Skip navigation Scroll to top
Scroll to top

The minefield of early-stage fundraising

09 April 2021

James Goodman, Wealth Manager

Founded by entrepreneurs, we at LGT Vestra understand how important both advice and early-stage funding can be for the growth of a business. However, finding the right angels or venture capital (VC) partners can be a minefield for business owners. The irony is that spending countless hours at ‘Dragons’ Den’ style pitches and networking events in the pursuit of raising capital often distracts founders from their main objective of growing their business.

That’s not to say that businesses aren’t raising funds. UK technology companies received a record $15 billion (£10.8 billion) in VC funding last year, representing more capital from VCs than the rest of Europe combined.[1] But these exceptional headlines tend to focus on the unicorn[2] end of the market. The reality is that many early-stage business owners simply don’t have the connections to find both qualified advisers and access to seed capital.

In 2019, Roei Samuel spotted an opportunity to connect angels and business advisers with start-ups in need of funding and advice. Together with co-founder Sam Luckett, they started Connectd to make it easier for business owners to meet potential investors and to provide angels with access to opportunities.

I spoke to Sam about the UK funding environment for start-ups and how business owners can navigate the often-confusing world of raising capital.

How do you help to facilitate growth in early-stage businesses?

We believe that the start-up eco-system is old-fashioned and needs to be modernised. For start-up founders, finding an investor is extremely time-consuming, stressful and often detracts them from their core job of running a business. Meanwhile, investors are inundated with often extremely speculative investment decks, which are not focussed to the investors’ areas of interest. Connectd is an easy-to-use online platform that uses smart technology to efficiently match innovative start-up founders with relevant value-add high-net-worth angel investors.

What is the main barrier when it comes to fundraising and getting good advisers onboard?

Access to the right investors is incredibly difficult for founders. Most entrepreneurs don’t have a strong network of wealthy friends and family that can help with fundraising in the early days. With regards to getting good advisers on board, I would say education and cost. Many don’t realise the true benefits of having an advisory board. Most start-ups can’t afford to pay recruitment fees to officially locate and appoint an adviser too (often £10-20k). Connectd provides this service for free.

What advice would you give founders looking to raise capital?

Plan, be strategic, use technology to make your life as easy as possible and, where possible, outsource to experts. Research in depth what goes into the process. Learn what good investment collateral looks like: pitch decks and financial models. Think extensively about the kind of investor you would like to work with - skill set, industry background, age, gender.

What would you say has changed since this time last year from a fundraising perspective? Are these changes here to stay?

Digital adoption and transformation have been rapid over the last 12 months. Investors' perception of using online video conferencing and technology to meet (and invest in) founders without ever physically meeting them has completely changed. Investors based in the South East can now invest in companies in the most northern parts of Scotland (as an example) should they wish, without either party ever having to leave their home. The world is changing rapidly, COIVD-19 being a major contributor to this change. Entrepreneurs are at the helm of rapid innovation and investors are part of that story.

What do you think the biggest mistake is that founders make when it comes to raising capital?

The common mistakes we see are typically:

Access and relevancy: many founders we speak to use LinkedIn to cold message thousands of users with “investor” in their title. Many investors don’t publicly announce themselves as such on LinkedIn and the ones that do are often not relevant to the start-up. Getting access to genuine high-net-worth and ultra-high-net-worth investors is difficult and success is often correlated to someone’s socio-economic upbringing or professional background, which creates disparity between the elite and the rest of the eco-system.

Investment collateral: inexperienced founders often make common mistakes when creating pitch decks and financial models. These include overinflating valuations because of greed or genuine lack of understanding, or producing non-relevant content for investment decks, which can be off-putting for investors.

 

With thanks to Sam Luckett, Co-Founder, Connectd

[1] https://www.theguardian.com/business/2020/dec/29/uk-tech-firms-record-15bn-venture-capital-funding-unicorns-2020

[2] a privately owned company valued at over $1bn

 

Read more from The Brief.

This communication is provided for information purposes only. The information presented herein provides a general update on market conditions and is not intended and should not be construed as an offer, invitation, solicitation or recommendation to buy or sell any specific investment or participate in any investment (or other) strategy. The subject of the communication is not a regulated investment. Past performance is not an indication of future performance and the value of investments and the income derived from them may fluctuate and you may not receive back the amount you originally invest. Although this document has been prepared on the basis of information we believe to be reliable, LGT Vestra LLP gives no representation or warranty in relation to the accuracy or completeness of the information presented herein. The information presented herein does not provide sufficient information on which to make an informed investment decision. No liability is accepted whatsoever by LGT Vestra LLP, employees and associated companies for any direct or consequential loss arising from this document.

LGT Vestra LLP is authorised and regulated by the Financial Conduct Authority in the United Kingdom.