Exploring Investor Readiness
Thursday 24 Aug 2017

iMultiply and MBM Commercial hosted an engaging Investor Readiness forum with a panel of experts including David Ovens of Archangels, Callum Stuart of Mallzee, Laura Peachey of MBM Commercial and Richard Lewis, Business Advisor and experienced Non-Executive Director.

The discussion gave the audience the opportunity to question the panel and gain valuable insight and real-life examples of what to expect when raising funding. 

An insight into some of the discussion:

What qualities do the most successful CEOs or management teams have when you’re looking at them as an investor?

David Ovens: “Emotional intelligence is key. The skill set you have from day one in terms of the Board is not going to be the skill set in year 5 and year 10 when you’re looking for an exit.  A CEO at the point where we invest will understand that and the need for good Investor Directors, Non-Executive Directors and a good team behind them that will ultimately continue to take that forward”

Richard Lewis: “I’ve worked with a couple of Chief Execs who are unrecognisable from five or six years ago because they’ve learned so much through that process. It’s been fantastic to watch.  There are others who believe that they already have the product that’s going to revolutionise the market. All they need is the money and they can go and make that happen.  Very quickly you identify those individuals and that’s not going to work.”

What expectations do people have of your time and your energy and if it’s high, how do you temper that?

Richard Lewis: “It does depend on the organisation.  There are Boards I’ve joined where they’ve had a very strong sales and commercial background. I’m fortunate that my career has been relatively broad so my role there is more strategic and product focussed so it does depend on the gap you’re trying to fill.  But whatever that gap is, it’s about having a conversation up front and being clear on what that person is bringing to the Board before they’re appointed.”

Laura Peachey: “Companies always seem to be thinking about what value this person can bring to the Board. They are very value focused so it doesn’t seem to be a case of just filling the space on the Board – it’s about ‘what does this person bring to the team?’”

Callum Stuart: “When you’re pitching to Angels particularly, you’ve got to find out very quickly ‘what is there strategic need for doing this?’.  Some will be building a diverse portfolio, some will have expert knowledge in your industry and want to help and others will just like you and want to invest in the team as it seems like a bit of fun”

When clients are trying to determine how much a business is worth, what are the two or three things you suggest they do to enhance that valuation and reduce dilution?

David Ovens: “As a business, if you can articulate credible milestones and stick to those milestones then that grows value on the journey.  Secondly, we understand that people want to keep the management team motivated and tend to be quite generous in terms of share option schemes and re-motivating people.”

Richard Lewis: “I’ve seen it through Archangels and other investors that realism of ‘this management team needs to be incented and there will be dilution but we need to support them and those share option schemes’ That’s the only way really to invest back into the business and give the management team what they need.”

Laura Peachy: “The best investor for you won’t always be the person who is offering the best valuation and if it is a case that your company is going to need re-investment through five or six rounds as many will do, then there are long-term benefits of going with an investor who understands that and can support you through that process.  Share options are a good and tax efficient way to boost the shareholding of key members of the management team.”

Richard Lewis: “The other advice I would give people is to always go a bit bigger than you think you need. A lot of the reasons that people end up in five or six rounds is because they don’t think they’ll get the level of money they really need so they ask for a smaller amount or they are not quite ambitious enough.  If you can take a larger round, always take it because although you will be diluted at this level you’re not going to end up having to go back in twelve months or eighteen months because you didn’t quite hit the numbers you thought you were going to hit and you need some more money.  That’s where it’s difficult to drive the valuation you need.”

From a company’s point of view, how to do ensure you’re valued at the right level?

Callum Stuart: “Do a lot with not a lot initially and then show a lot of value early on especially before raising any money.  It’s about managing the value throughout the process and making sure that you’re generating it.  The wider you cast the net, the more chance you’ve got of raising the money you need to raise and the valuation if you want to raise it.  It’s a numbers game, it’s finding the people to speak to.  A lot of angels and syndicates will do deals so you just need to get in front of them and convince those guys as well”

The forum was incredibly well attended and allowed the audience to gain a deeper insight and expert knowledge on the realities of funding and exiting a business.

 

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