I opened the topic of my next blog up for choice through Twitter, choosing a few topics that i’ve had experience with.
Going to find the time this week to write my next blog post on building a disruptive startup in #cornwall. What should it be on?
— Garry Barter (@garrybarter) January 1, 2017
As this is only just the beginning of my blog I thought the fact that anyone replied was pretty amazing! Anyway, as you can see, the public have spoken and they want to know more about the experience of raising Venture Capital for a startup in Cornwall…
The idea of getting Venture Capital (VC) support often seems foreign and impossible for many companies I talk to in Cornwall. I sympathise here because I can see why this is the default stance. Getting introductions to the right people and then knowing what to do when you do meet those people can make the task seem daunting.
The good news is that it shouldn’t feel as impossible as it currently does. There are a number of companies in the area that have raised VC recently and the shift towards looking outside of London for investments is increasing.
If you’re currently sitting on the fence about whether VC funding is right for your business, and how much you should be looking to raise, this post by Paul Graham from Y Combinator is worth reading.
The ‘VC Guy or Gal’
The reason many people shy away from the task is simply because of the amount of effort it takes to just get a meeting with someone in the position to support you with VC. A large amount of work is needed to get your message right, pull together supporting materials and to get out and meet with people means that it’s worth assigning the task to a single member of your team.
At Hertzian that’s myself, it’s probably one of the things that had the greatest effect in the early days, whilst any of the founding team have the ability to pitch at any time if asked, I am the one responsible for managing the whole task. That means that at any time I know what conversation is at what stage, what’s been supplied to potential investors and what the requirements. It also means that whilst one of you is off trying to raise VC, the rest of your business can continue to function and disruption can be kept to a minimum.
One thing I found out by being this person is that it’s worth setting a deadline for all negotiations as well. Whilst negotiations can take months, it’s worth giving yourself a deadline for interest. If that date passes and you haven’t got any concrete conversations in the pipeline, then move on trying to grow another way.
By having a single person in this role, potential investors know who to get a hold of for more information and should any one want to make an introduction (see next section), they’ll know who to introduce without having to reach out first.
Look Inwards (and Out)
Whilst the previous point can be applied to businesses inside or outside of the South West, this point is absolutely critical to any business in the South West looking at VC to grow. It’s also one of the most obvious pieces of advice but it’s, in my experience, one that’s often not listened too.
Get out on the road. Meet with people. Look in the local area. Look at the broader scene. Talk to similar start-ups. Talk to everyone.
It’s crucial when looking at VC that people know who you are. If you can get an introduction to a VC firm, that’s great, but imagine if you get that introduction and the person you’re being introduced too has already heard of you. That’s priceless.
My experience of VC’s so far is that they are always looking to hear from up and coming companies, even if you’re not at the right stage for them, they’ll want to know what you’re up to and they’ll want to be the first to know when you are at the right stage.
Attending community events is great for this, I try to attend all of the community events in the local area but I also try to get to hubs like London to attend events there as well. This means that I’m always talking to a diverse range of companies. As Hertzian is a B2B focused company, it’s easier to justify as it can help with lead generation, but for the task of raising VC finance it can be crucial as well. You never know who the person you’re talking to knows, they may not even know them yet but if you can put your business at the front of their brain, they may mention your business to the right person.
The other thing I do that helps generate VC contacts is to keep an eye for investments into similar startups. I’ve talked with a number of different business owners, from all over the world, about shared problems and how we can work together to solve some of them. Even if this is completely unrelated to VC, again, they may be the perfect person to introduce you to VC contacts.
Prepare, Prepare, Prepare
So if you follow my previous two steps, you’ve got a person who is the main lead for investment, you’ve got a lot of contacts to reach out to, now the final step is all about being prepared. It’s not as simple as being able to answer a potential investors questions, although that’s pretty important, it’s about a number of things.
The first is to make sure you have a suite of documents ready to send through should the potential investor become interested and want to know more. There’s nothing worse than having to rush to create an Investment Deck after pitching to a new contact. Having your supporting material (Investment Deck, Projections, Business Plan) ready to be shared can sometimes be the difference of getting an offer and not. A good Investment Deck can get you the face-to-face meeting required to secure your investment, when creating ours I looked to this article about LinkedIn’s pitch deck.
Perhaps more importantly than your deck is to make sure you are presenting the right attitude. One of the reasons I believe I’ve always had good results when talking with investors is that I put across a passionate but considered attitude when pitching my business. It’s easy to be nervous, the stakes when pitching can be massive, but it’s important to remain calm and make sure you get your points across. Part of this will come from knowing your supporting material is strong. The other part should come from the fact that you’re pitching your business. You should know everything about your business because you’re the one who runs it (or at least spend one third of your time on the planet doing).
Finally, be ready for questions. Questions are inevitable. One technique I’ve used is to try and focus the pitch so that certain questions will always come up. Sometimes this may be about being vague about a route to market for a certain product, or maybe leaving a gap about a technical area of the business. By leaving these gaps, and anticipating the questions, you can prepare your answers and over time, these answers will become more and more resilient.
Here’s that question again, the same question I answered (in part) in my previous blog post, but unless you’re pitching to a VC who has invested, or is based, in Cornwall already then it’s inevitable that the question will come up again.
The three answers I always go to are…
Cornwall’s cheap, it may not feel like it at times but when you compare cost per square meter for office space or expected salaries, then Cornwall is very cheap. That’s important to potential investors, they get more ‘bang for their buck’. This answer will result in other questions related to attracting the right talent so make sure you’re prepared (see above!) for this.
There’s not as much competition for new hires. Whilst the talent pool may not be as large as it is in areas like London or even Bristol, the competition you’re up against for the top talent is a lot less. Don’t underestimate the power of people wanting to stay where they currently are based.
It’s also a great story. Getting PR coverage for your business or products is often very tricky, especially if you’re a start-up looking to burst onto the scene. The story of a company changing an industry in the way that most start-ups want to do that’s based outside of London or San Fran is very appealing.
See, it’s not that difficult 🙂
I hope this article helps those considering looking for VC support. Of course, this is all just advice from my own experience in the world of Angel & VC investment. I do believe that you can find the right level of external investment should you want to and your location shouldn’t be the defining factor.
I would love to hear your thoughts/questions on the above so please leave your comments below.