So you’re thinking of starting a business? But you need some investment to get it off the ground? You need to read this interview with an investor specialist.
We spoke to Adam Stankiewicz the Head of Origination and Analysis at Fig (Find, Invest, Grow) to talk about crowdfunding, securing the investment you’re after, and what constitutes a good and a bad business idea. Thank us later!
1. How did you become an investor?
I was doing my masters at UCL and found out about Fig through a friend. FIG runs an initiative called the ESAS, the goal of which is to recognise enterprising schemes students are carrying out. This is the part that Gemma runs. There was a chap who approached FIG with his business idea but didn’t get funded but he was offered an internship. I applied because of that while I was doing my masters and subsequently was offered a job which about three and a half years ago.
2. Why did you decide to go into venture capitalism?
I suppose my background in engineering and problem-solving helped me. It uses similar skills, a lot of analysis of what makes a business successful. That aspect, for me, transferred quite easily across.
3. Do you think what you’re doing is safer than equity crowdfunding, because of shareholder issues?
Sites like Kickstarter and IndieGoGo are crowdfunding for people backing ideas because they want to see it succeed. That’s a good source of funding in the early stages. Equity crowdfunding can involve hundreds and thousands of investments but they sit under a nominee structure. Whoever is running the company will represent all of the investors. There are pros and cons to crowdfunding and I think in the next couple of years we’ll see if it really works or not.
4. Do you think crowdfunding sites work?
There’s not a lot of moderation around it which, for the companies, is a good thing. But my fears is more around the investors, they could be anyone, and likely not experienced in investing. Some platforms offer you the chance to meet the company founders, but it’ll never be as extensive as what you do if you’re working with a professional investor. I fear that we might start to see a few companies blow up in the next few years because people backed them without fully understanding everything that goes on under the hood.
Having said that, there are plenty of good platforms where you can pick up money early on and, don’t forget, there’s a lot of grant money available. There’s things like a Horizon 2020 which is an EU scheme where you can apply for funding and they’ll fund up to 100% of your project but normally it’s about 70%. There’s also RMD tax credits so if you’re creating something with real intellectual property the government will give you money back.
5. What is your advice to building a business plan?
There are a lot of really great resources available – we have our own template that comes from this Harvard Business Review template. The book A New Business Road Test by John Mullins is also fantastic. Making a business plan is a lot of work and much harder than people might imagine, but there is help out there.
6. Do you have any advice of things people often miss with their plans?
Speak to as many people as you can. If you’re scared about someone stealing your idea then that’s always going to be the case unless you put up some barriers. Put good people around you early on, identify your own weakness and one thing we often recommend is being open with what you can’t do. Investors like problem-solving by nature so they will give you ideas.
7. Do shows like Dragon Den misrepresent the business?
Starting a business is phenomenally scary since there’s very little security. Shows like Dragons Den simplify it to make it exciting, but people need to be aware that it’s still a TV show. The dragons appear to making investments out of a five minute pitch but most of the times those ideas, behind-the-scenes, don’t actually get invested in.
8. What would be a ‘no-way’ pitch?
I never say “no way” off of the bat. There are some ideas better than others. Companies don’t help themselves when the pitch is full of typos and it’s really badly formatted. If they’ve made no effort to present their information, how can they ask for hundreds to millions of pounds? People on the whole have similar ideas and we’re all looking for something original. Most of the time we end up investing in the better mouse-trap – if someone is doing something better.
9. What are the most common pitches you receive?
Given the nature of tech, it’s easy and cheap to start a business. Back in 2000, it would cost £5 million to launch an internet business. Now you can do it for less than £50,000. It’s good but it means that everyone can do it. But again, as soon as you start doing something, there will be copycats. You have to execute better or be first to market, ideally both, and put up some sort of barrier where other people can’t touch you – and that’s what we’re looking for, someone who has thought of those things. Mark Zuckerberg for example was in an innovative space at Harvard and he built a better mousetrap than the likes of Myspace.
10. What would be your best bits of life advice?
Set out to build a real business that makes money from day one. Don’t get sucked into the investment cycle – only take on extra money if you need it. Look to make a R.A.B.B.I.T (Real and Actual Business Building Interesting Tech). Do what you can without venture investors, that’s the real business – we’re just accelerators. If your business will work slowly then that’s fine and be forthcoming about stuff – show all the skeletons in the closet – we’re not scared of anything and we want to help. Your team is the most important thing, apart from a really good idea!