5 Ace Mentors: No 5 Finance

A Mentor for finance – and his experiences

Thinking early on about future funding needs; identifying and understanding investors; and keeping track of the finances.

 

“I worked with a cohort of startups in social enterprise, most of whose ideas had stemmed from their own experiences. They had been funded so far with small grants from relevant charities. I found myself repeatedly asking how they might hope to fund their enterprise at the culmination of their 12-week Accelerator programme. That would get them to focus on how the enterprise might be developed so that it would later meet the criteria of what would often be another grant-making organisation.

 

Although ‘Demo Day’ – when startups pitch their business to funders and to the startup community – marks the culmination of these Accelerator programmes, investors take time to evaluate the businesses in which they might invest and I stress that identifying potential investors and making their acquaintance early on is important. (Wayra Lab, Telefonica’s Accelerator requires that one of the three mentors that it attaches at the outset to its new businesses be an investor.)

 

I stress that Investors look for an experienced, successful founder, a compelling mission and a big opportunity, and that they will seldom invest on the basis of no more than a business plan: early-stage customers, a working product and an idea of how you get a product-market fit in this round of funding are almost essential requirements. And having good partners (and mentors) is increasingly seen as of added value.

 

A friend of mine with experience of several startups and a hi-tech background had won a grant of £100k from Innovate UK to develop a prototype for a well recognised market, and now sought funds for its manufacture. He used the website Kickstarter that enabled him to identify and make contact with potential users, get feed-back about his prototype and offer them the product at a future date – in return for payment now (from which he raised almost another £100k.) He anticipated that he could then sell a small share in his company to investors that would enable him to extend his product range and add to the value of his company. [Access to mentors, coaches and advisers is now available to grant winners free of charge via the Business Growth Service.]

 

I can introduce startups to Angel networks (which can also be reached through the UK Business Angels Association), to the Angel Co-funding Scheme, and to the Business Growth Fund which also categorises funders by industry, stage etc. (Trade sales/investments/options are frequently overlooked.) I emphasise the kind of returns that Angels seek and I stress that they are attracted if there is a clear path to the next round of funding, and are wary of businesses that may take a significant time to reach the next funding round’s benchmarks. I stress that negotiations will always take time; and I am able to help identify gaps in their pitches.

 

I have so far discouraged anyone from using crowdfunding websites (though they are evolving fast), because they are difficult to evaluate, and some require that you reach your target to win funding. There are too many dangers in determining your pitch; you will not necessarily get the help of an investor who has ‘been there before’; and you are likely to have to be dealing with a number of small shareholders.

 

And I take some responsibility for ensuring that a team is constantly aware of revenues, margins, costs, expenditures, cash flows, free funds etc.”

 

 

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