TSH Startup Masterclass: Why You Don't Need Investment


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Key points and highlights from Andrew Lockley's presentation “Why you shouldn’t raise investment seriously, it will kill your business!”

Take money from customers not investors for as long as you can.

Investment can really stifle your hunger for customer acquisition and, if that happens, are you really running a business?

Alternatives to raising funds: offer a service and develop your code base this way, build your product behind.

Alternatives to raising funds include managing cashflow better: pay slow, get paid quicker.

Cut your costs - £1 saved = £1 on the bottom line. This is unlike sales where you need to pay out a cost per acquisition so £3 of sales = £1 on the bottom line.

If you do raise investment choose investor first, investment second.

Very importantly: don't waste money raising rubbish tech! Do your research.

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TSH Startup Masterclass: Why You Don't Need Investment

  1. 1. Why you shouldn’t raise (cash) investment Seriously, it can kill your business
  2. 2. About me• MEng & Man, Birmingham• History in SME, sales, property• Web startups• Internet marketing• Consulting• Equity investments
  3. 3. Sales vs. Cash 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.
  4. 4. 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
  5. 5. Investors – false friends?• Investors create dependence• When cash runs out, they strike• Venture capital turns to vulture capital• You can end up getting eaten
  6. 6. 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
  7. 7. 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
  8. 8. 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
  9. 9. 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!
  10. 10. 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
  11. 11. ...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
  12. 12. 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• @andrewjlockley• www.andrewlockley.com