Raising money for your start-up is difficult, particularly in the UK where "tech city" is still in its early stages of development. The whole process can be time consuming and stressful, particularly when you have a business to run at the same time. My start-up 'Screenburn', a Facebook VoD platform enabling the sale of film and TV from a Facebook page, has recently raised £300k of investment and appointed some senior industry figures to the board. I thought I would share some of our experiences of raising money, and what to look out for when raised money in the UK.
Angel networks are groups of angel investors that gather on a regular basis and offer the opportunity for new businesses to pitch to this group. Some popular angel networks in the London area include Thames Valley Investment Network, London Business Angels and Angel Lab. Some angel networks will charge you to pitch, typically £300-500 and may also take a "success fee" if their members do invest. It is therefore worth weighing up the cost of this, and you may wish to look at other (cheaper) options first. Screenburn pitched at all three of these angel networks, and they worked well in addition to the other options but shouldn't be relied on exclusively.
Events & Networking
One of the best ways to meet angel investors is simply through networking. Attend as many events as you can at places like TechHub, The Hub, and Innovation Warehouse. Check EventBrite and subscribe to newsletters such as Tech City News and 3Beards to find out about events happening in London. Although you may not meet angels directly, word can spread about your start-up and you may be surprised about who you are introduced to. This is how Screenburn was introduced to our lead investor, who in-turn was able to make introductions to further investors. Screenburn also had mentors from the NESTA programme, having key industry figures on board not only helps with validation but also gives you introductions to new clients and investors.
Screenburn presented at 3beards 'Don't Pitch Me Bro' event which although isn't focused on investment (quite the opposite, as the name suggests) is a good example of how you can increase exposure of your product and business.
For new businesses, 'Accelerators' or 'Incubators' are a popular way of raising money in the short term. Typically an accelerator will invest £25-£50k in the business but also offer support, desk space and introductions. Wayra and Seedcamp are among some of the most popular (but over-subscribed) accelerators in London. Screenburn did not take part in an accelerator program, although there are many similar start-ups that have had success through these programmes. Also look out for accelerators specific to your industry, Microsoft, BBC, Warner Bros. and Disney all offer their own accelerator programmes.
CrowdCube and Seedrs have received a lot of attention recently for crowd funding your business. Whilst they do offer a great platform for raising money, it is vital that you do have some investors lined-up prior to going on the platform. The sweet-spot of investment appears to be around 30%, after which you are more likely to complete the round. You may therefore look to secure 30% of your funding via other sources, and then use crowd funding to complete the round.
The Technology Strategy Board are a government funded organisation promoting technology innovation in the UK. If you don't fancy completing the forms yourself there are companies that will do it on your behalf such as Grant Tree.
Keep it top level, you'll often only have 5 minutes to get your whole business plan across. Focus on problem, solution, traction, team & forecasts. The more traction you have the better, and be realistic with your valuation. An idea is worth nothing, an early prototype with traction might be worth £300k, a business with early revenues might be worth £500k. You may also want to cover SEIS eligibility, which is a great benefit for investors when raising up to £150k. Here you will find the pitch deck that we used to raise money, some info has been removed but it will give you an idea of the overall structure.
Even when you have money secured it's certainly not the end of the process. The legal process will take 1-2 months minimum, there are term sheets, tax compliance and various other factors to consider that will always take longer than you imagine. Raising a seed round is an incredibly important part of any business, but do it right and it can ensure you are on the path to success.