Diary of a start-up: How to pitch to high net worths and angel investors
Fresh from raising £1.2m, Headbox founder Andrew Needham shares the 5 tips that helped him secure backing from a number of big name investors...
Founder and CEO of creative meeting and venue space booking platform Headbox, Andrew Needham is our regular Diary of a start-up blogger. In his most recent blog, Needham outlined essential advice to help start-up entrepreneurs achieve focus.
In this latest blog, Needham explains the 5 ways he won over investors – including the CEO of the Interncontinental Hotel Group – to raise £1.2m seed funding.
In September I was pitching HeadBox to Andy Cosslett; chairman of the recent Rugby World Cup and former CEO of Intercontinental Hotel Group. He asked me a very interesting question as part of his decision making process to invest in the company; “When have you failed Andrew, and what did you learn from it?”
I replied by telling him the story of Univillage, the Facebook equivalent I co-founded in 2006 where we signed up 250,000 students in four weeks, only for that explosive growth to falter because our site was suddenly blacklisted, causing the 650,000 invitations going out each week to be treated as spam. It killed us because we didn’t have the in-house technical experience to deal with this problem quickly enough.
Although Cosslett was interested in my answer, he was more focused on what this told him about my character and personality and it highlighed five important tips that I can share with other entrepreneurs when talking to potential investors…
Investors are backing you as much as the idea
Investors want to know about you; about your successes and failures and your past experiences. They want to see the passion, energy and drive you are bringing to your idea and that you back yourself. They also want to know when things get tough and don’t work out as you expected that you have the resilience, determination, and adaptability to get things back on track and if you have failed can you show that you are able to learn from your mistakes.
Luckily for me I have made a success of two other companies Student Pages and Face Group, so being able to demonstrate that I have successfully started, grown, and sold companies previously has been a big help.
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You should be able to explain your idea in a sentence
In all my investor meetings to date, I have recognised that I have 30 minutes before they switch off so being able to explain an idea at the outset in one sentence is vital.
A good litmus test is pitching the idea to your parents or family members. If they immediately get it by responding with “that’s a good idea” then you know your investors will too. The business term for this is an “elevator pitch” because if you can’t explain your idea to someone in the time it takes to go up a few floors then you need to go back to the drawing board.
This happened to me with my first business idea Student Pages when I got into a lift with a vice president for Coca-Cola and had to pitch him the concept as we went up to the sixth floor.
Let your product/service tell the story
I started my pitches with a deck of slides and then, as soon as I had a version of my product, dropped this in favour of giving a presentation around the product itself.
Most investors will not have spent time looking at your idea prior to the meeting even if you have asked them to do so. Demonstrating your product; getting them to see it and use it, is the best way to tell your story and get them excited about it.
Never stop building your network
Most of my initial investors who have backed me in HeadBox are people that I came to know through meeting or working with them in my previous businesses.
Make sure that you keep in contact with everyone you meet, as you never know when or where you might have an idea worth sharing. Even if this means flagging down a potential investor as I did while I was running through Hyde Park and he was travelling towards me on a Boris Bike.
Make investing in your idea tax efficient
High net worth individuals are sophisticated investors and so will want to take advantage of all of the government’s tax incentives for investing. It is important to make sure you set up your company with this in mind.
HeadBox is a SEIS (Seed Enterprise Investment Scheme) and EIS (Enterprise Investment Scheme) company and this has given my investor base some fantastic tax benefits. I would recommend to every start-up to do this from the outset. There are strict rules to be followed right from the beginning but, with proper advice, it is well worth it.
Cosslett decided to invest in HeadBox along with other private investors including Ralph Kugler; former board director of Unilever Plc, Martin McCourt; former CEO of Dyson, Nick Wheeler; founder and CEO of Charles Tyrwhitt Shirts, and Aaron Simpson; founder and CEO of Quintessentially.
For future updates about HeadBox’s journey (and content from previous diary bloggers), check out our Diary of a Start-up channel.