Why you shouldn’t raise investmentSeriously, it can kill your business
Sales vs. investment• Real money comes from customers – It’s yours. Spend it.• Investment is fake money – You’re selling a piece of your ass! – Investors own you forever.
Real vs. fake money• Real money – Establishes customer relationships – Builds share value – Doesn’t have to be given back• Investment sucks out your very soul – Lose control – Creates dependency & obligations – Stifles hunger for customer acquisition
Investors – false friends?• Investors create dependence• When cash runs out, they strike• Venture capital turns to vulture capital• You can end up getting eaten
Translation guide• We’ve got 18mths funding – We don’t have to bother with sales for 18mths• We’ve raised 250K – We can waste 250K before we have to run a proper business• We’ve got 20K pcm covered – We’ve let our spending blow out of control
Alternatives to fundraising• Sales!• Better market research – Avoid developing rubbish tech you don’t need• Product / service blend – Offer a service, develop your product behind• Licence tech – In (saves money) or out (makes money)• Cashflow management – Pay slow, get paid quicker
Sweat equity• Building partnerships, not selling stakes• Lasting commitments• The gift that keeps on giving• Emotional and practical commitment• Can be combined with cash – Choose a committed, helpful cash investor
Cutting costs• £1 saved is £1 on the bottom line – unlike sales, which is more like £3 to £1• Keep flexible – staff, premises, contracts• Reduce overheads – save the pennies• Avoid building rubbish tech which is obviously never, ever going to sell to anyone!
When to sup with the devil...• Land grab – E.g. Facebook, YouTube• Technological developments – E.g. Pharma, algorithms• Long customer lifetimes – E.g. 5 year contracts
...but use a long spoon• Raise late, get better valuations• Build convincing data• Prove traction• Attain profitability or revenue first• Choose investor first, investment second• Don’t take money from idiots – They’ll be a pain forever
Summary• Delay or avoid raising cash• Save money• Research! – Don’t waste money building rubbish tech• Consider sweat equity, JVs, partnerships• Sell more, sell quicker