Raising that all-important first round is the early-stage founder’s dream, but it’s not easy. The good news is that there are plenty of options to help you get that first round of cash, you just need to figure out the best route for you.
We asked a bunch of our entrepreneur friends how they raised their first round of funding. Here’s what they had to say…
Founder of Brightpearl
Brightpearl raised $26M over 5 years, and scaled from 6 to 100+ employees between Bristol & San Francisco in 2.5 years. Those numbers may sound large for a Bristol based tech start-up, but like all other companies, we started small. Customers are a key determinant to a company’s future success, so we focussed on finding customers and developing software that delighted them. We didn’t allow investors, or the tech ecosystem to distract us from this focus.
“When my co-founder, Chris Tanner, and I started Brightpearl, we funded the company’s first 2 years with our savings, customer sales, and a £20,000 personal loan from my bank. The Brightpearl software platform was already running the day to day operations of Chris’s other business, and we were confident it would be popular with other customers, so we hired 4 staff, and started marketing/selling.
“When we realised that cash was the limiting factor to growth, we decided to seek investment, and raised £1M of Seed capital. To achieve this, we assessed the options, and decided to search for a Venture Capital (VC) investor. VCs tend to have deeper pockets than other investors so are capable of supporting a company’s long term funding needs, and they shared our belief in creating a *big* ($1B+) company. We met several VCs, and it was Charles Grimsdale & Katy Turner, from Eden Ventures (a VC based in Bath), who stood out from the pack. Charles is a software engineer & entrepreneur with several successes under his belt who was hands-on – his experience added value from day 1. We wanted to have the right experience on the team, and not just capital.
“Eden Ventures introduced us to Chris Tottman, from Notion Capital, a VC that specialise in B2B SaaS, and like Charles, Chris’s experience as Commercial Director of MessageLabs (acquired by Symantec for $550M) was a superb fit with the company. Charles and Chris were later joined by Rory Stirling from MMC, several Angel Investors, employees, and family to invest a total of $26M into the company.”
Founder of Nurph
“The first round of funding for Nurph was raised through a personal contact, as have the following rounds. Personal connections seem to work best because of the trust that is already in place and the likelihood that you and the prospective investor have already known each other for some time in a non-investment-focused capacity.”
CEO of W2 Global Data Solutions
“With the very first round I did I used Angel Network, posted my business plan and then waited for the potential investors to contact me. A lot of it is about how confident you come across in your idea, if you don’t believe in it, no one will. I spoke to probably a dozen potential investors, I ruled out a few, some were obviously a bit ‘iffy’ and eventually I settled on two of them.
“I think it is also important to reach out to your network. Sometimes it is a bad idea to mix business and friendship or families, but equally they can sometimes be the ones who don’t get on your back at the earliest opportunity. Speak to business acquaintances, most people seem to know someone who invests in startups. Look at the peer to peer options and crowdfunding sites like Crowdcube. Just put yourself out there, be ready to be knocked back, know your business inside out, even if you don’t have all the numbers memorised you absolutely must know your market and how you are going to build the business.
“Above all, don’t take no for an answer and keep going, if I can do it, anyone can.”
Founder of Social Belly
“First rounds of funding are tough. There are a million opportunities out there, so many options, which makes it so much more difficult to choose. Especially in London, there are so many companies out there trying to encourage people to become entrepreneurs, and build something people will love, that it would be silly to ignore.
“I think I made a smart choice. In July 2014, I spent hours on Google trying to search for startup competitions and I came across #GetStarted2014 by Simpleweb. They were offering an equity free prize worth $70,000, including a handful of resources including web development, marketing strategies, legal advice and web hosting. It was ideal, so I applied. The first round was to get as many people to vote for your idea as possible. You could see how many votes each person had therefore it became quite competitive. The 10 ideas with most votes would get to pitch their startup to a panel of 6 judges. I pitched and Social Belly won. It was the greatest day last year.”
CEO of The Crowd
“We started the business on the entrepreneur’s lifeline – our founder’s credit card. It took us around 4 years of experimentation to get the plans to a point where they were “investible”, which to us meant “scalable”. At that point, we raised funds on Crowdcube, selling 27% of the businesses for £450k. Crowdfunding is brilliant – it is exciting and cost effective, but most importantly it helps to build a community. We’ve made new friends and collaborators, who we hope will be key to our success.”
Everyone that we spoke to had a different story to tell, but there were some common threads. Here’s the key takeaways…
- Do your research! There are plenty of opportunities for startup funding so find the one that’s right for you
- Make sure you choose a funding route that’s in line with the future of your business, not just the one that gets you the cash quickest.
- You’re going to have to put in a lot of hard work and scrimp and save before you get funding. Be prepared for the worst.
- Put time and effort into building your network, it helps to know the right people.
- Be prepared to fail a few times. You’re going to need a thick skin, but don’t give up.
If you want to discuss your startup, get in touch with Simpleweb today for an informal chat.