How to close an angel seed round in 43 days – first pitch to money in bank - top 10 tips from Elemental Software co-founder Jennifer Neff
Back in June 2017 Elemental closed a £300k seed round in just 43 days from first pitch to money in the bank and at the time, the three of us were inundated with the same question – How on earth did you do that? We still get asked the same question today.
There’s a lot of negative press around how difficult it is for especially female entrepreneurs to access & raise early stage finance and for this reason, we paused and jotted down our top 10 tips in that very busy week in the hope that it will help other women (and men!) out there who are in the same boat as we were in early 2017 – about to start out on a funding journey to raise investment from business angels. So here are Jennifer Neff’s top tips:
1. Be clear on your why When you first start out in business you automatically think - 'we need investment straight away' but it’s not always the case and it’s not always easy to get. Weigh up the options available to you and be very clear on why you’re seeking investment. Our board members put us through our paces on why and what we needed the investment for. This helps you make a compelling case when you’re ready to pitch and everyone in the room will understand why you are there.
2. Have a veteran on your side Someone who has done it before, has a black book to die for and who is prepared to ask the awkward questions will be worth their weight in gold. By having Mary in our camp, we were focused, prepared for the road ahead and had someone in the team who’d already invested in the company and was available to take calls and answer questions from our 7 prospective angels during those 6 weeks.
3. Forget the frogs You can spend a lot of time pitching to various angel and VC networks, some of whom will have no clue about your market, no experience of the challenge you are overcoming and just don't get it. Don’t pitch at events where the audience is only there for the free booze or sandwiches. Seek out the right investors, use your influencer/sponsor to make the right connections and rule out the tyre kickers and armchair investors.
4. Apply filters We were warned that fundraising would be distracting, time consuming, disheartening and often unsuccessful. On several occasions we were told 'just be aware that all this effort may come to nothing'. Last summer we had two people sit across a table from us and tell us we were over ambitious and had over valued our company. We thought 'We'll show them'. It happened again mid investment round in May. Someone, who should have known better, expressed interest in investing and then through his behavior almost derailed our round. Thankfully our lead investor believed in us and what we had and could achieve so it didn't make a difference. Block out the negativity and use it to fuel your ambition to succeed.
5. Be pitch perfect Leeann had been on the Propel Programme with Diane Roberts and anyone who knows Diane knows how much emphasis she puts on developing and delivering your pitch. Leeann was so confident in pitching that it rubbed off on me. We pitched at a ClearySo event in London on 3rd May alongside another healthtech startup. The room was packed and we had only 10 minutes. We were confident and slick in answering our questions and that was down to preparation. We took this confidence with us through due diligence and onto researching the investors. Which leads nicely to....
6. Do your research on the investors One of the investors, who subsequently became our lead investor taking half of the available round, spent 2 hours with us asking lots of questions about us and how we work together and playing devil's advocate. We also asked him lots of questions and suddenly it became an equal playing field where we were all sounding each other out. We had 7 new people joining our company so we wanted to be really sure about each person and clear about what they would bring to the table. The day after that first meeting our lead investor joked "I gradually realised I was sitting opposite two lionesses and I was the zebra".
7. Remember why you are doing what you are doing It’s often tough for people to understand why there are communities that need more help with health and wellbeing improvement than others. We were once asked 'what can't they just google what’s on in their community?'. Don't be put off by this and do your best to simply and clearly articulate the challenge that each stakeholder in your business model faces.
8. Close fast and keep everyone informed of the deadlines There was a high level of interest from investors following our pitch and our round was oversubscribed. This helped us reach out to and subsequently include other influential people who we knew could add value. From the outset we explained the deadlines and the reasons for it. We checked everyone's holiday plans, and checked again. The last thing we wanted was for someone to be away on holiday, off grid and unable to sign any of the legals on time. We set out timescales so that everyone knew what documents would be coming their way next.
9. Have a lawyer who finds solutions It’s an amazing feeling when you rate your lawyer highly, but another feeling when your investors also rate your lawyer. We had the unstoppable Katey Dixon of Forde Campbell in Belfast. Katey pre-empted issues before they even arose; she was always 20 steps ahead. She and I were in daily contact. Once the legals started I locked myself in a room for 3 weeks with a phone and a laptop - think Renton from Trainspotting boarding up his front door and living off tins of beans. It was mine and Katey's sole purpose to get the Heads of Terms agreed in the first instance. We needed everyone to be happy with these terms first so that acceptance of the Shareholders’ Agreement would progress smoothly. All of this takes a lot of to-ing and fro-ing, even with a lead investor. The love Katey got from the investors when she announced our completion was pretty impressive.
10. Enjoy it The legal side of things and negotiating is not for everyone so if you’re not that person, assign or find someone else to lead the process. My co-founder Leeann is the queen of operations and project implementation and develops a rash when money is mentioned and difficult questions have to be asked. I, on the other hand, love talking money, contracts and negotiations and had found my 'happy place' being the key point of contact between all the investors, the lawyers, accountants, our board and our advisors. It’s why Leeann and I work so well together. We asked ourselves throughout the 43 days how someone without a co-founder could manage by themselves. Leeann kept focused on our existing clients throughout and even secured a sale mid round!
Great tips from Jennifer. Having said of all this, there is no doubt that it’s MUCH harder for female tech entrepreneurs to raise money – but with the right approach and the right team it is possible and as we’ve shown, it’s even possible to do it quickly.
It goes without saying that you must have the right team, a great product, a massive and ready market opportunity and a business model that will help you access that huge market and you have to learn to pitch in a way that investors can quickly grasp your offer and decide whether or not it’s of interest to them. Once you have all of that, my advice would be to really do your homework on the type of organisation you want to fundraise through. ClearlySo was always our first choice but we had a Plan B and a Plan C for if that route failed.
If you're pitching your startup over & over again and aren’t getting any interest I urge you to find an independent set of eyes to take a look at what you’re doing to see if they can spot the flaw.