Having just closed our largest funding round to date for Thalia I thought now would be a good time to reflect on the process and the environment.
Like most start-ups, at Thalia we have been through times when things didn’t go to plan. Getting heard and securing customer engagement is always a big challenge in any business.
But the tough times can make you stronger. By listening to customers and refining our offering and business model, we are now seeing strong interest in our analog IP migration and reuse capability. We’ve identified a real business need: and of course that’s one of the keys to convincing any investor to back your company.
In our case, we’ve understood that helping customers move functionality between processes and between foundries is a key capability for cost reduction and security of supply. We can help the trade off all business managers face between deploying valuable internal experienced resource on new IP development or cost reducing existing IP. We turn the latter into a clearly understood and bounded cost and let the internal designers focus on what they enjoy the most – and where they add most value – developing new circuits.
It is a common belief for early stage companies in the tech sector that it’s VERY hard to raise equity funding. In fact in my experience it’s not. Things continue to be very buoyant in the UK given the strong tax incentives available to investors through EIS and SEIS schemes.
There is a great deal of money around looking for a good investment. But “good” is the key word. Good is partly about the strength of the opportunity, but also about how the story is presented. If you have a less than good story and it’s presented badly, then funding is really hard. So if you’re having trouble, don’t blame the VCs.
Far too many founders focus on the technology, as that is their interest and comfort zone. It’s vital to look at the view from the investor’s side of the table. Most investors see hundreds of plans per month; they rarely understand the technology, it’s about return on their investment. VCs are generally not philanthropists. The key is to stand out. A strong exec summary is a key marketing document; that’s vital to get a face-to-face meeting.
Investors look for proof of a large market and customer interest, defensible IP (in case you really have something big), a team that has experience of building a company and so knows what they are doing (founders or advisors), and a financial plan that says you have thought through how much you need to get to break even and where you are going to spend it. Painful as it is for any early stage team, financials are THE common language across EVERY investment, so that’s an area where it’s good to have put in the effort.
It’s a lot to think about, and to do: securing our latest funding round means that Thalia has ticked all of those boxes. It also shows that you should never be afraid to explore new business models or change if you identify an attractive opportunity.
The key above all, however – once you get beyond the first 2-3 rounds of funding to get over the chasm – is customer revenue. Orders and revenue say customers are willing to pay for whatever you have. So as long as there is a global market to scale into, investors will line up.
And if, like Thalia, you have all those bases covered, the venture capital community will welcome you with open arms.