1. Early Stage Funding
Charles Grimsdale
Eden Ventures
3 November 2011
Authorised and regulated by the FSA

2. Eden Portfolio
Sold to Nokia/Siemens
Sold to ORACLE Sold to TESCO
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3. Seed Capital – what is it?
 First round of capital that you raise
– Typically raised from a combination of Friends and Family, Founders
and external investors
– Typically less than £1m in total
– This does depend very much on the type of business
 How much should you raise?
– Enough to fund your plans for 18 months or more
– Enough to deliver a first functional version of your product/service
– Enough to win your first key customers
 What will it cost
– Assume that you will likely give up 15-30% of your equity
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4. Various Funding Options
 Bank Loans
– Really only viable for businesses that have established trading
history, and which are either a) profitable or b) have adequate
physical assets to underwrite the loan
 Grants
– Technology Strategy Board and other sources
 Venture Capital
– You issue shares in return for capital
– Several sources of capital
– Friends and Family
– Angel investors
– Venture Capital Funds
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5. Who should I approach?
 Depends on the size of the market opportunity and your Plan?
 Plan - £10m in Revenue within a 5 – 8 year time frame
– Raise less than £1m in total and focus on Angel investors and Friends and Family
– Get the business to break even as quickly as possible and use Bank debt to fund growth
 Plan - £50m in Revenue within 5 – 8 year time frame
– Raise £500K - £1m seed round
– Assume you will need at least another £5-8m in one or two rounds
– Approach Angels and smaller Venture Capital Funds for Seed round
– Aim to get at least one VC who can invest >£3m in the next round
 Plan - >£100m in Revenue within 5 – 8 year time frame
– Raise £500 - £1m seed round
– Aim to get two VC’s in the seed round who can each invest >£3m in the next round
– Assume you will need to raise £10-20m in 3-4 rounds
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6. What do investors look for
 Market knowledge in the team
– Do you really understand the competitive landscape
– What will make your product/service stand out
– Disruptive opportunities in the market
– You need to be “all over” the numbers
 Experience in the team
– Obviously look for experience of successfully building businesses
– BUT often the founders are too young to have such experience
 Good balance of skills and personalities
– Really Strong Technology visionary who can build the product
– A commercial person who can sell it
– A strong operator who can build process
– Venture capitalists do not fund one founder operations
– Prefer to see equity split at least three ways in the founding team
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7. What do investors look for
 Ability to attract great people
– If you have managed to convince some great engineers to come and
start building your vision that helps
– Demonstrate you can get some good advisors on board
 Clear understanding of your target customer
– Exactly who are they likely to be and why
 Very clear and tight Product Proposition - FOCUS
– Really well defined launch product/service
– What are the key things you need to do to attract customers
 Marketing Strategy - How will you reach those customers
– Obsessive attention to detail
 Clear Milestones for Seed Funding
– In 12 -18 months we will achieve A, B, C
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8. What to look for from your investors
 More than just money
– Can they help you recruit that next key person
– Could they help bring your first key customer
– Have they got experience of building a business
 Empathy
– Better to have an investor who understands a bit about your
business and who has been there so that they can be
supportive/sensitive when you are feeling the pain
 A Long term travelling companion
– Investors who will invest in every round
– Do you want to find a whole new set of investors for every round?
 Do your Due Diligence
– Ask your investor for references!
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9. Raising capital is like any Sales Process
 Find the decision makers
– Make sure you understand who makes the final investment decision
 Deliver a blindingly good pitch
– You have a maximum of 15 minutes to deliver your pitch
 Listen and handle objections precisely
– Ask investors exactly what they don’t like about your proposal
– The bits they like are irrelevant…. Focus on the objections
 Own the references and Market Background material
– Can you help them find other independent sources to validate your
proposal…. Own those references
 Constant communication
– Keep feeding your prospective investors with good news and trading
updates, try to get multiple meetings
 Control the time line for a decision
– Ask investors for clear milestones
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