Author: Toby Hicks

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

Our latest fundraising blog series features the accumulated wisdom of startups who have successfully raised via AIN over the past two years. Last time we looked at the top fundraising pitfalls. This week we look at the top tips for raising successfully.

All of the founders interviewed have raised successfully through AIN and several on multiple occasions. They have kindly given up their time to share their top tips and advice, helping to improve the startup ecosystem for the benefit of all. Their advice really is worth its weight in gold.

1. Understand what stage your business is at before fundraising

This really is crucial to saving an awful lot of wasted time and effort. The first question you need to ask yourself is are you investment ready? Is your startup at a stage where investors will see something they want to invest in and you have some evidence of traction.

According to Andrea Armanni, Co-founder of marketplace for on demand services, The List: “It may sound obvious now, but one thing that we learnt whilst raising our first seed round is to be “Investment ready.” Angels invest when they believe in the idea they hear, in the founders’ ability to realise its vision and in the market opportunity. When, as a founder, you are ready to tell this story, and bring some proof of customer adoption, you are ready to raise money.”

If you are investment ready, then think hard about who you are approaching. Are you pitching for VC funding at too early a stage? This can be a fruitless exercise when an angel investment round is where you should be focused.

According to Benjamin Carew, Co-Founder of affordable workspace solution Othership: “If VCs keep being really nice but don’t invest you are probably too early. Save yourself the time and build more traction and try and do an Angel round or friends and family.”

This is backed up by Alex Christodoulakis, co-founder of DIY wealth-building app Wealthyhood: “It’s always easier to approach angel investors, than early-stage VC funds. Start from your own network, pitch them your company and vision and then expand to your second degree connections, angel networks and of course the Angel Investment Network. If you can’t persuade angel investors to invest in your company, then you should reconsider your pitch.”

2. Be patient

Based on the dozens of interviews we have conducted, the most common piece of advice was being patient. It may seem obvious but the point is, the process needs to be understood from the outset as fraught and difficult with so many variables at play. Therefore a patient mindset is the best one for founders to adopt. This includes understanding that multiple calls with some investors can be needed. While multiple rejections are an inevitable part of the process.  

According to Richard Romanowski, co-founder and Executive Director of cleantech energy company eleXsys Energy: “Be prepared to spend a large amount of time raising funds and listen and learn from every pitch. If they say no, ask why. Always be raising and expect to pitch to 50 or more before you hit any jackpot.”

Nick Begley, founder of wellbeing startup Psychological Technologies (PSYT) agrees: “It takes a great deal of time and attention, so start early. Make sure you have enough runway and try not to be involved in any other big projects at the same time. The process is time consuming, not just the pitching,  but the follow up emails and calls as well.”

This point is arguably most succinctly summed up by Rav Roberts, CEO of Medtech startup Pharma Sentinel: “Persist. It took us months of pitching to get our first investor, then bit by bit, the floodgates opened.” 

3. Practice, practice, practice

Being investment ready means being able to absolutely nail the pitch in front of seasoned investors who will ask all the tough questions. No amount of rehearsing can substitute for being in front of actual investors. But clearly you want to be absolutely ready for the most relevant on your target list.

According Thomas Vosper, founder of AI consumer technology business aisle 3: “Even if you feel very clear on your mission and execution I’d recommend drawing up a list of ideal investors and then flip the order so you are saving the most relevant till later. You have to practice your pitch so that it evolves naturally. I remember the pride we felt with the version of our deck but cringe now at some of those early conversations as we found our feet.”

Antony Yousefian, co-founder of agtech startup Bx Technologies had a similar approach: “Make a tier list and go to the tier 3 first and then end of tier 1. You will have refined the pitch, the deck and your data room.”  

According to Indiana Gregg, founder of neobank Wedo: “Practice with people in your surroundings to see how you can improve your pitch and ask experts their opinion of your model, your projections and your deck to refine and develop it so that when it’s time to present your plan to investors, you are confident and they are confident that you will be persistent and hit a home run for the company.” 

4. Don’t lose sight of the bigger picture

In thinking of all the crucial components of a pitch, the risk is losing sight of the bigger picture. Ultimately a clear narrative with what problem your startup solves for is what early stage investors will be buying into.  

According to Ben Hallett, co-founder of EdTech business Vygo. “Nail your authentic storytelling. If you feel like you don’t have an authentic story, dig deeper, you have one, find it and obsess over it.`’

Gary Piazzon founder of the digital travel companion, Porter is also an advocate of clearly articulating your story: “Don’t raise money until you have thought through your business model and can communicate what you are building/creating or selling very succinctly. If investors don’t understand what you are aiming to achieve, it means you aren’t communicating the problem you solve properly yet.”

Yang Li, Chief Growth Office of crypto company Ziglu stresses the importance of not being distracted by competitors. “Don’t overly focus on how your product compares to competitors. Be clear about how your product truly delights customers. No startup has failed due to competition alone.”

5. Ensure you have rigorous attention to detail

You can have the most awe-inspiring pitch, clearly demonstrated the problem you are solving for and shown the grit needed to get in front of the right investors. Yet you could still fall down at the final hurdle if you haven’t got the necessary attention to detail. This includes thinking through what questions investors will ask for and also having fully transparent financial information.

According to BorrowMyDoggy founder Rikke Rosenlund: “Do your due diligence on interested parties. Also have someone review the investor deck so you can get feedback on the material. Finally check a crowdfunding platform if you want an idea of top investor questions. I would also look at the top questions you would expect and have answers ready for them.” 

According to Derek Van Tonder, Senior Investor Relations Manager of 3D dataset company Axiom Holographics: “If you are at all cagey about disclosing financials, many investors will see this as a big red flag. The gold standard is to have an independent, 3rd party accountant sign off on a copy of your balance sheets before you raise capital.” 

So there you have it. The recommendations from those who have been there and done it and want to share with you their top tips. Good luck with your fundraise. Go for it!

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

In our latest blog post Graham Davies founder and CEO of Addition gives us the low down on R&D tax credits and what the recent changes in the budget mean for startups.

Innovation is at the heart of entrepreneurship – whether it’s finding a new solution to an age-old problem, or creating something no one else has thought of yet. Research and Development plays a vital role in economic growth – which is why the UK government has committed to investing 2.4% of GDP in R&D by 2027.

What are R&D Tax Credits

Research and Development Tax Credits are a UK tax incentive designed to encourage companies to invest in R&D. Companies can reduce their tax bill and recover up to 1/3 of their R&D expenditure.

To get R&D relief, your project must have:

• Looked for an advance in science and technology
• Had to overcome uncertainty
• Tried to overcome this uncertainty
• Could not be easily worked out by a professional in the field
• The project may research or develop a new process, product or service – or improve on an existing one.

Since 2020, the uptake in R&D tax credit claims from start-ups and SMEs has rocketed. Gov.uk reports a 16% rise in the number of SME R&D claims, with 76,225 small businesses benefiting from the scheme as of the government’s last report in 2020.

SMEs have been making the most of R&D tax credits, but what’s the uptake in your sector? Many start-ups – especially those at grassroots levels – have yet to understand the role that R&D plays in their business offering.

SMEs have been making the most of R&D tax credits, but what’s the uptake in your sector? Many start-ups – especially those at grassroots levels – have yet to understand the role that R&D plays in their business offering.

Figures from the last Government report (2020) show that certain start-up industries have yet to take full advantage of the scheme. Thanks to new reforms announced in March 2022, however, we might begin to see a change.  

What Changes Were Announced to R&D Tax Credits in 2022?

In his Spring Budget, Rishi Sunak laid out new reforms to the existing R&D system, with the aim of expanding qualifying expenditure while tackling false claims. The reforms, which come into effect April 2023, mean the following costs will qualify for R&D tax relief:

1.   Data and cloud computing costs associated with R&D (including storage)

2.   Expenditure on overseas R&D activities where there are:

a) material factors required for the research (for example, geographical factors such as weather conditions that are not present in the UK)

b) Regulatory or legal requirements which mean the R&D project must take place outside of the UK

What do the R&D reforms mean for start-ups?

Understanding how these changes relate to your business can help you spot opportunities for future claims and projects. It’s also important to be aware of any challenges these new reforms could present for start-ups.

First, let’s take a look at the good news:

A Triumph For Tech

Anthony Lalsing is Innovation and R&D tax expert at Menzies LLP. He acknowledges that data and cloud computing are necessary services for most start-ups – and often incur significant costs.

‘The cost of cloud computing, data and storage associated with R&D – as well as activities and expenditure which relate to mathematics – will all now qualify under the new proposals. These reforms will be appreciated by tech start-ups,’ Says Anthony, ‘and will support emerging sectors such as artificial intelligence, quantum computing, robotics, as well as strong sectors such as manufacturing.’

Bigger Wins for Small Businesses

So far, start-ups have only been able to claim under the SME R&D scheme. However, the government is now considering increasing rates on the RDEC (Research and Development Expenditure Credit) scheme. This is only reserved for larger companies, but Anthony suggests that start-ups should consider cashing in.

‘Most start-ups will claim under the more generous SME R&D scheme. However, the large (RDEC) scheme can still be relevant where work has been subcontracted to an SME company from a large company.’ He states, ‘Even if the intellectual property/R&D rests with a larger entity, if part of this has been subcontracted to an SME company, a claim can be made under the RDEC scheme.’

The inclusion of data and cloud computing costs is a massive win for start-ups – not to mention expanding possibilities for claims on other schemes. But other aspects of the R&D scheme reforms could negatively impact start-ups – so it’s important to be aware of them as early as possible.

A Loss for Longhaul Labour

For most start-ups, hiring or outsourcing tasks abroad is more cost-effective than paying UK wages. Salaries for overseas labour relating to innovation were previously covered under the R&D scheme. However, the new specifications mean the playing field is narrowing once more.

John Miller is COO at Addition. He says grassroots start-ups risk being disproportionately impacted by the change in April 2023. ‘ The purpose of the scheme is focusing R&D spend on UK talent and innovation.’ States John, ‘For potential claimants, all contractors and developers used must be UK-based, rather than foreign nationals (unless the project meets the new requirements). This means weighing up the cost/benefit of cheaper non-UK labour, versus a higher R&D claim.’

John adds that start-ups can best inform their choice by consulting an R&D expert (like Addition).

PAYE To Play

While this isn’t a recent announcement, many start-ups continue to be caught unawares by the April 2021 reform – which limits claims with low employee numbers and high connected sub-contractors costs.

‘The SME cap on R&D tax credits was introduced for accounting periods beginning on or after 1 April 2021.’ Says Anthony, ‘This limits the repayable R&D tax credits to £20,000 plus 3 x PAYE/NICE, albeit with exemptions available. Many start-ups do not have significant payroll costs (often using subcontractors) and may therefore find their R&D tax credit repayment unexpectedly restricted.’

How can start-ups access R&D tax credits in 2022?

R&D tax credits are claimed through your Company Tax Return (CT600). This is based on the numbers from your Statutory Company Accounts and is submitted annually.

Due to the complicated nature of the R&D claim process, many founders choose to outsource their application to a professional. And with the government set to clamp down on false or exaggerated claims, getting expert help is more important than ever.

 ‘It’s true we are seeing increased scrutiny from HMRC,’ Says Anthony, ‘including a new cross-cutting team focused on tackling the abuse of these reliefs. However, R&D tax incentives remain incredibly valuable, offering up to 43.7% tax relief on expenditure for profitable companies and 33.35% for loss-making companies in the form of cash back.

So what’s the most effective way for start-ups to access R&D tax credits, without risking the notorious wrath of HMRC?

‘It’s important that businesses engage with specialists.’ Anthony concurs, ‘This will ensure claims are properly considered and justified, with all relevant qualifying costs captured.’

TOP TIP: The gov.uk website has information about eligibility requirements. If you’d like more tailored details and support, why not use Addition’s R&D Tax Calculator to figure out how much you could claim?

In Conclusion

R&D Tax Credits are an excellent means of rewarding yourself for innovation. The March 2022 announcement brings new opportunities – and challenges – for UK start-ups. But with HMRC zooming in on claims, having professional support is more important than ever.

At Addition, we help start-ups like yours identify qualifying expenditure, and handle every aspect of your claim. We understand integrity matters, which is why we’ll only take on your claim if we’re confident you’ll be successful.

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A strong quality that marks out successful startup founders is a ‘fail fast mentality’. Integral to the fail fast philosophy is cutting losses when testing reveals something isn’t working and trying something else.

However in fundraising this can be a very costly process, with raising investment being carried out in parallel with running a nascent business. Making mistakes with potential investors or going down rabbit holes with time wasters can take you further away from your other job of building a game-changing startup. That’s why we wanted to bring to bear some of the accumulated wisdom of startups who have successfully raised via AIN over the past two years.

They have the self awareness to acknowledge the mistakes they have made so others don’t have to. Here are the top pitfalls.

1) Underestimating the time and effort required

This came through loudly and clearly from several startups we spoke to and was the most commonly reported fundraising mistake, based on our interviews. 

According to Benjamin Carew, Co-Founder of affordable workspace solution Othership: “It took me some time to realise that I needed to run it like any other business activity, as a structured process. I spent months pitching at intermittent events and meetings waiting for my angel to land in lap not realising what I was doing was practising. I was at the wrong events, with no real investors; and worse meetings with the wrong people who were more interested in introductions than investing. Once I sat down, opened the round in SeedLegals, got all my deliverables in place, built a sales funnel and set a firm date to close the round then I was well on the way.” 

This sentiment was echoed by Nino Judge, CEO of low cost airline Flypop:
“Building a company always takes longer and costs more. We ended up incurring unexpected costs including paying consultants to perfect the business plan. Good people cost money. Third party validation reports, marketing campaigns & events to raise funds, Legal & IT costs.”

He continued: “It always takes longer as the holiday seasons get in the way. With Easter, Summer, Ramadan, Christmas and New Year, nearly 4 months out of 12 are go slow or closed months. Let’s not forget our unexpected Covid -19 virus!”

BorrowMyDoggy founder Rikke Rosenlund agrees that everything takes longer than expected: “You need to be prepared that it may be longer, especially when it is the first time. For example with angel groups, they don’t necessarily meet that often. Even with a crowdfunding platform there is a lot of work to get a pitch ready and then the closing off of the investment round.”

2) Pitching to the wrong type of investor

A key part of the preparation stage should be on finding compatible investors. However much you hone your elevator pitch and deck, if you are targeting the wrong type of investor the investment of effort simply won’t be worth it. You can also get it wrong by pitching to the right investor but at the wrong time.

According to the co-founder of DIY wealth-building app WealthyHood, Alexandros Christodoulakis:   “We began by approaching early-stage VC funds, instead of angel investors. This was wrong; it cost us time and money, but we soon realised it and switched our focus to angels, who were a much better fit for our stage and needs! However, it helped us challenge our value proposition, improve our deck and positioning and make it more robust.” 

According to Ben Hallett, CEO and co-founder of EdTech business Vygo: “My biggest fundraising mistake has been limiting myself to close proximating investors, I wasted a lot of time with pools of investors that expected global standards of traction but only wanted to give us “local market standard” terms. We all now have access to global capital so in the same way that investors will have global benchmarks for your traction, startups should have global benchmark expectations for investment terms.”

3) Not doing your homework on investors

Once you have identified investors who could be a good fit for your business, you need to appropriately tailor your pitch. Getting this wrong can be costly.

Gary Piazzon who founded Porter, a digital travel companion said: “I initially failed to adapt pitches and conversations for my audience. I quickly learnt that different types of investors were looking for different information from our discussions, with a big difference between angels who were much more interested in the vision and team, versus VCs who were much more focused on the quantitative side of things.” 

Olivia Sibony, exited Founder of GrubClub and AIN Head of Impact and International Partnerships says: “Learning to switch perspective to put the most pertinent argument forward is one of the simple steps we can do to increase our chances of investment if fundraising for a start-up. Failing to do this can create a barrier. My experience of launching my old start-up GrubClub was critical in helping me understand how important it is to think of different angles, adapting my pitch according to the investor I was speaking to, so I would research each investor carefully and highlight a different reason for them to invest, based on their background and interests.”

4) Being impatient, understanding no’s are an inevitable part of the process

It is crucial to understand that rejection is an inevitable part of the fundraising process. You may have been raising for some time and not had much success but it could just take that one great conversation to get you back on track.

 According to Katie McCourt, founder of sustainable underwear brand Pantee:  It’s really easy to get bogged down by the no’s which you will get a lot of, in most cases more than the yes’. Don’t let it slow you down – we were given some great advice by a fellow startup founder who advised us to ‘learn to enjoy the rejection’ – once you stop taking it personally it allows you to learn from it – in a productive sense!”

According to Mike Lebus, AIN co-founder: “There is so much emotional investment that has gone into launching a startup it is easy to feel disheartened by rejection. All the most successful startups have to go through this, including many who have first raised on our platform who have gone on to successful exits. Being patient and having a realistic timeframe to find the perfect match is the best approach.”

He continued: “Remember it’s not a no until the investor says so. A lot of entrepreneurs say “I messaged the investor and didn’t hear back, so they’re obviously not interested”. Investors are busy people, so they often need to be nudged to jump into action. Think of sales people – they don’t just send you one email, they then send several follow-up emails to try and get a response. It may be mildly irritating, but it is clearly effective, and this tactic also shows investors that you’re persistent and won’t give up.”

5) Failing to drill into the terms on offer 

Of course once you have landed interest from an investor this is the time to exercise maximum caution. You may have great chemistry but their interest is gaining the maximum value they can from any partnership. 

According to Rich Wooley, CEO and founder of item-swapping marketplace app Paperclip: “Probably the biggest fundraising mistake I made was not pushing back on some of the investment agreement terms in our first VC raise. There are a bunch of reporting, corporate governance and approval processes that I have to go through. For example, I need to gain approval for spending over £5,000 on something, or hiring someone with a salary of over £35,000. These terms ultimately do benefit and protect our shareholders, so they’re not all bad – but for the stage we’re at, they can be slightly onerous; they  can slow things down at times or take me valuable time to report.”

Timing can also be crucial here in determining the terms, according to David Pattison, angel investor and founder of advertising agency PHD: “Never leave it too late to raise funds. Investors will sense if you are running out of money and will try and delay the completion so that they can ‘chip’ the deal just before closure. Leave yourself plenty of time. Never underestimate how long it takes to raise money, allow 6-9 months if you are looking for serious money. Try to give yourselves options. Taking money from the least worst option is never good.”

The fundraising process is time-consuming, can be draining and there will be many dead-ends. But it is a vital part of the process providing the investment that can fuel your startup’s future growth. All of the founders interviewed above have raised successfully and we thank them for their honesty. The more prepared you can be going into the process, the better the chances of success. We wish you the best of 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

Ben Hallett is the CEO and co-founder of fast growing EdTech company Vygo, built to ensure no student is left behind. In the latest Behind The Raise interview he talks to AIN about creating equality in education, scaling fast and pivoting, the reasons for rising investor interest in EdTech and how to avoid wasting time when fundraising.

Tell us about Vygo and how you came up with the idea?
While studying at university, myself and my co-founder witnessed too many of our peers struggling, falling through the cracks and ultimately falling short of their potential. With further research we discovered that the problem was global with 30-50% of students dropping out of higher education and most students struggling with severe or debilitating stress. We discovered that one of the core challenges is helping students connect with the support they need when they need it and we couldn’t see anyone else meaningfully solving this. This set us out on a mission to ensure that every learner has equal access to the support they need, when they need it, so that they can reach their full potential.

What is the problem you are looking to solve?
Equality in education.

How did you get the business off the ground?
At first we built a minimum viable solution (MVP) which enabled students to academically support each other. We saw a overwhelming student response to and universities started asking us to lease the platform. We ran the impact and revenue numbers and after that decided to adapt the platform to be B2B SaaS. It’s accelerated since then. 

What traction have you seen?
We’re now working with universities across APAC, EMEA and North America, consistently doubling or tripling growth every year and have raised over $3m in investment.

Why has there been such increased investor interest in EdTech?
Better education is at the root of almost every challenge the world is facing. The pandemic exposed a lot of the weaknesses in the education system and further catalysed everyone interest in EdTech, including investors.

What initially attracted investors to your company?
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.

What is your top tip for anyone raising investment for the first time?
Nail your authentic story telling. If you feel like you don’t have an authentic story, dig deeper, you have one, find it and obsess over it. 

My biggest fundraising mistake has been…
Limiting myself to close proximating investors, I wasted a lot of time with pools of investors that expected global standards of traction but only wanted to give us “local market standard” terms. We all now have access to global capital so in the same way that investors will have global benchmarks for your traction, startups should have global benchmark expectations for investment terms.

If you had a magic wand and could wave it, what would you wish for to improve the fundraising process for startups?
I would wave that wand to create much more transparency from investors and startups about each other, the deals the are doing and the journey ahead. I’m a big believer that honesty and integrity leads to better deals. I’d wave my wand for something similar to the ingredients list and health ratings on food packaging. I’d love everyone to post the specifics of their deals ($, valuation, special terms, traction, TAM/SAM/SOM, etc.). This would save startups so much money and time spent in negotiation and lawyers. Of course this would create another suite of issues to be solved BUT it’s my magic wand.

In our latest guest post David Pattison, experienced angel investor, business leader and author, considers the thorny question of investor due diligence. Is it a threat or or an opportunity? Or a bit of both?

If you are trying to raise money, there will be a requirement for the company (and often the management) to go through a Due Diligence (DD) process. This is where the prospective investors will take a deeper look you and your business.

If the investors are individuals or angels then the DD can be quite light touch, usually involving an interrogation of the business plan, some conversations with the team and maybe some customers or current investors. If they are funds or institutions, then they will take an almost forensic look and ask you to provide a mountain of information.

This can cover Finance, Legal, Commercial, Tech, Management, Sales and Marketing, Security. IP etc. They are looking for weaknesses, threats to the business, problems and anything that could be vaguely called illegal. Almost all of this will be done by sector experts often employed externally.

It’s a tough and distracting process. My personal experiences and most businesses I have spoken to about this process show it to be exhausting and emotionally difficult.

So is DD a threat or an opportunity, or a bit of both? The answer is that it depends. It is largely driven by the type of investor. It can be a threat if they are obsessed with just protecting their money, then it can feel negative and can erode the future relationship. It can be an opportunity if they are looking to help to build the business and see the future health of the business as the key to their investment paying off. As they will use the DD to come up with recommendations on how to improve practices and processes.

Whatever type of investor you have, DD will be part of the investment process. Here are some things you can do to help yourself:

1. Be well prepared.
   A founder of a company I worked with always said ‘run your business as if you are always about to enter DD.’ Make sure you always know where all the documents are and be prepared to share everything. You will be asked to set up a data room with all the company information in it. Why not set this up from the start of your business? It’s a good discipline and shows good business practice.
   
2. Spread the load.
   The CEO should not be the only source for DD. Spread it around the team. It shows confidence in the team and exposes the team to the investors. Have a DD data lead and if possible don’t make it the CEO. If they are a good team, then show them off.
   
3. DD is distracting.
   Do not underestimate the amount of time it takes to get through the DD process. Often it can be three months or more. Almost every business I know suffers a drop in performance during this period, always because the team is distracted. Try to minimise the effect by being well prepared in advance.
   
4. Don’t be afraid to say no.
   Investors can be lazy and will just ask for everything you have. If you think the information is not justified, then push back.
   
5. Set a time limit.
   At the start of the process set a date for when no more information will be provided, and no more questions will be answered. Doing this will ensure that the deal keeps moving forward and the advisers/specialists employed by the investors will not be tempted to over justify their fees by dragging it on.
   
6. Do not lie or cover up in DD.
   This is a forensic process and whatever you are trying to hide will be found. Good businesses with good practices should not be afraid of DD. Bad businesses should.
   
7. Just answer the questions.
   Sometimes you don’t know the answer to a question, don’t try and tap dance your way through it. Just say you don’t know and then find out the answer. Sometimes a finding will surprise you. Be surprised and then find out why you are.
   
8. Do not get emotional.
   This is the easiest thing to say and the hardest thing to do. You and your company will effectively be accused of all sorts of things. It can sound like you are a ‘fraudulent liar’ running an illegal money laundering crime syndicate (I am exaggerating a bit!). Unless you are then let it wash over you and try to explain why none of this is appropriate and here are the reasons why. Remember they are looking for weaknesses and that’s what they focus on.
   
9. If it’s not mentioned, you are probably doing it well.
   It’s very rare in DD that you get congratulated for doing something well and if you are it is usually in passing and buried in the small print. Don’t look for a lot of ‘pats on the back’. If the investment happens that is usually the sign that you have a good business.
   
10. Investors become partners.
    Try not to burn bridges with the people doing the investment. You will work with them after the investment is made, and friction early in the relationship rarely diminishes.

Two final things to remember about DD:

• Firstly, it is, in effect, an extended interview. Part of that interview will be the ‘quick cup of coffee’ or ‘meet for a drink’. Everything you say will be noted. It’s important that you and your team are aligned and have the same answers to the same questions.
• Secondly, DD is a two-way process. Ask the investor about their performance, who they work with. Talk to some of the companies they have invested in. Do your own DD and do not stop asking questions of them.

DD is hard and even if you are well prepared it is distracting and emotionally demanding. But it can make you a better business in the long run. Is DD a threat or an opportunity? A lot of it is up to you.

This is one of the many topics David covers in his book 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.

There has been a significant rise in the numbers of angel investors looking to back startups across the globe. Technology is the most popular sector and food and beverage seeing the fastest year on year growth. These are some of the key findings from Angel Investment Network’s annual analysis of the global state of angel investment funding based on data from their platform. 

AIN has 40 networks extending to over 90 different countries; and now with more than 1.75 million users it is the largest angel investment community in the world. The results are a real barometer of global startup investment activity in 2022.

The data reveals there has been a significant rise in interest from investors looking to back businesses solving problems in a range of industries. There was a 6% increase in searches from angel investors looking for potential startup investments. Over the same period, the number of pitches fell by 7.5%, which highlights an increasingly positive ratio of investors to startups.

Technology remains the most popular sector for investors, with searches up 23% year-on-year. Software remains second, up 7%. Food and beverage is third with the fastest growth of all sectors, up 35% with a range of innovative ideas coming to market.

The finance sector becomes the fourth most popular sector, up 24% YoY, with huge interest in the FinTech space. However, there is a mismatch with it being only the 11th most popular sector for startup ideas. Meanwhile, interest in property has soared since the start of the pandemic, up more than 100%.

AgTech businesses remain in high demand and since the start of the pandemic have been one of the fastest risers. 

Top 10 sectors for startups
1. Food and beverage
2. Property
3. Technology
4. Entertainment and leisure
5. Fashion & Beauty
6. Retail
7. Software
8. Agriculture
9. Manufacturing & Engineering
10. Hospitality, Restaurants & Bars

Top 10 sectors for investors
1. Technology
2. Software
3. Food & Beverage
4. Finance
5. Agriculture
6. Property
7. Medical & Sciences
8. Entertainment & Leisure
9. Energy & Natural Resources
10. Retail 

According to Mike Lebus, founder of Angel Investment Network: “The results show the global startup ecosystem in good health. We are seeing a lot of pent-up demand from angel investors, who have held back during the pandemic and have accrued more capital that they are now looking to invest. Meanwhile entrepreneurs are now working harder at ensuring the proposals they are bringing forward are more fleshed out so we are seeing more quality over quantity in terms of nascent startup proposals. During a challenging period many have taken the sensible decision to bootstrap their businesses further and go for funding at a slightly later stage.”

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 located all over the world.

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Antony Yousefian is the co-founder of innovative agtech businesses Bx Technologies. In the latest Behind The Raise interview he talks to AIN about transforming farming, his lightbulb moment courtesy of cannabis growers, a near death epiphany, and a clever approach for refining your pitch for investors.

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

Bx Technologies helps farmers switch to climate friendly practices by measuring the climate-impact of produce, and putting that information on food. We do this via our software technology that quantifies farmers’ positive impact on improving their soil. We then sell that as a service. This enables farmers to differentiate their crops from others.

My co-founder Ben Bardsley is a 5th generation farmer and my background is in asset management where I was involved in the initial waves of cleantech. So we really understood the challenges in this space. Both on the ground and the economics behind it. 

What is the problem you are looking to solve?
Food production systems are the main driver for 70% biodiversity loss and over 30% of greenhouse emissions globally. With the pressure to feed the growing world, this is creating a negative feedback loop, we are incentivising farmers to produce food as cheap as possible, at the expense of the planet. 

Our soils are our biggest carbon sink. They can hold three times the amount of carbon versus air. However through the use of damaging chemical inputs and pursuit of cheap yields, we are turning our biggest source of carbon capture into an emitter. 

There is now a clear realisation this needs to change, but helping farmers to transition is critical. Many farmers are also in the red, with many farms only covering costs with the farming subsidy. I have to give a shout out to Jeremy Clarkson for bringing this to life in his series on Prime. Supermarket and food brands are under pressure to reduce their emissions – with the majority coming from farms. So what if we could use technology to quantify farmers who improve the soil, share that knowledge and incentivise more of it?

What was your lightbulb moment?
My personal “ah ha” moment was when I was working with medicinal cannabis growers in North America with a Dutch agtech company 30MHz. They seemed to be optimising the crop by improving the soil health. The byproduct or result of this was putting more carbon back into the soil. 

They did this because they were incentivised by their buyers (pharmaceutical companies) who paid more for higher nutrients or therapeutic effects from the crop. When I quizzed these growers and said, “Why don’t you do this for food? Their response was, “Yes we should” and I asked them “why don’t you do it then?”. Their response was “There is no money, there is no incentive”.

This was where my two worlds collided together. I had left the finance industry where more than 30% of assets had an ESG mandate and looking to invest in impact. Here is one of the most important industries in the world, which can grow in a way which repairs and improves the soil and our planet.

No amount of agtech or robotic automation was going to solve this. We had to either pay growers more for what they did or help them earn new revenue streams. For example repairing nature or putting carbon back into soil. Where it belongs by the way! It is how nature has been designing it for 3.8 bn years.

How did you get the business off the ground?
Thanks to my co-founder Ben. He had been on a remarkable journey, coming back into his family farming business in 2013, after being a leader in the British army, who was shot on the front line in Afghanistan. He had a realisation in the moment of being shot that if he did survive, he needed to focus on something that would truly make a difference. He realised the farm would have to change if it was going to survive. He made the brave decision to stop investing in new trees for his farm, and agreed to set-up and incubate Bx within his farm business.

My role was to build out the capability to measure the positive impact in the soil (more carbon), quantify it and find a way to sell it.  We had the perfect incubator and the envy of many Agtechs, where we had 800ha of playground to test and iterate. We were able to go fast, test and iterate with a market leader in the industry at scale. 

It worked. Bardsley England became verified as Carbon Negative. Bx supported the farming business to win a multi-year contract with a supermarket. There we saw a brand or retailer willing to pay more for planet positive produce. We had proved the model.

What traction have you seen?
Food Brands are under pressure and also have made commitments to remove emissions. The majority of their emissions are occurring on farms. For example for Nestle 90% of their total emissions come from scope 3 (ingredients, farming). Working with brands directly, we have found they are willing to pay more for carbon removal. In some cases 10x more than carbon credits farmers are selling for today (£15/t Co2e). Consumers want this to happen and brands can capture market share and premium. We have seen fantastic traction with leading food brands in the UK, and have our first international customers in the US and NZ.

Why are you raising investment now?
We are raising to push out our series A raise (Early 2023), deliver the MVP for these first customers, including discussions with a major UK supermarket. We can double down resources on data-science, build on our machine learning capability and automate data-collection on the farm. This will give us the foundations, readying us to scale up with a supermarket and larger global brands in 2023.

What initially attracted investors to your company?
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 legit money making games, media and finance.

Our business model has been attractive to investors which is centred around incentivising a transformation in the food system. We are able to quantify impact and reward it explicitly. One of our first investors was Counteract, a carbon removal VC. They understand this space well and the potential for soil to remove carbon at scale.

How important are startups in helping to solve climate change? And how can their ideas be best facilitated to tackle the existential threat to our planet?
This is probably where us and Counteract see eye to eye. We believe it is going to take big bold bets NOW, not later to prevent a disaster. We need entrepreneurs with clear vision and backed by passionate impact investors who want to make a difference. Waiting for validation of business models is going to be too late. We have less than 8 years in the current carbon budget (1.5c warming-) and we need to start creating disruptive changes to industries. As Larry Fink (Blackrock CEO) said recently, the next 1,000 unicorns will be climatetech. 

What is your top tip for anyone raising investment for the first time?
Take time to do your homework on the investors you want to approach. Obviously capital/cash is one of the main drivers but investors can add a lot of value. For us now, patience, impact, food, ag. capital is best for us. 

For Bx right now, Angel Investment Network is perfect for us. Though in 12 months time, we are looking for investors who understand how to build an AI business. The expectations and go to market are different versus say an enterprise SaaS solution.

Another tip, once you have done the above, make a tier list and go to the tier 3 first and then end of tier 1. You will have refined the pitch, the deck and your data room.

My biggest fundraising mistake has been…
From a previous life, not doing the homework on the investors and bringing in the wrong type of investor. They wanted acceleration of commercialisation vs product development. This took us down a wrong path and stalled our growth. 

If you had a magic wand and could wave it what would you wish for to improve the fundraising process for startups?
Reduce the time needed. It would be great, if investors were able to look into a business remotely and it didn’t require any significant time from the founders of the business. It’s catch 22 though, you need to educate investors about your business but some of the most valuable people driving the business forward are out of the business for months on end.

Bx Technologies are currently raising. Please contact Sam Louis for more information – sam@angelinvestmentnetwork.co.uk

In this article, founder and CEO of Addition Finance Graham Davies explains how automation can help small businesses create scalable processes and promote growth.

The average startup is working with extremely limited resources and manpower in its early days. As cash is king, it’s easy to focus all your time and effort on delivering your product. This is natural and understandable. However, it’s also why founders are hitting burnout at record levels as they try to stay afloat while under pressure from wearing multiple hats. Attempting to manage everything, alone and all at once, isn’t only dangerous – it’s also ineffective.

“Well who else is going to do it?”. I hear you. It’s tough being an entrepreneur – especially when you’re just starting out. Maybe you’d love to outsource the bulk of the grunt work, or expand your team, but money’s tight and you’re not quite there yet. If this is you (and even if it’s not), automation is your friend.

Whether it’s B2B or B2C, automation trends are on the rise. According to 2022 Gartner research, AI software revenue will hit approximately $62.5 billion this year – with a 21% increase over last year.

Five ways automation can help you level up

Automation can help streamline workflows and reduce manual tasks – giving you (or your team) more time to focus on the human elements of growing a business, such as sales or customer service.

When wielded with precision, an AI toolkit is the perfect ally for startups – wherever you’re at on your business journey.

Let’s break this down.

1.   Processing Power

The power of streamlined processes can’t be understated. Regardless of how big your team grows, you want your product or service to be delivered in a consistent way. This builds trust, brand loyalty and credibility.

Workflow automation leader Zapier sums up its purpose very clearly in its Quick Start Guide: ‘The heart of any automation boils down to a simple command: WHEN and DO. “When this happens, do that.” Even the most complex automation can be broken down into this simple command.’

For example: when you get a lead from your ‘Get in Touch’ website form, the ‘do’ would be to have an automatic message sent to your sales team. This is a very basic workflow process, but it ensures that no leads are slipping through the cracks.

It may sound obvious, but always have your team test the trial version before committing. Different tools serve different workflow styles. We love Zapier and Make (formerly Integromat) at Addition. These are highly effective tools, but they do require training to use. Consider either hiring an automation specialist or investing in a training course for one of your team.

TOP TIP: Ask a sales rep to walk you through a demo on a call and answer any questions. This will help you determine whether the tool is really the best for your business. There’s sometimes wiggle room for price negotiation as well (if you don’t ask, you don’t get).

2.   Less hard, more smart

It’s not how many hours you work, or even how hard you work – it’s how smart you work. Diligently scraping data together into an Excel sheet, or manually emailing cold leads is a noble effort, but it isn’t going to help you scale. In fact, quite the opposite – it will slow you down and hinder growth.

Using automated software for process-heavy tasks is like using a dishwasher or tumble dryer. You could do without them – but the rate of progress isn’t even comparable.

TOP TIP: Lead generation, nurturing and conversion is one of the most common areas for automation. Tools like Hubspot and Mailchimp are giants in this space and for good reason. Hubspot has a wealth of free guides, ebooks and certified courses on all kinds of automated marketing processes. If you haven’t checked them out yet, it’s definitely worth the effort.

3.   Right on the money

Money, money, money. Businesses spend it, earn it and invest it. Keeping track of ingoings and outgoings is a lot easier with automation. There’s a wealth of bookkeeping and accounting software to choose from. Just picture it – a platform where you can raise and pay invoices, balance the books and manage your taxes, all in one place. Major leg-up for your company, right?

TOP TIP: Speaking from experience, Xero is the number one tool to beat. Why? Its open API syncs with over 1000 other apps (Stripe, Paypal etc). Also, optional add-ons like Payroll or Xero Tax make it a limber tool that can grow with your business. We love it at Addition.

4.   Track and trace

Ah the ‘key performance indicator’. We all know why they work – but figuring out how to get started is often just as difficult as keeping track. Automation can help you collate data to work with, like unique website visitors, conversion rates and domain rankings. When you already have a clear picture of where you’ve been and how you got there, it’s much easier to chart a path to where you want to go. And getting that information gets a lot easier by utilizing technology for your payroll.

TOP TIP: If you’re already automating things like your lead generation, the tool you’re working with probably has options to report back on KPIs. But if not, or if you’re looking for software that is KPI-tracking specific, here’s a list of some KPI Dashboard tools.

5.   Checks and balances

AI is by no means flawless. You’ll often find the ‘computer says no’ scenarios crop up where the situation isn’t cut and dry. This is where the human touch comes in – and it’s important to keep the right balance between program and person.

Focus your AI use on process-heavy tasks (like generating templates and reports, extracting and importing data scraped from multiple sources, or auto-filling forms). You can then channel that extra time and manpower into stellar customer service. Never underestimate the power of a sincere note or phone call when your clients hit a snag. And always double check your AI’s final product – just in case the computer said no when it should’ve said “let’s talk”.

TOP TIP: While the pandemic has given remote working and automated processes a huge boost, the need for human connection is also at an all-time high. If you don’t have the budget for a permanent physical office, look into shared professional spaces (like WeWork) where you can offer clients face-to-face meetings to build trust and relationships (and host company socials!).

In Conclusion:

It may take a bit of fine-tuning and digging, but the right tools to take your business further, faster are definitely out there.

However, automation can be much more than a tool to save money and scale quickly. Setting up efficient workflows through automation requires you to think about every process on a granular level and will give you a unique understanding of your business.

Addition offer outsourced financial services for startups in the UK and US.