Getting investment for a software product?

[supercommuter]

Hi

I am currently developing a SaaS based enterprise tool/application which is due to be complete Q3 2023. We have a registered company and have been self funding to this point and will continue to do so if absolutely required, but ideally we would like to get sell some equity in the company to help get us to market quicker.

We are not talking outrageous amounts, up to around £100k total will be required.

I am currently putting a pitch together on the Angel Investment Network but before I pay the £150+ to post it I was wondering if anyone else had experience raising funds based on equity share anywhere? If so, can you recommend. Or any experience of the Angel Investment Network?

Thanks in advance!

[akirk]

supercommuter said:

Hi

I am currently developing a SaaS based enterprise tool/application which is due to be complete Q3 2023. We have a registered company and have been self funding to this point and will continue to do so if absolutely required, but ideally we would like to get sell some equity in the company to help get us to market quicker.

We are not talking outrageous amounts, up to around £100k total will be required.

I am currently putting a pitch together on the Angel Investment Network but before I pay the £150+ to post it I was wondering if anyone else had experience raising funds based on equity share anywhere? If so, can you recommend. Or any experience of the Angel Investment Network?

Thanks in advance!

get a lot of feedback from externals in the industry / in business. It is very easy when focused on your product to see it as the perfect solution to life, whereas it might have all sorts of flaws. As an example an investor friend of mine asked me to look over a proposal for a web design SAAS company the other day - on the surface the projections looked good, and he had no technical knowledge - however I was able to see a large number of flaws and red flags in their proposal sufficient to mean that they were uninvestable - ensuring that you get rid of those is key to investment...

[supercommuter]

Thanks for the post.

Yes, agreed, we’ve done a huge amount of research, competitor analysis and client reviews and I actually work in the industry we are making the product for. I’m comfortable this will be a slam dunk for an investor but just seeking the best platform to find them.

[akirk]

good - always nice to see a company with a good product and who has done their research!

I haven't had investment from an angel's network now for a number of years, but the principle still remains the same - it is a quick way to get your product in front of a number of people, however every network is different and any investment is more likely where there is a personal interest - the reason why people are angels is because they want personal involvement / association. So for me the first step would be looking at the investors / interests / sectors they are investing in - but the alternative would be to see if I could find investors with a match who might not even be in an angel network, and approach them directly... to a certain degree otherwise it is a suck it and see approach - your £150 is effectively a gamble and you might need to try several networks... the network itself though should be able to give you feedback on who is investing in matching sectors and how actively they are investing - so I would be asking them how many of their angels are making / have made investments in sectors that match you - your market vertical / software / online / etc. because that will give you the best idea as to whether you might have success

[skeeterm5]

If you are sure it will make money then why not a straight forward loan? That way you don’t give away any equity and benefit from bigger returns in the future.

On £100k it is likely repayments would not be significantly more than any return an investor would want to see.

[supercommuter]

skeeterm5 said:

If you are sure it will make money then why not a straight forward loan? That way you don’t give away any equity and benefit from bigger returns in the future.

On £100k it is likely repayments would not be significantly more than any return an investor would want to see.

Thanks. It’s also a consideration, given we are self funding at the moment we would likely continue to do so and stretch the timelines instead of adding additional repayment overheads immediately. I am confident we will find equity investment to expedite things.

[C69]

You could investigate a platform like Crowdcube, but £100k does fall below its minimum thresholds (£150k seed finance / £250k early-stage finance).

[AdamV12V]

BBC Dragons Den Application Form

[LooneyTunes]

Have sat both sides of the table on this, raising a quite a lot for previous business and more latterly writing cheques.

At £100k you have a choice, but I'd advocate thinking carefully about whether it's money you need, experience and guidance, a combination of the two and then figure out how/where you get that. The angel networks are, frankly, quite variable but can be a good source of funds. The other option is anything from one to a handful of private investors (there are pros and cons to the number you'd want).

Need to dive out and I'll try to write more later but the key thing many investors will look for is realism. Do you know, for example, (and not knowing is OK as that humility to admit that there are knowledge gaps is really important)
1) Whether there's any product-market fit;
2) What it's going to take to get your product to market;
3) How you propose, at a high level, to address the various challenges;
4) What prospective exits look like for investors.

From what you've written I'd comment that:
1) £100k is not a lot. Scaling SaaS can get really expensive really quickly, especially when you reach the point at which you need serious infosec capabilities. Investors will want to know that you realise this and have at least some outline thoughts about when/where the rest will be needed/might come from!
2) Software is rarely, if ever, complete! Pilot ready is one thing, market ready can be completely different.

The one big thing with tech start-ups is that what you think you're developing, and what early stage clients say they want, can be quite different from what the wider market wants. Be really careful to not close off development avenues too soon or excessively customise for initial clients.

[supercommuter]

LooneyTunes said:

Have sat both sides of the table on this, raising a quite a lot for previous business and more latterly writing cheques.

At £100k you have a choice, but I'd advocate thinking carefully about whether it's money you need, experience and guidance, a combination of the two and then figure out how/where you get that. The angel networks are, frankly, quite variable but can be a good source of funds. The other option is anything from one to a handful of private investors (there are pros and cons to the number you'd want).

Need to dive out and I'll try to write more later but the key thing many investors will look for is realism. Do you know, for example, (and not knowing is OK as that humility to admit that there are knowledge gaps is really important)
1) Whether there's any product-market fit;
2) What it's going to take to get your product to market;
3) How you propose, at a high level, to address the various challenges;
4) What prospective exits look like for investors.

From what you've written I'd comment that:
1) £100k is not a lot. Scaling SaaS can get really expensive really quickly, especially when you reach the point at which you need serious infosec capabilities. Investors will want to know that you realise this and have at least some outline thoughts about when/where the rest will be needed/might come from!
2) Software is rarely, if ever, complete! Pilot ready is one thing, market ready can be completely different.

The one big thing with tech start-ups is that what you think you're developing, and what early stage clients say they want, can be quite different from what the wider market wants. Be really careful to not close off development avenues too soon or excessively customise for initial clients.

Thanks for the response.

Great points and things we have considered in this space. For some background I have around 20 years experience in Software from small to enterprise clients and have successfully funded and delivered another project which is now going to market, the problem is my business partner sourced the funding and it was extremely time consuming. So I am looking at other options for this project.

My full time role is for a large conglomerate and I head up the department that onboards these types of apps, as such I am fully appraised with details around scaling and being able to demonstrate the product security to BISO/CIO teams so as we have designed the tech stack we have kept this in mind, for sure!

We have a lengthy software development roadmap for additional functionality but there is a gap in the market for this type of tool at the moment in its MVP form.

Thanks again for the response!

[essayer]

just out of interest.. does your current employer possibly have any claim to the work you're doing "out of hours" ?

(mine does!)

[supercommuter]

essayer said:

just out of interest.. does your current employer possibly have any claim to the work you're doing "out of hours" ?

(mine does!)

Oh really? I have heard of this, but not for me, I informed compliance I am a director of other companies. My dedication hasn’t ever been in question to my employer (not saying yours has!) so they are happy for me to do as I please in the down time I have/holidays or weekends.

[skwdenyer]

supercommuter said:

Hi

I am currently developing a SaaS based enterprise tool/application which is due to be complete Q3 2023. We have a registered company and have been self funding to this point and will continue to do so if absolutely required, but ideally we would like to get sell some equity in the company to help get us to market quicker.

We are not talking outrageous amounts, up to around £100k total will be required.

I am currently putting a pitch together on the Angel Investment Network but before I pay the £150+ to post it I was wondering if anyone else had experience raising funds based on equity share anywhere? If so, can you recommend. Or any experience of the Angel Investment Network?

Thanks in advance!

I have no expertise with raising money for an SAAS play. But I do have a question around the offer (which is one that I'd ask if you were asking me for investment): what is your versioning strategy?

As a user of a range of enterprise-type SAAS and on-premise solutions, the thing that puts me off many SAAS pitches faster than anything is the training overhead of the service lifecycle.

Ideally I want you to be offering me a fixed version of the software that I can commit to for, say, at least 12 months (but upgrade if I wish to, not when it suits you). Why? Because I have to train staff to use it; if it changes (and many start-up SAAS offerings do evolve rapidly) then I am stuck.

The downside for you is obvious, of course - you're now running and maintaining instances of software on different releases, which means in effect you're a hosting company, not a pure SAAS play.

Likewise I'd want to know about infosec - is it one large database, or a series of instances?

Some SAAS providers offer tiered service: £X per month for a mandatory monthly release cadence; £Y per month for only annual release cadence (with security / bug fixes along the way); £Z per month for a fully-separate instance. I don't like those, but I can see why commercially they exist.

And finally, I'd like to know where you're hosting, and possibly have the choice of where my data / instance / whatever is hosted, for regulatory and other reasons.

Obviously, I don't need to know the answers to those questions in this thread; just that these are some of the issues I look at. And they may not be relevant to your particular product at all.

[LooneyTunes]

supercommuter said:

Thanks for the response.

Great points and things we have considered in this space. For some background I have around 20 years experience in Software from small to enterprise clients and have successfully funded and delivered another project which is now going to market, the problem is my business partner sourced the funding and it was extremely time consuming. So I am looking at other options for this project.

My full time role is for a large conglomerate and I head up the department that onboards these types of apps, as such I am fully appraised with details around scaling and being able to demonstrate the product security to BISO/CIO teams so as we have designed the tech stack we have kept this in mind, for sure!

We have a lengthy software development roadmap for additional functionality but there is a gap in the market for this type of tool at the moment in its MVP form.

Thanks again for the response!

There’s some positive stuff there in the experience bucket, but a couple of potential red flags, the main one being around focus. It’s often tough to raise funds if there’s any perception that it’s not your main focus, or better still an obsession.

Investors also often aren’t keen on companies where the founders don’t have enough risk exposure as this can be perceived as them lacking a need for it to work out. Quitting a job to focus on a start up is a really bold move but it’s hard to run/grow a business when you’re working for someone else’s… especially when you have live clients of your own. If the idea is solid and investable, I’d suggest it’ could be more likely to see investment if you can hold out long enough to prove the concept and then ask for more in order that you can give it your full attention.

Ultimately though most of the early stage investment case is driven by how well identified the problem is, the characteristics of a good solution, why other solutions don’t hit the mark, how/why you can solve it, and having a team that looks like it can deliver.

Don’t fall into the trap of MVP. Read up on the differences between MVP and MSP. Getting the broader product view is often essential to avoid going too far into a tech rabbit hole. I’ve seen several businesses fail to launch because they aimed for what they saw as technical perfection rather than what their market actually wanted.

Often it’s how you’re going to tackle issues/development (product/tech/corporate) that is more important than what exactly you’re proposing to implement. For pre-seed/seed I’d be a bit worried if a roadmap seemed too rigid behind a relatively short horizon (you often need to be iterating/improving rather than constantly adding features before understanding reactions to what you’ve just shipped). Oh, and long term roadmaps often end up client pitches, and then as commitments, and then you’ve got a whole world of pain to deal with…

skwdenyer said:

Likewise I'd want to know about infosec - is it one large database, or a series of instances?

<snip>

And finally, I'd like to know where you're hosting, and possibly have the choice of where my data / instance / whatever is hosted, for regulatory and other reasons.

They’re two points that can catch people out but, equally, are areas where the OP needs to be really clear and distinct between various stakeholder/client groups.

I realise it’s just an example, but single db instances vs multiple instances is really only scratching the surface. Depending on the application you can get away with being quite technically immature as an organisation for a period of time provided you know what good/excellent looks like and have at least the beginning of a credible, prioritised, plan to get there.

Clients need to know you’re not buying head in the sand on such things, but investors need their companies to be realistic about what it takes to get to good/excellent (resources, cost, time).

Unless it’s aimed at a regulated environment, few startups will offer location choices. Just too expensive to offer that for, candidly, little benefit. Instead you’d try to consider the future need for this and ensure that your architecture and deployment processes can handle it so that when you need to do it (often for market expansion reasons) you’re not starting from scratch.

All of the above really plays into a small part of the “what does the OP want from an investor(s)?” question which, if he can answer it for himself, will help him get his eye in about where best to raise.

There are huge differences between people searching for something online that looks appealing (and offers little opportunity to due diligence), and dumb money from crowdfunding is probably still quite easy to source if the concept and pitch looks appealing in a pretty deck (money spent on proper design/presentation can really pay off), vs pure financial investors vs active/experienced investors capable offering practical advice (sadly this is the smallest group of potential investors in the UK right now, but I’ll steer clear of how badly the UK does at encouraging innovation). All bring different benefits (and challenges), and come at different costs, especially at early stages.

In terms of where to look for money, either crowdfunding, or local/national angel investor groups would seem like the most obvious and easiest to access. Best way to identify the ones that are relevant is to look at who has financed companies that do similar things to what you’re doing (Google can be your friend with this) that have gone on to be successful.

Hope this helps.

[Wilmslowboy]

Lots of good points above, mentioned above.

I’d add my own experience (invested directly and through networks for the past 20 years).

Find a long term solution for funding or one that can really take you to break even / meet scaling needs. It’s amazing how much time fund raising takes up, and can almost become a constant work chore for founders……you need to be on3 step ahead, if you come close to running out of money, you will get shafted.

If you can, ensure the investment is SEIS compliant.


I’d be open to taking a look, I know half a dozen like minded investors - cheers