Last Thursday, July 10th, we held the latest in our series of mentoring sessions at Guildhall as part of our Entrepreneur Academe programme. This month we were holding a special session looking at finance, and especially fund-raising. We framed the day with a series of questions, including:

  • What are the different types of funding? And what are the pros and cons of each?
  • What’s right for your business? When is the right time?
  • What do investors look for? How do you approach them?
  • How do you value your your business?
  • How much equity should you be prepared to give up?
  • What does a typical term sheet look like? And what is it for, exactly?
  • What do you need to know about SEIS and EIS?
  • How do you present and adapt your pitch for the audience?

To guide us through these questions, and many others from our entrepreneurs, we had a great panel of experts, each with a specialism in a particular area of funding and finance:

(We also had a number of our initiative’s mentors in the audience to help conversation along, including Angelique Mohring, Bridget Connell, Susanne Chishti, Matt Mower and Nick Reynolds.)

It was, as you can imagine, a very lively discussion that carried on some way past our three hour deadline and it’s great to see our entrepreneurs really grappling with the financial realities with which their businesses are engaging. Here are some of the insights from the afternoon, and some great quotes too…

  • Accepting equity funding always assumes some level of loss of control – and may even mean board level interference. As one panellist put it, equity funding is “horribly expensive”.
  • “Having lots of investors sucks.”
  • Angels can offer so much more than funding – their experience is critical.
  • There’s a very clear, and well trodden “funding ladder” that broadly goes bootstrapping > friends and family > angel round(s) > series A > series B
  • Along the way there are various other forms of funding available, including research grants, crowd-funding and incubator investment.
  • Don’t go for funding if you don’t need it! It’s perfectly legitimate to grow a business organically – although of course funding can help accelerate the process.
  • Investors are going to be looking for “traction”, but this need not necessarily be financial (although that helps!) – it can be about personal reputation or size of user base or degree of innovation, for example.
  • Don’t expect US levels of investment here in the UK.
  • Funding can be a “massive distraction”. Ask whether the CEO is the best person to be doing the raising.
  • For angels, funding is still “more an art than a science”.
  • Ask for what you need – not what you think you can get.
  • The advantage of crowd-funding is the ability to spread consumer awareness and build community.
  • With regard to exiting, “M&A has fallen off a cliff”.
  • More than anything else, investors are investing in the team.
  • No-nos for investors include the lack of an exit strategy, not being honest about the competition, the exaggeration of market size and lack of clarity around IP.
  • When pitching, give the “50,000 ft view”; that is, don’t go into too much detail until asked for it – although you must have it at the ready.
  • And, finally, the CEO must have a strong grasp on the figures – this will really give investors confidence.