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And thank you all for coming. I know the weather's pretty miserable, which was a lovely welcome back to Oxford today.

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So I appreciate you making the effort to come out. I suppose when you're giving a lecture which could be retitled How to Get Money,

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it's not actually that surprising that people have made the effort to come out.

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And so you all here for that reason, you are interested in learning about building a business.

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Maybe you have a start up, maybe you want to have a start up, maybe you had one and you're thinking about having another one.

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Either way, I'm sure you'll be aware just how fragile and delicate start-ups are.

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Having a great idea or a vision for what you want to do is only a fraction of the challenge.

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The execution of that idea is really what it's all about, and not the least difficult thing within execution is how do you finance your start-up?

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How do you raise the capital to keep it going? How did you raise it at the right time?

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How did you raise it from the right people? So that's what we're going to talk about today.

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Having said that, in a lecture which is going to be about raising capital,

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obviously we should start by talking about why you should not raise capital.

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And there are a number of reasons why you might not want to.

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Often people think that the big check would be a great thing for their start-up, but that's not always the case.

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And there are a few situations that I'll talk about right now, which is why you might not want to.

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Firstly, if you are running your own business, you're in charge.

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That means you set the vision for what you want your business to be.

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If you take investors, they have needs to grow a company very quickly and very aggressively that might

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not suit the product you want to make or the kind of company that you want to run.

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If you're in charge, you decide you want 100% of the shares, you want 100% of the upside, and you can run the business how you want.

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If you do have ambitions to have a global business,

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then starting starting a business on your own without capital can be great because it stops you getting lazy and it makes you start it quickly.

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If you are financing yourself, you need to make sure that you're out there with product that people are prepared to pay money for from very early on.

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And this is a great way to get a business started, especially in industries where first mover advantage is going to be important.

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It can be really key to get out there. I'm sure you've all read or heard about Lean Start-Up and that way of doing things.

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Bootstrapping is a great way to force yourself into that. It really does stop you being lazy, but maybe that's not what you want.

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Maybe you want to be your own boss because you want to be lazy and you're good enough to be able to work just a little bit.

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And having a business that you control and that you run where you're the boss and you're your own boss means you can do what you want.

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And that's very important. But really, we are here to talk about why you would raise capital and how you should raise capital.

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So what are the reasons if you're founding a business and running a business that you might want to think about raising capital to start with?

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If you are extremely ambitious and you want to have a business that is global in scope and really a world leader,

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having partners to help you do that can be key. The investors have big visions.

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They invest in companies expecting to make significant returns on their money.

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And to do that, typically the companies have to go very global and get very big.

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So having a partner who's pushing you to do that can be a real.

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So the aid and sort of agent in forcing you to be a global company, they can also provide you with global support.

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If you're starting a business in Oxford or London or Manchester, thinking about expanding into New York can be a bit daunting.

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If you have a partner who knows how to do that and can help you, that's really, really helpful.

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Secondly, if you have those kind of ambitions, it's really expensive.

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And so financing it yourself can be really hard.

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You can constrain your growth rates by not having enough money if you're growing off the money that you're making.

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It can be a linear growth rate. And this is a phrase you might hear me say twice or more today,

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but I was always told when I was younger, dressed for the job you want and not the job that you have.

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And quite often, this is what Start-Up Businesses need to do.

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If you want to expand into a new geography or grow your sales channels, quite often you have to hire people in advance of doing that.

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And trying to fund that from your own capital is very, very difficult.

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So that's a reason to take on an investor who can give you the money to do that.

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Finally, for those of you who have run businesses or currently are running businesses, you'll know just how difficult it is.

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It is extremely tough and there are days where you will feel miserable and there are days where you'll feel great.

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Having someone to share that with who understands and especially someone who's been there before is a real advantage.

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So if you decide that capital is for you and your business and you want to go out and and raise some.

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When when's the right time to do that? When in the lifecycle of your business, should you go and seek it?

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The truth is there are many stages in a company life cycle and frankly,

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you couldn't get capital at any one of them and you may need it at all of them, depending on the nature of your business.

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So thanks to Mark Leslie, who is a professor of mine at Stanford, for this for this framework.

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But. You'll see here that the five categories of business,

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the seed the seed stage is when you've got an idea and you're formulating it into a business plan and building the models,

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putting together that sort of presentation and really just sort of conceptualising what your business is going to be about.

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You might not need money to do that. Maybe you do need a bit to live off.

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Maybe you need to do some market research, but potentially you might need to take some small financing to get that done.

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Development when you're creating the product sort of depends on the product or how much capital you might need.

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But again, that's something that might require capital and resources that you just don't have.

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When you go to market, this is what Mark Leslie calls the chasm, because you've been building these products and you've got to go out and sell it.

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And it can be a really difficult bridge again, that can require resources for PR, marketing, sales, people spending on your product.

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It can be a very expensive thing to do.

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Market expansion, as the name suggests, that's taking your products from somewhere where it's been successful to new verticals or new geographies.

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And that again requires extra resources that you might not have the capacity in-house to take a harvest.

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You might not need cash because you are an established company with a product that people are buying and you're generating plenty of money.

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The reason you might need it at harvest is for M&A purposes.

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And if you look at Silicon Valley and some of the tech companies, how acquisitive they are, you'll see what I mean.

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So as I said, financing happens at all stages and often in one company.

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It could happen at all the stages.

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But in every stage there are three questions which I think you should ask before you decide to go out and raise capital.

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The first is, have we reached a growth ceiling? Now, I don't mean by that.

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Have we reached a point where we're not growing anymore? But have you reached a point where unless you inject capital, your growth rate will slow?

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This is very important because you want to take your company as far as you can before taking on capital because point to sorry, getting a bit excited.

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Have we created all the value that we can? This is key.

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You don't want to start raising equity and giving away stakes in your company at a valuation that's lower than what you could achieve.

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You want to make sure that you've given everything you've got to the point where

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you start getting diminishing returns before you go out and raise capital.

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And then finally, do you know how much capital you need and what you need it for?

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And this is the dreaded business plan and the Excel models and everything.

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But unless you know and can conceptualise what you're going to do with the money, it's going to be very, very hard to ask anyone to give it to you.

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And it's really important to have spent time soul searching in deciding on the

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strategy of the business and where the capital will go to aid that strategy.

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So you've decided you need capital. And you're ready to go and get it.

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But where can you get it from? There are traditional sources of capital.

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As you saw, I'm a venture capitalist.

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We are one of these, and I'll just run you through some of the others just to sort of make sure that we cover everything.

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Friends and family.

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This is, as I said, often at the seed stage, you need a little bit of money just to make sure you're eating and not living off ramen noodles,

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maybe, or to get some market research done early sort of idea testing.

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And quite a lot of people turn to their friends and family, and this is a sort of pretty common thing.

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The one thing I would say here is really beware. This has many pitfalls and it can go tremendously wrong.

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So as a rule of thumb, I say don't take money from friends and family if they can't afford to lose it or you can't afford to lose them.

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It's really key that you understand that because it can go wrong and you don't need the pressure.

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On top of running a business of losing friends or family members.

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Universities. Oxford is actually very, very good at supporting Start-ups, particularly in biotech.

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So I understand, although I'm no expert in biotech, but there are plenty of programs going on.

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I was just hearing about the the new workspace they're creating here at the side business school.

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But there are also things around R&D and grants you can get and funding.

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Stanford's where I was is just created a fund to actually seed entrepreneurs with money start-ups that they like as part of an incubator program.

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So you should definitely look at the institution that you're a part of to see if they can offer you help.

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Angel Investors. These are generally wealthy individuals, often with expertise in the area that they want to invest,

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and they get tremendous tax benefits from angel investing.

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If you structure it in the right way for them.

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I won't go into the specifics of that, but essentially it's got to be an equity product and that materially reduces the risk.

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So they're often very willing to help with with money.

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And as I said, if they're people who have made their money in the field that you're in, they can also help with a lot more than just money.

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Incubators are proliferating wildly. I'm sure you've seen many of them and there are some fantastic ones out there.

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What's great about incubators is they put you in a community. They give you resources that you might not have as a small company on your own.

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You know, simple things like access to Wi-Fi and printers is really important, but also access to other people who you can ask questions from.

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They might have been through some of the issues you're going through.

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And then also, incubators give you access to a broader network than you might be able to achieve on your own.

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Typically, they take companies which have an idea and have a sort of vision and a business plan, but there are incubators out there.

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Entrepreneur first is one actually who I have mentored with who take individuals and then create the teams as part of the program so that,

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as I said, they come in all shapes and all sizes, but they can be a great way to get resources beyond your means.

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Venture capital. This is what I do.

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Venture capital comes in all shapes and all sizes and broadly covers the whole spectrum of the life cycle of a company.

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Up until the very mature stages, venture capitalists are looking to invest money in Start-ups and see significant returns from those start-ups.

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They know that they won't get returns from all of them. So it's important that when they do, they're very big.

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So they look for start-ups with global visions playing in big markets with

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entrepreneurs who have the talent to execute and create a really meaningful business.

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Banks. You would have read in the British newspapers, I'm sure, about banks and small business lending,

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and there's not enough of it going on and there's lots of government initiatives to encourage them to try and sort

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of lend more to entrepreneurial businesses and especially sort of the backbone small medium enterprises in Britain.

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The truth is they do offer a means of financing and they'll lend you money often at quite good rates.

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The difficulty is for for start up businesses, it can be hard with no track record if you're not cash generative,

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which you may not be as a tech business especially. It can be hard as well.

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So banks are an option, but only for certain types of businesses. Now we're getting into the late stage stuff.

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Growth capital, you've made it when you're talking to growth capital investors,

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these late stage venture capitalists or often private equity investing fairly sizeable checks

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which are not leveraged to help companies expand into new geographies or new verticals

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on a proven model that already shows that it generates money and they're just trying to

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help roll it out when you've really made it is when the buyout funds are coming after you.

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So they're looking for cash flow and they are going to leverage against that cash

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flow and use it to pay the debt that they have taken on against your company.

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And public markets. So if any of you IPO your business and you think back in many years and say,

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oh, that Henry Davis lecture was crucial, please ring me up, buy me a beer.

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So where do these guys play? This is not 100% right,

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because things move around and you'll see angels popping up all over the place and you'll see private equity people moving lower.

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But broadly speaking, this is how I see the map.

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You'll have your traditional very sort of early stage people, which are your angels, your friends and family.

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The incubators come in generally just after that, once you've got an idea of what you want to do.

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Venture capital. That, too. So you can pitch some venture capital firms,

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the seed firms with a business plan as long as it's credible and venture capital funds go all the way through to to growth capital, as I said.

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And then towards the end, once you've got a track record, you can get the banks.

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And once you're growing very quickly, the growth capital. And then the exit scenario is the private equity and the IPO.

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So I'm sure you're all thinking up. But what about the non-traditional sources?

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And this has been a great change in the landscape, especially for entrepreneurs,

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because now there are so many more ways for you to finance your business than there ever was before.

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Many of the new ways are actually entrepreneurial successes themselves.

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This one's probably top of mind. Crowdfunding and Kickstarter.

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There's some great success stories.

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Blaze being one, the guys that make the The Cycle Lights and they launch the product on Kickstarter and it was very, very successful.

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And Kickstarter can be fantastic way to finance your business. You choose how you raise the money.

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Often that's presale of goods, which means you're not even selling any equity or anything like that.

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You're selling goods before you've even made them, which is fantastic.

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The downside is it's all or nothing, so you can't raise a bit of what you say.

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You've got to get it all or you don't get any of it. And the truth is, it is specific to certain industries.

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I personally haven't seen any enterprise software businesses, for example, on Kickstarter.

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Please correct me if I'm wrong on that.

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Peer to peer lending funding cycle, actually an index backed company and some really talented entrepreneurs themselves.

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This is a way to get debt financing. Often in places where banks wouldn't lend and essentially, as the name suggests,

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it comes from people who have invested in the platform to fund businesses.

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It can be relatively accessible and cheap, but it's debt.

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So you need to be able to pay it back, often with interest, which means you need a business that's producing the cash to do that.

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So it's only suitable again for certain kinds of businesses. Microloans.

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The SBA is a government organisation in America with a social purpose, often geographic or trying to back certain groups within society.

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And they have mandates to lend money and help businesses get off the ground.

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There's talk in the UK of that being what's imaginatively called the business bank, which Vince Cable is kickstarting,

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and that's going to do a similar kind of thing and try and get entrepreneurs money and get small businesses money.

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It can be great if you fall into some of the criteria that they're looking for.

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It can be extremely bureaucratic and frankly, they don't massively understand innovative new businesses.

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So there are companies that do understand this, the new small, medium enterprise lenders on deck.

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Another Start-Up has raised a lot of venture capital itself, and they specialise in lending money to small businesses.

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They do it all online. It's all very efficient. It's all very quick. They have algorithms which help them assess the risk,

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which means that they can generally lend to people banks wouldn't, and it rates potentially lower.

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It can be expensive. That's that's the thing. You need to make sure that, again, it's that you've got to pay it back.

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You need to make sure that you can and you can cover the interest. Factoring another Start-Up.

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In fact, Kabbage, which does this factoring, is basically borrowing against your receivables.

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So it really is only for e-commerce and businesses that sell online.

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Specifically, if you sell through eBay or Amazon or platforms like that where it's very easy to see how your business is working.

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And this helps you find the working capital that you need to sell products.

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Finally there's you. Lots of entrepreneurs have funded their businesses themselves.

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I'm sure you've all heard the stories. Oh, I mortgaged my house, or I took out seven credit cards to start this business.

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Certainly the Dragons Den seemed very keen. You know, you're not a committed entrepreneur unless you've gone to these kinds of sacrifices.

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My personal view is that financing a business yourself is a really difficult thing to do because it puts additional risk on you.

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The entrepreneur who's already taking a massive chance to start a business, potentially giving up income and all the rest of it from your job before.

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And it can make you take decisions to solve for your own personal risk, which might not be in the best interests of the business.

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So think very carefully before you put yourself on the hook.

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The truth is that most businesses will raise traditional capital, especially if you get to a meaningful size.

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At the moment, the non-traditional backers haven't raised the capital needed to fund companies all the way through the life cycle.

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So if you are going to have a successful backed business, it's probably going to be from traditional sources at some point.

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And that's really what I want to talk to you about now. How do you go about asking for that from traditional sources?

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See the right people the right way. What does that mean?

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So the first thing I'd say is select the right investors.

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I said before, venture capitalists come in all shapes and all sizes and all countries and so on, so forth, and they all have mandates.

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And generally they're pretty open about what they will and won't do. If you spend time on their websites, angel investors, too, have public profiles.

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They talk, they put themselves out there.

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It should be quite easy to find out who the right investor would be for your stage, your sector, and your geography.

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If you do a bit of homework, you can save yourself a lot of wasted time chasing the wrong people.

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Seek a warm introduction. So a couple of you already come and said hello to me today and I'll be around, as was mentioned earlier, for drinks.

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Please do later. But that's a really good idea.

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In in raising capital is make sure that you get yourself out there and get known because all investors, angel investors,

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venture capitalists, everyone else get literally tens of emails a day from start-ups looking for money and to stand out from that,

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however good your idea is, is really, really hard, you know,

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from a cold email where you're just trying to pitch your business and it's really, really difficult.

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So if you can get out there, get known, at least get your word about your company out.

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That's a really, really good thing to do. Be sort of as dogmatic as you can be without being over the top.

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You don't want to scare anyone. But what I will say is that the best introduction you can have is a warm introduction.

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So rather than coming up and shaking someone's hand, if someone the investor trusts introduces you, that is going to get you a lot more airtime.

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So if you know a way into an investor, I would definitely explore those avenues.

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LinkedIn is obviously great for that and a warm introduction is by far the best way.

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Now, however, you go about finding and approaching your investors, the one thing that I would say is.

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Be prepared for people to say, no, it is going to happen.

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And even the best businesses in the world, the most successful start-ups in the world, had venture capitalists say no to them.

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Obviously, in those cases, the venture capitalists probably regret it now.

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But you do need to be prepared to hear the word no.

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Probably quite a lot, unfortunately. And if you're prepared, hopefully you can be graceful about it, because if your company is successful,

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you will come across this small network of investors again for sure.

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And they may be able to help you in the future. So I would say be prepared and, you know, be graceful about it.

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When they do say no, they may well be wrong and hopefully they are.

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And that would be awesome that you can prove them wrong in future. But it is something that will happen and you do need to be aware of that.

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So if you do get the meeting, you get the introduction.

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You're in that. You've got the meeting with the investor. How do you convince them to fund you?

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So this is, I suppose, the art of the pitch caveat that there is no right way to pitch.

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And this is very much subjective thought. This is what I think a good pitch should have.

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And if you can answer the six questions that I'm about to show you,

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I think that's got the makings of a great pitch and has covered everything that an investor should want to know.

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So what are the six things? Number one, why are you doing this?

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Why did you quit your job or do whatever it is to give up whatever you were doing before to do this?

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What specific insight or disruption or special technology or gap in the market did you see that made you want to do this?

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Oh, sorry. Number two, given that insight that made you want to do it, what are you doing to address it?

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So it's actually fairly common that you look you sort of meet entrepreneurs

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or look on their websites and you're not quite sure what the business does.

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So it's really key to just make it very clear how you're addressing the the thing you identified in point one.

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Number three, who else is doing this? Now, obviously, by nature of being an entrepreneurial business, you're trying to do something new and different.

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You're trying to do it in a different way. But you need to be really honest.

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The truth is that there are substitutes. Even doing nothing on the customer's part is a substitute of sorts.

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So you really need to be honest about what the options are that are out there and be honest with yourself and also the investor.

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So you can then go on to point four and tell them why you're going to blow those guys out of the water.

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What is it about your product, your team, your strategy, which is going to enable you to beat everyone else and every other option?

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Number five, money. Now the top 36 venture capital.

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Backed businesses was released this week. You might have seen it. I think it went out on a LinkedIn article.

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Actually, two of those do not make revenue.

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Does anyone know what they are? I didn't hear.

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So it does make revenues and it's it's sorry, these are non-public companies.

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I should been clear. GOODMAN And I'll say the other one is Pinterest, but only two out of 36.

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So it's not 1998 anymore. Revenues are important.

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People are thinking about this. They want viable business models and they want proof that they work.

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So even if it's many years out that you're going to make revenues,

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it's important that you've thought about it and you have an idea how your business turns into one that generates money.

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Number six is a slight variation of that you can show.

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Amazing. Understanding of your business and your model.

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If you can show the KPIs that are going to be important as you grow and how they flex and scale with the business,

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if you show a deep understanding of the metrics, that shows success.

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So if you're an e-commerce business, you might want to look at conversion rates and so on and things like that.

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Each. Each sector has its own sort of terminology, which I won't bore you with because it is essentially terminology.

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But underneath that,

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it's things that will show that you really understand what drives your business and will help all the other things fall into place.

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So you've decided that you want to raise capital.

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You've approached the investors, you've pitched them, and you've convinced them that they should invest in you.

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What happens then? How does a financing round work? So pre-funding.

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Let's say your business is worth £4 million and we will talk about valuation.

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So don't panic. But congratulations. You have a business that's worth £4 million.

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You started it yourself. You own it all. 100% of the equity is yours.

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And you've done your work, as we said, and you've worked out how much you need to raise to get to the next stage, and that's £1,000,000.

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And so your investors are going to put in £1,000,000. What that means is after the capital raise, you'll have a company that's worth £5 million.

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Now, this is called Post-money valuation. This is something that you will hear when you raise money.

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The post-money and the pre money. The 4 million is the pre money.

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You add the one, you have the post-money, which is the five, and you now own 80% of 5 million, which is still the same 4 million that you had before.

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But you've got the additional capital from the investor.

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You should never really think about selling your own shares, only taking on new capital as an early stage business.

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Only sell your own shares once you're very, very mature because it's a very bad signal.

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So all the new capital that you take in shouldn't go to you. It goes to the company and helps the company grow.

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But as I said, we would talk about the dollars and cents. So how much you should raise is obviously a really important thing.

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And we talked a bit about it before. You should work it out using a model and you should think about the business needs,

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but you should only really raise as much as you need to get the next to the next stage.

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So what does your model tell you? You need to get to either breakeven or another point for a financing round.

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You don't want to raise more than that because essentially then you'll have to give away more

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of your company and you want to get enough to get the business to the next stage for sure.

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But you don't want to give up too much of your business more than you needed to.

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You need to be prepared to give up some of your business for the benefit of it.

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A smaller percentage of a bigger value business can be worth more than a bigger percentage of a smaller value business.

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Remember that. But try and get the balance right that. And then how does valuation work?

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Well, frankly, it's not that simple. It's a bit of an art and not a science.

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It will be driven by demand. If you're a super hot valley, start up with venture capitalists beating your door down, the valuation will be very high.

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If you've only got one investor, really it's up to them.

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So it's driven by demand for your company and the parameters will be led largely by the investors appetite,

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which is how much they want to invest and how much they want to own.

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So in the last example, it was 1 million for 20%, and investors will have a pretty good idea about that.

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And a good investor shouldn't try and sort of get one past you here.

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If you're picking the right investor,

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then they should be behaving in a way where they realise that screwing up early is going to lead to misaligned incentives.

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It's important that you understand that you shouldn't be too defensive.

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You should obviously be aware, but investors really are aligned with you and so they need to keep you incentivised and not get one positive.

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So once you've agreed on the parameters of the deal, the valuation and the amount you're going to raise,

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you will get to a point where you're given a term sheet.

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And these are terrifying things with all sorts of language in them that will scare the [INAUDIBLE] out of you.

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I won't bore you with the minutia. We could have a whole day's worth of lectures on timesheets and still not agree.

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So what I'll do is hit the five key points that I just want to flag to you now.

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So if you ever see them in a time sheet, you sort of thought they were coming, and you'll be a better place to deal with them.

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The first is the type of instrument.

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So in the worked example before it was just sort of 20% of the same shares that you had, which is the common equity.

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And often that's what investors take, but sometimes they want preference shares.

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And what that means is shares that have either different economic or legal rights to yours.

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So they might be entitled to a dividend or they might have more rights over what direction the company can go in than the common shares and finally,

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convertible shares. These are things that generally happen in early companies and they're great because they don't need a valuation.

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So before you have anything to really value convertible shares a great because they work like a debt instrument with

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an interest rate which just accrues you don't actually have to pay it it just accrues in value on the on the loan.

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And then when you do raise around with the value, it converts into equity at that valuation.

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The thing about convertible shares is back to the angel investors and it sort of tends to be around that early stage when angels might be involved.

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They can't get the tax relief on convertible shots, so be aware of that.

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Legal restrictions. There will be a bunch of these in the timesheet and these will be the investor

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putting restrictions on primarily when you can sell shares in your company,

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when you can issue new equity,

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i.e. when you can go out and raise a new round and when you can sell the company or materially change the direction of the company.

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Now, this is not because they want to repress you.

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It's a shield for the investors, not a sword. They're investing based on a vision.

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And and they hope that your interests are aligned. So what they're doing here is just trying to make sure that your interests are

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aligned and and protecting themselves as minority investors in your business.

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Thirdly, the the Aesop. This is really, really important.

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So when you raise money certainly later on. So not not at the very, very beginning, but but series and beyond,

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investors will probably ask you to put aside a bit of your business into a share option scheme.

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Ten 15% is typical. So as well as selling the 20%, you'll have to give another ten or 15% into this option scheme.

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The culture in the UK is not that in favour of option schemes in America that

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extremely popular and extremely sort of well-liked and entrepreneurs don't mind.

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Here people are a bit less sort of bullish on them.

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My view is that they are extremely important and it will really help your business to have one.

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So I would not be too worried about giving equity to a to an option scheme.

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The reason for that is if you're going to be a world class start-up, you need world class people.

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And to get world class people and then incentivise them to remain world class,

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you need to give them some skin in the game and an option plan does that.

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Diligence. So there will be requirements in the time sheet about what investors want to do to make sure that your business is what you say it is.

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Three types legal, which is pretty much what it sounds like it will be checking that your company exists and it was

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registered in the right way and you own the copyrights and the trademarks and things that you need,

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checking that your employment agreements all work. This is pretty arduous.

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You'll get asked to provide a ton of documentation and it's really, really painful, but it's important and it happens in every deal.

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Financial doesn't happen in every deal, especially at the earliest stage.

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But if you have financials, you've been making money.

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The investor may want to go through the accounts and just make sure everything adds up and that your cash balance is what it should be and so on,

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so forth. And commercial diligence again, doesn't always happen because quite often the commercial diligence is done before you get the timesheet.

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But that's the investor just checking that the market size is what they think

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it is and that you're strategic direction is is what was agreed and what.

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You know, they think it is. And so that's that's the third element. So you will definitely have to do legal whatever.

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And the other two you may have to do especially at a later stage. Finally liquidation preferences you may have heard about.

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They're extremely complicated. They can be.

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Very difficult things to get through. Essentially what they are are the rights of an investor to get a different return at certain thresholds to you.

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Again, they fall in the category of the investor just trying to align incentives.

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So the investor is is looking for a return that sort of five, ten, 20 times.

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They want you to grow the business that much and it might be good for you to double the value of the company and sell it for a few million pounds.

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And that's a great positive outcome, but it's not good for the investor who needs to get these big returns.

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So what the liquidation preference does is sort of stop you selling to cheaply, if you will.

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So again, a good investor shouldn't use this to to beat you.

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They should use it as a sort of a way to align incentives.

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And you should just be aware of it because it does have material outcomes on your returns at the end of the day.

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So what do you need in a financing? Really?

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You need a good lawyer. It's really important. There's a lot of stuff in there that you probably won't understand.

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And the table is stacked against you because chances are the investor's done it before and chances are you may not have done so.

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Make sure you hire someone. It's worth spending a bit of money on.

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So I've said a lot about the rights. Investors are not doing things that go against your interests and working with you as a team.

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How is it that you can go about choosing those right investors?

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Well, first, let's just talk a little bit about what a syndicate looks like.

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Typically, you have a lead investor and as the rounds get bigger, so series and beyond, even at seed stage, you'll have other investors.

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So the lead investor. Well set the terms of the deal and will drive the diligence and drive the deal and be the key sort of investor going forward.

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Generally, they take the largest state, not always, but mostly,

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and they'll also help you structure the rest of the syndicate with the other investors.

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So they'll sort of help you decide who's good and who's who's not.

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The other investors follow the terms set by the lead so they don't negotiate separately.

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You all sign one set of documents, which is great because you don't have to do it four times.

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They can be heavily involved in the company despite not being the lead.

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So they might take board seats if they've got enough stake, for example.

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And it's important that you like them. They're not just sort of dumb money to tag on.

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They can be very important partners as well. So what should you look for?

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Well, in your lead investor, I think it's really important that they have a solid reputation.

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Raising money from someone who has a great reputation puts you in a pool of that reputation.

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So you can really do a lot for your company by being backed by the right investor or the right venture capital fund.

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Secondly, relevant expertise and a good track record. Someone who's done it before.

380
00:35:34,220 --> 00:35:38,630
I'm showing you that they've done it before and can prove that they know what they're talking about so they can help you.

381
00:35:40,080 --> 00:35:46,049
Breadth of network. It's really important that they can help you with contacts, introduce you to people that you might want to hire.

382
00:35:46,050 --> 00:35:49,710
Introduce you to people who can give you advice, help you scale into new geographies.

383
00:35:51,090 --> 00:35:56,370
And other resources that can help you. As I said, hiring PR more money is also quite important.

384
00:35:56,460 --> 00:35:59,550
It might be helpful to go with an investor who can follow on in the next round.

385
00:35:59,580 --> 00:36:04,440
They don't always do that for various reasons, but it could be helpful to have at least one in the syndicate who might.

386
00:36:06,660 --> 00:36:09,780
You need an individual in the deal who you like and trust.

387
00:36:09,810 --> 00:36:13,139
This is really important. They're going to be on your board. You're going to see them once a month.

388
00:36:13,140 --> 00:36:17,940
You're going to call them probably more than that. You better like them and you better believe that they believe in you.

389
00:36:18,150 --> 00:36:22,080
It's really important that you spend time with them before signing anything and make sure that

390
00:36:22,080 --> 00:36:26,420
you like them and also make sure that there's a clear commitment to you and your business.

391
00:36:26,430 --> 00:36:32,070
Obviously, portfolios are big, so you need to understand how you fit into that portfolio and what kind of attention you'll get.

392
00:36:33,770 --> 00:36:36,860
So with the other investors, I think a lot of the above is true for them too.

393
00:36:37,550 --> 00:36:41,000
But additionally, you want to make sure that they'll work well with the lead investor.

394
00:36:41,030 --> 00:36:47,329
You don't want to have investors who disagree and clash. So it would be good to see that they've worked together before, or at least they're aligned.

395
00:36:47,330 --> 00:36:52,810
And what they want from you sector expertise or deep knowledge of your company can be helpful.

396
00:36:52,820 --> 00:36:55,280
You might want to take a small investor, for example,

397
00:36:55,280 --> 00:37:00,290
who knows a tremendous amount about what you're doing or who has mentored you through the early stages.

398
00:37:01,930 --> 00:37:04,540
And finally again, the ability to follow on.

399
00:37:04,990 --> 00:37:10,630
This can be so often you take an investor with a small stake with the hope that they'll take a bigger stake in future out.

400
00:37:11,710 --> 00:37:15,370
So how do you then sign the deal? You've got to a point.

401
00:37:15,370 --> 00:37:20,770
You've decided you want to raise capital. You've worked out which investors you want, approach how to approach them, you've pitched them,

402
00:37:21,310 --> 00:37:24,820
you've worked out how much money you want to raise and at what valuation you've gone through.

403
00:37:24,820 --> 00:37:28,060
The time she, you've chosen the right syndicate. How did you sign?

404
00:37:30,160 --> 00:37:34,820
Generally with a pattern. So where does that leave us?

405
00:37:34,850 --> 00:37:43,910
What have we learned today? I think there are a few key takeaways that I would like to just reiterate from from our conversation.

406
00:37:44,840 --> 00:37:48,860
Firstly, capital can be vital for your company to grow.

407
00:37:48,890 --> 00:37:53,810
Don't be scared of raising capital. It's not giving away your business. It's really opening doors and opportunities.

408
00:37:54,440 --> 00:38:01,499
If that's the way you want to go. You may need capital more than once at every stage.

409
00:38:01,500 --> 00:38:05,410
As I said, it can be crucial to you to have capital sometimes.

410
00:38:05,430 --> 00:38:12,030
Sometimes you only need it once, sometimes twice, sometimes five times. You know, go and crunchbase and just click through companies and you'll see.

411
00:38:14,200 --> 00:38:19,780
There are a lot of places you can go for capital and you should pick the right one for you given your stage and what you're doing.

412
00:38:20,020 --> 00:38:25,870
So that could be traditional, it could be non-traditional, but really be aware that there are a lot of places to go.

413
00:38:25,870 --> 00:38:33,979
And we've talked about a few of them today. You should approach investors with care and do your homework and make sure that you're ready for the

414
00:38:33,980 --> 00:38:37,610
conversations that you're going to have because you don't generally get more than one go at it.

415
00:38:38,270 --> 00:38:40,340
And so we've given a few tips about how to do that,

416
00:38:40,730 --> 00:38:46,700
but make sure that you're definitely sort of ready to answer the difficult questions when you go to investors.

417
00:38:48,610 --> 00:38:54,430
Beware the details. So we talked about a few of the things in the time sheet and evaluation, but it's really important that you do.

418
00:38:54,460 --> 00:38:59,220
When signing a deal, it's never simple. It's never, Oh, I'll just take the money and it's all done.

419
00:38:59,230 --> 00:39:03,670
There will be things that will impact the future of your business and your life materially going forward.

420
00:39:03,670 --> 00:39:09,670
So make sure that you do personally spend time because you're the person who's most invested in your Start-Up.

421
00:39:11,460 --> 00:39:15,900
And finally pick investors that you trust and you like and you think are going to be good for your company.

422
00:39:16,440 --> 00:39:22,440
If you are aware of all these things, as you scale your company and grow it, this will really help you on the financing side.

423
00:39:22,740 --> 00:39:27,780
They said it's only one part of having a successful company, but it is a really important one.

424
00:39:28,140 --> 00:39:32,550
So I hope that you can take away some good advice from this presentation.