The improving economy and tax breaks for investors mean it’s one of the best times to win seed investment, but that doesn’t mean you don’t have to do the footwork.
Giles Moore, the co-founder of drone photography startup Airstoc, is no exception and says he pitched over 300 VCs and business angels before successfully raising a seed round.
An idea takes flight
Airstoc is a new international marketplace for the professional drone industry, with thousands of different operators in over 90 countries. The service allows businesses to hire an approved drone filming operator as well as providing stock footage.
Moore tried out a similar idea to Airstoc at Startup Weekend Sheffield in November 2013. The team won that event and ended up getting to the semi-finals of the Global Startup Battle. So they took the plunge and went full time in February 2014.
Moore remembers: “Andre [our COO] already had a drone filming company. We met Manu [the CTO], who’s a tech guy, at the startup weekend, and my own brother was high up in a media company. I’ve always wanted to start my own business - and I saw a perfect collaboration opportunity.”
It was a new industry, the team were inspired by the huge potential and were excited to get started on the journey. But Moore says he had no idea how hard it would be to win the funding needed to get the idea off the ground.
Balancing day-to-day operations and investors
The process started at Web Summit 2014 where Moore met with multiple VCs and angels. This was in November 2014 and he managed to talk to 40 or 50 VCs and 20 or 30 angels by Christmas, often taking part in pitching events and meetings so that they could reach more people.
He approached another 80 VC firms and met 150 angels at events like City Meets Tech and Dorset Business Angels.
The startup received a lot of interest, but nothing concrete and so Moore came back from the holiday break with a slightly different tack.
He approached another 80 VC firms and met 150 angels at events like City Meets Tech, Dorset Business Angels and a Bloomberg pitch event. He started to get more positive reactions, but still no offers.
“We had some great feedback and quite a few longer discussions, but again nothing.
We met VC firms and some of their head people. We even got to the stage where they were introducing me to the head of another VC firm – but still nothing.
“It was still the same kind of message all the time: it’s too early stage, they didn’t see the potential of the market and it was too much of a risk,” says Moore, who adds he also looked at crowdfunding platforms and considered startup incubators even though the business was a year old by this point.
Balancing the demands of the business with fundraising was difficult and Moore recommends anyone that’s going to go through the process make fundraising their first priority.
It was still the same kind of message: it’s too early stage, they didn’t see the potential of the market and it was too much of a risk.
That means being prepared to spend two to three hours in the morning or afternoon working on the business, so that you can spend the main part of the day working with investors, he says.
“Getting investment is a full-time job. I don’t know if many people get it right; it’s a very tricky to grow your business and fundraise at the same time. The hard thing is that whoever is doing it in effect leaves the team, but they will still have to spend some part of each day building the business because investors are going to ask: ‘what’s the change in the last few weeks?’ And it’s really important that there has been a change,” says Moore.
Pitching different types of investor
Moore was asking for around £150,000 from angel investors because of the SEIS and EIS tax breaks, £400,000 from VCs in Europe and as much as £700,000 from VCs in America. The team didn’t want to give away more than 20% in equity and discussions ranged between 10 and 20%.
The amounts were driven by the funding they thought they could get from those sources rather than sticking with the same valuation and amount. “We knew we would die if we didn’t raise the money and that was more critical than anything,” says Moore – and he got used to pitching the business in a variety of ways.
“When I was talking to angels for £150,000 our next raise was necessarily much sooner and we knew where we were going to put the money,” Moore explains. “When we were asking for £400,000, however, we knew we had a longer extension and could talk in slightly different terms.”
Getting investment is a full-time job; it’s a very tricky to grow your business and fundraise at the same time.
In general, VCs looked at the bigger picture and the opportunities available, while angels were more likely to scrutinise how much money you’re making and what the valuation is based on, says Moore.
The range in valuations and different types of investors didn’t make the pitching process more difficult, according to Moore, but did force him to feel his way through a lot of different situations. It meant asking a lot of questions, scrutinising the reasons investors said “no” and using that information to adapt his pitch.
In March 2015, after meeting somewhere in the region of 130 VCs and 180 angels, the process began to wear on Moore, who’s generally a relentless optimist.He made the decision to go back into sales, marketing and business development to prove that it could work.
“I got quite angry and frustrated by the whole situation. In the UK it was terrible.There was a lot of interest, but no one had the ambition to put their hand in their pocket and give it a try. The American investors were harder and we were expected to ask for a hell of a lot of money, which anyone can ask for, but at that stage we didn’t know we needed it. The interest we got was more from Europe and Germany,” he says.
It makes no difference who you are if you’re in the right place at the right time as that’s the way to fund-raise.
This was, says Moore, a critical point. Not only was funding a problem – the business had already extended its cashflow forecast by an extra six months and it now had enough money left to last about a month – but Moore had also taken himself out of the day-to-day operations for a long time. So he decided to go back to concentrating on growth.
The reinvigorated focus on building the business had an almost instant impact. Airstoc won a number of new jobs, started to see repeat customers and benefited from a high-profile project working on Karl Pilkington’s television show.
The team started to wonder whether funding was necessary and when Moore did go back to investors he approached it with a whole new mentality, which he describes as: “It’s up to you. We’re going to do this anyway, and this is where we see the market. If you’re interested in joining us we want to know what you can bring to the table.”
Aside from the change in attitude, the additional business made a key difference. Not only did the size of the jobs range from £20,000 to £300,000, but they were working in 15 different countries.
“People see confidence in people. That helped a lot. I know now when I’m talking to investors about raising additional seed money that the confidence I’ve got in the business rubs off on them. They’re excited about it because they can see the passion and that you know what you’re doing.
“You’ve proven it works, remember. To the scale they expect? No, you’ve still got a long way to go, but you’ve got that proof of concept and some big customers,” says Moore.
In the end, Airstoc raised £490,000 for just over 20%, predominantly from a single VC, with the other amount split between another VC and an angel investor. And the process took just over six months, despite the number of approaches Moore made.
What did Moore take away from this process?
What does Moore tell startups that seek him out for advice about funding? In short, there’s no silver bullet. There’s no single way that’s going to work for everyone.
“There’s no right or wrong way to raise money. I got told a way to do it and that certainly wasn’t the way it worked for us. Then I found out later that the same guy that advised me tried again with a fund-raising and failed the second time. It makes no difference who you are if you’re in the right place at the right time as that’s the way to fund-raise,” he says.
Today, Airstoc has had over 700 jobs come through the platform and the team has carried out 120.
The opportunities include becoming a preferred supplier for Disney, Discovery, Sky, the BBC and ITV, and the team is in talks with NBC and National Geographic (it’s a good place to be since being vetted by these companies means it’s easier to pick up work from their partners and suppliers).
Although he stresses that raising money is different for everyone, Moore says the mentality you take into the process is crucial.
“I never imagined it would be as difficult as it was. That’s why a lot of people don’t raise. They take a small section of what they should do, then make approaches and get some ‘noes’ and feel that there’s no point in carrying on. It’s the wrong attitude, but I can see why people do it.
“You have to get yourself up for every single meeting and treat it like it’s the first meeting you’ve ever had. You’ve got to be prepared to take criticism probably on a scale you’ve never received before. And then the next meeting you go to you use that criticism in your pitch, so you have answered the question before the investors even ask it,” he says.