In the last 20 years, I’ve been through more than 10 capital raisings with highlights including securing venture funding for my first business at age 19, bringing Westpac onboard as uno’s majority shareholder (securing more than $50 million) and several unsuccessful funding rounds. It’s left me with a pretty good understanding of the best way to raise capital. Here’s my advice:
Think beyond dollars
When approaching early stage investors, it’s a good idea to think beyond money and ask them to contribute their knowledge to grow the business.
At the early stages of a business, you need help, relationships and blunt feedback as much as money. I met the first investor in my previous company, Planwise, at a festival in Perth. He had just spent four years in Silicon Valley, so was interested in hearing about my plans to move there. I met with him regularly to get feedback on my thinking, strategy and focus. A year later, I hit a wall and needed to raise $20k to get us from concept to launch and he wrote the cheque.
Be wary of pitch events
I advise entrepreneurs to mostly avoid pitch events. Investors in an early stage business are investing in two things: the market for your product and your team. Despite the number of speed-dating-type events aimed at pairing startups with investors, five minutes isn’t enough time for investors to know whether they should back you. A pitch event can be beneficial for getting your narrative tight so it can be understood in five minutes, but don’t go there expecting to close a round.
Angels aren’t always a godsend
Approach investors who know your industry over angel investors who invest in a lot of different industries. It’s infinitely harder to get investment from an investor who doesn’t have a specialist understanding of your work because they won’t truly understand the customer problem you’re solving. This is hard for two reasons. It means you have to do a lot more convincing that the opportunity exists, but also means that they will find it harder to add value when they invest.
The first major round of funding we did at Planwise included two guys who had strong knowledge of and connections in financial services. The counsel provided and doors opened enabled us to make it through critical moments in the business.
One of the most important things to consider when securing funding is to know when to cut your losses if an investor is not committing. In my experience, if an investor hasn’t committed after a month it’s unlikely they will. A serious investor will be excited about moving things along and is likely to suggest one or two other people to talk to.
If someone says, ‘too early’ they are saying no. Thank them for their time and ask for feedback as to why they aren’t investing. If you get platitudes, dig harder and be prepared for the real feedback, which you should take on board.
Vincent Turner, Founder and Chief Innovation Officer, uno Home Loans.