April MoMo London - Financing
I was at the Mobile Monday event yesterday evening on "How to Finance your Business in a Credit Crunch".
There were presentations by DCKTN, Numeritas, Gateway2Investment and Vodafone Mobile Clicks followed by a panel session and discussion including Benjamin Ellis of Redcatco, Pamir Gelenbe of Newton More Partners, Rose Lewis of Pembridge Partners LLP, Carl Uminski of IMW and Chris Padfield of London Business Angels and London Seed Capital.
Here are some insights I took away from the event…
- Due to the current financial situation, companies can no longer expect to find one source for funding. You will have to pursue multiple sources who will do greater due diligence.
- There are still angel investors about - typically CEOs who have cashed in their company and now seeking investments - especially as low interest rates mean cash isn’t working for them now.
- Valuations tend to be less than a year or two ago. Some investors have pulled out and others have moved in.
- There’s generally less money available but a similar number of deals are being done.
- Later series funding is getting more difficult.
- Advantage of being a startup at the moment is there’s less competition and more talent available.
- There’s always money available for compelling businesses.
- Find customer or cash first? Angels prefer customer first. However, just one customer doesn’t validate a proposition. Special cases of scalable businesses (e.g. IP based) can raise money with no customers.
- Funding terms are important as they can kill you further down road as a founder.
- It’s better to fund via customer revenues than venture capital if you can.
- iPhone/Appstore successes are not yet enough to attract VCs. 30 million isn’t mass market. Not considered/proved sustainable yet. Person in audience disagreed - iPhone is a game changer.
- Opportunities: Convergence of Mobile and Digital Media (Internet). Mobile Money.
- Given recession, run lean for longer or finance now? Best businesses are ones that can run on customer revenue. Fund if need to gain time advantage over competitors. Less competition now so less risk to run lean.
- Raising funding can distract business.
- Focussing on one customer can end up a consultancy business (rather than a product).
- Alternatives? Government grants. 15 to 20 angel groups in UK. High net worth and angel investors will give better terms. Venture debt is 3 year loan-need VC before you can get this. Advances from publishers. Banks are lending for 2 million plus and not startups.
- Revenue streams? Any business that depends on powers that be (e.g. network operators, iPhone store?) is bad business. Fragmented supplier/customer better.
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