Advice from an investor — How to find the right funding options for your start-up
Ambition A.M. takes a look at how a start-up can find the right funding options for them, with some firsthand insight from an angel investor and serial entrepreneur himself.
Every week, Ambition A.M. passes the pen (or keyboard) to a founder eager to share the unfiltered stories fuelling Britain’s entrepreneurial spirit.
This week, we hear from Xavier Collins, serial entrepreneur, angel investor, and vice president of the UK for car-sharing marketplace Turo.
After spending over a decade building and scaling marketplaces, Collins gives Ambition A.M. some first-hand insight and advice for seeking investment as a start-up.
When is the right time to seek investment as a start-up?
One question founders should ask themselves before seeking investment is whether this is a venture scale business.
If you’re asking someone to invest, you must believe you can generate significant returns. Otherwise, the risk-weighted reward just isn’t worth it, and raising capital under these conditions can artificially distort founder decision-making.
Raising capital makes sense in a highly competitive market or one where significant investment is needed to generate a technological advantage.
Far too often in recent years, lifestyle businesses (read: a business with a website) have contorted themselves into venture businesses with bad outcomes for investors and founders.
How can a founder find the right option for them?
For first time founders, I’m a believer in accelerator programmes. It’s hard to build a network from scratch, so these help solve the cold start problem.
I believe one of the most rewarding elements of the start-up ecosystem is “paying it forward.”
All successful entrepreneurs are the beneficiaries of people who have gone before them and offered advice or funding.
Harness this and seek out mentorship and advice – asking for help and building a network is one of the first litmus tests you must pass.
What is one thing you’ve learned on your entrepreneurial journey that you wish you knew before starting?
This is a difficult question to answer because if you knew how hard it would be before you began, you wouldn’t have started in the first place.
To this extent, it feels like all lessons are a necessary part of the process.
That being said, there are a few basics to get right at the start because they can be expensive to fix later: go slow to go fast – get good advice early on setting up your capital structure, choose the right co-founders (it’s like a marriage) and couch your optimism in realism and long-term thinking.
How do you manage the growing pains and stay in line with investor’s expectations?
The key to managing investors is transparency and authenticity. Consistent and candid investor updates are a condition precedent for success.
The best approach is to be solutions-oriented, frame negative feedback around requests, and ask for help.
Companies are hard to run; everyone makes mistakes, but the important thing is to be candid about what is happening so that you can course-correct. Seek advice, but be discerning in who to listen to.
What do you look for in a start-up seeking funding?
I’ve always been led at the seed stage by the founder.
Ultimately, at this stage, so much comes down to the ability to execute, pivot and survive.
To this end, I look for whether they have experience doing this before and strong pattern recognition, or if they are a first time founder, are they resilient, fundamentally optimistic and a first-principles thinker. Can they be contrarian and yet correct?