Approaching investors and pitching for funding can be a daunting experience, but for most tech entrepreneurs, doing so is key if they’re to scale their business.
But with so many different venture capital firms and investors to choose from it’s difficult to know who’s looking for what and when.
We spoke to Tim Mills, investment director at the Angel CoFund, a £100m government-backed investment fund, to find out how tech startup founders can get his attention.
The fund, which tends to invest in between £100,000 and £1m, co-invests alongside business angels who can offer sector-specific expertise in addition to funding early-stage ventures.
“The co-investment model is about finding great companies to invest in, but also finding the right Angel partners to invest alongside into those companies,” explained Mills.
Founded five years ago, the Angel CoFund now boasts a total of 69 portfolio companies spread out across many tech verticals. So far, the fund has invested about £33m and has set aside £17m for follow-on investments to spend in the next three decades.
“In pure financial terms our most successful investment to date has been in Ebury,” said Mills, adding that the FinTech firm’s revenue has grown significantly since it secured funding from the fund.
Other Angel CoFund portfolio companies include the likes of recipe box delivery startup Gousto, which has gone on to raise just under £30m in total from investors including MMC Ventures, BGF Ventures and Unilever. E-lending platform Ezbob and HealthTech startup Micrima, which closed a £2.6m funding round earlier this year are also portfolio companies.
So how can other startups imitate these companies’ success?
“If I was going to encapsulate it simply, what we’re looking for ultimately is the ability to execute better than anybody else.
“There’s often a myth, for those that aren’t in venture circles, to think that it’s all about the great idea, whereas of course we know that in the modern world there’s really no such thing as an original idea,” he continued.
The Angel CoFund, it seems, is looking for the full package: founders with a sensible, achievable plan, which can be sold to investors, employees and customers. An exceptional team, Mills noted, is also essential.
He went on to say that there tends to be an over-emphasis on core teams, and that an attractive startup must have access to all the necessary business-building skills in order to be successful.
He commented: “Those skills might lie directly in the team, or it might be that they’re bringing them in through their investor base.
“One of the things we always look for in Angels is that they bring in more than money, as they often have the grey hairs and experience of building businesses themselves. So they can be a valuable resource,” he explained.
Alongside this, Mills said he is on the lookout for individuals who are self-aware. The best startup founders, he added, are aware of their own skill set and can be molded to suit the needs of their business.
“A sense of urgency is also key,” Mills said.
“The reality in growing any business is that there’s always far more things to do than you’ve got time to do them in. But being able to get on with things quickly, to execute first, to fail first – if that’s going to be the outcome – and to keep moving forward and exploit the advantage you’ve got is important,” he explained.
Being able to follow the aforementioned points will help companies stay ahead of the competition, an attribute which Mills thinks will help founders secure investment from VCs.
Mills is well aware of the potential negative implications of Brexit, despite two of the fund’s deals closing successfully around the time of the referendum.
“I think it’s fair to say the market is active now, but there is a lot of caution out there.
“Nobody’s in a particular hurry to make big commitments at this point, so it’s definitely not a red light, but it feels like we’ve got a bit of a flashing amber at the moment.”
Going forward, the investment director suggested that we must ensure the UK remains an attractive place for EU nationals to come and build their lives.
“It’s very important that we make them feel welcome, as well as ensuring they are able to access the job market here,” Mills concluded.