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The When and the Where: Knowing When to Seek Investment and Who to Approach

Posted on Dec 17, 2013 by Dr. Julie Nixon  | Tags: startup, funding, investment  | 0 Comments

By Julie Nixon

Monday night’s Eclub entitled “Raising Investment and Working with Investors” was delivered from the perspective of someone who has literally built a company from nothing, Kanika Bansal of Medicen Devise Ltd, and also from the view point of those enabling funding, Mary Jane Brouwers of Archangel Informal Investment and Jude Cook of crowd funding platform ShareIn. The message was that you can take your business some way before reaching a stage where you are prepared to part with equity, but when you reach that point you should be approaching the right investment vehicle for your company.

Kanika describes herself as a medical device innovator/entrepreneur and credits her RSE fellowship for developing her entrepreneurial skills (and paying for her patent application). Starting with nothing she won her first pitch with a £500 prize, and from there developed her business plan. Using her ipad, also won as a prize, she pitched her design to doctors and through their feedback found how she could develop and deliver a product that healthcare providers needed. Currently still a 100% shareholder in her company Kanika has, after two years of product development, reached a stage where she is ready to approach potential investors who can match her government funding. She stressed the importance of finding an investor you “click with”; underlining that investment is not just about the money, but also the knowledge an investor can bring to your company.

As Kanika demonstrated how far you can take your company before investment, Mary Jane expanded on this from the stance of an investor, encouraging entrepreneurs in the audience to question whether they actually need investment and want to sell equity. This almost seems odd from someone who wants to make investments, but in reality reflects that investors want early stage companies to have considered many things before approaching them, such as knowing who the investor is and the areas they are interested in. Archangel tends to have a bias towards tech companies rather than retail opportunities, with emphasis on the value of a company’s IP to its business. There is no point pitching to investors with no interest in your area of business when other syndicates may have more history of investment in that area. Mary Jane also stressed the importance of tailoring your pitch, one size definitely does not fit all.

The final speaker was Jude Cook, the founder of ShareIn, an equity crowd funding platform that has just entered into its beta phase. Jude also raised the point that an entrepreneur should consider if they want to sell equity in their company when perhaps they could raise money via a reward based platform such as Kickstarter. However this route of raising money might not be suitable for a technology company and Jude saw a gap in the market for a crowd funding platform focused on technology and healthcare. In its first week one company using ShareIn has raised 67% of its required funding, demonstrating the potential of this route to investment.

The question session did raise the crowd funding issue of how to manage so many shareholders when company decisions need to be made. Jude has considered how investments can be managed with many shareholders on the company registers by having appropriate legal documents in place. Our own Stuart Hendry however touched on an earlier point made by Kanika, that it isn’t so much about documentation being an issue with crowd funding, more that this source of funding is all about the money and doesn’t bring the connections and experience that an angel investor can give to a young company.

Of course there are pros and cons with every method of raising funds using equity that this blogger will not expand upon here, but I think the main message to take from the event was that as an entrepreneur you can do a lot for your company before approaching the right investor but that it is important to know when you should seek investment and who best to approach.

Julie

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