Fundraising tests entrepreneurs and business owners in multiple ways. It brings its own mixed messages, and often, you find yourself up against conflicting advice. Should you be like another business or just be you? Is the investment decision about the product or the founder or the team? Should your investors be involved, or do you just get the money?
In this article, Merlie Calvert, founder of Farillio, the legal tech start-up transforming how SMEs access law, identifies some of the common fundraising paradoxes and maps out a way to navigate these.
Paradox No.1: Investors – are they angels or demons?
People make and break businesses: You’ll meet some amazing people on your fundraising journey – sadly, some of these are amazing for all the wrong reasons.
Like the person who told me on one of our earliest funding rounds that I’d be ‘brilliantly investible’ if I just had a male co-founder. Or the enthusiastic PE investor who kept asking us to meetings, told us she was ‘definitely in’, then rudely never spoke to us again.
There are a lot of time-wasters out there – many are simply checking out the competition. The truth is, you probably won’t spot many of them, so you’ll inevitably experience things like this for yourself. Just remember that this is a founder’s lot. And this crazy, confidence-challenging experience is nuts, but also normal for most of us.
There are investors however, who will blow your minds on incredibly positive levels and you’ll be stronger and more resolute because of them. One of our current investors, Lord Stanley Fink, is one such person: someone almost as passionate about our vision as we are, who brings the right balance of attention and support to help us grow our business, while also trusting us to take it forward in a way that is true and authentic to us.
Paradox No.2: Conform and follow ‘the formula’ or embrace your maverick?
The natural temptation with fundraising is to emulate those who’ve been successful before you – which isn’t illogical. It can be easy to lose sight of you; you the founder and you the business.
Avoid the pressure to strip out who you are. When it comes to the pitch deck and presentation piece, yes there’s core elements investors want to know. But don’t let this process commoditise or compromise you.
One of the best pieces of advice I received early on came from a fellow founder, who laughed when he saw my fear…and our pitch deck. “Seriously?” he said, “If I had a brand like yours, I’d make sure its personality showed on every page. Why have you made your deck look just like everyone else’s?”
I’d been trying too hard. And I’d taken the wrong advice. The minute I let our brand shine through, we scored several key investment commitments.
And it’s the people around you who can make all the difference. Being able to reach out to those who completely understand what you’re going through, and to learn from their experiences is gold dust. Don’t be afraid to ask for help. People cannot back you if they don’t know that you need them.
And each time someone helps you this meaningfully, pay it forward. Because now you’re learning the secrets, you need to pass them on. #TheFoundersCode
Paradox No.3: Are you the Formula 1 driver or do you look more like a scooter?
I have a secret love of scooters. When I set up Farillio, I wanted to call it something with ‘scoot’ in the brand name – because a scooter gets to the same destination as everyone else, but simpler, faster and better. And it’s not over-engineered.
You’ve probably seen the ‘Formula 1 founders’ on-stage? They look as though they effortlessly left the competition behind… They’re the leaders, those with expertise and track record. You’d invest in them, right? They have the market knowledge, contacts, training, etc…
Investors need to be persuaded that you’ll go into the race and deliver a fabulous return. And that can be really hard to do, especially if you don’t have a track record. You start a business because you’re passionate about an idea and you’re generally great at something that is core to creating a business from that idea. The reality is, you’re likely to be missing some key skillsets.
So how can you give investors ‘Formula 1 grade’ confidence in you? For me, this comes down to how you build a great team around you. While I’m an expert on my start-up’s core product, I can’t write code for toffee – not the sort of original code that our developers do. With our marketing, I’ve appointed a content creator whose knowledge and creativity is a class apart.
It’s not about being a Formula 1 founder: success is about having the Formula 1 team.
Paradox No.4: Investment is about the product, about the founder or about the team
It has to be all three – don’t let anyone tell you differently. And make sure your pitches and presentations cover them each well.
Meaningful investment requires a robust, well-planned proposition, that’s being built by a compelling and committed team, led by a strong founder with exceptional vision. If any part of this equation is weaker than the others, there will be plenty of others who can tick all three boxes.
Good products can get to market with poor teams or founders, but their businesses don’t last as others spot the opportunity, build better and steal market share. Bad products equally get to market thanks to decently qualified build teams, but if sales don’t result, those businesses will fail too.
Paradox No.5: You need advisers or you need to go it alone
Lots of people will try to tell you that you need them to help bring in the investment money. The reality is that they want to make money off you. In some cases, this is of course fair, if they’re working hard to help you get deals and make the right investor contacts, for example.
I’ve also seen some of the most inappropriate and unwelcome hard-sell tactics since becoming an entrepreneur. Go in to any relationship discussion with your eyes wide open and, beware the vultures. Sadly, startups are seen as a hyper-attractive sales funnel. Do not allow yourself to be pressured into signing deals without time to reflect and take references or get a second view on the value to your business.
And when you do sign contracts, don’t agree to overly long notice periods, because you’ll otherwise end up in the unhappy position of having to pay someone money for a service that you no longer want,
I’ve been very careful who I choose to work with – even in the early moments when everything felt so new and I really needed help to secure the investment to bring the dream to life. As an ex-lawyer, seeking to transform how SMEs access law, it goes without saying I do my DD on the folks that we work with.
I believe in having the right advisers. Farillio’s span markets, experience and even areas of expertise that we simply don’t have as a team. Choose wisely. Sometimes the very best support does not come with a price tag and is always willing to give first, before taking.
Paradox No.6: The best investors are hands-on…or hands-off?
A balance of both actually works well. Just ensure the ones who are keen to be actively involved will add real value – this means expertise, or key introductions across their network. We learned pretty quickly which advisers mean well, but end up being more of a distraction and we ration our time spent. We have others who are active and brilliant – like-minded rebels with a ‘make it happen’ mindset – who are a joy to spend time with.
And then there are those who believe in the vision, but are happy to backseat and crack on with their own lives, leaving you to it. Your requirements will change depending on your business’ lifecycle and how much you’re raising for what objectives.
I’d always encourage transparency and rigorous communication in all investor conversations.
So where does this leave us?
Two fundraises in and with a stack of war stories from fellow founders, I’ve noticed a number of common threads relevant to navigating the ever-conflicting world of investment advice.
Whether it’s your co-founders and colleagues, or a wider team of peers and community around you, surround yourself with great people. Often, the very best advisers, resources and solution-providers will be your peers. Network honestly, reach out, share, support and solve your challenges together.
Stay unapologetically true to you; don’t let your vision get diluted by a couple of negative pitch experiences. This is easier said than done, but it will be far harder long-term, to build a compromised brand that you don’t believe fully in. Values can bring brilliant clarity in tricky times.
Avoid the tendency to get drawn in by theorists and Elon Musk figureheads. Look around you instead, engage with your fellow founders to share recent experiences, contacts, referrals, resources, tips, the list of all those investors we’ve each black-balled for good reasons…
Then when you make it big, pay it forward, adding your own experiences of the fundraising paradoxes and the solutions you applied to the list I’ve started here.
By Merlie Calvert, founder, Farillio