Venture Capital Advisors
Discussion
Anyone know or can recommend advisors that specialise in supporting entrepreneurs in raising VC money.
The company has launched its product (SAAS), is revenue earning and super-fast growth. It has been funded to date by individuals but now needs the next level.
The level of funding wanted (~£500k) is below the level at which private equity would be interested (and risk profile too high), but equality now beyond friends and family etc
I've seen advisors at the higher amounts (£100M+) add huge amounts of value, looking for a company that operates in the hundreds of thousands rather than the millions.
Plenty of early stage VC firms will help with a sub <£1m seed round.
Best-in-class for UK firms are places like Passion Capital, LocalGlobe, Balderton, etc, etc.
EDIT: Sorry - I realise I misunderstood the question. I would wager that the best way (best being most direct, cheapest, whilst having value added in the meantime) is finding an angel who wants to invest and is well-connected in the VC space. These tend to be founders who have had big exits themselves and will then facilitate intros to firms like the above because as investors in the company themselves they have a vested interest in helping them succeed. They will also be able to provide good quality strategic advice.
Best-in-class for UK firms are places like Passion Capital, LocalGlobe, Balderton, etc, etc.
EDIT: Sorry - I realise I misunderstood the question. I would wager that the best way (best being most direct, cheapest, whilst having value added in the meantime) is finding an angel who wants to invest and is well-connected in the VC space. These tend to be founders who have had big exits themselves and will then facilitate intros to firms like the above because as investors in the company themselves they have a vested interest in helping them succeed. They will also be able to provide good quality strategic advice.
Edited by 22s on Tuesday 29th June 19:16
of equity to make it worthwhile. You’re better off looking for a well connected HNW or group of. £500k is small VC but, depending on what the product actually is, potentially quite easy to do in the HNW market (even where you are in the country) especially if you wanting to split it 2-4 ways. You would need to think carefully though about whether it was just money or expertise you wanted as well.
The issue with SaaS is that the numbers can get big pretty quickly when you start getting beyond POC, so you need to be realistic about cash burn and how far that money takes you. There is a big difference to the polish, prep, and process associated with “proper” Series rounds than something that is still arguably seed (distracting, frustrating, ultimately useful in varying measures).
Have you looked at the BVCA list? In addition to the HNW market, there are a few smaller funds that have a NW or tech focus that could easily digest that sort of size. Be careful though, most investors will have views on what you’re doing and what they think you should be doing. It’s hard to ignore the new investor, but some can be quite spendy.
(Edit for typo)
The issue with SaaS is that the numbers can get big pretty quickly when you start getting beyond POC, so you need to be realistic about cash burn and how far that money takes you. There is a big difference to the polish, prep, and process associated with “proper” Series rounds than something that is still arguably seed (distracting, frustrating, ultimately useful in varying measures).
Have you looked at the BVCA list? In addition to the HNW market, there are a few smaller funds that have a NW or tech focus that could easily digest that sort of size. Be careful though, most investors will have views on what you’re doing and what they think you should be doing. It’s hard to ignore the new investor, but some can be quite spendy.
(Edit for typo)
Edited by LooneyTunes on Wednesday 30th June 10:41
Wilmslowboy said:
Tried the direct approach but without a connection or advisor, I assume it’s just another of the hundreds of pitches they get.
If the business is doing well and the revenue trajectory looks right, a direct approach could work. The VC market is hugely competitive (more money than good businesses) and there is nothing we like more (in the PE side at least) than a "proprietary" deal (i.e. no bankers involved). You will need to be comfortable that you can negotiate well to get a good deal and don't want someone to hold your hand to avoid common pitfalls / investor tricks. Multiple prospective investors clearly creates competitive tension.If SAAS is c. £500k enough? It isn't difficult to burn through quite a lot - and sometimes going for more opens up other options...
Could the Future Fund work for you: https://www.thefuturefund.co.uk/ (need matched investor funding and have to meet certain criteria)
The amount of investment you are looking for is bang in the equity gap funding area (too much for private investors / too little for PE / VCs) - the government has historically tried different solutions for this (we had SEGF invest in a business 17 years ago, so it was happening then) - have a look at: https://www.british-business-bank.co.uk/ourpartner... or an example of one of the funds: https://www.scottish-enterprise.com/support-for-bu...
then there are angel syndicates (e.g. https://www.equitygap.co.uk/) who combine to plug that gap and share risk across a broader set of people...
It is an area where you have to be a bit more creative, but there are options out there...
Could the Future Fund work for you: https://www.thefuturefund.co.uk/ (need matched investor funding and have to meet certain criteria)
The amount of investment you are looking for is bang in the equity gap funding area (too much for private investors / too little for PE / VCs) - the government has historically tried different solutions for this (we had SEGF invest in a business 17 years ago, so it was happening then) - have a look at: https://www.british-business-bank.co.uk/ourpartner... or an example of one of the funds: https://www.scottish-enterprise.com/support-for-bu...
then there are angel syndicates (e.g. https://www.equitygap.co.uk/) who combine to plug that gap and share risk across a broader set of people...
It is an area where you have to be a bit more creative, but there are options out there...
akirk said:
The amount of investment you are looking for is bang in the equity gap funding area (too much for private investors / too little for PE / VCs)
£500k genuinely isn't too big for private investors if the opportunity is compelling enough (i.e. they believe in the team/product/market/potential returns).akirk said:
If SAAS is c. £500k enough? It isn't difficult to burn through quite a lot
Agree with that, depending on the service and processing demands it's very easy to burn lots and lots, especially if you want to have a good standard of readiness for a proper capital raise. Later investors won't expect perfection, but they will expect to see increasing levels of maturity and awareness of issues that need to be addressed within the business (and that's not always a journey that is easy for people to go on).akirk said:
sometimes going for more opens up other options...
Some investors will take the view that asking for too much will make you sloppy when it comes to cost control and focus. Others will encourage you to have some reserves/contingency or to throw money at accelerating development/growth. Being cynical, getting you to take more can sometimes be a good thing but other times can be a way to buy in to a larger degree (and sometimes exert more control) than you initially anticipated.LooneyTunes said:
akirk said:
The amount of investment you are looking for is bang in the equity gap funding area (too much for private investors / too little for PE / VCs)
£500k genuinely isn't too big for private investors if the opportunity is compelling enough (i.e. they believe in the team/product/market/potential returns).akirk said:
If SAAS is c. £500k enough? It isn't difficult to burn through quite a lot
Agree with that, depending on the service and processing demands it's very easy to burn lots and lots, especially if you want to have a good standard of readiness for a proper capital raise. Later investors won't expect perfection, but they will expect to see increasing levels of maturity and awareness of issues that need to be addressed within the business (and that's not always a journey that is easy for people to go on).akirk said:
sometimes going for more opens up other options...
Some investors will take the view that asking for too much will make you sloppy when it comes to cost control and focus. Others will encourage you to have some reserves/contingency or to throw money at accelerating development/growth. Being cynical, getting you to take more can sometimes be a good thing but other times can be a way to buy in to a larger degree (and sometimes exert more control) than you initially anticipated.It's a minefield.
Another avenue that is VC'ish, but slightly different is Family Office. At that level of funding, with the right product and vision they might be interested.
If you don't have a personal network, setups like https://www.angelsden.com/en-gb/ might be prepared to take you on. I gather they help start-ups fine-tune their proposition to investors but am unclear how much ongoing support they offer or what fee they charge (perhaps c.10% of funds raised?). They tend to put their propositions out on a virtual conference call, invite Q+As, then seek a 'lead investor' to complete due diligence etc on behalf of the other angels who might commit perhaps £10-50k each. You could at least try to benchmark your own offering against those companies on their listing page.
https://www.crowdcube.com/ is a more modern variant. Investors are more likely to take a scattergun approach of putting just a couple of grand into dozens of companies and hope that one pays off big-time.
Another idea, from the one start-up that I financed single-handedly, is try to recruit a decent chairman with strong track record of sourcing investment and growing businesses. Good contacts and networks pay dividends!
https://www.crowdcube.com/ is a more modern variant. Investors are more likely to take a scattergun approach of putting just a couple of grand into dozens of companies and hope that one pays off big-time.
Another idea, from the one start-up that I financed single-handedly, is try to recruit a decent chairman with strong track record of sourcing investment and growing businesses. Good contacts and networks pay dividends!
LooneyTunes said:
£500k is small VC but, depending on what the product actually is, potentially quite easy to do in the HNW market (even where you are in the country) especially if you wanting to split it 2-4 ways. You would need to think carefully though about whether it was just money or expertise you wanted as well.
..
Thanks for the pointer to the BVCA, I will check it out. ..
The org is set up and running by a friend, I supported on tech, but very much a minority player.
The founder wants a bit of cash off the table (he is 50+) plus cash to support growth, they are only between 2 and 6 months away from break-even, cash burn is already down significantly as the product build finished and revenue started.
They signed a few big deals (wholesale. rather than direct with end clients) with the major players in their industry (household names), which could be game-changers.
They don't need an active investor (someone that brings expertise) but equally would not be reluctant to take one on board.
NickCQ said:
If the business is doing well and the revenue trajectory looks right, a direct approach could work. The VC market is hugely competitive (more money than good businesses) and there is nothing we like more (in the PE side at least) than a "proprietary" deal (i.e. no bankers involved). You will need to be comfortable that you can negotiate well to get a good deal and don't want someone to hold your hand to avoid common pitfalls / investor tricks. Multiple prospective investors clearly creates competitive tension.
Yep, I work for a PE-backed business, we do a lot of acquisitions, amazing those with advisors always achieve higher multiples.PE doesn't seem to get out of bed for less than £100M rev businesses.
akirk said:
If SAAS is c. £500k enough? It isn't difficult to burn through quite a lot - and sometimes going for more opens up other options...
..
Thank you for the recomedations...
Burn rate is down to 50% of total costs, as revenue increase at the current trajectory, should break even 3 to 6 months.
Wilmslowboy said:
LooneyTunes said:
£500k is small VC but, depending on what the product actually is, potentially quite easy to do in the HNW market (even where you are in the country) especially if you wanting to split it 2-4 ways. You would need to think carefully though about whether it was just money or expertise you wanted as well.
..
Thanks for the pointer to the BVCA, I will check it out. ..
The org is set up and running by a friend, I supported on tech, but very much a minority player.
The founder wants a bit of cash off the table (he is 50+) plus cash to support growth, they are only between 2 and 6 months away from break-even, cash burn is already down significantly as the product build finished and revenue started.
They signed a few big deals (wholesale. rather than direct with end clients) with the major players in their industry (household names), which could be game-changers.
They don't need an active investor (someone that brings expertise) but equally would not be reluctant to take one on board.
Unless there's a compelling reason for it, the founder wanting cash off the table so early in is not going to go down well with most investors whilst it is still underwater. You want success vs failure to matter to the founding team but not to the extent that people's lives cease to function (so sometimes some money out early makes sense to allow a moderate de-risk). Investors will however require you to have enough "skin in the game" to follow through and deliver that return on investment... and it's a win for all parties if you do.
Getting a SaaS product to full scale (assuming a fairly broad market) is really expensive. Putting "pure" tech product to one side, you could eat all of that £500k and more on branding/PR/advertising in a year without even trying. Likewise, a more mature support model costs real money (there will come a point where the small founding team can't deal with the general flow and/or by doing so development work grinds to a halt). Again makes it a tough sell to ask for money out early.
As you probably know, doing something new is also fraught with hidden problems for investment. For example, signed deals are one thing, but it's subscriber base and recurring revenue that ultimately counts for SaaS... add to that the likelihood that your first clients might not be great clients (you promise them the moon on a stick, don't price properly, etc) then also add in the risk that you design the wrong product around their needs/feedback (making it unattractive to others and/or making poor design decisions if you didn't see the broader picture) and you can get into some serious trouble (and unexpected cash burn) that throws your projections way off. Proven delivery drives confidence in the projections, and that's important for investors!
Wilmslowboy said:
Burn rate is down to 50% of total costs, as revenue increase at the current trajectory, should break even 3 to 6 months.
Have you factored in your cost model changing as you scale? Already mentioned support, branding, marketing etc, but things that add functional/organisational maturity end up being needed at some point. For example a proper InfoSec team is the obvious one in the SaaS world. People "get by" and do OK without for a while, but scale brings a changing threat profile that then necessitates certification and more assurance and active approaches to manage. That causes a step change in the costs associated with that area.I've gone way OT here but my suggestion would be to really encourage the team to think critically about where they are on the journey and project forward a bit. The gaps can sometimes be obvious when you stop and think, and spotting those can help 1) your own awareness; 2) your financial modelling; and 3) your investor pitch.
Edited by LooneyTunes on Wednesday 30th June 21:35
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