Preparing for investment - challenges faced by the tech sector

Last week we were joined by a 40+ of London and the South East's ambitious tech entrepreneurs, several leading VCs and a handful of successful entrepreneurial mentors for a loud, lively and illuminating discussion about preparing for investment and the future success of tech businesses.
With the support of our Partners, Silicon Valley Comes To UK, Penningtons Manches and Advanced Business Partners, the discussions ranged from talent to valuations to international expansion demonstrating the breadth of challenges the sector is facing, but also the determination to overcome such challenges and continue to thrive.

We have summarised some of the learnings from into 5 key areas.  Please see below.
 
Types of Funding
  • Crowdfunding – a fantastic way to add reach and exposure to the public, but harder to control and needs to be managed well.
  • Angels – are likely to invest on an emotional as well as rational basis - you need to win them over.
  • VCs –  many businesses competing for their funds, so you need to see a clear opportunity for ROI
  • Venture Debt – predictable cash, although will need to be repaid.
Valuations
  • Future exit potential (and therefore ROI) for an investor is key
  • Angel investors will be more variable than institutional investors
  • Where investors need to see returns, gaining an artificially high valuation can cause problems for future raises.
 
Timing 
  • Get to know VCs early, even if they don’t invest in this round they may in the future, or at least provide constructive feedback.
  • Ensure the right size of raise, raising too little or too much can be costly.
  • Be clear on what the money raised will allow you to do that you couldn’t do otherwise.
 
International Expansion
  • Founders should seriously consider having a local representative or address in the city/country where investment is being raised.
  • For UK-headquartered businesses seeking investment in the US, there is an expectation that the founder will relocate or spend majority of time in US.
 
Talent (Board and Staff)
  • Different skills and characters are required to complement and challenge one another.
  • Investors will likely want a seat on the board. Having the right investor onboard is important. Make sure they are aligned fully with your vision to save trouble later, ensure that they ‘get it’.
  • Staff and management are key part of team. Incentivise with equity, EMI good in the UK and US employees will certainly expect equity.
If you are interested in joining us at future events just drop us an email to let us know.
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