In one corner you have a startup founder, who wants to set the world on fire with a new concept.
In another corner you have an investor, with loads of cash to splash around.
Like a marriage, startup founders and private investors need to work together, over the long term, through the good and bad times.
And just like in a marriage, honesty and teamwork are the key ingredients to a lasting relationship.
On the 5th of February, Startup Victoria brought together a panel of startup founders and private investors, to discuss what it takes to keep this marriage on track.
The panel co ordinator was Rohen Heine from Luna.
Alison Hardachre is co founder and managing director of the successful company HealthKit.
Alison developed and launched the practice management platform Specialist Link in 2008. It offered searchable practitioner directories and shareable clinical tools.
HealthKit was then launched in 2012.
“Often the case first business fails. Second business more successful due to experience”.
Alison pointed out that health technology is a unique area. Traditional hospitals’ make big money and so do traditional ‘technology’ fields.
However health and technology falls in between these cracks. Founders in this area need health sector sensitivity. There is greater regulation and a higher need for safety.
She also warned that founders need to choose the right investors to support their business from the start.
“Look for investors who can handle fast scaling and non traditional models of fundraising.”
And finally, Alison said that a lot of founders have given up too much equity in their business and eventually felt it was not worth their while to pursue their business.
Alison has raised 5 million dollars in total, via a mix of Angel Investors and Family Investors.
Heidi Holms is currently co-founder of MentorLoop.
MentorLoop is a software platform to run mentoring programs that was started in 2014.
Heidi’s first company was a job board for older people.
Since then Heidi has raised money from Angel Investors and Venture Capitalists like Rampersand.
Heidi has discovered that it takes time to build up a relationship with an investor, and you then have to do ongoing work manage it. She also points out that different VC’s had different skill sets.
The main priorities are being honest with investors, finding paid customers and proving Return On Investment.
And remember, fundraising is regular part of running a business.
Sheree Rubinstein is the co founder of OneRoof.
Sheree started the largest co working space for women in Australia in 2015. It currently hosts a wide range of women run businesses.
OneRoof offers business advice, assistance with funding, networking and ongoing education. The vision is to have 5 other working spaces for women in Australia. Sheree has just raised 1 million.
Sheree says relationships with investors need to be nurtured, they need to understand your vision, be given regular updates and thank you’s for the support they have given.
Dilution of equity needs to be balanced with the need for enough cash.
Jonathan Byrne is the co-founder and co-CEO of Memobottle a beautiful, flat, reusable water bottle designed to fit in modern bags.
It was launched in 2014 crowdfunding platform Kickstarter, with friend and co-founder Jesse Leeworthy.
They raised 385,000 in 2 weeks and have gone on to create a sustainable and B Corporation certified business.
They have since undergone a second successful crowdfunding and raised over 500,000. The company also has a 4 year relationship with investor whose values are aligned with the company.
Jonathan has never approach Venture Capitalists as he feels they would not be right type of investors.
Instead crowdfunding is part of the companies business plan.
“Stay self-funded as long as possible.”
Garrett Camp, Co-Founder of Uber
Matt Alan is a business development manager on the startup team at AWS.
Matt currently mentors startups a launching a business, building their technology architecture, and raising capital.
Matt has founded 4 startups, invested in 10 others and advised countless founders over the past 20 years.
Matt described himself as a geek, developer, investor and advisor. He offers founder couching, blogs on Medium and is a partner with the Startmate accelerator program.
My goal is to connect dots, to help people with the others in my network.
Paul Naphtali is a co founder and managing partner of Rampersand, an early stage Australian/NZ tech venture capital fund.
Before Rampersand, Paul lived in Silicon Valley, where he was a senior marketing exec with a number of successful venture back startups.
Since launching Rampersand in 2013, Paul has backed more than 20 high growth tech startups. He explained that Rampersand actually invests in about 1 out of 120 applications for funding. The company doesn’t just ask for extensive data points. They also seek an honest relationship with founders. Rampersand is more for established companies with a financial proven history.
Paul says that founders to be clear about why they are seeking funding, and from whom.
(Founders) need to keep honest feedback, this is what went wrong, this is what we did about it.
Campbell Andrews in the investment manager at Baron Corporation Investors.
Campbell is responsible for evaluating new investments and assisting with management of the portfolio at this family office funding.
Baron Corporation has a finance background, they are a big mixed investment company, wanting to build a portfolio. Their investments range from bricks and mortar to tech companies in Aust and the USA.
Family investors can be highly idiosyncratic and decisions can be fast.
Family investors tend to use family networks to confirm data. They also look for a meaningful relationship with company they are investing in. Baron tries to add value beside investment money and offer advice and introductions.
As a rule, early stage companies receive less funding and established companies receive more.
Baron is interested in who the founder is as a person, not how slick their pitch is.
Originally from Northern Ireland, Alan introduced crowdfunding to Australia in 2010 with the platform Pozible. It was designed to help creative people connect with an audience, raise some capital and turn their ideas into reality.
In 2017 Alan launched a sister platform called Birchal, a platform for local brands to connect with investors. The following year Birchal became one of the first ASIC approved licensed platforms in Australia.
Between Pozible.com and Birchal.com – we’ve 610k+ members and have transacted $70 million+ for thousands of creators, founders, startups and projects in Australia.
“If you’re an investor looking at the dots, somebody else may be looking at the lines.”
Mark Suster – entrepreneur turned VC.
Are you looking to raise funds for your startup but feel you don’t fit into traditional VC or Angel funding models?
Here are some new business funding options to consider –
Microfinance started as the provision of very small loans to poor entrepreneurs and small businesses lacking access to traditional bank services. Microfinance is being used as a tool for socio-economic development in poorer countries and tiny ‘bridging loans’ in western countries. An example is the Good Shepherd.
Revenue-Based Financing is a is a type of loan provided to small or growing businesses. Investors inject capital into a business in return for a percentage of ongoing gross revenues. Generally, RBF investors expect the loan to be repaid within 3 to 5 years of the initial investment. An example is FitBiz loans.
Marketing-Focused Funding. In order to fund business growth, the company provides capital to fund for digital ads so growing companies can acquire more customers and drive revenue growth. An example is ClearBanc.
Government-Funded Capital (Government grants). A government or quasi-governmental agency will offers zero or low-interest loans. An example is the Public Sector Innovation Fund.
Accelerator-Based Funding is available for startups who have been accepted into certain Accelerator programs. An example is TechStars.
And finally, here are some tips from both founders and investors on what to avoid.
- Don’t do crowd funding around Christmas time
- Don’t underestimate the fees required by fundraising platforms
- Avoid drafting exotic shareholders agreements
- Keep an eye on your competitors. Founders don’t want to hear ‘we are the only people in the world doing…’ where there are several people already in the same space
- It’s a fine line between personal belief and arrogance. Just be yourself and maintain your integrity
- Clarity of expression is essential for investors, don’t over complicate things with flowery words
- Listen to investors and accept their feedback
- As risk is part of investment process, honesty is always the best strategy
- Dilution is a big issue for founders. Be aware and plan ahead. Every time you go to raise money you give up some equity in your business
- When you are pitching to an investor you are pitching hard facts – the business, your paying customers and Return On Investment. You are not pitching your personal ‘dream’
- Talk about the problems that you can actually solve with your startup
- Always give yourself enough time to raise money. It is a gruelling and drawn-out process
- Preparation for investors is essential, have your company figures and markets data
© Wikihospitals February 2019