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
Many entrepreneurs struggle with this question. It's really important that you give this question of TIMING proper consideration, so that you can make the right decision for YOU and YOUR business.
Securing equity finance is not a business goal in it's own right; it's a tool to help you ACHIEVE your goals.
So the first thing you need to look at is WHY you are Fundraising?
Funding is all about getting you from one key milestone, to the next key milestone. From one set of achievements, to the next set of achievements. So the funding you raise NOW, needs to get you from that A to B.
So how do you know when you're at optimum point A to be in a good position to raise equity finance?
A GOOD time to raise equity finance...
It's challenging to raise significant amounts of cash through equity finance when you're at idea stage only. There is a caveat to this. IF you're a serial successful entrepreneur, investors may well be prepared to back you on an idea only. Usually, at idea stage, you need to bootstrap your business at the start. Use your own funds, or borrow from friends and family. You might even get a start-up loan, which are available for up to £25k.
Raising equity investment is much easier at a point in time when you have TRACTION in your business. Traction is all about proving that the market wants what you are offering, and that your business has potential. If you try to raise finance when you have zero traction, it's going to be an uphill struggle, because most investors will feel that there is too much risk in backing you.
The more you can show that you have paying customers, great customer feedback, returning clients, and accelerating growth, the better. The further you are along with proving your business model, the better. These things help DEMONSTRATE to an investor that your business has great potential and they can expect a good return on their investment if they back you.
When you have just completed a key milestone that PROVES traction, you have a strong story to tell investors. This is a really good time to raise money.
A BAD time to raise equity finance...
Do NOT leave it to the point when you are out of cash. This puts you in a much weaker position because you'll be at the point of desperation. Make sure you have a good 6 months worth of cash in the bank. A well run fundraising campaign, if you know what you're doing and have experience in equity fundraising, will take 3 months or sometimes a little longer to actually complete the legals and get the cash in the bank.
If you've never raised finance before, and you don't really know how to do this, the chances are it's going to take you 12-18 months to get your funding. Or worst case, you will fail at fundraising.
Raise money BEFORE you need it.
And if you want to fund your business FAST, without wasting time and effort along the way making all the mistakes in the book, and burning through investors who all say NO, then get professional support to help you.
Getting the support you need
If you feel that NOW is a good time for you to be raising equity finance, and you're ready to get going and make this happen for you, then reach out. Because if you have a great business that is already proving traction and is ready to scale, I would love nothing more than to help you raise the finance you need... so that you can achieve all your business and personal goals that this funding will unlock for you.
So how do you figure this out when you're out there seeking your first investment round?
Of course, you want to make sure that your valuation is attractive for investors. Because otherwise, you may end up with no investment, and no business. It's better to have a slightly smaller piece of what will be a much bigger pie down the line once you have that investment, rather than no pie at all.
But you also need to make sure that the valuation is right for YOU. That YOU get a fair deal out of this.
Now, you can search online about how to value a business. There are lots of different calculations you can do.
But the truth is, when it comes to valuing a start-up, absolutely none of this is relevant . You cannot use simple maths to work it out. In fact, there is no right answer on how to value your business.
Some people get a bit greedy. Have an overinflated opinion of what their company is worth, when they haven't really got much traction yet. Valuing your company at £10m+ when you're only just out of the blocks is not going to wash. You might think you're going to be the next unicorn, but quite frankly it's unlikely. You’ll lose any integrity you had with investors, nobody will invest, and your dreams of making a real difference in the world will never be realised
Others are nervous and go in too low. Maybe because their revenues are small or profits are negligible or negative. Maybe because they don't have any experience in fundraising, and don't know what they're doing. Maybe because they feel desperate. They end up giving away too much equity, and massively reduce the potential that they can make down the line when their company is successful.
Somewhere in the middle of those two scenarios works. But how to do you make sure that you get the best deal?
Here are some things you need to think about FIRST...
Ultimately at this stage, your business is worth what someone is prepared to pay for it
The most important factor in determining your valuation is what you and your investors believe your business will be worth in the future, and whether you can give them a great return on the investment that is put in
What will influence your valuation MOST, are these things:
These are the things you need to focus on, rather than sitting down with a calculator and trying to do the maths to work out your valuation.
If you're not sure about how you would value your business, and you want to have a chat about it, just reach out.
The latest research on Equity Investment in the UK* shows that there there’s plenty of cash available IF you have the right investment opportunity AND know how to navigate your way to investors.
But don't let the headline figures fool you...because it's getting tougher. Deal numbers overall are actually down 3.54% compared to H1 2016.
In the first half of this year, a record £3.03bn was invested in the UK, showing a 74.7% increase on the second half of 2016.
46% of this money is going into Seed Funding, which is the earliest stage of investment.
HOWEVER it’s important to note that although more is being invested, the deal sizes are getting larger and fewer deals are actually being done. There were two huge deals done this half of the year (Improbable £389m and FarFetch £313m) which have massively skewed the numbers. Deal numbers overall are down 3.54% compared to H1 2016.
This means that the market is becoming even more competitive. If you’re an early stage business seeking your first round of investment, it’s not easy to secure the funding you need.
When you're out raising investment for your business, FORGET producing a 40 page Business Plan. Don't even THINK about sending a Business Plan out to people. Why? Because NOBODY has time to plough through this beast of a document!
Don't get me wrong. You need a Business Plan. Your Business Plan is a document for YOU, to guide you in how you are going to implement your business strategy.
But....when you're out raising investment, the document you REALLY need is a Pitch Deck. And this document needs to be STELLAR.
Your Pitch Deck is THE main tool you'll be using when you have conversations with prospective investors.
And you know what? Professional investors see HUNDREDS of Pitch Decks each year. So the truth is, you MUST make sure that YOUR deck does an outstanding job for you.
A great Pitch Deck can make ALL the difference in enabling you to be successful at raising finance.... so that you can take your business to the next level and stop treading water.
A great Pitch Deck enables you to do these 4 key things:
1) Build rapport with your investor
2) Show your investor how you can solve their problem
3) Qualify potential investors to make sure there's a good fit
4) Close their commitment to invest in your business
But guess what? Most entrepreneurs FAIL to address all 4 of these things in their pitch deck, and so they FAIL to secure investment.
Here are the 5 things I see that are wrong with most Pitch Decks:
1) They're overcomplicated
2) They don't tell a good story
3) They aren't honest and authentic
4) They're full of jargon
5) They don't look professional
And honestly, it makes me weep when I see what is a fantastic business, with a smart entrepreneur behind it, with great potential to secure investment for growth..... that is simply being LET DOWN with a poor Pitch Deck.
Have you produced your Pitch Deck yet? Is it good enough? Are you SURE it's good enough?! Want some help with it? Reach out and let's have a chat.
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.