On Tuesday 26th March, Manchester Digital hosted the third session of their Startup Activator programme, gathering founders and entrepreneurs from across the region for an insightful panel discussion on investment. The panel featured both investors and founders, giving attendees a well-rounded perspective on the investment process and the current state of play.
Adam Mitcheson, Co-Founder and CEO of My2be, chaired the panel which featured Kate Longworth (Gaia Learning), Ciaran Rawcliffe (Sure Valley Ventures), and Jess Jackson (Praetura Ventures).
Here are some of the key takeaways for founders looking to raise investment:
The VC Mindset
Ciaran Rawcliffe broke down the VC hierarchy of needs - performance and ensuring strong returns is the top priority. Any investments made must be strategically justifiable to the fund's promises to its LPs (limited partners/investors). The main criteria is returns potential.
The Investment Process
The panellists outlined typical investment processes, which often involve multiple pitch rounds bringing in more senior team members to evaluate. Investors need to be able to clearly justify how an opportunity fits their fund's strategy.
Fundraising Rounds Explained
Jess Jackson clarified that a fundraising "round" refers to a defined chunk of money a startup is raising, by selling an allocated stake to investors. Tools like SAFEs can provide flexibility.
The "Too Early" Conversation
Hearing "you're too early for us" from investors can be tough but useful feedback. Jess advised doing thorough research to understand each investor's focus areas and stage preferences. If rejected, ensure you have actioned any feedback before looking to re-engage.
Due Diligence Importance
Due diligence is critical from both the founder and investor perspectives. Founders should have data rooms and financials organised and interrogable.
Pet Peeves
From an investor perspective, panellists warned founders against asking investors to sign NDAs early on, as they just serve as a blocker. From a founder point of view, Kate Longworth shared frustration at angels thinking they know it all and wanting to take over your business, and in absolutely no circumstances wants a mentor!
The Current Market
While the environment is still fairly challenging, the panellists emphasised that negotiations and compromises are normal. Investors still need to see a clear path to strong returns.
Overall, the event provided founders a candid look into an investor's mindset and the current landscape for securing investment, balanced with reassuring advice from those who have been through the process themselves.
Manchester Digital’s next Startup Activator session will take place on Thursday 16th May, an interactive workshop run by TLT where they will give you a whistle-stop tour of the legal process before aiming to demystify the equity term sheet and all the legal jargon that comes with it.
You can sign up to the Startup Activator here.
