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drinkersTo build and scale great product startup founders need access to substantial funding.  However, building a funding round can take 6 months and this assumes that the startup is investment ready. On the other side of the table investors are sitting on a huge pile of decks and can’t see the wood for the trees. At later stage, this is not such a problem because the founders can afford to pay trusted third parties to get involved and make introductions and even take a strategic deal-making role. Their involvement cuts the process and brings investment ready startups to the attention of the most appropriate source of investment. At early stage it is difficult for third parties to undertake this role because the founders have no money to pay for such a hands-on approach. Platforms such as www.dreamstake.net bring down the cost of each fund-raising transaction and can therefore support the founder in a more efficient way.

Corporate Finance houses normally get involved in funding rounds at around about £1m -£2m or when founders have enough money to pay a substantial retainer. Although founders may find the retainer a deterrent it focuses the advisor on putting resource into the task of getting the startup funded. It is rare that any startup is 100% ready for funding and the role of the advisor is to work with the founder to refine the deck (and the proposition) to the point where it is ready. The next step is to match the startup with the most appropriate form of funding. VCs are invariably sector and stage oriented and therefore a ‘spray and pray’ approach to distributing decks rarely works.

The beauty of platforms, is that they radically bring down the cost to serve. Look at how Airbnb and Uber are transforming their sectors. They do this by building efficient markets where consumers are matchedwith providers at a fraction of the cost. We have brought the same principles to funding startups and use algorithms to sort the deal-flow and match with the most appropriate form of investor. We can therefore, engage with earlier stage startup founders on a performance fee only basis or later stage at a greatly reduced retainer cost.

Blog by Paul Dowling – Co-Founder of Dreamstake  the world’s first tech startup platform to match founders with the most appropriate investors using a unique startup rating system. This allows entrepreneurs and investors to monitor startup progress and inject capital and support when most needed. Startup founders can create profiles on the platform and get direct introductions to investors. We are constantly looking for great early stage tech startups. Investors please contact [email protected]

We have also recently launched an exclusive tech angel investment club in partnership with The Hoxton. HoxTech Angels will run invitation only angel investment evenings every month.

 

I attended the recent Product Camp #PCampLDN. As well as being impressed with the great ‘unconference’ format I was struck by the growing importance of product management for early stage startups. It appears that tech startups continue to get simpler. Many offer single functionality addressing one particular business need in an elegant and simple way. Snapchat, Tinder, Uber, TaskRabbit, Hailo and YPlan are all examples of propositions that offer the consumer a very simple UX.

We will also see the enterprise software market transformed by the emergence of disruptive startups with very simple UX/UI.  In fact, in many cases the UX will be the USP for these products. Enterprise employees are becoming accustomed to using elegant consumer apps. and will demand the same in the workplace.

All this means that the product manager, who ensures that technology, UX and business needs are aligned, will become a far more important part of the startup team. The challenge is that early stage startups have to chose between a product manager and a CTO, which is a difficult choice.

In the early days of the startup a compromise has to be made which will probably mean that the product management function has to be split between the CEO and the CTO, with additional support from UX/UI designers in the team. However, it is surely important to bring in dedicated product management stills as early in the process as possible. This will largely be down to budget.

Dreamstake provides end-to-end support for entrepreneurs wishing to get a startup funded in the shortest possible time. The startup rating system allows entrepreneurs and investors to monitor progress.Dreamstake Academy provides guidance on how to create a successful startup. Dreamstake will link startups with suitable mentors and professional advisors.
Startups that have successfully achieved an acceptable rating will be given the opportunity to feature at monthly demo days and investor pitching events.

 

Building a successful tech startup is extremely hard.  There are millions of apps out there and even if you have an amazing product it is hard to get discovered. The secret is; use your unfair advantage!

Unfair advantages come in many forms. You may have a particular skill such as being the world expert in image recognition. This skill will allow you to come up with something unique and will make it extremely hard for others to copy.  Or you may have a massive following as a fashion blogger or have some unique contacts in your chosen industry. For example, celebrity endorsement can be the fast way to success.  Imagine having a pop -star pushing your music app or an ‘A’ lister pushing your film app. These contacts are worth their weight in gold.  Without them you will simply get lost in the noise.

Another type of unfair advantage is having done it before. Second time entrepreneurs have a great advantage. They know the ropes and find it easier to get investment.

Unfair advantages are often called USP’s or Unique Selling Points. I would go as far as saying that if you don’t have a USP don’t start in the first place. Creating a successful business is largely about exploiting our unfair advantages to tackle a problem or create an opportunity. However, if we search hard enough we will often find an unfair advantage that we can use to get our idea out there.

Dreamstake provides end-to-end support for entrepreneurs wishing to get a startup funded in the shortest possible time. The startup rating system allows entrepreneurs and investors to monitor progress.Dreamstake Academy provides guidance on how to create a successful startup. Dreamstake will link startups with suitable mentors and professional advisors.
Startups that have successfully achieved an acceptable rating will be given the opportunity to feature at monthly demo days and investor pitching events.

As the founder of an early stage tech startup you will be searching for funding from a relatively small pool of investors. It is therefore crucial to prepare well and make the best of any opportunity. Here are a few common sense tips to improve the chance of successfully obtaining funding from angels:

  1. Understand their investment criteria – Investors are not a homogeneous group.  They have diverse interests. Only a tiny minority will be interested in tech startups and even these will often have additional investment criteria. Many will only invest in specific sub-sectors such as mobile, B2B or consumer internet. They may also only provide funding within certain tightly defined investment bands. It is important to understand all this before approaching angels. Otherwise, you will be wasting their time and yours.
  2. Remember angels are spoiled for choice – Imagine the investor that you are trying to meet,  has already got a big pile of business plans on his desk. Make sure that your business plan is concise, well written and addresses all major questions.
  3. Make sure you are ready – These days investors expect you to have tested your proposition before seeking investment. This means creating an MVP (Minimum Viable Product) and demonstrating that people are prepared to pay for the service on offer. This is called, achieving Product/Market fit.
  4. Get an Introduction – Investors like to obtain introductions from trusted third parties. This saves them time as it avoids the need to go through masses of business plans from unknown sources.
  5. Learn how to pitch – It doesn’t matter how good your startup is, if you can’t communicate it in a clear way. This means delivering a great pitch that clearly addresses all likely questions about team, proposition, market, financials and investment requirements. It is also essential to rehearse your pitch and make sure any technology that you are going to use is working correctly.

Remember, that angels are simply people with money to invest.  They are taking a high risk with their own cash. Anything you can do to reduce this risk and demonstrate your credibility will increase your chance of success. Make sure you research each angel well and understand what they are looking for. Clearly demonstrate that you understand their requirements and address any likely concerns through a clearly communicated business plan or pitch. These steps will reduce the time it takes to get the funds you are looking for and allow you to get on with running your business.

Dreamstake provides end-to-end support for entrepreneurs wishing to get a startup funded in the shortest possible time. The startup rating system allows entrepreneurs and investor to monitor progress.Dreamstake Academy provides guidance on how to create a successful startup. Dreamstake will link startups with suitable mentors and professional advisors.

Startups that have successfully achieved an acceptable rating will be given the opportunity to feature at monthly demo days and investor pitching events.

moneyMost early stage tech startups require seed funding at some point. This usually takes the form of angel investment or crowdfunding. Either of these two options will take considerable time and effort to achieve a successful conclusion. This presents a risk as the founding team can easily lose focus. Dreamstake provide funding support throughout the entire funding process:

Preparation – Startups need to reach a certain level of maturity before seeking investment. Dreamstake Academy provides the basic knowledge required to launch a successful tech business. The syllabus covers business modelling, business planning, product development, legal and commercial and a range of other topics.

  1. Loans – Some businesses will require a small injection of capital to build a prototype or produce marketing material. Dreamstake can provide Government backed Startup Loans.
  2. Communications – Many funding rounds fail because startup team is unable to communicate their proposition. Dreamstake provides pitch training and a platform to showcase each new venture.
  3. Mentoring – It is essential to find mentors that clearly understand the tech startup process and can add value with specific domain experience. It is also useful for the founding team to be able to tap into deal making skills.
  4. Connecting with investors – The whole tech funding scene is very opaque. There are investors who do not wish to be identified and advisors who will pretend to have money to win clients. Dreamstake is building a database of ‘real’ investors and provide them with validated opportunities. We are able to introduce startup founders to investors one-to-one or at monthly funding forums.
  5. Tracking progress – The Dreamstake platform automatically tracks startup progress with a unique rating algorithm.  This helps identify what has to be done to prepare the business for funding and flags when investment ready.

Raising funding is a complicated and time consuming activity. Accelerators and incubators have proliferated but are highly selective and expect founder and team to give up their day job. Dreamstake democratizes the process by providing a platform to a broader audience and nurturing on a larger scale. We believe this approach to be unique and welcome new members to give it a try.

Dreamstake provides end-to-end support for entrepreneurs wishing to get a startup funded in the shortest possible time. The startup rating system allows entrepreneurs and investor to monitor progress.Dreamstake Academy provides guidance on how to create a successful startup. Dreamstake will link startups with suitable mentors and professional advisors.

Startups that have successfully achieved an acceptable rating will be given the opportunity to feature at monthly demo days and investor pitching events.

Over the last year in the UK new funding options have emerged. The Startup Loan scheme provides loans of up to £10K to individuals based in England. However, there have been questions about how suitable loans are for early stage businesses.

Loans have to be offered responsibly because unlike grants or angel investment they have to be paid back whether or not the startup succeeds. The key steps to avoid problems are:

  1. Quality over quantity – Providers should avoid being driven by targets. Marketing the scheme should be handled in an intelligent way, hence over-aggressive marketing must be avoided at all costs. Hyping the scheme and dealing with applications en-mass is dangerous.
  2. Understand startups -All applicants should be vetted one-to-one by individuals who have the knowledge to make professional judgements about the business plan and the individual. Responsible decisions should be based on the validity of the idea and the individual’s ability to repay the loan.
  3. Link loans to outcomes – Loans should be linked to achieving specific milestones. A £10K loan will often be enough for a prototype to be built that is necessary to achieve revenues or attract follow-on investment.
  4. Provide professional backup – Early stage businesses have a very high failure rate. A strong platform should be provided to give continuous support throughout the early stages of the new venture.

In summary, Startup Loans are a viable option for early stage businesses.  However, applicants should go into the scheme with both eyes open and the intention to make repayments on time. Providers should act responsibly and avoid hyping the scheme and should always put the interests of the individual first.

Dreamstake provides end-to-end support for entrepreneurs wishing to get a startup funded in the shortest possible time. The startup rating system allows entrepreneurs and investor to monitor progress.Dreamstake Academy provides guidance on how to create a successful startup. Dreamstake will link startups with suitable mentors and professional advisors.

Startups that have successfully achieved an acceptable rating will be given the opportunity to feature at monthly demo days and investor pitching events.

 

 

 

There is a lot going on in the world of startup funding. The traditional early stage investment model is being shaken up by a combination of equity and non-equity crowdfunding, Y-combinator type accelerators and matching engines such as Angel.co. An online accelerator combines elements of each of these models to provide end-to-end support throughout the startup lifecycle. It is highly disruptive for a number of positive reasons;

  1. It extends the eco-system – the strength of clusters such as Silicon Valley is the proximity of all the resources needed to grow a startup in one place. In the old model investors would not invest in companies more than an hours drive away. This led to small tightly-knit communities where the rolodex was king. The internet is opening this up by connecting startups with investors, team members and mentors online. This will create a global startup market.
  2. It democratises the startup world – Silicon Valley has been very effective at creating a massive funnel of startups over a very long period. It is basically a numbers game. The more startups entering the funnel at the top end, the more successes that dropout of the bottom. However, it has always been a winner takes all mentality and other clusters have been unable to replicate the sheer volume of startup activity. Funding platforms are democratic by nature. They are open to large numbers of founders and attract large numbers of investors.
  3. It cannibalises existing business models – The model recognises that startups don’t have money. Dreamstake is a free platform, offering free startup seminars, free demo and pitching days. The platform even provides a skillswap function which allows founders to access resources without hiring or wage costs.

Founders now have a range of options when launching their tech startup.  However, very few of these options can provide free hands-on support from inception to exit in the way that the Dreamstake online accelerator does.

Dreamstake provides end-to-end support for entrepreneurs wishing to get a startup funded in the shortest possible time. The startup rating system allows entrepreneurs and investor to monitor progress.Dreamstake Academy provides guidance on how to create a successful startup.
Startups that have successfully achieved an acceptable rating will be given the opportunity to feature at monthly demo days and investor pitching events.

After joining DreamStake I noticed their free academy where sponsors offer training for free on various aspects of running a startup. My first event was on legal issues for startups, hosted by Guy Wilmot from Russell Cooke Solicitors.

The session covered:

  •  Business Vehicle – Sole Trader versus Private Limited Companies.
  • Legalities of raising finance.
  • Share holder agreements.
  • The basics of Intellectual Property
  • Employees and contractors.
  • Liability.

 

Business Vehicle

In general – the best type of company to establish is a Private Limited Company. There are some basic requirements for this type of company, like needing at least one director. You also need to report to companies house details of share holders, annual returns and such.

The problem with a LTD is the directors duties. These are owed to the company, not the share holders. The main being: ‘to act in the best interest of the company’, ‘to act with care’ and ‘not to be under a conflict of interest’. Breach of duties at an early stage can come back to haunt you if you sell a company. The buyer of a company might (for instance) argue that you have a conflict of interest and pursue you for liabilities. This means it is usually best to form new companies rather than merging companies when you take a break from one to work on another. The worrying part is that this obligation can be persued retrospectively against the directors after a sale. This point was something new to me and worth remembering as a company director.

 

Raising Capital

One of the first things you need to know about when you are founding a startup is that as a founder you can invest your cash into your startup as a loan. This has a number of tax benefits. This is was a mistake that I personally made. Not only does it mean you can take your cash back out of the company later on, without paying tax, you can also expect to earn modest interest! As almost every founder ends up floating a company with personal cash, this is probably relevant to anyone starting a company.

As with ‘high net worth’ individuals, you can also raise cash from friends and family under the SEIS program – which offers significant tax incentives to the investor. The incentives under SEIS make it a no brainer.

Raising capital from angels can make a big difference but usually comes with significant contractual obligations. Some angels have been known to require majority control. I have personally heard from a number of founders that have been asked to vest their own shares – leaving the investor as the controlling share holder. Obviously it does depend on the ‘angel’, but it can be some of the most expensive money you can raise.

 

Company Articles and Shareholders Agreement

As part of your company setup you need to create the company articles which set out the limitations of powers of directors, rules for meetings and voting rights. This document is publicly available and probably the best place to lay out any exceptional items. The tricky thing with the company artilces is that you set them out before you really know what you may need to include.

Another important document is the shareholders agreement. You may have to have one due to the requirements of an investor. For simple cases though, you can state share transfer rights in your articles without needing a shareholders agreement. Soem other things you might include in your share holders agreement are exit cases for death, voting restrictions, deadlock resolution and requirements for consent. One of the really important parts of the share holders agreement is the model for payment of dividends and retained working capital requirements.

There are a number of other clauses like the right to maintain a certain percentage under dilution – you usually don’t want them unless an angel forces them to be included (think Facebook); note that they have to buy the shares at the same rate as the investor; drag rights offer majority shareholders the option to force them to sell; tag rights are for a minority share holder to participate in the sale. Drag rights are vital if you want to be able to sell otherwise a minority share holder could block the acquisition of the company.

 

Patents, Trademark and Copyright

Patents – an old favourite of mine – cover the protection of practical aspects of an invention. For software projects it is possible to get around this but it can be very hard for a software or process.

At an early stage, investing large amounts of time on patenting could mean you spend a lot of time only doing patenting, in some cases before you have even confirmed whether your invention is valuable. For me this is the key weakness of a patent – it won’t protect you from someone innovating on top of your work to create something which is significantly different. As many startups don’t know what their ultimate product will look like it is hard to anticipate even your own innovation. Obviously, you cold spend all of your time patenting ideas as you go; this doesn’t sound like the primary focus of a startup to me. Isn’t the point supposed to be to spend your time improving your product and finding a market as rapidly as possible?

Patents are more easy to obtain in the US. The bottom line though is that even if you get a patent granted you still need to be able to defend it. Obviously for a startup this could be a real problem. My personal take on this is that if you are innovating fast enough as a startup (if you are not then are you really a startup?) that copycats can’t keep up.

Trade Marks are a lot more useful as they allow you to protect your brand. In the UK this will cost you a couple of hundred pounds. The IPO government web site lets you search for prior art trade marks. Your trade mark has to be distinctive and not be too similar to trade marks that are already registered.

Copyright is automatically applied when you create a new creative work. It doesn’t take much to be unique. It can’t protect a concept or idea though, only the textual content. Crucially this also applies to computer code.

One interesting points to be aware of is that if you employ contractors, unless otherwise agreed, the contractor owns the rights on the content they produce. As the payer of the contractor you have a licence to use their works only in the way that was intended. This means if you use their work for a new purpose you need to get the permission of the contractor. This could be an issue when a startup creates something that is re-used in a different way. Conversly, this means your contractors could potentially sell anything they create to a competitor.

 

The Rest of The Talk

Guy covered a number of other subjects which were equally useful. Why not sign up to the next DreamStake academy from Guy Wilmot from Russell Cooke LLP.

 

About the Author

Damien is the founder of SiteMorph, a London based startup. SiteMorph is a collection of web apps that show site owners how to make more money using ideas for marketing, customer engagement and conversion rate optimisation.

 

Note: These notes are a personal take on the DreamStake Accademy event provided by Guy Wilmot from Russell-Cooke solicitors. This post does not constitute a recommendation of Russell-Cooke. This post is also purely for information and does not constitute legal advice.

excuses-greater-than-your-dreams-1

It is suddenly hot to be involved with startups.  Entrepreneurs are the new rock stars or film stars. Film stars, singers and models are the new entrepreneurs. Jessica Alba is doing a startup, Natalia Vlodianova talks at Le Web.

However, it is a mistake to believe you are an entrepreneur just because you attend networking events and hang out with the startup crowd. Launching a startup is risky and it’s therefore easy to prevaricate and find excuses not to start.  Here are a few of the most common reasons for not starting a startup and some ideas on how to overcome them:

  1. I don’t have an idea – it is easy to imagine that all the good ideas have already been taken. However, it is wrong to obsess on finding an idea. Think in terms of either solving a problem that you encounter in real-life and doing it ‘quicker, smarter,cheaper’ or develop a vision of something you want to change in the world. Don’t overwork the idea at first. Get a co-founder and work it out together – it’s sure to change a lot on the way.
  2. I don’t have any money – this can often mean uncertainty about the idea! There is little doubt that there is high financial risk in getting involved in a startup. At the early stage it is always a case of beg or borrow. However, the situation has got a lot better over the past few years with Startup Loans and Crowd-funding. Don’t use lack of money as an excuse if you truly believe in your idea.
  3. I can’t find a co-founder – If you can’t find a co-founder it usually means that either you are not networking enough, you are not convincing enough or you are unrealistic in what you want to offer your co-founder. Think very carefully what gap in your skill set are you trying to fill, hone the way you communicate your idea and make the deal attractive. if you can’t immediately attract a co-founder, try using contractors, part-timers or swap skills.
  4. I don’t have enough experience – It is often a mistake to believe that it is necessary to study further or take a corporate job to build experience. Many great startups have been built by college dropouts or people with limited experience. Jumping off the corporate ladder at a later stage is very hard. If you have a great idea and want to do a startup, do it as soon as possible.  There is plenty of free help out there from startup academies and mentors.
  5. I don’t have time – This is one that can’t be overcome easily.  Startups require 100% commitment or they fail. In the early days it is sometimes possible to burn the mid-night oil on your startup, whilst doing a corporate job or contracting during the day. However, it normally comes down to quitting the day job and working full time on your passion.

Creating a startup is one of the most satisfying activities to get involved in.  It is a massive learning curve for anyone but the buzz is indescribable. It takes true bravery and commitment.  There will be ups and downs. However, you can’t pretend to be an entrepreneur and retain any credibility.  It is binary, you are either fully committed to making your dream happen or you are not.

So the message is, don’t hang about – the market won’t wait for you!

Dreamstake www.dreamstake.com is Europe’s fastest growing platform for early stage internet startups. Our objective is to help build robust new businesses by providing access to knowledge, resources and funding. We run weekly Dreamstake Academy workshops as well as larger networking events at Google Campus. We also provide Startup Loans and access to angel investment.
We are keen to help European startups to get noticed by potential users, investors and the press.  We help by offering guest slots at our ‘startup stories’ events and welcome suggestions for guest blogs. Our unique rating system allows others to track progress of startups as they emerge.

 

Startups have specific challenges that relate to the lack of funding. The sharing economy is growing rapidly but does not really directly address these problems. Bootstrapping has become popular but basically involves begging for free stuff. To evolve as a sustainable model there needs to be something in it for all parties.  There are two models that both work well;

1) Bartering – This involves swapping skills or goods that have value to each party.  A business oriented founder may want to swap his skills for a UX designer.  We have introduced a skillswap feature on Dreamstake that allows bartering skills based on members linkedin profiles. This approach avoids both recruitment fees and wage costs.

2) Robin Hood – This model is more prevalent.  It involves the provision of free services to hard-up startups made possible by the patronage of more wealthy organisations looking for future clients. Dreamstake provides a free platform, education and events and many other services with the kind support of sponsors. This model is highly beneficial to all parties.  The startups get free support while the sponsors gain access to a large community of emerging startups

Both these two models reduce startup costs significantly and represent the future model for company launch. When combined with other trends such as crowdfunding it is clear to see we are on the verge of a startup revolution.

Dreamstake www.dreamstake.com is Europe’s fastest growing platform for early stage internet startups. Our objective is to help build robust new businesses by providing access to knowledge, resources and funding. We run weekly Dreamstake Academy workshops as well as larger networking events at Google Campus. We also provide Startup Loans and access to angel investment.
We are keen to help European startups to get noticed by potential users, investors and the press.  We help by offering guest slots at our ‘startup stories’ events and welcome suggestions for guest blogs. Our unique rating system allows others to track progress of startups as they emerge.