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Finance Focus helps businesses navigate the ever-evolving world of finance. Each episode features expert insights, practical advice, and in-depth discussions on topics such as crowdfunding, trade finance, angel investing and debt. Hosted by Tracy Smart from The Smart Team and Sam Jones from Satellite Finance.
[00:00:00] Sam Jones: Hello and welcome to our bonus episode of Tips in Ten. On our main feature episode, we were speaking to David Ford about angel investing, and here we are. He's going to give us some of his top tips in how to go and get some of his money.
[00:00:17] Tracy Smart: Yeah, so we're very excited to hear some secrets, David, on if you're just starting out, you're looking for funding, and you want to go on your fundraising journey, what sort of tips and what sort of experience can you share with these people that are getting ready to take that leap?
[00:00:33] David Ford: I'm not sure I'd describe them as secrets, but, yeah!
[00:00:37] Tracy Smart: Well, I can, if you're just starting, it is, it's interesting to...
[00:00:40] David Ford: Because actually they shouldn't be secrets, of course, I think they should just be,almost common sense,and things to, to be aware of, because, of course, one of the issues as, as an entrepreneur, as a founder, is that you're in your business and you're passionate about your product and you don't necessarily have any experience of raising finance. So I think the big thing for me is just be aware that you don't have to have all of the answers to all of the questions. An early stage investor is looking for a vision of the future and where you want to take the business.
It's unrealistic for them to be asking, financial projections for next three years, next five years.It's about communicating that vision and how you can demonstrate your passion and your idea and how you're going to execute on that idea rather than having answers to every, little question.
[00:01:29] Tracy Smart: It's a little bit different to Dragon's Den, who, who say you have to know your numbers and,
[00:01:33] David Ford: Exactly. I get quite frustrated with that because I think that's not realistic. Time and time again, every time you see, what a company thought they were going to do at the start is nowhere near what they're going to end up doing five years on or three years on or whatever it happens to be. So absolutely.
[00:01:46] Tracy Smart: Yeah. Well, planning and budgeting is, you never get the answers right when you do it in the first place. And the longer you look forward, particularly with a start up, things change. So, yeah, I can relate to that.
[00:01:58] David Ford: Yeah, exactly, things change.
And I think that's my next point, which I think is, choose your investors wisely. As an investor, we're,selecting companies, we're selecting the best investment opportunity, but as a Founder, you need to choose your investors as well, and preferably value added investors.
So it's, they're not just bringing money, they might be bringing network or experience or contacts. But also you're gonna be with that person for however long it takes to exit. So you need to bring them along for the ride and you need to have that relationship with them.
So, you know, you need to be, I think very selective about,who you are allowing into your business because it's a business relationship ultimately.
[00:02:38] Tracy Smart: Yeah, and I see that a lot, encouraging clients to have board meetings and involve these non execs or directors that come on board as investors because you guys have got a wealth of experience that the business can lean on and leverage that experience to help them solve problems.
[00:02:58] David Ford: That's exactly right, and, it's lonely enough being an entrepreneur, being a founder. So surround yourself with as many good people as possible, starting with your investors and go from there. That's absolutely right.
[00:03:10] Sam Jones: And you're not queuing up outside their door, with a blank check, so how would they, find you? How would they approach you?
[00:03:16] David Ford: Yeah, so I, so I think, there are, you know, online platforms, crowdfunding and the like, which I think works for certain type of business, where it's perhaps easy to explain a consumer facing business for something more, more technical, like the kind of things I would invest in, I think that's difficult for crowdfunding. But there are angel networks, there's angel networks in Oxford, in London, elsewhere throughout the southeast. So I think that's, you know, a good opportunity to find a large number of investors and approaching some of those angel networks,to go and pitch.
And then very often after that, there are networking sessions and that's how you can just, embed yourself in, the local sort of angel investing
[00:03:54] Sam Jones: Because it's early stage, a lot of it is people led, and it's all about that networking, building that relationship from day one.
[00:04:00] David Ford: Back to my vision point, it's about, if you're asking people to buy into your vision, well, actually, that's going to be, we're taking a lot on trust there.
So actually, always just coming back to relationship. That's absolutely right.
[00:04:12] Tracy Smart: What sort of things do you look for in a pitch?
[00:04:14] David Ford: What's the problem you're trying to solve?And is it a big enough problem? And is it innovative? You see a lot of me too ideas, incremental ideas, just a slight incremental improvement.
I'm not really looking for those things. I'm looking for something that is there's a big problem out there. No one's doing it. or maybe they're not doing it as well, and you're able to solve that problem.And if you're successful, then that's going to return many multiples of my investment.
What's the ultimate market for that,solution? And therefore, how does that then flow back into the investment return? And that's what you try, ultimately what, that's what you're trying to communicate.
Yes, of course, the science is important, but certainly from my perspective, it's not about getting into the details of the science, for example, If you think of it in PowerPoint terms or slide terms, it's five to 10 slides, which is about here's the problem, here's the solution, here's the team. And that's basically it, right? It's very simplistic but it's almost a case of who cares, who pays, who buys.
And it's about that sort of, well, is there a problem there, and that's the cares point. Ultimately, who's going to pay for the,product or your drug or whatever, your solution, so who pays, and ultimately, therefore, who's going to buy your business at the end of that. And that's the way I try and think of it, just in those three very simplistic terms,as a way of framing the opportunity.
[00:05:36] Tracy Smart: That's very good. I like that.
[00:05:39] Sam Jones: A
nd are there any red flags?
[00:05:40] David Ford: I'll answer it a slightly different way. The one thing that isn't a red flag is previous failure. I think that's absolutely not. I think we need to steer that notion needs...
[00:05:50] Sam Jones: first attempt in learning.
[00:05:51] David Ford: Yeah, exactly. Provided you've learned
[00:05:54] Sam Jones: Yes, yeah, yeah,
[00:05:55] David Ford: learned from that experience, and you're not making the same mistakes.
So no, I think there are not red flags as such. I think there are things that make it harder to raise money from me or from other angels. Things like, prefer a founding team rather than a solo founder. It's more nuanced than any particular sort of hard red lines or something like that. But absolutely not previous failure.
[00:06:20] Tracy Smart: Yeah and I guess that will change depending on each investor because they all have their own nuances that are relevant to
[00:06:28] David Ford: And the big, and I think the biggest thing probably is, not biggest thing, but one of the important things is, are you raising enough to buy yourself enough time to prove something? And is that timeframe realistic to deliver something? So if you're raising, 300,000, 500,000, and you think that's going to last you three months. Well, that's not enough time. You need to raise more. That's probably one of the biggest reasons for me to walk away from something is that you're just not raising enough to be able to demonstrate sufficient value to raise that next round. You haven't got enough time to raise that next round.
[00:07:02] Tracy Smart: Because you usually want to get to another milestone before you do the next fundraise.
[00:07:07] David Ford: Yeah, valuation, we haven't really touched upon that, but, I think if a founder has unrealistic expectations from a valuation perspective, that probably will cause me to walk away.
[00:07:18] Sam Jones: Excellent, thank you very much. That wraps up our Tips Under Ten. All the details will be in the show notes on your preferred podcast platform.
[00:07:24] Tracy Smart: Thanks, David.
[00:07:25] David Ford: Great, thank you, my pleasure.
[00:07:25] Sam Jones: Thank you very much.