Author: Toby Hicks

For our latest Behind The Raise interview we speak to Moses Rashid, founder of online marketplace for Limited edition Sneakers & Streetwear, The Edit LDN. He reveals how he had his lightbulb moment at a sneaker festival, his huge focus on service and the impressive partnerships and celebrity backers that have helped propel the business forward.

He also reveals his top tips for anyone raising investment for the first time and why he initially thought a call from Harrods wanting to partner with The Edit LDN after just 18 month of operating was a prank…

Tell us about The Edit LDN?

At The Edit LDN, our mission is simple. Making the inaccessible, accessible. Helping our diverse, fashion-hungry community across the globe access the best in limited edition fashion and sneakers from the biggest brands in high-fashion.

How did you come up with the idea?

I’m a sneaker head at heart and would spend my days at sneaker festivals buying shoes. One day I was at a sneaker festival buying a pair of shoes that were £600/700. I asked a simple question, do you have a plastic bag? And the guy selling them said no. It blew my mind that I was paying for a premium product but I wasn’t getting a premium service. That was the lightbulb moment. How can we create the most premium sneaker platform globally?

How are you different?

Smashing the restrictions of traditional online shopping, our product specialists work hard to maintain a market-leading, unparalleled range of sneakers and streetwear unique to The Edit LDN. So customers will never be short of exciting new pieces to discover.

In a market which traditionally takes 2-6 weeks for delivery, our service level was about delivering this in 1-5 working days. A few months ago we become the first global reseller to achieve same day service. We are also all about creating a Personal Shopping service. Offering a tailored styling experience, and access to a product sourcing service, where we take on the hunt for the perfect piece on behalf of our customers.

What initially attracted investors to your company?

If you think of our business like a FarFetch premium retail environment powered by tech. For us it’s all about creating real value for our customers. Our mission statement was about becoming the most disruptive, innovative sneaker streetwear platform globally. I’m pleased to say we’ve achieved that.

We were the first to accept crypto. We were the first to achieve same day service in a market that normally takes 2-6 weeks. We were the first to donate sustainably. For every single sale on our platform we take 1 kilo of plastic out of the ocean. Investors have bought into our vision and record of delivery so far. We also have a number of sports celebrities who have invested, such as New York Giants captain, Xavier McKinney, basketball legend PJ Tucker and Premier League football star Jesse Lingard.

What has the funding enabled and your top priority going forward?

Part one of our funding was about personnel and putting the right people in the right places. Part two was about testing the technology. Making sure it was user friendly, both for the reseller and the consumer.

Part three was marketing and there are two parts to that. Paid performance/ affiliate to support customer acquisition. But also the brand piece as well. How can we continue to create PR moments and elevate our brand? You’ll see we have just signed a 2 year Global Partnership with Chicago Bulls.

Part four was warehousing, so making sure we could deliver everything in-house. That was really important from a cultural and environmental point of view. Making sure we can really accelerate the business.

 And then the fifth strand was about building the pre-loved market place to tackle a $60BN industry, and make a long lasting sustainable impact.

Why did you raise via Angel Investment Network?

I was introduced to AIN via my brother and  out of the angel networks we’ve worked with, it’s delivered the best results. It’s been the most fruitful.

What are your top tips for anyone raising investment for the first time?

It’s really important to get out there, be flexible, have lots of conversations, but know that only a few are going to convert. Make sure you are chasing down those conversations where something might come through. The same approach you would have with any sales process really.

When you are pitching, having real clarity on your USP. What’s your vision/ mission, really where is the business going? Of course understanding that investors are going to want to know what is their return on investment.

You are the first business of your kind to be welcomed into the legendary Harrods, London. What was your approach to getting a such a prestige listing just two years after launching?

We were actually approached by Harrods after just 18 months of trading, on the back of great media coverage we had secured in Forbes and GQ. At first I thought it was someone playing a joke, but then there was realisation that Harrods were really serious and could see the power of our marketplace and that we could really deliver for their high end customers.

We started off with one small section on men’s which has now expanded to three floors. It’s testament to our positioning, but also how well we’ve been received by their customers.

We are also thrilled as part of our global expansion to be Galeries Lafayette (Doha) and Harvey Nichols (Riyadh) and as reported in Esquire we partnered with the legendary Chicago Bulls in a multi-year partnership. They spotted the great synergies with their sports fans and sneaker heads.

If you’re looking for an angel investor to help fund your business, then the Angel Investment Network can help. Sign up to pitch your business to investors all over the world  

The new year offers everyone a great opportunity to reset and renew. For startups seeking investment this could be the perfect time to evaluate your approach and see if it needs tweaking.

After all, we are in a very different climate in 2023 and investors are being far more careful with the deployment of their capital. To boost your chances of a successful raise, ensure your strategy is tailored for now, not last year.

So what key resolutions should startups focus on in 2023? 

1) Revisit your elevator pitch

The life of any startup is varied, stressful and relentless, wearing so many hats and juggling so many balls. All the while, trying not to let any drop or run out of cash. However in this maelstrom of activity it remains crucial to not lose sight of the eureka moment that led you to quit the day job and come up with the idea in the first place. The start of the new year offers a great chance to refresh your core pitch for investment as clearly and articulately as you can. 

According to AIN co-founder Mike Lebus: “One of the key mistakes entrepreneurs make is not explaining the concept clearly enough. Entrepreneurs are often too close to their own business, so don’t give enough information for a stranger to understand exactly what their business does.”

Why not start with a blank piece of paper and make sure you can get the pitch down to a paragraph? A clear articulation of a real world problem, how your startup solves it and what it actually does. You need to be able to story tell. 

Having the right credentials, the perfect team and a beautiful pitch deck means nothing if you can’t explain to a stranger, simply and convincingly, why your company needs to exist. Test it out on more critical friends and contacts who you trust to give some honest feedback. Is it as straightforward as it could be?

2) Critically review your pitchdeck/ pitch materials

The new year could also be the perfect time to review your pitch materials and pitch deck. According to Lebus: “A common thread running through unsuccessful pitch decks is startups not focussing on their core product/service. Some business plans say “we plan to do this. and this, and this, and this…”, which can become very confusing for potential investors. Feel free to mention your long-term product pipeline towards the end of your pitch, but the main initial focus should be on your current/initial offering to keep things as clear as possible.” 

Another reason many pitch decks fall down in Lebus’ view is the failure to differentiate what they do from the competition and how they’re going to gain market share.

Use this time at the start of the year to review your pitch deck and ensure there is a clear narrative, focus on the core product and how it stands out from competitors. Investors will want to see that your nascent business is learning to walk before it can run and that the promise of a decent future return is tangible. 

3) Consider a lower valuation in the current climate

In the current climate many businesses are needing to alter their plans and potential funding pathways. Early 2022’s valuations already seem like a different era with layoffs in the tech industry and an uncertain medium term economic outlook. What was 8x early last year may now only be 5x. 

According to Alexander Caparros, analyst from the AIN brokerage team: “We are seeing a lot of pushback from investors, less willing to back companies whose valuations are based on the uncertain promise of future revenues. It is vital that valuations are rooted in fact and not fantasy. Proof of concept is now a must have. You will be far more likely to gain the interest of prospective investors with a more realistic approach.”

It could be time to consider whether you might change your strategy and raise a smaller amount at a lower valuation. You will still be giving away a similar amount of equity but are more likely to get the investment.

4) Traction, traction, traction

With investors less willing to bet on unproved models, fabled traction is more important than ever, particularly in a more restrained climate for investment. Xavier Ballester is an experienced broker who has worked with AIN for 15 years and works closely with investors across the globe.

He says: “Evidence of traction is always critical for startups seeking funding, but in 2023 it is king. With investors less willing to bet on unproven concepts, it is crucial startups can demonstrate the viability of their proposition through evidence of success. All the more hard won in recessionary territory. If you can show there is appetite for your proposition now, this will show a clear pathway to future profitability and investor returns.”

Take the time to revisit your traction points and make sure they really stand out and are relevant. 

5) Re-appraise your communication strategy with investors 

 January is a great month to connect with investors with a fresh update on your business. If you are reaching out cold, think how succinct you can be while covering off some vital points.

According to Matthew Louis from the AIN brokerage team: “Investors are busy people and likely to be inundated with pitches and proposals. Make sure yours gets to the point quickly with the information they need. Think top level information about the company and what you do, the problem you are solving for, why it is different, the traction, team, how much you are raising, the valuation and what you are planning to do with the investment.”

For investors already on your database is this the time to give that perfect ‘nudge’ on what has been going on with the startup. Perhaps it is a new product launch? New staff hires, new clients or traction point such as a revenue milestone. Perhaps something has happened in the news that provides a reminder of the need for your business. Something with context and relevance will ensure this isn’t just spam and likely to get your startup noticed. 

The new year is a good time to plan a content pipeline for your investors and outreach strategy for new potential investors.

Following these five resolutions could help you supercharge your fundraising in 2023. Perhaps there are others you would add to this list. The key things is making sure they are realistic and that you can stick to them. Happy new year from the AIN team and good luck!  

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Businesses are missing out on huge commercial opportunities due to a lack of gender diversity in early stage business investment. This is the message from experienced investor Roxane Sanguinetti in our latest Meet the Investor interview. Tackling the gender funding gap was her motivation in joining Alma Angels, which backs female and/ or minority founders. It is now 350 angels strong. As well being an investor with Alma Angels she is co head of the London chapter of Women in ETF’s.

In a wide ranging interview she discusses how to create a more level playing field, why it matters, the sectors that she is drawn toward investing and the common qualities of founding teams she has backed. Why dedication is what you need…

What led you to angel investing?

A few years back I was advising start-up founders on their fundraising decks and financial models, as I had realised it could be helpful to those who do not have a finance background. I kept coming across some very interesting business models and I started thinking “oh I wish I could invest in that one!” but I lacked confidence. I started with a few investments via crowdfunding in businesses I had met or supported, but I wanted to get more involved.

I went looking for an angel community, or mentors who could guide me. One thing I knew for sure, I wanted to focus on female and/or minority founders. And that is exactly what I found with Alma Angels. December 10^th 2019, I attended the first meet-up where we exchanged ideas on how to support female founders. Now 3 years later, we are a community of 350 angels who have collectively invested a few millions, and I’ve had the opportunity to learn alongside some incredible people.

You back businesses (co-)founded by women. What drives you to do this?

I want to see more wealth in the hands of women, be it on the fundraising side or the investing side. And these go hand in hand.

We have all seen the horrendous stats – only about 1% of VC funding goes to all-female teams. There is a fundraising access gap for female-led businesses, and I have pledged to bridge that gap by investing and introducing the founders to my network. I also spend a lot of my time educating on angel investing. Women are more likely to back women, but less than 15% of angel investors in the UK and Europe are women. And this isn’t about charity, research shows that investments in female-founded start-ups perform better than in all-male teams. Ultimately, we want to create a virtuous cycle: successful exits to bring more wealth to reinvest.

I want to do everything that’s in my power to better the ecosystem and level the playing field.

From a business perspective, what are the benefits of ensuring we have more gender diversity in the start up ecosystem?

There is now a lot of research and data on the financial benefits of diverse leadership teams. Businesses are potentially missing out on opportunities and revenues from half of the market when products and services are not adapted. One sector I know well is WealthTech: Over the last few years, we’ve seen an explosion of businesses such as roboadvisers and trading apps. What all these apps have in common is that women are rarely involved in building and testing, and it now shows in the user base. 70 to 90% male. Which is an opportunity for female-led businesses to come in and make a killing.

To build long-lasting inclusive technology AND businesses, we need diverse teams involved in the whole process – from ideation to development, testing and distribution. And by diverse, I mean gender-wise, racially but also cognitively.

And if I can expand the question to the investing landscape: diverse investment teams will back a more diverse portfolio of founders, which is beneficial in terms of returns but also means that they are more likely to support builders of inclusive technology. 

What sectors particularly interest you for investment?

I am naturally drawn to FinTech and WealthTech due to my background. I understand the pain points and I feel that I can be more helpful to the founders. However, now when I look back at my investments, they are all from various sectors (I added Sexual Health, Recruitment, Impact…) but they all have in common that they are making the world a better place for women and minorities! And as new sectors emerge, my curiosity gets tickled. I have recently been looking more into web3 businesses.

What are the successful traits and tactics of founding teams you have backed?

I think my founders all have in common an insane sense of dedication. They are so incredibly passionate about their cause and are the most hardworking people I have ever seen. They have all brought in impressive results with limited financial backing. A successful founder can also be one who realises their own limitations and know when it is time to sell or to step away from the business, even when it does not maximise their profit, but it ensures their team and the business can carry on.

Female investors are twice as likely to invest in women than male investors. What advice would you give to those interested in getting into investment for the first time and getting active?

Ask loads of questions and ask for help from experienced angels – what do they look at? What questions do they ask during due diligence? From my experience, angel investing is a collaborative environment. I am yet to meet an angel who hasn’t been open to discussing their journey or their investments. Angel investing is a game no one plays on their own, as we are there to support the founders through their early fundraising journey so we coinvest, we help each other out, we connect with later stage investors. As a first step, joining a community or a syndicate can be of great help for those who feel they need an organised structure. You get to ask your questions in a safe space and see dealflow more easily. By the way, Alma Angels is 70% women.

Does the current national and global context, and the outlook of an increasingly uncertain world change your investment thesis?

I wouldn’t say that it changes my investment thesis. Female-founded businesses generally have had to build with very limited funding which tends to make them much more resilient, much more cost/ cash-burn conscious. BCG released a report stating that female founders generate twice as much revenues per dollar invested than male counterparts. 

What has changed however is the way I look at the business models. I might focus my due diligence questions on some risks that seem more prevailing due to current market conditions.

Join the world’s largest angel investment network, where global angel investors meet the great businesses of tomorrow.

For our latest Meet the Investor Interview we chat with Addy Windsor-Clive, an investment manager at Regenerate Ventures. Regenerate Ventures is an EIS VC fund focusing on Early stage AgTech investments. She discusses her motivation in supporting startups tackling the ‘broken’ agri-food supply chain, her desire to see a more diverse set of founders within agriculture and the trends transforming the ag-tech sector.

What led you to investing in start-ups?

I started my career in Venture Capital and that’s where my love for it began and helping startups reach their true potential.

You back businesses that drive systemic change in the food system. What drives you to do this?

The agrifood supply chain is broken and all the pressure is being put on farmers so we are trying to alleviate that issue as well as producing food without ruining soil health to ensure it for future generations.

What is the gender and ethnic make-up of the founder population you look at? Does this impact how you invest in businesses and the way they work?

We are seeing more and more female led companies but we would like to see a much more diverse set of founders within agriculture.

What interesting trends are you seeing in the Agtech sector?

Precision agriculture to improve efficiency of crop prediction and yield and decarbonisation of the agricultural sector.

How are these trends changing the system?

Helping reduce chemical and fertiliser inputs that are helping to improve soil health but also to reduce GHG

What would you like to see more of, to accelerate the change in this field?

I would like to see more around soil testing and also data aggregation in the sector.

What are the key red flags when you are dealing with start-ups that you are potentially going to back?

A pitchdeck that isn’t in a suitable format asking the typical questions a VC would ask. Not knowing their market size or having a product fit.

What has made the biggest difference among your successful investments – traits and tactics of the founding team that have made the biggest difference?

 In the AgriTech sector all the founders are very mission led and pivot easily as a result of feedback from industry experts. Also founders that are not afraid to give away equity.

What advice would you give to entrepreneurs going through the fundraising process?

Have a bank of FAQs ready to go, ask friends and families or an investor that you know to help work them out. Allow yourself enough time.

Does the current national and global context, and the outlook of an increasingly uncertain world change your investment thesis? If so, how?

If anything it only verifies it more. The global food security and food safety issue is only becoming more pressing and investing in this sector as this stage is absolutely key to the future of the planet.

As both an investor in start-ups and a founder currently fundraising for your own fund, what is your top tip for anyone looking to fundraise for the first time?

Good pitch deck, all FAQs ready to go. Find out what the investor is looking for and tailor your pitch to that.

Join the world’s largest angel investment network, where global angel investors meet the great businesses of tomorrow.

‘Founders need to be passionate, driven, and fully committed in the longevity and future of their company.’ These are the words of experienced investor Noel Duigan describing what he expects from entrepreneurs pitching their business ideas. As someone who has personally invested in 12 businesses in the past year his advice is worth its weight in gold.

We are delighted Noel has given his time for our latest Meet The Investor interview. He discusses the reasons he invests, his typical ticket size, the red flags he looks out for, how founders should update investors and top tips for anyone raising for the first time.

What has led you to angel investing?

Independence mainly. I looked at it as a strategic step to gain financial independence and build a successful family office. Prior experience has helped me overcome a level of confidence required to interact with founders and CEO’s and not be afraid to ask the ‘stupid’ questions when I don’t know or understand something.   

What do you invest in and at what stage? Any reason why you go for those investments?

I mainly lean towards tech and fintech due to the scalability. However I have also ventured into renewable energy. I prefer to get in at the seed round, but have also invested in Series A and B, as well as pre-seed. I think it’s being sensible with your portfolio and spreading the risk. Seed is attractive due to the low valuations and high potential for return, but with greater risks. So I hedge these with larger investments into Series A and B rounds, smaller returns and ‘usually’ a safer bet. But not always!

Do you invest with the head, the heart or the gut?

I think you really need to be paying attention to both the head and gut, I don’t tend to invest with my heart, at all. I will always look at the business case first to see the potential. If that checks the box and my gut is off then I pause and try to work out what the problem is. If I can’t find it, but still keep that feeling that something isn’t right, I don’t usually invest.

How often do you tend to invest per year and do you have a typical ticket size?

A few times a year, however the last year was quite busy with 12 investments. The sweet spot for me is £100k. However, I have a few at £200k and some at £50k. It really depends on the round, valuation and exit opportunities.

What are the key red flags when you are dealing with start-ups that you are potentially going to back?  

Lack of experience of the founders, or their team is the main one. Often you are investing in the founders rather than the company. If the founders don’t have any skin in the game, that’s pause for consideration. Lack of traction in their space will often mean stalled growth and is a red flag.  Have a look at their runway and burn rate, you don’t want it short and wide. That could spell either bad margins or high overheads.

How do you view your relationship with your investees? What is a good relationship?

At pre-seed/seed the company is smaller so the relationships tend to be more personal. You can offer networking support and help with growth. Whereas the later rounds you really are just a name on the cap table. Regardless of when you invested, a good relationship means consistent updates. 

There is a challenge for founders to find a sweet spot between the management of their workload, and the stress it entails, alongside the expectations of their investors.

How often do you think founders should be updating their investors of their progress and by what method? 

At a minimum a quarterly update should be emailed to investors covering progress (or lack of), metrics and financials.

What is your top tip for anyone raising investment for the first time? What gets you on board?

You need to be vested. A product or service driven from need, not greed will always win over investors. The market is over-saturated with people making a dash for cash off recycled ideas. Founders need to be passionate, driven, and fully committed in the longevity and future of their company. Hand sanitiser during a pandemic doesn’t cut it.

If you could offer an early investor one piece of business advice, what would it be?

Research. Research the company you want to invest in. Research the founders. Research their pitch deck, research also includes fact checking. Research their product, download their app, try it out, read the reviews. When you are not researching a company then start researching for self-education.  As we used to say: “Time spent on reconnaissance is seldom wasted”.

Join the world’s largest angel investment network, where global angel investors meet the great businesses of tomorrow.

 “If you don’t see it, you can’t be it” says inspirational investor and founder Andy Ayim MBE. The quote describes his philosophy in setting up the Angel Investing School with the aim of empowering a new tribe of diverse angel investors for the benefit for the whole startup ecosystem. In our latest interview this game changing investor discusses his motivations, advice to aspiring angel investors, how he finds deals and where the best investment opportunities lie in this tougher climate.

What has led you to angel investing?

I was inspired to invest into startups because I met so many working class, diverse founders who lacked access to knowledge, networks and capital. Many didn’t have friends and family members who could invest in them despite having great skills, ideas and unlocked potential.

You started Angel Investing School in 2020, with the aim of empowering a new tribe of diverse Angel Investors, levelling the playing  field of investment and increasing the numbers of BAME investors.  Why is this important to you?

 “If you don’t see it, you can’t be it.” Role modelling is important for empowering people to feel like they belong. Whether in school, at work or within an industry. The more diverse investors we have, the more diverse founders will get funded and have the opportunity to execute on their ideas.

You recently operated as a syndicate,  investing with 8 other black investors (some new and some experienced angels) into a Consumer startup.  What do you feel the benefits are to startups taking on funding from a syndicate?

Syndicates put simply are a collection of people that come together around an aligned area of interest. For a startup, this is great as they get to tap into the collective knowledge and networks of the group as well as efficiently managing their fundraise. Often the angels that invest small tickets, work hardest on the Cap Table to support founders and add value.

For the investors it is also great as it allows for small ticket investors to club together and cumulatively invest a larger amount into a startup. It democratises access to startup investing so that you could build a portfolio by investing £1,000 – £5,000 in each startup.

How did you find your first 2-3 deals and do you have any advice to aspiring angel investors who want to find their first deal?

The industry-wide challenge around inclusivity is that some of the best deals often get shared from founders and investors through private networks. The majority of new angel investors don’t have access to those networks.

Therefore, I highly encourage new angels to surround themselves with more experienced investors. That’s what I did as I joined syndicates such as HoaQ Club, HERmesa and Green Angel Syndicate as well as building relationships with individual angels.

The great thing is, you learn a lot from mistakes and just having skin in the game as an investor. Then your reputation starts working for you if you are responsive and helpful to the founders you invest in. That makes it more likely for them to recommend you to other founders in their network.

We understand every project is different but looking at your career of investing, with the startups you back how many conversations do you have on average from first conversation before signing a contract?

Like you mention, no two situations are the same. One thing I will say is that I don’t give in to FOMO. If I get a deal on a Friday that closes on a Monday, I simply say no as I need time to nurture a relationship and understand the founder and vice versa so they can get to know me.

I can usually do this with 3-5 meetings but some founders I know for over a year before committing too.

Our research shows that one of the biggest bugbears of entrepreneurs fundraising is the amount of time it takes from the initial conversation to signing the contract. What advice would you give to entrepreneurs going through the process?

The tech industry over indexes on intelligence and being smart. In reality, entrepreneurship is more about perseverance, grit and luck. Fundraising is hard work for most, there is no shortcut.

However, it should also be a great learning experience to on positioning, selling and storytelling. Most founders I speak to get better at this with time. I highly encourage founders to speak to other founders they trust who have previously fundraised as they are often an invaluable source of advice.

In this more challenging climate, what new hurdles do entrepreneurs need to overcome to win investment?

The current environment has seen a resetting of valuations, return to fundamentals (profit, revenue, unit economics etc) and capital efficiency. Any business, built on this as a foundation is off to a solid start.

Founders will need to foster relationships and play the long game with investors to build trust and show they have a plan to survive and thrive throughout this climate. Gone are the days for now of investing in scooters or deep tech companies with no clear business model.

Similarly, what are the best investment opportunities for angel investors in this tougher climate?

Angel investors should remain discipline and hone in on startups that fit their investment thesis. This environment favours certain sectors more than others. We have seen layoffs in particular with Buy Now, Pay Later and speedy grocery companies. Why? Because consumer behaviour has shifted and discretionary spending has been cut.

Founders that understand the terrain they are operating in and how they have adjusted their plans accordingly are the right ones to consider investing in – in this climate.

Join the world’s largest angel investment network, where global angel investors meet the great businesses of tomorrow.

Andrew Craissati has had a storied career with over 20 years in senior roles across investment banking, Universal Studios, National Geographic, the David de Rothschild family office and the Virgin Group. Working closely with the country’s most famous entrepreneur, Sir Richard Branson, Andrew gained remarkable insight of the world of early stage investing. 

 As a founding member of the Bricks, an early-stage investment firm, for the past 12 years he has used his personal experiences in supporting companies. Not just with capital but with constructively designed support and value-additive skills and knowledge. For our latest Meet the Investor interview, he discusses the benefits of angel investing, the most exciting markets for investment at this time and an unorthodox but effective approach for identifying the top performers.

What’s led you to angel investing?

Coming out of 6 years of working closely with Sir Richard Branson as a regional chairman across the entirety of his Virgin Group, I had a remarkable set of experiences in the art – and science – of early stage investing. One of the key aspects which I most enjoyed was the people part of investing: realising and accepting that a business idea is a mere manifestation of people coming together and embracing people talent. So, in wanting to deploy wealth into early stage investing, I was drawn to it because of that very premise. How could I use my personal experiences in supporting companies not merely with capital but with constructively designed support, nurturing and genuine, value-additive skills and knowledge?

It seemed logical, therefore, for me to focus on early stage investing as this seemed to be the point where entrepreneurs need or want both capital and legitimate support. I felt as though my past experiences led me to a point of focus where companies were young enough to warrant the type of assistance I’m capable of providing.

What is your most active area of interest?

I would contend that our area of interest is driven more by stage and less by sector. To the extent that I and my family office are driven by a thesis, it is focused principally on several guiding parameters: (i) the founder or founders must come from the sector which they are targeting (and with domain expertise), (ii) the company must have the ability to articulate its product or service (whether yet built or not) and to demonstrate demand, (iii) there is clear differentiation in the company’s approach and (iv) both the company and we must believe that we make a difference to them by virtue of our value add approach.

In your opinion, what are the potential pros and cons of angel investing?

Our style of investing is very time-consuming and requires a steady level of dedication and focus. To my mind, this is the disadvantage of investing in early stage companies: the time that is demanded of an investor who leads (as we do) or an investor who supports and serves. Of course, this is also the rewarding aspect: the ability to be close and remain close to the founders of a business throughout the journey, even where our investment gradually becomes small by comparison to the other investors in the company.

What has made the biggest difference among your successful investments – traits or tactics that have made the biggest difference in the startups being flops or top performers?

I believe that the tactic (by us) which has driven the greatest additive aspect to our investments is our use of our in-house psychologist. While this might be an unorthodox response, it is by far the most valuable aspect of our pre- and post-investment processes.

Pre-investment, all of our founders and lead management team members take a fun and interesting test and private 1-on-1 interview with Sylvia, our psychologist. This process (we call it Team Dynamics) allows us to have an extremely deep understanding of the founding team and their relationship with one another (and with us, too).

Given that founding teams’ collapse is so often the main contributor to company failure, we have found this process invaluable in understanding the teams we’re meeting and helping them to maximise their relationships and interdependence.

You have started, led, and exited several successful ventures. What is the one piece of advice you would now give to your younger self starting out on your journey?

Listen to your gut. Sometimes it does a better job for you than analysis.

Do you invest more with the head or the heart/gut?

We invest with our head but the gut gives a very good reason to pull the plug or change an opinion. The key is to listen to the gut when it sends you a red flag.

Do you feel that being an operator before becoming an investor creates advantages over those with experience solely in the investing space?

To my mind, angel investing is a mixture of conceptual and theoretical thinking as much as it is about building relationships and bridges. It is key to understand the human aspect of being an entrepreneur: their fear, their self-confidence, their willingness to speak openly: these come most easily to those who have been in the same shoes or who have had to face similar challenges. That said, I know many institutional investors who are rich in their knowledge and who give sage advice: this comes from their years of seeing and processing challenges.

You’ve invested right across the globe during your career, where do you think is the most exciting market for angels at the moment?

Asia is always touted to be the most important continent on the planet, if only by its sheer population and geographical spread. True, it has critical mass but it also has tremendous diversity and cultural differences and challenges. I have a tendency to prefer the European markets at the moment as the valuations are generally well constructed, the legal systems are mature and structured to minimise legal issues and litigation and the cultural divide is minimal. While we do invest in North America, it can be more challenging in terms of legal systems and valuations.

Why do you use AIN to find investments?

AIN puts thought into the deals it shares and introduces. There is a genuine level of care and professionalism in what it does and how it does it.

Join the world’s largest angel investment network, where global angel investors meet the great businesses of tomorrow.

Three of Angel Investment Network’s senior team have been named in the 2022 edition of the prestigious Spear’s 500. The index is the definitive market-leading guide to the top private client advisers and service providers for HNW individuals. 

AIN co-founders James Badgett and Mike Lebus were named alongside experienced broker Xavier Ballester who has been with AIN for fifteen years. 

Featured in the publication Lebus commented: “We have now grown to over 1.5 million entrepreneurs and over 300,000 investors across 194 countries worldwide. We’ve tried to never lose touch with our entrepreneurial roots.”

Also interviewed in the publication Badgett reflected on the “Phileas Fogg-like journey” of the network with “over 100,000 pitches submitted last year, ideas coming from almost every country – North Korea and Guinea included.” He said: “in this age of rapid innovation, it’s not just about the latest ‘OMG’ idea, but rather CVs and people. If you’ve got an idea plus a great team, you’re going somewhere.”

Describing AIN’s success in democratising access to early stage funding Ballester said that “the era of approaching ‘grey-suited men in ‘oak-panelled rooms’ in the hope that they would ‘bestow you some cash’ is finally over.” He says ‘‘We all have ideas. But it’s teams and people that turn great ideas into great businesses.”

Join the world’s largest angel investment network, where global angel investors meet the great businesses of tomorrow.

David Pattison left school not knowing what he wanted to do. He ‘fell’ into the media side of the advertising industry. With two partners he founded globally renowned advertising business (PHD) and had a successful exit.

For the past decade he has been a hugely successful angel investor, working as a chair, mentor or adviser for a variety of businesses and CEOs. Acting as a ‘wingman’ watching CEOs and companies’ backs and witnessing first-hand the ups and downs of start-up and young company life.

Last year he wrote his first book, The Money Train: 10 things young businesses need to know about investors. It has received rave reviews and award recognition. We are delighted he has shared his insights with us. He discusses the benefits of angel investing, the common traits he looks for in startup founders and what new hurdles entrepreneurs need to clear to win investment in a more challenging climate.

What’s led you to angel investing?

I didn’t wake up one morning and decide to become an investor. It really found me rather than me finding it. I finished with full time executive roles in my mid-fifties and I started helping young businesses in a variety of roles. As they looked to raise money and I got more involved (often as a chair) then if it was a business I liked and had faith in then I would invest. As a result of this I started to get a reputation as not only a source of advice and help but also as a potential investor.

What are the benefits of angel investing?

I think it varies, depending on who you talk to. For myself there are three things that I find as benefits:

– I very rarely invest without some form of ‘mentoring’ involvement in the business, so I get to spend time with good companies and smart, young, bright management teams.
– I no longer want to be a ‘big dog’ so seeing and helping a company grow and succeed and exit gives me real satisfaction.
– Of course, there is the potential financial benefit. EIS and SEIS schemes in the UK mean that if you pick a winner then there is a real financial upside. I am not interested in running my own stock market investment portfolio, so I have built a company investment portfolio instead.

Having said that angel investing is almost always early stage so it is likely that you will get a high failure rate. I reckon over the years that for every ten investments I make then three really fly, a couple make a bit and then three or four are a claim on my tax return. But the ones that really fly make a lot. My best ever was a 40x return. The wins cover all the losses and still give a big profit.

What are the common traits you look for in the start-up founders you back?

It’s a mix of what the company is and what the founder is. I have three criteria when it comes to getting involved in a business or make an investment:
– Can I spend two hours in a room with the people (particularly the CEO)?
– Is it an interesting product?
– Can I make a difference?

I believe I have good instincts and people judgement so with regards to the founders I have over the years added:
-Are they legal decent and honest?
-Are they clear on what they want to achieve?
-Are they passionate about their business?
-Do they listen to my views?

Having said that I sometimes fail to listen to my first instinct, and it usually costs me money!

Are there any red flags in dealing with start-ups that you are potentially going to back?

There are some red flags that I can spot before I invest, unfortunately some are well hidden and occasionally show themselves after investing. These are the pre investment red flags for me:
-When the opening conversation is just about how much and when?
– A team that is rewarding itself too well on other people’s money
– If it’s in a sector I don’t understand fully.
– If it’s going to be an entirely arm’s length investment with bi-annual updates then that doesn’t work for me. It does for a lot of other people who are really only looking for a financial gain. But not for me.
– I find it very hard to invest in businesses where I don’t know the people and/or I am not introduced by someone whose judgement I trust.
– I never invest in Apps. It’s just ‘a thing’ and I am sure I have missed a few good ones.

Our research shows that one of the biggest bugbears of entrepreneurs fundraising is the amount of time it takes from the initial conversation to signing the contract. What advice would you give to entrepreneurs going through the process?

If you want other people’s money then it’s just part of the cost of getting the investment. Too many entrepreneurs think that they are almost ‘owed’ the money and it should come quickly and with few strings attached. Every entrepreneur should respect your potential investors and their money.
Having said that, in the investment process you only need to remember one thing:
– Investors only care about one thing and that is their money and how much money you are going to make them.
If you remember this then you will start to understand why it takes time.
The other thing that a lot of young businesses do is fail to prepare for the fund-raising process.

– Get your finances and your forecasts in shape.
– Make sure you know more about your business and your market than anyone else
– Make sure you have a clear plan for the future and an exit strategy. The plan can, and often will, change over time but a clear route will play well.
– Be clear on how much you need and what it’s for and what the deal is. With Angel investors they will expect you to set the deal parameters, institutional investors usually set it for you.
– Enthusiasm for what you do also goes down really well.
– A good lawyer pays for themselves a thousand times over in this process.
– Don’t let the time it takes lead to deal fatigue, that’s when you agree to clauses that will cause you problems in the future and is often what some unscrupulous investors hope to achieve.
– Young businesses always underestimate how long it takes to raise money and then hitting cash flow issues.
– Leave lots of time to raise money. Even with Angels it can take 6 months.

One final thing to remember, there is a difference between Angel/Individual Investors and Institutional Investors. Angels/Individuals don’t have to invest and are much more likely to pull the plug at the last minute, whereas the Institutional Investors must invest to get their funds fully invested in a certain time frame.

We understand every project is different but looking at your career of investing, roughly how many conversations do you have on average with a founder before you are willing to invest?

As you say every project is different, but I would say that from first conversation to putting the money in it is probably 6-8 conversations. This would include meeting other members of the team and references.
The variables would be:
– Shorter if I know the people or the business.
– Shorter if it’s in a sector I really understand.
– Shorter if there is a role that I really want to do.
– Shorter if my first instinct is really good.

You have been an investor, an entrepreneur, business leader and now an author. What is the one piece of advice you would now give to your younger self starting out on your journey?

Hindsight is such a wonderful and useless thing! Having said that the advice I would give would have been listen to my instincts, be braver, be more confident in my own judgement and don’t invest because you feel you ought to. Oh, and in 1997 put every penny I had into Apple stock!

In this more challenging climate, what new hurdles do entrepreneurs need to overcome to win investment?

In a challenging climate the chances of needing investment money greatly increase. Conversely whilst there is money around to be had, it becomes harder to get and the chances of running out of cash increase.

Investors become more risk averse and whilst good businesses will always be able to raise money the valuations can be significantly below market value and entrepreneurs can end up with less of the business than they feel comfortable with.

Make sure you have a plan B. This would normally be running the business on a break even basis. This might mean having to make hard decisions, particularly around people, but the future of the company will probably rest on this.

If you are struggling to raise money go back to your shareholders and see if you can do a smaller raise as a bridge to better times. Give the good deal to the people who have supported you in the past.

How long would you spend doing due diligence and what do you look for? 

Usually between 4-6 weeks. I have covered a lot of what I look for above but in the ‘formal ‘ part of DD I would look at the following:
– Financial information (P&L, Balance Sheet, cash position and cashflow projection etc)
– Any IP that is in place
– A business plan
– Any legal docs (The proposed investment Agreement, Articles of Association, Shareholders agreements if they exist)

You’ve written an award-winning book, The Money Train, on what young businesses need to know about investors. Why did you decide to write this?

I wrote the book following a particularly drawn-out and bruising fundraising process. It struck me as unfair that just at the point where a young business is at its most inexperienced it is often negotiating with very experienced investors who may insert clauses that look harmless (or may not even be understood) that come back to haunt the business in the future. I felt that a guide to preparing for the investment process might be useful. Shedding light on what some of these clauses are and how to resist them. It seems that a lot of people have found it really helpful.

David’s award-winning book is The Money Train: 10 Things young businesses need to know about investors. It’s a guide to preparing for the investment process from seed capital to Series A, with lots of real-world examples.

Join the world’s largest angel investment network, where global angel investors meet the great businesses of tomorrow.

The angel investment world is still overwhelmingly male. Data from the UKBAA suggests only 13% of business angel investors in the UK are women and it is a similar picture worldwide. Lack of access is one of the biggest challenges of gender inequity. There is an urgent need for more successful women to speak up and show others the way. One of the key reasons is that more female investors means more female entrepreneurs are likely to receive support. 

One such woman is the incredible Marla Shapiro- CEO of HERmesa – a UK based angel syndicate, 2022 finalist Angel Group of the Year at the UKBAA awards, investing in extraordinary female (co) founded start ups.  We speak about her continually growing portfolio of exceptional women led start-ups, her drive to support female backed business and what she sees as the fundamentals of a founding team.

What has led you to angel investing?

I find angel investing incredibly interesting!  You have the opportunity to meet fantastic entrepreneurs, learn about new technology / products / scientific innovations and, to play a small role via your capital and expertise in making these innovative businesses a success.

You back businesses (co-)founded by women. What drives you to do this?

I invest in women-(co)founded businesses because women founded companies return more and generate greater returns to investors.  Angel investing is about making money:  you make more money investing in women founded businesses and alongside women investors.

At HERmesa, we call this the “diversity dividend” and share the underlying data on the performance of women funded and founded startups via our website.

You operate as a syndicate, with the aim of not only supporting female founders, but also increasing the number of female investors. Why is this important to you?

The statistics about women investing and receiving early stage financing are dire:  13% of the angel investors in the UK are women and women (co)founders receive 5% of early stage financing.  This means that the world is being built by men to meet the needs of men.  If women do not have a seat at the table to invest in companies of the future, we get a reduced range of products & services.  If all investors are the same (e.g. white men from the southeast of the UK that work in the City), how are we going to get solutions that meet the needs of the entire population!?  If you don’t invest, you are letting someone else build your future.

And, if women don’t invest, they are excluded from private wealth generating opportunities vs their similarly situated male peers.  While angel investing is risky, with an appropriate portfolio strategy and risk management, you can generate meaningful returns.  Why should this be available only to men?

Finally, while I don’t think it is the responsibility of women investors to solely solve the lack of funding that goes to women entrepreneurs, it is true that women investors back women founders at a disproportionate rate (~40%) vs their male peers (~2%).  

What do you do to support more women to become angel investors? 

HERmesa angel syndicate does a lot to bring new women into angel investing!  We support new angels in a variety of ways:

• Ongoing education sessions on all topics re: “how to angel invest”
• “Buddies” – pairing new angels with experienced angels to ask ‘silly’ questions (even though there are no silly questions!  And we work really hard to create an open, curious culture at our events)
• Setting a very low minimum ticket size of £2k/deal. This low ticket size allows new investors to dip their toe in the water with a limited amount of capital at risk vs the typical syndicate which requires a £10k minimum ticket.  HERmesa are huge believers in “learning by doing”.  You can’t be an angel investor unless you invest; and you can’t learn by reading about angel investing.  The best investors learn from experience and by having ‘skin in the game’.
• We have found that the lower ticket size is not just attractive to new investors, but also to investors earlier in their careers, including entrepreneurs who have not yet exited their business.  This low ticket size lets HERmesa bring a huge amount of talent, expertise and support to our investee companies, and from these ‘operators turned angels’ we are becoming known as high value add investors for founders.

What is your most active area of interest?

HERmesa is sector agnostic; we invest in consumer product, technology and deep science companies operating across B2C and B2B.  (This IS a wide range; fortunately, we have a fabulous community of investors who are sector experts and help us review all deals).  But, one theme that tends to run through our investments is “impact”:  solutions to the climate crisis, pollution reduction, access to justice, etc.  At least 50% of our businesses address impact in some way.

What characteristics do you look for in a founder/founding team?

When I first started angel investing, I found it immensely frustrating when experienced angels would tell me “great founders have a special something; you know it when you see it”….but, having now met hundreds of founders, I think it is true!  But, to break this down, I would say that great founders/teams:

• Have strong founder/product or market fit.  Ideally this means that you have deep experience in a sector that has led you to creating an innovative product and that you have the network to find the first paying customers.  Or you have some killer functional experience that will allow you/your team to out-execute others.  
• In addition, we look for thoughtful people who ask for advice.  Founders get a lot of advice; not all of it valuable!  But, knowing when to put up your hand and ask your investors for help and the maturity to weigh the responses goes a long way towards building a successful company.
• Finally, we really try to invest in nice people.  We are putting our own money into the business and we are going to be with these founders for the next 3, 5, 7 years.  Life is too short to invest in jerks!

What turns you off on a pitch deck sent to you and why?

Small font where everything is crammed onto the page.  Investors want a super clear, concise story that gets us excited to ask more questions and set up the first call.  As one of our members says, “pitch decks are meant to be commercials, not novels!”  

What has made the biggest difference among your successful investments – traits or tactics that have made the biggest difference in the startups?

The best startups are characterised by really strong founders, who have the ability to hire top talent / top performing teams.  As well, our best companies  show flexibility and adaptability in terms of doubling down on things that work, stopping doing things that are not working and a willingness to change the business model if necessary.

As a serial entrepreneur yourself, what is the one piece of advice you would give to your younger self starting out on your journey?

Try to see failure as a growth opportunity; not just as a crushing disaster!  I once was told to write a “CV of failures” and it was the best thing I ever did.   Only by looking at where I failed, where I was fired, where I didn’t get a promotion was I able to see the doors that then opened up.  If I had succeeded at my first job, I would never have taken all of the other steps that led me to becoming an entrepreneur and investor today.

Join the world’s largest angel investment network, where global angel investors meet the great businesses of tomorrow.

For our latest Behind The Raise interview we speak to Florian Jacques, founder of Midstay, the platform helping companies and individuals work remotely. Florian talks to AIN about his innovative startup catering for ‘digital nomads’ with an all-in-one solution to set up remote working experiences. He discusses the benefits of his platform for both employees and employers, the traction points that won round investors and what Elon Musk has got wrong.

Tell us about Midstay and how you came up with the idea?

The idea for Midstay came from the experiences my co-founder and CTO Magnus and I had as remote workers and travellers. We met each other in Bali while surfing on a flat day. While waiting for a wave, we discussed our common experiences of being a “nomad”. We understood that the current landscape of digital tools was missing the essential tool of helping facilitate the relocation of people taking their work with them while travelling.

What is the problem you are looking to solve?

We are trying to solve two main problems:
– Wasting working time while moving from one place to the other. So we integrate hundreds of local partners and digitalize the whole journey of settling down in a new place.

– Loneliness: We have social features that allow remote workers to connect with like-minded people, either through sharing a home, an activity or simply around a coffee/beer after work.

What initially attracted investors to your company?

We’ve had great traction on the B2B side since March 2022, where companies from Singapore and Australia have been active in onboarding their employees via our platform. We understood that our solution is ideal for them, as it helps integrate this new found way of working in dreamy locations. It becomes part of their HR strategy to attract better talent, retain their existing employees and support the global company culture. 

The investors found that quite unique, and were very excited to back us.

What has the funding enabled and what is your top priority going forward?

We are focusing on proving the features we developed with the Bali Market as a “Lab”. The fresh money helps us to grow the team and increase our global velocity. We are also perfecting our sales funnel, and doubling down on growth hacking to attract more companies as clients.

What is your top tip for anyone raising investment for the first time?

Being courageous, resilient and keeping the pipeline wide enough to make sure you always have a plan B. It was a first time for me as well, a completely new world to learn about, but it was really interesting, I met so many people that challenged me, and this has been super helpful to tailor our pitch and product. In the end, Midstay got oversubscribed by 140% so I suppose we did something right.

My biggest fundraising mistake was….

Start the fundraising roadshow too early when you can still bootstrap. We tentatively began that in November 2021, but then we quickly understood it was not the right timing. So we got back to the product, kept bootstrapping, testing and improving before talking again to our pipe of investors.

Elon Musk recently told Tesla workers that they were required to “spend a minimum of 40 hours in the office per week.” Those who did not do so would be fired, he wrote in the memo. What did you think of this perspective?

Indeed, I’ve seen this news. And I believe that some industries are more comfortable with the future of work and where it is heading. I would have thought that a visionary like Musk would follow the path of others like Bryan Chesky at Airbnb… But I was wrong! I think that he is quite old fashioned with his view of the world of work, and the work-life balance of his employees.  Eventually, I believe he will change his view, if he wants to attract better talent and retain talented people longer as well.

While working remotely has obvious appeal for workers, what are the key benefits for companies in your view?

There are several… The three main ones we mentioned already are:
– Attract better talent
– Retain your talented employees for longer
– Increase company culture
But as well:
– Indirectly increase the total productivity of the team (as they are happier to work for a company that cares about them).
– Offering remote working experiences abroad with Midstay is such a significant perk for employees, that the company’s salary bill will be less overall.
– Being seen as a forward thinking company.

If you’re looking for an angel investor to help fund your business, then the Angel Investment Network can help. Sign up to pitch your business to investors all over the world  

With a downgrade in some valuations and a more challenging economic outlook, angel investors are increasingly rigorous with the startups they are backing. 

This means that after a few years of future-gazing and hype alone driving some investment rounds, genuine traction is squarely back in the back in the conversation. Early stage startups especially need to be able to demonstrate their potential investability with tangible proof points of momentum.

The Oxford languages dictionary definition of ‘traction’ is ‘the extent to which an idea, product, etc. gains popularity or acceptance’. Investors will be looking for the metrics or KPIs that best demonstrate these are being achieved.

So how can you show your startup has ‘popularity or acceptance’ even at this early stage?

1. Customers/ users

Whilst many businesses may still be pre-revenue, investors want to know that there is the potential for future growth. That you can show some signs of potential ‘popularity’. At this stage it may not need to be about paying customers but evidence that your nascent business has grabbed the interest of potential customers and can grow. A social media following, app downloads or website users can be a proxy for paying customers at this stage. Of course if they are already driving revenues this makes your case even stronger.

Linas Pozerskis is co-founder of smart EV startup WAU , one of AIN’s most recent success stories. According to Pozerskis: “Traction is KING. Early-stage investors want to see that you have users/customers and have passed the sketch on the napkin stage. Investors can handle higher calculated risk but not a roulette wheel.”

Alex Christodoulakis -founder of DIY wealth-building app Wealthyhood agrees: “We had already built some momentum, showcasing that we were heading in the right direction. We had more than 3,000 users signed up to our waiting list, over 10,000 followers in our LinkedIn and Instagram pages and had developed a community of 50 Wealthyhood Ambassadors across Europe.”

2. Positive reviews and PR

Whenever a consumer researches a potential business in the modern world, they first turn to Google. In many ways it is the same with investors. They may be aware of a potential business through a brokered service or via their network but will want to do their own research. Positive PR mentions in established publications and reviews, good or bad, will rank highly. Especially with recent changes to Google’s algorithm favouring ‘unique, authentic information’ to readers over SEO-optimised content.

According to Katie McCourt, co-founder of sustainable underwear brand Pantee who raised on the AIN platform last year: “Within a short time of launching, we were racking up 5* reviews on Trustpilot and had been featured by the likes of Vogue, Stylist Magazine, Drapers, The Observer and named a ‘Top Sustainable Underwear Brand’ by The Independent.”

Meanwhile when WAU went for funding, the business had already been rated as one of the top e-Bike brands in the world by the Financial Times and The Week. 

Clearly garnering these sort of reviews is not possible for tech businesses at a very early stage where they are still developing a product and at an MVP stage. However investors will still be looking for encouraging signals from early cohorts of users testing a product. 

Sam Louis from Angel Investment Network has helped broker raises for hundreds of startups over the past ten years. Discussing the traction needed from early stage EdTech firms in a recent article for Global Ed Tech he commented: “We like to see strong uptake and engagement, that they’ve really tested the product or service with consumers and that the feedback has been encouraging. Not just they like the product, but that it delivers real value.” 

3. Partnerships

For many startups who need investment to continue to build out their product, traction can also be based on potential partnerships with key players in their industry ecosystem. This is the ‘acceptance’ part of the dictionary definition. Investors will be looking for the influential and credible organisations who could supercharge the startup’s future success.

According to Jim Mulford, founder of US rewards redemption platform for gamers, acQyr eXchange: “During our Phase 1 MVP, we have signed 10 Letters of Intent for our Phase 2 rollout and have contracted with 3 game publishers to test our end-to-end functionality and solution set. We have successfully onboarded both game publishers and gamers to the platform.” 

BibliU is a great example of an EdTech business who rapidly scaled and had some impressive partnerships signed up when they went for an angel funding round. This included 100 University customers including Oxford, Imperial, University of Phoenix and Coventry University. The company had digitised content from more than 2,000 publishers including: Pearson, McGraw-Hill, Oxford University Press showing the power of relevant partnerships with powerful institutions.  

Another early stage startup who has recently raised with AIN is agtech business Bx Technologies, helping farmers switch to climate friendly practices by measuring the climate-impact of produce. An entirely new concept. But according to Antony Yousefian, the co-founder, having ‘a multi-year contract with a supermarket’ with a farm they were tested their MVP helped to bring investors onboard. He said that having a brand or retailer willing to pay more for planet positive produce meant they had ‘proved the model’.

4. Intellectual property and patent protection

Many tech platforms at an early stage may have the right product market fit, but they will need to show they have a competitive advantage over others and a defensible position. A strong way to demonstrate this to investors is to hold patent protection or have unique intellectual property. 

According to Derek Van Tonder, senior investor relations manager at Axiom Holographics who successfully raised with AIN last year: “Shareholders of Axiom Holographics are interested in a long-term pre-IPO Intellectual Property play, they are investing with us because we have a lot of unique IP and patents, we have proven that customers want to buy our products, and we are offering new Hologram products not seen before that solve a lot of the problems with Virtual Reality.” 

In sectors such as MedTech this is also clearly crucial. According to Dan Daly, founder of Disease Screening and Diagnosis startup Occuity: “A large part of the attraction for investors was the upside potential of Occuity. We have a proprietary technology, protected by nine patents, and an expert team developing products which deliver clear solutions to large and growing markets. The opportunity is tremendous.”

So traction can mean many different things depending on which sector or stage your business is at. Ultimately keeping in mind the dictionary definition of ‘popularity’ or ‘acceptance’ will keep you focused on what you need to demonstrate to win the backing of an angel investor. These sign posts of momentum are needed like never before. Good luck! 

If you’re looking for an angel investor to help fund your business, then the Angel Investment Network can help. Sign up to pitch your business to investors all over the world

For our latest Behind The Raise interview we speak to Jim Mulford, founder of rewards redemption platform for gamers, acQyr eXchange. The serial entrepreneur talk to AIN about his mission to effectively monetise the hugely growing gaming market with relevant rewards and offers, learn about how to get ahead of your competitors. As someone who has led several exits he also offers his top tips for raising investment and reveals the pitfalls to avoid.

Tell us about The acQyr eXchange and how you came up with the idea?

Our mission and QX Offering have a strong foundation of research, development, pilots, partnerships, and IP for the real-time issuance and redemption of digital reward value in markets that effectively apply loyalty rewards to attract, engage, and retain the customers of businesses within each market.

It all began when Targeted Shopping Solutions, Inc. (TSS), the Corporate entity for QX, was founded to solve the reward redemption challenges facing small- to mid-sized retailers (SMB): How do SMBs issue, manage, track, and redeem sales promotion offers and coupons? SMB owners did it manually, if at all.

TSS developed the ShopMyNeighborhood (SMN) program to automate the process for these smaller retailers and to provide an easy-to-use, real-time solution for their customers. SMN electronically enabled owners to define offers and instantly redeem them on their existing point-of-sale terminals. Partnering with MasterCard®, SMN issued shoppers a branded prepaid card where loyalty rewards were redeemed, accumulated, and spent.

The key to SMN was that it was a coalition loyalty rewards program. Shop owners on Main Street could all sign up and share customers and offer the same rewards and redemption platform, making their loyalty programs more valuable to shoppers.

However, the high cost of customer acquisition and the market entry of household-name competitors led TSS to pivot in late 2018. The TSS team researched and identified that using the Company’s existing IP and technology for issuing, tracking, exchanging, and redeeming digital reward value represented a significant opportunity, and the pivot was made to the acQyr eXchange. Having invested over $7.0 million into the research, development, piloting, and integration of the core technology platform, TSS was well positioned to bring our competitive IP to markets that use personalised offers and digital rewards to increase the lifetime value (LTV) of their customers.

What is the problem you are looking to solve?

The Gaming Market is currently experiencing double digit annual growth. Over 2.7 billion gamers worldwide and three out of four people in the United States are fueling this growth. It is estimated that 250 new games are introduced every week! While great for the industry, it now costs more to acquire new customers (CAC) and to retain gamers longer to increase LTV. Social media, app stores, gaming platforms, and other marketing methods are proving to be less effective and more costly across the industry. The industry needs new and more effective marketing channels to acquire, retain, and monetize their gamers. 

QX delivers a well-proven method of issuing targeted offers and rewards to attract new customers and retain existing ones, thereby lowering CAC and increasing LTV. In the retail industry, loyalty programs have been proven to increase sales and profits, reduce churn, and lower the cost of acquiring new customers for nearly 70 years. That is why more than 90% of retail companies have some sort of loyalty program according to Accenture. 75% of consumers say they are likely to make another purchase after receiving an incentive according to a study at Wirecard.

How did you get the business off the ground?

We have developed, researched, tested, piloted, and launched our offering through a strong friends & family investment network, including the company founders. Over $7 million was invested by this group to make sure we delivered a superior and well tested offering to the market. 

QX has been developed as a fintech platform for issuing, tracking, exchanging, and redeeming loyalty rewards across multiple rewards programs in any market. We are bringing our platform to the Gaming Market in three phases. Phase 1 has been launched, allowing for the exchange of in-game issued rewards and subsequent redemption for cash. During Year 1 (starting this quarter), we will release our Phase 2 personalized rewards offer engine and premium member value added services. Later in Year 1, we will also introduce multiple redemption options to bring further value to our Offering (Phase 3).

What traction have you seen?

During our Phase 1 MVP, we have signed 10 Letters of Intent for our Phase 2 rollout and have contracted with 3 game publishers to test our end-to-end functionality and solution set. We have successfully onboarded both game publishers and gamers to the platform. The largest cash back reward redeemed on QX during the MVP was over $600! 

In addition, we have worked with industry insiders to prepare for our Phase 2 launch and market expansion in 3Q22 (year 1). Larger publishers, including Electronic Arts and Rovio have discussed QX with us and expressed interest in our offering as we begin to penetrate the market.

What are the key trends to look out for as the mobile/video gaming industry rapidly expands?

In 2020, the mobile and video Gaming Market generated $160B in worldwide revenues and has an expected CAGR of 10.5% over the next 5 years. There are over 2.7 billion gamers worldwide, with three out of four people in the US playing games (245 million). The market is expected to continue to outpace other entertainment industries.

Today, we are seeing 250 new games being introduced every week. While the game publishers and developers are seeing great growth, they are also challenged in how best to attract and retain gamers to their games. For example, only about 5% of mobile gamers spend money. Most mobile games are free-to-play, with ad engagement and in-game purchase options used for the monetization of these games. Game owners use various in-game rewards and tactics to get free-to-play gamers to spend money, but their success is low.

In contrast, the retail industry has evolved to using sophisticated, targeted offers and rewards to attract new shoppers and keep them coming back to make additional purchases. Over the past several years, we have built a flexible and compelling platform for issuing personalized (targeted) offers, with common rewards, that offer shoppers an asset (cash) that attracts them to participating retailers and retains them over the long term.

What initially attracted investors to your company?

1. Our team of key executives has successfully launched, operated, grew, and exited entrepreneurial ventures in the tech industry. Investors who received very attractive returns from those prior ventures were eager to invest with this team again.
2. The size of our market and the potential for scalable growth with very attractive returns has appealed to our investors.
3. The use of scalable and real-time technology by our team gave early investors comfort that we could expand and grow in a very large and growing market, the mobile and video gaming industry.

What is your top tip for anyone raising investment for the first time?

If possible, start with investors who know your team, your industry, and/or your market opportunity. Not only can these investors provide early funding, but they also bring other value-added expertise to your company. Always stay focused and don’t overstate your business plans. I would also advise that you connect with an investment network, like AIN, that can bring a broad range of investors that you can research and align to your specific investment stage, opportunity, and offering.

My biggest fundraising mistake has been…

Investing too much into developing a very robust and well tested platform before reaching out for major market expansion funding. For some investors, the large amount invested into preparing for our market launch and growth has created a barrier for them to invest.

If you had a magic wand and could wave it, what would you wish for to improve the fundraising process for startups?

For any startup, the best magic wand is one that aligns their stage, market opportunity, and solution set with the right set of investors. Too often, startups waste too much time trying to approach and communicate with investors that are not a good match for their business.

You have started, led and exited several successful ventures. What is the one piece of advice you would now give to your younger self starting out on your entrepreneurial journey?

More than anything, I have learned that success takes lots of hard work from a dedicated and properly constructed team. No entrepreneur will be able to achieve scale with their business without a team of skilled staff that complement one another.

If you’re looking for an angel investor to help fund your business, then the Angel Investment Network can help. Sign up to pitch your business to investors all over the world  

For our latest Behind The Raise interview we speak to Linas Pozerskis and Crystal Drury the co-founder of smart-EV and energy storage startup WAU (We Are Universal). They talk to AIN about their mission to transform the electric bike market, top tips for raising investment and why shortening supply chains has improved the startup’s capacity to innovate.

Tell us about WAU bikes and how you both came up with the idea?

The problem we identified was that there was no 2-wheel EV platform on the planet that would take all large 4-wheel EV perks and raw sex appeal and make it portable. Our solution was to provide a powerful/portable alternative to full size Smart EVs such as Polestar, Tesla, Lucid, etc.

What is the problem you are looking to solve?

There are four key problems our solution solves for. The first is Eliminating range anxiety (providing the longest range – ie. the Duracell factor!) The second is building a powerful road presence with the world’s first full 360 smart lights (preventing road accidents). The third is Worldwide tracking as standard (theft prevention). Finally Supercharging (fast charging).

In short, shrinking the 4-wheel smart-EVs into a portable 2-wheel base with all tech and performance already onboard. Also it worth noting that no matter how much press large EVs receive, their drivers still suffer from and need a portable alternative/companion to avoid four things:

1) High price tags
2) Getting stuck in severe traffic
3) Lack of charging infrastructure
4) Councils pushing all cars IC or EV out of city centres worldwide due to unsustainable urban congestion.

 What initially attracted investors to your company?

The incredible upsides with investing in this business and the powerhouse core team behind WAU as a start-up. EVs are only in their infancy and our team bridges the divide between Tech and EVs. As you can imagine for anyone participating as an investor in a growing smart-EV start-up this is an extremely exhilarating, exciting and, of course, high return equation.

What has the funding enabled and your top priority going forward?

Honestly, countless improvements, but if we were to focus on the top 3:
1 – Start to advance the WAU Auto-Pilot mapping.
2 – Doubling the production volume at the Essex plant to keep up with growing customer demand.
3 – Move the central HQ from Nottingham to Birmingham (8 times larger talent pool) to successfully hire senior talent from Google, large EV brands, Gymshark, etc. all to quickly expedite front-end growth of WAU as a growing smart-EV brand.

Why did you raise via Angel Investment Network? 

We initially started raising via an Indiegogo campaign. In under 2 months from a cold start the Indiegogo campaign exploded to over $320k+ in pre-orders (half is off the platform as the $174k was only pre-order down payments only). We were all blown away by the demand for smart 2-wheel EVs and knew that this could be something absolutely incredible.

Following this initial success, we were in Silicon Valley in San-Francisco at an investors’ events. A couple of investors mentioned Angel Investment Network as one of the best investment networking platforms out there. We quickly jumped on LinkedIn and decided to reach out to one of the original AIN founders and see if they liked our Indiegogo campaign. After the connection was made the rest was history!

What is your top tip for anyone raising investment for the first time?

Firstly, never fall into the ‘solopreneur’ trap. You can’t do it all on your own.

We fell for this early in the journey but quickly learnt that all success and brand longevity will absolutely be determined by who joins your team. You have to ensure there is both a culture and skillset fit before onboarding anyone (including investors). But when you start to onboard hungry, driven, skilled talent, that is when the magic happens and that will build your success.

As founders we are the enablers for great talented employees to shine and do their best.

Secondly, Traction is KING. Early-stage investors want to see that you have users/customers and have passed the sketch on the napkin stage. Investors can handle higher calculated risk but not a roulette wheel.

My biggest fundraising mistake was…

Not reaching out to AIN sooner. This would have expedited talent acquisition much faster in the early days leading to an even faster take-off.

With the bikes being designed, tested, programmed, and manufactured in the UK you are clearly championing local manufacturing. Why was this important?

Firstly, incredibly fast hands-on innovation. When a new idea, trend, technology, etc. arises we can now avoid spending any unnecessary time flying all around the world. Instead we go from our Birmingham HQ down to Essex and implement it right away with the design team and production line working seamlessly. 

Secondly it provides perfect opportunities for mass EU and global export without any trade issues. Thirdly we are also proud of our role in stimulating the UK economy, supporting local jobs, and bringing back mass manufacturing to the UK.

If you’re looking for an angel investor to help fund your business, then the Angel Investment Network can help. Sign up to pitch your business to investors all over the world  

Almost three-quarters of investors wouldn’t back a company with a problematic workplace culture.  And 66 per cent of potential recruits wouldn’t accept a job with a company known for having a bad culture.  In a recent report (May 2022) by software developer, Culture Shift, these startling statistics reveal that attitudes have significantly shifted – people are simply unwilling to put up with negative or toxic cultures.

This means that when growing your business creating a positive working culture is higher up the priority list for a founder and organisational leaders of small or large enterprises, than it has ever been.  With a natural expectation from investors for a business to be resilient in challenging economic circumstances and still grow, then this culture has to be carefully created and maintained.

The good news is that if you get this right there are positives for your business.  A LinkedIn survey found that employees would rather put up with lower pay (65%) and forego a fancy title (26%) than deal with a bad workplace environment.  Get it wrong and not only can you have an unhealthy culture, 85%  of CEOs and CFOs believe it also leads to unethical behaviour – which often leads to organisational failure. 

Even 20 years later, most business school graduates still have the 2001 Enron scandal as the exemplar of corporate boom and bust, and at its heart was a story of ordinary, but widespread corrupt business practices by employees, in Enron and in the accounting firm, Arthur Anderson – put simply: a bad culture.

As a mental health care organisation, The Soke, has a particular point of view on culture.  Very often we see clients as the result of poor workplace cultures where bullying and harassment is commonplace, competition between employees is malicious and there is little trust between managers and their teams.  Psychologically these people are badly injured and after successful treatment and recovery, rarely return to the place that the damage occurred.

So, if building a positive workplace culture is the answer, what does it take to be an organisation that does that, drawing great employees in and holding them there?  Ultimately, there are myriad of factors and you cannot simply project manage this. It has to be at the core of everything that your company does – a collection of ideas, customs and behaviours of you and your team that is applied every time and in all situations. What follows are some ideas of where to start and how to take it a step further.

Define and state the company’s purpose

Whether you build it around a founder’s story, aligning your purpose with the company’s purpose, or defining a purpose of your business that others can align to, make sure the reason for the business is clear, distinct and memorable.  It means that employees across a range of roles, know how their contributions to the workplace are meaningful.  Authenticity is key here – your customers and staff will tell if it’s out of synch.

Define and state the company’s values

This helps every person to instinctively know what they need to do, how to act, and what to say without the necessity for training at every conceivable moment.  Be aware that values are not just what is written on the walls or in a glamorous presentation.  The way you role-model these values in your behaviour day-to-day and in your interactions with the team is how values grow.  For example, if you are constantly talking about profit and focused on the speed of the company’s growth more than anything else, then don’t be surprised if your team operates with these principals in mind.  This might mean that the values around quality and taking time with customers don’t materialise, or take a back seat.

Communicate relentlessly

It’s not possible to over-communicate with your team – only at the point that you are sick of repeating the message have they heard it.  This can start as part of collaborating with your team about purpose and values, so they feel it is done with, rather than done to – particularly if people fall short of the values that you’ve set.

Be consistent

Only through the consistency of your emotional response to situations, the way you lead and manage, and role-model good behaviours will you build trust across the team and sustain the positive culture you are looking for.  This is really the test of how aligned your own purpose and values are to those of the company. For a workforce spread across different time zones and locations, working remotely through a variety of communication channels, the task of building a positive culture is layered with additional challenges, but cannot be neglected.

Ultimately, organisational resilience and growth comes from the individuals in the organisation.  Leaders set the example, but are not the whole organisation.  They can model consistency in values, purpose, and how to respond to situations, which is important, but this needs to be integrated into the entire team and way of working.  Only a consistent, values-based approach and a curiosity about learning from hardship and success will enable you to build a culture of resilience and growth.

Ed Lowther is Head of Soke Performance, the corporate services division of the private mental health and wellness clinic The Soke.

If you’re looking for an angel investor to help fund your business, then the Angel Investment Network can help. Sign up to pitch your business to investors all over the world  

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Birmingham-based smart-EV and energy storage startup WAU (We Are Universal) has raised £650,000 in a pre-seed funding round with Angel Investment Network, the world’s largest online angel investment platform.

WAU, launched in 2018, is a fast-growing smart-EV vehicle platform transforming urban mobility. The product offering includes: WAU Bikes, a smart, long range electric bike with a powerful onboard computer, the 2 wheel version of the smart electric car; and soon unveiling the WAU Powerwall, enabling the bike’s power cells to be linked together to serve as power storage for solar homes and power plants among other uses. Finally WAU vision, its data gathering capability for an autonomous EV future, rolling out to all current and future riders of WAU across the world. 

The investment will enable the business to advance its nearvision mapping. WAU is the only 2-wheel EV platform that has enough physical space and energy onboard to compute, process and send the road data required to help all EVs reach level 5 Auto-Pilot. It has been rated as one of the top e-Bike brands in the world by the Financial Times and The Week. 

The funds raised will also mean the business can double the production volume at its Essex plant to keep up with growing customer demand. Finally the business is relocating the central HQ from Nottingham to Birmingham to focus on successfully hiring senior talent to quickly expedite front-end growth of WAU as a quickly expanding DTC brand.  

According to co-founder Linas Pozerskis: “We are delighted that AIN investors have backed our vision of transforming the mobility sector with a powerful and portable alternative to full size Smart EVs such as Polestar, Tesla and Lucid. There is simply no 2-wheel EV platform on the planet that would take all large 4-wheel EV perks and make them portable, from eliminating range anxiety to worldwide tracking to supercharging.”

He continued: “We are proud that our bikes are British designed, tested, programmed and manufactured. With all ongoing innovation WAU’s will become appreciating assets. After focusing heavily on R&D in the initial phase, this investment will help us scale production to the next level and advance our game-changing WAU Auto-Pilot mapping.” 

According to Sam Louis, Director Angel Investment Network: “WAU is one of the most exciting teams we have worked with. Their vision of advancing the EV sector combined with the drive and passion they have for executing it has really set them apart. It was a key component in their ability to bring experienced angel investors onboard from our network. Alongside that, the work they’ve done to strengthen and control their supply chain is a prime example of their dedication to doing things the right way over the easy way. We’re thrilled to have helped support their oversubscribed round on this exciting next phase.”

If you’re looking for an angel investor to help fund your business, then the Angel Investment Network can help. Sign up to pitch your business to investors all over the world  

The SEIS & EIS venture capital schemes are two of the four schemes managed by HMRC that enable UK early stage businesses that are potentially high risk to raise money from angel investors, crowdfunding platforms and venture capital trusts.

They offer investors attractive capital gains tax breaks that significantly hedge the risk of their investments. For any business looking to raise pre-seed to series A funding in the UK, offering SEIS & EIS relief to investors is almost a prerequisite for a successful raise. However, it is not always straightforward to navigate.

We spoke to specialist startup legal advisors Dragon Argent, who’ve seen numerous clients make mistakes over the years that can damage relationships with early investors and even invalidate their tax relief status. They shared their top tips below to help founders avoid some of these pitfalls!

SEIS & EIS TAX RELIEF SCHEMES: DO’S FOR FOUNDERS

1. Get Advance Assurance

• Assurance is available in respect of both SEIS and EIS. As neither
  relief can be applied for until the investment in question has been made, submitting the relevant information to HRMC ahead of this allows the company to get an indication of whether HMRC agree that the investment (and the company) will qualify under the terms of either regime. This means
  that if there is any objection by HMRC as to eligibility this can be dealt with before any investment which otherwise may not qualify.
  
  Having said that, the assurance itself is based on the information provided so the more specific and accurate an application for advance assurance is, the more reliable the indication from HMRC will be as a result.

2. Onboard funds & Issue Shares compliantly

• Take in SEIS funds first and issue your SEIS shares at least a day before your EIS shares. Shares will not be SEIS eligible if they are issued on the same day as EIS shares. If you do issue both sets of shares on the same day then you would need to opt for EIS relief on all of them.

3. Be Cautious of Self-Serve Platforms or a DIY Approach

• Get advice prior and instruct professionals to submit your Advance Assurance and Compliance Statements. The SEIS and EIS requirements are complex and as mentioned above, not all mistakes can be rectified. The most common mistakes
  encountered on applications include:
  
  – Trying to apply for SEIS/EIS relief for an existing shareholder who holds non-SEIS/EIS shares – this cannot be done.
  – Applying for EIS too late. Subject to certain exemptions, EIS investment must take place within 7 years of the company’s first commercial sale.
  – Applying too early. Applications for SEIS/EIS can only be submitted once the company has traded for at least 4 months, or spent 70% of the funds raised. The “trading date” is not always the date of your first invoice so advice should be sought.
  – The company submitting the application doesn’t carry out a qualifying trade. Not all companies will be SEIS/EIS eligible. Certain trades such as banking, insurance and property based trade are ineligible. Licensing IP will also sometimes render the company ineligible and subsidiaries also need to be taken into account.
  – The investor for whom SEIS or EIS is being applied for and their associates together hold more than 30% of the ordinary share capital or voting rights in the company. If this 30% threshold is exceeded this will render the investor ineligible and companies often forget that associates are included in this calculation.
  – Value provided to the investor by the company hasn’t been declared. Where value is received by an investor, relief may be reduced or withdrawn. Care should be taken when confirming whether or not value has been received as transactions that you wouldn’t necessarily expect e.g. the company
  repaying a loan to an investor, may also count as value.

4. Be Cautious Ahead of Transactions:

Take advice on SEIS/ EIS consequences before entering into any significant transaction. Some types of transaction can have adverse consequences on SEIS/EIS relief.

Transactions to be particularly aware of include:
– Share Buybacks. If a company buys back non-EIS shares from a non-EIS shareholder 12 months before or 3 months after an EIS share issue, there will be a clawback of EIS relief for the remaining EIS shareholders.
– Grants. Certain grants and allowances that a company may be interested in may count as ‘de minimise state aid’. This is important to know from the outset as SEIS is also classed as ‘de minimise state aid’. This means that any additional ‘de minimise’ funding would need to be taken into account when determining whether the £150,000 SEIS maximum has been met.
– Joint Ventures & Share for Share Exchanges. These types of transactions can cause companies to become ineligible in respect of SEIS/EIS due to requirements around percentage control over subsidiaries and qualifying trade.

5. Monitor Spending of SEIS/EIS Funds:

There are requirements for each regime in relation to how long the company will have to use the funds raised.

In addition, the funds can only be used for the purposes of the company’s trade. For many early stage start-ups it’s relatively easy to keep track of
when and how funds are spent but once the company begins to make it’s own money the waters can be muddied unless you take a proactive approach to monitoring.

SEIS & EIS Tax Relief Schemes: Don’ts For Founders

1. Submit an EIS Compliance Statement Before Using SEIS Entitlement:

Once an EIS compliance statement has been submitted to HMRC it cannot be withdrawn, even if it was submitted in error- so any SEIS relief would then be denied.

2. Assume Founders Aren’t Eligible:

Whilst it is true that the aim of the SEIS and EIS regimes is to encourage investment from third parties, this is not to say that founders can never be SEIS or EIS eligible. There are detailed rules which differ in respect of both regimes and set out the circumstances to apply to founders when deciding whether they are eligible.

It’s important to take advice on this before incorporating the company and allotting founding shares.

3. Assume all Advance Subscription Agreements (ASAs) Are SEIS/EIS Eligible:

The default position under the SEIS and EIS regimes is that investors will only be eligible for relief if they invest their funds in equity- not loans (even if they are convertible).The exception to this is that in some cases funds provided under ASAs may be eligible. HMRC guidance has been issued on when it is likely that an ASA will satisfy SEIS/EIS requirements and this includes:
– When there is 6 month longstop date for shares to be issued;
– Where the agreement is purely for equity;
– Where there can be no variation or cancellation; and
– Where there are no provisions in the ASA which would be standard for a loan document.
N.B. This is not definitive or conclusive guidance so checking the terms of any ASA with a professional is a must.

4. Inadvertently give SEIS/EIS Shares a Preference:

As SEIS/EIS shares must be ordinary, full-risk shares this means that they must not carry any rights to preferential treatment. For example, a liquidation
preference or preferential treatment over dividends. Some companies don’t realise that these rights can be inadvertently afforded to ordinary shares when articles of association or a shareholders’ agreement are drafted, particularly when a new class of shares is introduced which are to have lesser rights than the ordinary shares e.g. deferred shares. For this reason, both the articles and
shareholders’ agreement should be carefully drafted, ideally by a professional with SEIS/EIS experience.

5. Issue Shares Before Funds are Received:

In order to qualify under SEIS/EIS the shares issued must be ordinary shares which are subscribed for in cash and fully paid at the time of issue. If you would like to discuss utilising either the SEIS or EIS schemes on an upcoming funding round for your business, contact Dragon Argent to discuss eligibility and how to best manage the transaction.

If you’re looking for an angel investor to help fund your business, then the Angel Investment Network can help. Sign up to pitch your business to investors all over the world  

What is the magic formula that turns investor interest into action? In the last of our fundraising top tips blog series, we consider ‘the million dollar question’ of why investors back early stage businesses.

We have identified the top reasons based on the accumulated wisdom of startups who have successfully raised via AIN over the past two years, based on dozens of interviews. So exactly what are the top factors that will encourage an investor to become part of your cap table? 

1. The strength of the founding team

This came out as the number one reason startups received backing. After all, at this early stage, often pre-revenue, traction may be  limited. Investors are taking a gamble that any early stage company will go onto a significant exit and ensure a significant return. They need to have faith in the founding team to deliver. The old adage that ‘people buy people’ is proved out here.

According to Ben Hallett, CEO and co-founder of fast growing EdTech company Vygo: “Our first round of angels mostly invested in Vygo because they believed in the founders’ conviction around the mission and our horsepower to bring it into reality.”

This view was shared by Antony Yousefian, founder of innovative agtech businesses Bx Technologies: “ We are told it is our story and the experience of the team. We understand farming and the food chain deeply, the problems that exist including in agtech development. Bringing together data-science and experience from sectors including gaming, media and finance.”

According to Yang Li, Chief Growth Office, crypto firm Ziglu: “Ziglu has an experienced team with a proven track record of building amazing startups like Starling, Monzo, Wirex, Meituan.”

This view of the vital importance of the founding team was perhaps best summarised by Archie Wilkinson, Co-Founder of energy startup LifeSaver:
“Investors will invest in a great team with an ok idea over a great idea with an ok team, it is important to have people around you that make you feel like the weakest link!”

2. The market opportunity

As seasoned veterans backing a multitude of companies, angel investors are adept at very quickly identifying the opportunity. Ultimately their chance of making a decent return on their investment.

According to healthtech startup Occuity founder and CEO Dan Daly:
“We have a proprietary technology, protected by nine patents, and an expert team developing products which deliver clear solutions to large and growing markets. The opportunity is tremendous.”

According to StJohn Deakins, the founder of ‘Zero Data’ leader CitizenMe. 
“We’re a cutting-edge Marketing Technology provider that is also driving significant social impact. It’s a great mix of a market-making enterprise with huge market potential, whilst also creating a brighter future for us all.”

 According to Alex Christodoulakis, co-founder of DIY wealth-building app Wealthyhood:: “Our angel investors immediately acknowledged the gap between trading apps and robo advisors and the need for a DIY wealth building app for long-term investors.”

3. Timing

Investors will be drawn to the newsworthy, not just the why in terms of the problem you solve for, but the why now? Can investors see that your business is part of a rising trend that has real momentum?  This of course needs to be a substantiated trend rather than a more short term fad.

According to Nick Begley of  founder of Psychological Technologies (PSYT): “The popularisation of meditation, mental health destigmatisation, and the willingness of millennials and Gen Z to invest in their wellbeing, has led to the market exploding in recent years, giving rise to many 9 and 10 figure company valuations in the space.”

The importance of market timing in gaining the backing of angels was also stressed by Rav Roberts, CEO of UK Consumer & Business healthtech Pharma Sentinel: “Healthtech was very topical, even before Covid-19, with more people living longer & taking personal responsibility to manage their health to live quality lifestyles.” 

4. Traction

Alongside the team, market opportunity and timing, investors will still need the evidence for take up to show this is an investable opportunity. Good old fashioned traction is still a key factor in why successful startups get funded.

According to Alex Christodoulakis : “We had already built some momentum, showcasing that we were heading in the right direction. We had more than 3,000 users signed up to our waiting list, over 10,000 followers in our LinkedIn and Instagram pages and had developed a community of 50 Wealthyhood Ambassadors across Europe.”

As well as actual users, other metrics can also cut through the ice with investors who need verification of success. PR and those all important product reviews are crucial.

According to Katie McCourt from sustainable underwear startup Pantee: “Within a short time of launching, we had grown an engaged community of over 10,000+ women, were racking up 5* reviews on Trustpilot and had been featured by the likes of Vogue, Stylist Magazine, Drapers, The Observer and named a ‘Top Sustainable Underwear Brand’ by The Independent.”

5. Personal understanding

The final reason on our list can provide the sprinkle of magic dust to turn consideration into definite action. This is the investor having a personal understanding or connection with the business. This perhaps underlies why we tend to see a disproportionate amount of funding into food and drink startups. Clearly this may be more difficult for B2B SAAS platforms who will need to make sure they really deliver on the other four factors. 

According to co- founder and CEO of AI consumer technology business aisle 3:
“Investors understood the problems aisle 3 is trying to solve and they related to their own shopper journey – especially when I was able to walk them through the competitive landscape and how we had already exceeded the current incumbents. I think, as shoppers, we are too accepting of the status quo and the need to open multiple tabs on your browser even though hotels, car insurance or flights are easy to compare.”

Gary Piazzon founded digital travel companion Porter after becoming frustrated finding a suitable hotel. “All of our investors resonated with the problem we’re trying to solve. They’d all experienced the frustration and wasted time of endlessly searching for the right place to stay when going on holiday. This immediately put us in a good position when discussing the business.”

BorrowMyDoggy founder and CEO Rikke Rosenlund also agreed the ability to empathise was paramount. “It is also helped that many investors are dog lovers. They could ‘get it’ instinctively and understand it would be great to have something looking after their dog.”

So in summary, the top five reasons investors back startups are: The strength of the founding team, clearly defined market opportunity, timing, evidence of traction and personal connection with the service or product.

Good luck with your fundraise and keep those five factors in mind when preparing your pitch!

For our latest Behind The Raise interview we speak to StJohn Deakins, the founder of ‘Zero Data’ leader CitizenMe. He talks to AIN about his mission to improve the internet by enabling people to control their own data, developing your ‘why’ as a startup and his fundraising insights having raised in the UK, USA and Asia.

Tell us about CitizenMe and how you came up with the idea?

My last startup helped over 100 million people get online with their smartphones. After selling it, I had the ‘beach time’ to dig deep into the economics of the internet. It quickly became clear that data will become the new currency of our digital world. However, because everyday people can’t participate in the value of their own data, there are billions of dollars of value left untapped. This personal value from personal data can mean many things.

It could be the informational value of a type 1 diabetic collectively sharing blood glucose stats, plus other health and lifestyle data, with other type 1 diabetics; Or the utility value of receiving hyper-personalised loyalty offers, recommendations and services; Or the cash value of anonymously sharing 360º life data for consumer insights or medical research.

The important enabler is to do all of this “Citizen First” – with people always in control of their own data. If we do this, we unlock huge new value and a better internet for everyone: companies, governments, brands, healthcare providers – and people. This is the CitizenMe mission.

What is the problem you are looking to solve?

Democratising the value of personal data, for all.

What traction have you seen?

We’ve just been ranked #1 in the 2022 UK Marketing Technology Top 50. This is because we have unique technology that has enabled 450,000 Citizens to transact their zero-party data over 11 million times directly with organisations such as Mars, Sainsbury’s, GSK, WPP and the UK Government, through our Marketplace.

We’ve built world-leading technology that enables people (Citizens) to gather a copy of all their data available and store it locally on their own smartphone, where personal algorithms create personal insights. This way, our platform touches zero Personally Identifiable Information (PII), elevating our tech above all of the new regulations in the works in the UK, USA and EU. As a result, we’re now being approached by major UK and U.S. consumer brands to licence our ‘Zero Data’ tech for use with their own customers. 

In 2021, we raised a £1.4million investment from institutional investors and AIN angels, and we’re currently raising a round to support this acceleration in the USA market, with 60% of funds already committed.

What are the implications of the increasingly ‘privacy-first’ internet?

Huge! Our entire lives are becoming reflected digitally. Becoming privacy-first will improve the way that we all interact with the world and with each other. Data privacy is not about people reducing their interactions, it’s about promoting respect for people’s life data. It’s about asking rather than grabbing. Essentially, it’s about digital civility encouraging positive mass participation with data. Organisations that attempt to ‘harvest’ or ‘extract’ personal data make people anxious about interacting and the data that they share, and they are increasingly being legislated out of business. 

In the USA, 35 of the 50 states are passing different state-level personal data legislation, similar to GDPR. The UK is ‘upgrading’ GDPR to include more transparency and data portability. Meanwhile, the European Union has three new regulations in the works: the Data Act, the Data Regulation Act and the Artificial Intelligence Regulation. These will include more restrictions on “Big Data” (e.g. Facebook and Google), and give owners of all digital products the right to a copy of all the data they create. The legislation states that all this new data will be collected by people via personal “Intermediaries”, like CitizenMe.

We’re at the beginning of a shift to a more human-centred internet. Our real lives and online lives are rapidly blurring to become one. This will only be heightened with the imminent arrival of Augmented Reality and the ‘Metaverse/Omniverse’. It’s important that we make sure this happens in the right way.

What initially attracted investors to your company?

We’re a cutting-edge Marketing Technology provider that is also driving significant social impact. It’s a great mix of a market-making enterprise with huge market potential, whilst also creating a brighter future for us all.

Why did you raise via Angel Investment Network?

AIN is the UK’s most established and highly regarded Angel Network Platform – with good reason. The team understands the needs of both investors and the startups that they select, providing solid and trustworthy advice to both. They’re also great to work with. That’s why they’re number one.

What is your top tip for anyone raising investment for the first time?

Firstly, be brave. Starting a new company and raising investment can be daunting (and I should know, I’ve done it a number of times now!)

Be aware that you’ll need to kiss a lot of frogs! Meeting investors is a matching process, your new investors will hopefully be with you on your startup journey for a number of years. Also, have a plan, spend effort on designing and testing your deck, and assign adequate time to the process – it takes longer than expected.

Always be true to your ‘why’, but be open to hearing ideas on your ‘how’ and your ‘what’. Many investors have a great deal of experience, and talking with them can be valuable even if they’re not a match. That said, the final decisions are always down to you to execute; that’s what a startup is all about.

Finally, stay positive, enjoy the wins and keep the processes in perspective; it’s all a means to delivering your ‘Why’.

My biggest fundraising mistake was…

Speaking to institutional investors before we were ready. At the seed and pre-seed stage, startups are normally still proving out an idea and proving the value creation potential. It’s worth meeting with friendly VCs to align expectations for future raises. However, in the early days, it’s best to focus on spending time with users and customers and building products and revenues.

If you had a magic wand and could wave it, what would you wish for to improve the fundraising process for startups?

The startup fundraising market lacks information and transparency. I’ve been on both sides of the funding market, both raising and investing in Asia, the UK and the USA. Startups are often unsure where and how to engage with the right type of investors for their funding needs and funding stage.

Investors require a broad view of market opportunities, without being overwhelmed. They also want assurances about the representations being made, from the usual over-optimistic forecasts, through to protections against Theranos-style fraud. Platforms like AIN are bringing much needed connections to the marketplace. The wave of the magic wand would make the consideration and matching phase far faster and easier for both founders and funders.

CitizenMe are currently raising. Please contact Xavier Ballester for more information xavier@angelinvestmentnetwork.co.uk