Your funding and finance questions answered

Marc DaviesMark Davies works for Emerge Education, a start-up accelerator company exclusively interested in ed tech startups. At the Bristol summer school he answered your questions about finance and funding:

Who funds start-ups like this? Is there any money around?
It’s actually a good time to found an ed-tech start-up. One highly credible and professional London-based investment firm – Ibis Capital – have started up an ed tech funding stream, mainly aimed at later-stage projects. Aside from that there are plenty of venture capital (VC) investors in London who fund tech start-ups, one example being Balderton.

Angel investors are individuals who may have particular interests in funding a project; institutions can’t respond emotionally to investment decisions whereas individuals can. Such investors commonly deal with up to 100 investment requests every month, but they may also have other contacts who they can connect you with (perhaps we can get some Angel investors along to the event in November?)

Emerge Education offer start-ups a £15K living stipend for the period of the accelerator programme, plus a programme of support and 8% equity in the project. This is considered a ‘pre-seed’ level of funding; higher levels being as follows:

  • ‘seed round’ – typically £250K to £1.5m
  • Series A shares (£5-20 million)
  • Series B shares… (£20-50million

NESTA (National Endowment for Science, Technology and the Arts) has been revamped in recent years and has plenty of money to invest in innovation. Their support is typically geared at later-stage projects that can already demonstrate educational impact, but they are also interested in hearing from younger projects.

Finally, UNLTD ( support social enterprise start-ups through awarding prizes and grants. They are open to ‘pre-idea’, single-founder initiatives.

How do I pitch to investors?
Your first communication with investors is often called a pitch deck or slide deck. Dave McClure has written some good advice on puting this together that plenty of others have remixed ( Also try for examples. Always use numbers. Investors like numbers.

What about Kickstarter?
Revealing your idea to the world is a risk, but if you nail it, this is a great way of ensuring your proposition is attached to you from the start. Tim Ferriss (a ‘lifestyle design’ guru) has written a post on “How to raise £100K on kickstarter in ten days”.

Should I worry about a huge company like Google stealing my idea?
If they get to hear about it, you’ve probably already succeeded. Bear in mind though that ideas in themselves aren’t worth much – it’s all about the execution. Do you know how to realise your idea? Do you have a team?

How do I know how much my idea is worth?
Valuing a company or idea is tricky. There’s no point in getting too mathematical in the early stages, but don’t give away any more than 3-4% for an initial £10K injection. Do not undervalue the time that you’ve already put into the project – that £10K isn’t going to buy you much more, and is it worth the control you are giving up? When fleshing out the details of external investment, you need to take it seriously but at the same time realise that it is all a game. Take it as a compliment that the investor and wants to hear your story and your plans.

Will I lose all my users if I start charging for the product?
Remember you can afford to lose customers who won’t pay the fee as long as you keep some who are willing to pay more.

Why are some tech companies valued highly when they don’t have a clear revenue stream?
The UK invested in the East India Company as a huge operation but never actually made any revenue from it. Investment may be fuelled by the less tangible, indirect benefits of running/owning a large part of commerce, or – in the case of new tech – ‘owning the internet’. It’s more about power than direct financial return.

What if my potential investor doesn’t share my vision?
You may have to balance out your and their visions. This may require some compromise. So best not to go at it all guns blazing with potential investors in the first instance. Just outline your personal principles, be upfront and make your point intelligently. Make sure if you are giving away control to anyone, check that their leanings and motivations are broadly similar to yours.

Do I need to have an exit strategy figured out?
Investors don’t necessarily expect one at this stage. They are more concerned with whether the idea will work at all.


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