From Pitch to Payday, The Hidden Costs of Fundraising: Featuring Sam Simpson
Jul 15, 2024
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Sam Simpson, co-founder of FounderCatalyst, shares insider tips on SEIS/EIS, lessons from exiting tech startups, valuing early-stage startups, and navigating fundraising complexities. He discusses finding the right investors, angel investments, and what puts him off deals, offering actionable advice for all founders.
VC funding may not be suitable for all businesses; bootstrapping can lead to sustainable growth.
SEIS and EIS tax schemes offer benefits to investors supporting early-stage startups.
Choosing the right investors and angels is crucial; pitch decks should focus on team dynamics and problem-solution.
Deep dives
The Decision Between VC Funding and Bootstrapping
Entrepreneur Sam Simpson discusses his preference for bootstrapping over VC funding, highlighting that less than 1% of businesses are an ideal fit for VC investments. Simpson emphasizes the importance of having product-market fit and substantial growth potential for VC funding to be viable. He shares how some businesses could benefit from bootstrapping initially to achieve steady and sustainable growth, showcasing his own journey of bootstrapping after an exit.
Insights on SEIS and EIS Tax Incentive Schemes
Sam Simpson delves into the SEIS (Seed Enterprise Investment Scheme) and EIS (Enterprise Investment Scheme) tax incentive schemes introduced by the UK government. He explains the benefits offered to high net worth and angel investors to support early-stage startups. Simpson elaborates on the tax relief, CGT exemptions, and other incentives provided by these schemes to encourage investment in startups, sharing personal experiences of capital gains tax savings through SEIS investments.
Key Points in Engaging with Investors and Angel Funding
Sam Simpson highlights the importance of aligning with the right investors and angels based on their investment preferences. He emphasizes the need for founders to conduct due diligence on investors, understanding their expectations and thesis regarding venture scalability. Simpson provides insights on crafting compelling pitch decks, focusing on presenting the problem-solution, team dynamics, and the 'why now' factor to attract investor interest. Moreover, he stresses the significance of showcasing team personalities and achievements in creating impactful presentations for potential investors.
Raising Funding from Angel Groups and Private Equity Clubs
Entrepreneurs often struggle with individual angel funding, realizing it requires numerous conversations to secure investments. Instead, engaging with angel groups and private equity clubs, which collaborate on investments, may yield more success. By leveraging these networks, founders gain strategic insights, boost confidence through due diligence observations, and increase investment opportunities from pitching to multiple individuals at once.
Navigating Funding Terms and Investor Dynamics
Understanding the nuances of funding dynamics is crucial for founders, particularly when dealing with early-stage investor terms. Valuation negotiations, investor consents, and dilution percentages are key aspects to consider. Founders often grapple with determining fair valuations and evaluating the impacts of dilution on ownership. Engaging with lead investors can guide valuation discussions, due diligence processes, and set deal terms, streamlining the fundraising journey.
Have you ever found yourself drowning in fundraising legals and language? This is the interview you’ve been waiting for…
In this episode, we're joined by the brilliant Sam Simpson, Co-founder of FounderCatalyst, who's on a mission to simplify and accelerate the early-stage investment legal journey. Sam's not just talking the talk; he's walked the walk, having co-founded and exited several tech start-ups, including the 17th fastest growing company in Europe in 2017. Oh, and did we mention he took that company from £0 to £27m in less than 4 years?
But Sam's not just a founder; he's also an active angel investor with 32 investments under his belt in just 6 years. Plus, he's a sought-after board advisor. In other words, when it comes to navigating the minefield of fundraising and investment, Sam’s who you want to learn from.
In this episode we discuss:
Simplifying the early-stage investment legal journey
Insider tips on SEIS/EIS and equity investment
Strategies for finding the right investors for your startup
Lessons learned from co-founding and exiting successful tech start-ups
How to think about valuing your early stage startup
What Sam looks for as an angel and what really puts him off even a seemingly “great” deal
So, whether you're a first-time founder trying to wrap your head around the legal jargon or a seasoned entrepreneur looking to optimise your fundraising game, this episode is packed with actionable advice and hard-won wisdom. Don't miss out on this incredible opportunity to learn from one of the people I trust most in this ecosystem!