Funding the Unicorn – capturing our top tips
24th September 2021
Following on from our #WMTechTalk series, we recently held a panel discussion exploring funding challenges for tech start-ups as part of Leeds Digital Festival. Our panel provided their top tips for getting your business ready for funding and discussing the potential pitfalls to be aware of when raising capital in a fast growth company. Here are the highlights:
Vision and conviction is everything
The resounding message from the investors on our panel was that consistently the businesses they saw as being the most successful were the ones with founders with a crystal clear vision of where their business was heading and an unwavering conviction to see that through. A strong and thought-out vision will help to keep the business on track in difficult times (which will invariably occur) and make the right choices when change strikes. Accepting that circumstances change and being able to adapt accordingly is essential to success.
Get the best people…
To paraphrase one of our panellists , “taking a business to £1 – £5m is relatively easy, as the founder can control every facet. Taking the business beyond that, where you can no longer micro-manage every detail, is where it gets challenging”. Successful delegation is essential and it is fundamental that a founder has the right people around them as early as possible. Many nascent businesses find comfort in having people they know in the business but not striving to get genuine experts in the field can hurt them in the long run. Identify any weaknesses and be ruthless in bringing in the very best people.
… And empower and enfranchise them
Make sure the other people in the business are aware of the founder’s vision and working towards the same goal. Find people who share the same passion and consider giving employees shares so that everyone has a stake in the success of the venture.
Be attractive to the investor
Our investors underlined that the factors they will take into account include:
- Is the business solving a genuine problem?
- How scalable is the business?
- What is the management team like – do they have vision and conviction?
- Can we work with the people in the business in the medium term?
- Is there a model for commercial returns that will work for both parties?
Pick the right investor
Make sure the potential funder meets the criteria your business needs. If you have a five year exit plan, and your funder is envisaging a return in 36 months, clearly there is a misalignment and the relationship will just not work. What can your funder offer beyond a financial investment? Look into who their other investments are and challenge them on the network they can introduce you to.
Take advice (at the right time)
Seeking professional advisors comes with a cost and there is an understandable temptation for a start-up to hold off from incurring that expense for as long as possible. But, ultimately equity in a business is an asset and this should not be forgotten. Experienced advisors have been there and done it, speak to your professional advisors, mentors or other founders before diluting your stake in the business.
