Does your tech startup need help? If you have an idea for a tech business, or you have recently launched a tech business but have now hit a wall because you need advice, guidance and funding, you’re not alone. Thousands of tech businesses were launched in 2014 alone, but many failed to make it off the starting block due to a lack of expertise and funding. Of course you could start a tech company without any start-up experience, but you will have a significantly higher chance of success if you already know how to navigate a start-up’s unique challenges, including: raising money, changing product direction and design. These are all hard things to learn on the job and you may only have the finances for one shot at it!
BrainBox Investment Limited helps to grow young entrepreneurs tech businesses, not just by funding but by also offering the help and mentoring needed to maximise a start-ups potential successes.
We spoke to Co-Founder Chris Potten to find out more.
Chris, can you tell us about BrainBox?
The Brainbox concept was born in January 2013 at a meeting between myself (Chris Potten) & Vincent Isaacs at the IOD in London. We had been having lunch and bouncing a few ideas off each other, when the idea of a angel investment company with a focus in technology investments was thought off. We officially launched in January 2014 after 1 year of refining the business model and then raising the seed capital to allow us to start investing. We are actually a group of 6 angel investors who have extensive experience in business, made up of public company owners, IP law, Accounting, Marketing, Sales. Many of who have multi-million businesses of their own. We do work with other angel investors or VC’s depending on the type of technology idea that needs funding, some of the ideas that come through the door are very large projects!
How are you different to other Angel Investors?
A good question, the way we differentiate ourselves from other angel investors is that we are not just that. We offer a multitude of extras to ensure that the businesses we invest in are given the best chance to succeed. We mentor, help with financials, business plans, contacts, company formation, accounting, legal, marketing, design, app/software development, online development and anyway we can help in anyway we can. We are a hybrid of angel investment, incubator and accelerator with a very large network of high net worth individuals, which means that no matter what we invest in we either have the experience to fast track the business to success or know someone who can.
Who can apply for funding from Brain Box?
Two main criteria that must be met to apply for funding through Brainbox are that the idea is in the technology space and that it is based in the UK.
At what stage in their start up can they apply? Must their business be up and running or do you help people get investment to develop their ideas?
We prefer to invest in ideas that are still in-conception, when the idea is still just an idea or businesses looking for seed or second round funding. If we see an idea that we like but we do not invest in, we will usually make an introduction to someone we know who can invest and help that business.
How much can one typically expect to raise?
Anywhere between £20K to £20 Million. It is difficult to answer this direct as the amount of investment depends on the idea and the size of the project. For instance an idea that is a mobile app will need a lot less funds then a renewable energy business. We look at each investment individually and use our knowledge to weigh up the amount of capital investment, risk involved and how much money it would take to make the business a success. Financial forecasting is a daunting task for a lot of entrepreneurs because understanding how much investment you think you need compared to the actual investment you need can vary greatly. There are so many variables involved when setting up a business, but that is what we are here for.
Can you tell us roughly how much equity a small business would be expected to relinquish?
This question gets asked continuously as there is no exact formula to reach the answer and too many budding entrepreneurs watch Dragons Den and think that 10-15% in return for £50-£200K is the going rate. The most simplest way to come to a figure is for the entrepreneur to ask themselves that if someone was pitching the idea to them, how much equity would they want? Often you will find that when the roles are reversed they will realise the amount of equity will be higher than what they first thought. There are a lot of advisors out there, but then it is just advice, if you asked them to invest their own money in return for the equity they suggested you would find 99.9% of the time they would ask for double what they suggested. We generally request 50% equity in return for our investment and time, but once/if the company needs funding further down the line, we would dilute our shares and the original founders equity will be untouched.
What is the process like for applying for investment? Is it complex and would someone need an advisor to help them through the process?
Not really, for instance our submission desk is straight forward, we ask for a few questions to be answered and if we like what we see, we have a face-face meeting then take it from there. A good starting point when approaching any new investor is to put together a two page document, that covers the headline information of your business. It should only cover key points,if you send out a full business plan you are less likely to get the investment. Angel investors are busy people often running their own companies or helping develop others. Once you have got the interest of an investor then you can give them more detail.
How much detail needs to go within the application? Do you need to be a finance whizz? Do you need to detail exactly how you will spend every penny?
Finances obviously help when putting together an application because it gives the investor an idea of their potential return and the money needed. But don’t forget angel investors are experienced in business and they can generally work out the money needed and the potential return through a few facts and knowledge. The information I suggest to include in your initial correspondence with a potential investor is a concise description of your business, the reason you came up with it in the first place, market competition, market size, patents/trademarks, current revenue if you are trading and the features and monetisation.
How long could the process take from application to receiving the money?
Anywhere between 2 weeks to a few months, it depends on the size of the project and when the investor can expect a return. You will have to have at least a minimum of two face to face meetings to tie up a deal and then you have all the legal aspects which need to be put together. Don’t expect investment the same day!
Can you receive angel investment multiple times?
Of course, many businesses go through multiple funding rounds, but at the start it is better to analyse your business and see wether it is better to have 1 or a small selection of angel investors. It really depends on the businesses needs, if you need angel investors to help out, what skills they offer, contacts etc.
Do angel investors invest in you as much as your idea?
A key part to any investment is the person behind the idea. If you can’t get on with that person you will most likely be in a situation where they investment fails. This has to be self reciprocating as no matter how much you need the money to fund your business you also need to feel comfortable with the investor you take onboard. There has been a number of situations where businesses are invested in because of the person behind it, we have done this many times and have had a lot of success.
What application tips can you offer start ups?
Make sure you research the market extensively and have the facts to back up any statements you make. Don’t over exaggerate, its all good and well adding a little extra but don’t forget you are dealing with sophisticated investors who can read between the lines. Be concise and confident in your application!
What are the most common reasons applications fail?
Wow there are so many to list here! Lack of clarity, understanding of the business, valuations of business, set-up and launch costs, spelling mistakes, grammar, over embellishment, market size, competition…. The list goes on!
What are your top tips for securing angel investment?
Make sure your idea is water tight idea and can’t be picked at, price your business modestly, show the need for the idea and how it is different to any competitors, have some great references to back up any facts you make, choose the right investor and most importantly be yourself.