Raising funds can be a huge factor in helping skyrocket your business, whether it be from crowdfunding, angel investors, or family and friends - there are many ways to raise funds in today’s day and age.
But how do you know when you’re ready to take that step? How do you know what to accept? And how do you prepare yourself and your business to go out for investment? - These are all questions you may be asking yourself if you’re at the stage where you’re looking to grow your business, and go out for funding.
The latest roundtable with ZX Ventures and Food and Drink Heroes sees a group of experts and food and drink business founders discussing their fundraising journey, and finding out the top tips, and tricks on how to prepare for a fundraise.
Don’t let the fear of giving away equity stop you
Discussing how to know when it’s the right time to begin fundraising, and who the right person is to invest in your business, the group found that there was a common concern in handing over control, and giving away equity in the fundraising process.
Sarah McNena, Co-founder of Drop Bear Beer, said “I think it’s important to set out what type of relationship you want to have with your investor/s. We made sure we knew how much equity we needed to be in control, and we’re now in a position where we still make the decisions. Make sure you do your due diligence on the people who are wanting to invest in your business. It’s important to have people on board who can help you out, so whilst you still have control, you have the ability to give up a certain amount of control, to the right partner.”
“Do your due diligence, and don’t be scared about giving away equity - it’s not all bad if it’s with the right people” she continued.
Simas Jarasunas, founder Brite Drinks, added to this by discussing his journey with fundraising. “Our first funding round was with an angel investor, and the two later rounds were with the same VC. We have partners that we trust, and trust was never really an issue for us. In our funding rounds we were giving a relatively little amount of equity away, and our investors actually wanted us to continue to have control and run the business - so I wouldn’t be too worried about this.”
“It’s all about gaining traction,” he said. “If you’re just getting your first customers, it’s probably too early to go out for investment. In the food and drink industry especially, it’s about validating your product, showing that there is a space for it and demand for it on the market. This will help you gain confidence when going out to potential investors.”
Daniel Obaseki, Investment Partner at ZX Ventures, advised the group, saying “There’s a huge element of understanding who’s the right partner for your business, and at what stage, as not all funds are created equally. Some will want to invest really early, to come in with you pre-seed to help you get that first listing, and others will say that you need to be in a Tesco, Sainsbury’s or another platform, and then they’ll invest. So understanding who plays a role in each stage of the business cycle is important. Then also understanding what their value proposition is - some may be just financial investors. Which, if you’re concerned about giving away control and someone being involved in your business for the wrong reasons, may be more appetizing for you.”
Choose the right type of funding for you
Daniel Blatchford, Co-founder of Sip Champagnes, discussed how they ended up crowdfunding to raise money, over other investment options. “We first set out wanting a VC investor that we had been introduced to, who loved the idea, but it was ultimately too early for him to invest as it was three to five months in. He also wanted a little bit more equity than we were willing to give away, for fewer funds. So, we decided that VC wasn’t quite right for us and we started looking elsewhere and found Seedrs - the crowdfunding site.”
“Seedrs provided a lot of tools that helped us value our business - which can be really hard as a startup. They put us out to the crowd, and they encourage you to gather direct investors, which we did, and we ended up having roughly a 50, 50 split between direct investors and the crowd funders. I believe that we were introduced to the right person who then introduced us to their network and it just escalated”. However, Daniel and Peter Crawford, Co-founders of Sip Champagnes, both agreed that crowdfunding does have its downfalls, “I would encourage anyone to factor in longer than you would think it would to complete, and don’t wait until the last minute. From our experiences, it’s not going to be a quick and easy job. It is hard work and it is time-consuming”
Daniel also went on to say how the direct investors they received have been far more helpful in their journey. “They’re really engaged, they love the story, selling the story, and they’re keen to look at our numbers, help and give feedback. You don’t have to give regular updates to these investors, I guess it depends on what set-up you have with your investors, but for us, we’ve given away little equity, so we want to give regular updates from investors to keep them engaged and excited.”
To conclude, it is clear that one of the most important factors in going out for investment is knowing what’s right for your business. Don’t compromise on what your business deserves, and the best way to get that. There are multiple ways to raise funds - and there will always be one out there that is right for you, wherever and whenever that might be.