'Poisonous investors' will sink your business
Tech entrepreneurs seeking investment should treat the process like a marriage and get to know each other first before committing to a relationship.
That was the view of Howard Simms, CEO of Apadmi Ventures, which works with early-stage tech start-ups like advertising tech firm Bidooh, dating app JigTalk and music streaming start-up Beatstream.
Simms was speaking at BusinessCloud’s Insight Tech Investment, at UKFast, which was sponsored by Praetura Ventures and watched by an audience of more than 110 people.
Simms compared choosing an investor to forming a marriage in order to avoid ‘poisonous investors’. “You hold hands to start with,” he said. “You might eventually give each other a kiss but you don’t get married until you are absolutely certain. Why treat investment any differently?”
The entrepreneur said if the wrong investor is willing to offer you £200,000 then there’s no reason why the right backer won’t do the same so don’t rush in.
He also said money is only “one piece of the jigsaw” when it comes to finding the right investor.
Serial entrepreneur Steve Kelly (below) has raised more than £50m during this career, including £30m for his current business Smartkem, which is creating the technology that will be used in flexible screens like mobile phones and TVs.
He founded Northstar Advisors to help other entrepreneurs and said it’s vital businesses seeking funding are fully prepared.
“A lot of small businesses don't do themselves any justice by not preparing properly for investment and it's no surprise there's a high attrition rate for start-ups who are not able to find any kind of financing,” he told BusinessCloud.
“I'm always looking at what problem they're going to solve - is it going to change the world, is it going to change a small part of the market, and how much pain is there?
“I look at the results that they claim they are going to achieve, are they over-promising or under-promising? Then lastly looking at evidence that they've got the tools to survive - have they got the abilities, have they got evidence they've done this before, are they entrepreneurial in nature, have they used a bit of their own cash to take some risks?”
Carly Gulliver (below) is a managing associate at law firm Addleshaw Goddard and said investors hate surprises like problems with IP.
“Investors want to have trust in you and the minute they find a surprise, the relationship will start to waver,” she said.
“I think from entrepreneurs’ and growing companies' perspective, it's about receiving investment at the right time in their journey and as they're trying to scale the business.
“They (investors) have to be more certain about what they're investing in so I think their risk appetite has gone down which from a company and entrepreneurial side, makes it a bit more challenging because they'll be under more scrutiny and investors are less likely to take risks.”
Louise Rigby (below) is an investment director at Praetura Ventures, which is seeking to bridge the estimated £300m venture capital funding gap for scaling businesses in the North West of England.
The company has invested in 25 companies in seven years including Peak AI; Sorted; Inspire Energy.
She said business pitches should grab attention and get to the point. “Don't send a 20 minute pitch video, and don't put emojis on it,” she said.
Other speakers also included Mike Anderson, of Padoq; Elizabeth Clark, of Dream Agility; Mark Finlay, of Moneypenny; Paul Haydock, of Founder Fundraising; Paul Billingham, of Knight Corporate Finance; and Richard Hayes, of Mojo Mortgages.