don’t take it personally when an investor turns you down. More often than not it means that they weren’t the right fit for you. Pick yourself up, do a quick check to see what you can learn from the rejection, and move on to the next potential beau.
10. Get a bloody good lawyer
When you finally get to the point where you have an investor or two that are committed, and that you feel are the right fit, then the lawyers step in to help you get it over the line. These guys are going to be on your side to make sure you understand what you’re getting into, and advise you on where you can negotiate terms more favourably. You’ll start with a Term Sheet, which captures all the key elements of the deal, and then move forward into Investment Agreements, new Articles of Association, and often Consultancy Agreements for any of the founders who need to move to becoming employees. My commercial lawyers are Taylor Vinters , I highly recommend them.
Only one further thing to add – this whole process is likely to take a lot longer than you might think. For us, it was a good year from initially going out for investment, and finally getting the cash in the bank. Please make sure you factor that in, especially if your burn rate is significant and the cash is flowing out quickly.
When I was CEO of Upper Street, I spent a good proportion of my time thinking about finance, and in particular making sure that we were sufficiently funded to grow the business in the future. When I started the business with my sister in 2010, I had absolutely no idea this would be such an important part of my role.
Upper Street closed our first round of external investment in early 2014, which was really exciting for us. It was a far more involved process than I ever imagined it would be, and was hard to navigate, as I had no experience of doing this before. So with that in mind, I though I’d share my top 10 tips for securing investment with you. Hopefully you can draw something useful if this is something you’re contemplating. This is far from being a universally applicable list, but probably more relevant for a business that’s already been going for a while and is looking for their first serious round of investment.
1) Know your personal goals
When my sister and business partner Katy Chandler and I wrote our business plan in 2008, the first thing we defined was our goals. For us, it was always first and foremost about building a brand, product, team and working environment that we were fiercely proud of, and that we enjoyed a good work life balance and had lots of fun in the process. But of course, financial goals were also important to us because we wanted to get a good return from our investment, both in terms of the money we put in (not insignificant!), the time we'd devoted, the enormous sacrifices we'd made and risks we'd taken. I think our initial goal was to become ‘millionaires’! Quite a loose one that, and we further defined that over the years. But when it comes to making decisions about funding, we always went back to our original list of goals, and made sure that everything is aligned.
2) Explore all your funding options
Giving up equity isn’t the only route. Firstly, we put in a lot of our own money, as we totally believed in the principle of ‘backing yourself’. We turned down initial approaches by VCs quite early on in the journey, because we didn't feel ready for the significant and rapid growth they were looking for - we had more to learn about our business, and were concerned about our work life balance when our children were quite small. We then took a bank loan to help fund some growth (a massive personal risk as this had to be secured against my house, but this meant we kept 100% ownership). But three years into the business, we knew the time was right to start ramping things up more significantly. You can’t build a global consumer brand on a shoestring (excuse the pun), and it was a natural progression then to look for outside funding to fuel that given the amount we were looking to raise (£500k-£1m)
3) Network from the get-go
I can’t stress enough how important it is to build your networks when you’re on the path to investment, and the sooner you do this the better. Of course, you’re probably already networking to build your brand through connections in your industry and with potential partners. Developing relationships with other entrepreneurs is key, as you can share experiences on funding – I personally found The Sorority , The Industry and The Next Women to be very valuable networks to belong to, but you’ll find the ones that work for you. Every time you meet someone new, it’s a chance to practice your ‘elevator pitch’ about the business, and get feedback on what people are excited by in your story. And when it comes to the time when you’re ready to get investment, you should already have a great black book of people to speak to. Have initial meetings with investors NOT to ask them for funding, but to get their advice on your business.
4) Get as much support as you can
Navigating the investment ecosystem is tricky when you’re a first timer, so learn as much about it as you can. I bought a few books, but have to admit they’re still gathering dust on my shelf. There is of course a wealth of information online, and there are some great organisations that hothouse entrepreneurs . In 2012 we were lucky enough to get onto the ASTIA programme , set up to help female run high growth potential businesses. As part of this I went on an entrepreneurial ‘boot-camp’, learning about all the possible routes to investment, the different players in the industry, how to put together a pitch, and giving the tyres of my business a good kicking in the process. I made some fantastic contacts here, including lawyers, marketing specialists, financial advisors and investors. And at the end, I was given a team of advisors to work with me for a few months, who were instrumental in putting me on the right path to getting investment. I must say though, at times it felt like I had too many advisors and I spent a long time in the planning stages rather than cracking on with it, but on balance ASTIA was a good thing.
5) Demonstrate you have a good business
Demonstrate being the operative word here. You know your business is fantastic, but you have to articulate that well, and you have to prove it as much as you can. Know your numbers inside out; build a financial model that shows your historic and projected Key Performance Indicators (KPIs), especially the top 5-7 that you know are the ones that press investors’ buttons – top line revenue growth, spend per customer growth, cost per acquisition improvements, gross margin improvements – whatever is key for your business. If you’re not a numbers person I’d highly recommend you become one fast – get a part-time FD to help you, it’s worth paying for, but don’t just outsource this job to them, work alongside them to build your model. Investors want to know that you’re on top of your numbers or they’ll lose confidence in you fast. If your numbers don’t look as good as you need them to, park investment discussions for a while and get back to working in the business to get results. We first started talking to investors back in March 13, but quickly realised we didn’t have the right KPI story. So we went back underground, streamlined our costs, squeezed every last bit of return out of marketing spend, and frankly worked our butts off to improve performance. Only then did we return to investment discussions in Sept 13, and then fairly quickly we were able to secure investment with our demonstrable results.