Social Chain and Mush share how to raise finance without a bank loan
Has your small business been rejected for a bank loan? Too early for venture capital money? Steven Bartlett, CEO of Social Chain, and co-creators of Mush, Katie Massie-Taylor and Sarah Hesz, share their stories
For many start-ups and small businesses, a bank loan is often the most obvious and traditional way to get the cash you need to help get your business idea off the ground.
But what if there was another way? If you’ve struggled to get a bank loan, or your business isn’t quite ready for venture capital (VC) investment, don’t fear, there are now more funding options and alternative finance routes than ever before for small businesses.
Steven Bartlett, the co-founder and CEO of Social Chain, and Sarah Hesz and Katie Massie-Taylor, the founders of Mush, can both attest to this, having chosen alternative routes to fund their businesses.
The trio form part of our inspiring Plusnet Pioneers panel; successful business leaders who have come together for the Plusnet Pioneers programme – a campaign from Startups.co.uk and business broadband and phone provider Plusnet to help small businesses succeed in marketing and securing funding.
Here are our Plusnet Pioneers’ inspirational investment stories that your business can learn from, and a rundown of each investment option available:
Funding provided by investors to startup companies and small businesses that have strong potential to grow. In return, the investors receive a stake in the business.
The earliest stage of funding where a relatively modest amount is raised to get the company off the ground. This usually funds startup activities such as market research, product development or other early-stage operations.
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Where a company raises small amounts of money from a large group of people to finance a new business. This method usually uses the internet to bring investors together on specialist websites.
Angel investors are wealthy individuals who help start-ups take their first steps. In return, they receive a share of their business.
Funding success story: How Social Chain’s Steven Bartlett secured investment
Steven has had an entrepreneurial edge from an early age. As a student, he convinced local coffee machine manufacturers to pay to have their coffee machines fitted in his school, instead of the other way around.
So, it’s not surprising that when it came to his early funding efforts for his social media marketing agency, Social Chain, he used the same approach:
“My first experience of raising money was going on LinkedIn and typing in the word ‘investor’. I then sent an email to the first guy who came up – simple as that.
“I was only looking for about £5,000 – £10,000 for my startup, and within 48 hours of him receiving that email, we had a conversation. He said: ‘if you can get a team together and someone who can make a website, then I’ll be interested’.”
By his own admission, Steven’s experience of raising funding has been unusual. But his story illustrates how startups can make their own luck by taking advantage of connections and not being afraid to seek out opportunities.
Steven has outlined the importance of chance encounters, and getting to know as many people as possible, as they may turn out to be an investor in your business later down the line:
“I got through the audition stages for The Junior Apprentice when I was 14 years old. I ended up pulling out of the show before it aired, but someone I met at the auditions popped up a few years later and his dad had become a billionaire. He contacted me and told me that his dad wanted to meet me.
“When we met, I started telling him about myself and my story. I think I used the word ‘obsessed’ to describe my passion for business and he stopped me and said: ‘I wish other people had the fire for something like you’. From that moment, he was interested and he invested!”
Not every start-up founder is going to get the chance to pitch to a billionaire but you never know when you could meet a potential investor and all opportunities should be taken.
Be ready to show that passion, obsession, and ‘fire’ in yourself that could convince them to invest.
After all, you’re not just selling an idea, you’re selling yourself.
Funding success story: How Mush secured funding from its loyal community
After securing initial investment, Mush founders, Katie and Sarah, found themselves struggling to find additional funding.
Katie explains: “We were too advanced for seed-stage but we weren’t quite advanced enough for venture capital money. There is a gap between those seed VCs and the ones who are looking for businesses with traction.”
Having already built a large following of mums through their marketing efforts, there was one clear funding solution for the Mush founders.
“Crowdfunding is a wonderful way to bridge that gap. We knew we had a product that was very understandable, and raising money through your followers is a wonderfully tactful approach if you’re trying to build up a rapport with your audience. Plus, it offers a great marketing campaign!
“Mums knew about us and we could actually get them to invest in us and be part of the journey.”
But, that’s not to say that there weren’t challenges in getting the crowd to invest in Mush.
Katie continues: “Running a crowdfunding campaign is quite stressful. You have to be very prepared.
“The way we approached it was to have 40% of the round filled before we even went liveThis involved privately confirming a set amount from investors before launching the campaign. So, you can actually show that a number of investors are already interested and then the crowd follows suit.”
Sarah agrees that a successful crowdfunding campaign takes work:
“Be prepared to answer lots of questions from people. You could get lots of enquiries on your crowdfunding page and you won’t know if they’re going to invest £10, £10,000, or more.
“We had long conversations back and forth with potential investors on the website where they’d invest a small amount, and then we’d have complete strangers out of the blue investing £30,000 or £40,000. It can take you by surprise.”
However, their crowdfunding efforts were worth the hard work once the investors started to snowball, as Katie was happy to discover:
“I’d hoped it would happen, it was surprising when it really did. People joined in because they thought that this was an investment that would definitely go ahead.
“We were 100% funded within two or three weeks of our campaign starting, and then we were able to raise one and a half times what we’d hoped.
So, how did they decide on a crowdfunding target? Sarah explains: “We based our crowdfunding target mostly around what we knew we had secured already.
“We knew what we had to raise, we had a minimum amount and we knew what we had secured. Then it was just working out how to manage the fund: you never want to be at 0%, you always want to have money coming in from other investment sources such as angel investment and venture capital funds – you want to show momentum. It’s about having a cocktail of different types of investment.”
According to Katie, Mush never stops thinking about how they are going to take their business to the next level with funding: “The way that we approach raising investment generally is that we always think what we’re going to need to be attractive to the next set of investors.
“Even now, we’ve just secured our third funding round and we’re thinking about what will make us attractive at our fourth round. It’s an exciting, endless cycle.”
Every company will have a different experience when it comes to funding, so it’s all about finding the right method for you and your business.