The document provides advice on raising capital for startups. It recommends starting small by raising money from friends and family (bottom of the pyramid) rather than immediately pursuing large investments from venture capitalists. Facebook is given as an example that started this way. The document also notes that most business plans and applications are rejected due to lack of proof of concept, unrealistic forecasts, complex models, or lack of trust in the management team. It advises proving traction first by achieving milestones before seeking larger investments from sources higher in the funding pyramid like angel investors or venture capital firms.

1. Capital Day
Raising Money inToday’s Climate
24th May 2013
Rose Lewis, Partner
@roselewis

2. Never been a better time to be an entrepreneur.
• Global market opportunities.
• Tech is cheap(er), it works.
• Access to resources is high
(not necessarily in this country).
• Support for start-ups is high.

3. More money available
• Accelerators
• Crowdfunding
• SEIS/EIS
• Angel investing – better than a bank
• City meets Tech
• Grants – tsb
• Corporate Venturing

4. You could also do this !

5. Soitshould be easy toraise money
right….?
5

6. Only
2%
of those who submit business
plans/applications get funded.

7. Why?
Business Plans
are rejected
because…
• Lack of skills/ credibility in the management
team - No unfair advantages.
• No Market opportunity- “reinvented the
wheel”.
• No proof of concept- “Ali G pitch”.
• Business Model Not scalable.
• Forecasts based on unproven assumptions.
• Business Model too complex to execute.
• Inadequate financial returns (10X within 3
years?)
• Lack of trust.
• No clear exit route.
• All solvable maybe?

8. You can whine all you like that….
• Its easier in US, they have a bigger appetite to risk.
• They back business plans with million £ valuations.
• The UK is rubbish, there is no money, we don’t take
risks!

9. So,whydosomanyStart-ups
findit too hard toraise ££?

10. The number 1 reason why start-ups find it hard…
They target the wrong sources of money
at the wrong time

11. Sources of Money

12. Difficulty
Level of
Raising
Investment
Sources of Money
Most of you
start here

13. Scale Quickly with Capital to get to an Exit.
To do this they look for:
• Technology Businesses
• Market Potential of $100 million
• Ability to make 10 X return
• And they want traction – you need to have
achieved several key milestones.
Most start-ups just don’t have that at the start.
VC’s Have Big Ambitions

14. So Where Should You Start ?
• Right at the bottom of the pyramid
• Easier to raise investment from
your Mum right?

15. Difficulty Level
of Raising
Investment

16. Facebook started this way:
• His college friend funded it first of all.
• Then Peter Thiel (angel investor).
• Only then did VC become interested
and even at this stage, many of them
passed.
• If they had tried at the top – they
would have failed.
• And we wouldn’t have the biggest IPO
in history.

17. So to Successfully Raise Money
You Need to Start at the Bottom
• It’s easier – you have to prove less.
• The early rounds validate your
business which makes it easier
when you get to the top (FB).

18. When should you raise money
www.growthaccelerator.com
CAPITAL NEEDS
TIME
SEED Pre Revenue EARLY
GROWTH
SUSTAINED GROWTH
HIGH RISK
LOW RISK
Co-investment
Funds
Business Angels
Formal Venture Capital
Exit
IPO/Trade Sale
PRE-SEED
Friends, Family,
Neighbours

19. When you have actually
done something
We are not risk takers so we want you
to have de-risked the proposition.
Team Market
Product Returns Potential

20. Milestones / De-risking
• Team – proven – you have done it
before, you have sector experience.
• Product – its built/mvp; trials with
customers, contracts.
• There are current exits in the sector
that are similar.

21. How do You Find Your Investors Then?

22. Plan Plan Plan
• Do your research.
• Plan your strategy – sector, size.
• Profile your investor.
• Ask people to help.
• Network.
• And do something more than just write a plan.

24. Tips for Success