Back in the summer of ‘13 I was wrapping up my MBA programme at Cambridge Judge Business School whilst hitting the seed funding trail for SyndicateRoom. I’d previously turned down a number of offers to give this thing called ‘entrepreneurship’ a proper go – what with working full time and playing a sport semi-professionally, time and dedication to the cause were heavily restricted. Needless to say, having just proposed to my now wife, I had a lot riding on getting this up and running.
Gonçalo had been put in touch with a number of angel networks through our first supporters, including Peter Cowley and a few other angels who have continued to back us to this day. We arranged meetings with those who didn’t immediately tell us we were full of… falafel… for thinking anyone would be interested in investing in early-stage businesses online, and started to prepare the pitch.
I’d never pitched to a group of angels before
So I did what every naïve entrepreneur does: I spent hours watching episodes of Dragons’ Den to try and get a sense of what it would be like and what types of questions we’d be asked. Fortunately, the angels were a lot friendlier than many of the Dragons, though the questions were tougher than I could have imagined. In another post we can go into how to prepare for what is hands down one of the most gruelling interviews you can experience, but for now let’s just say that by the end of the process – and a lot of ‘no’s – we’d come out the other side more seasoned pitchers, more in tune with our product, and with a far better idea of the potential for it, the massive hurdles we’d have to overcome in making it work and the risks we would face.
We ultimately settled on a group of lead investors who had asked some great questions and seemed interested in diversifying their portfolios into something a bit more techy than they typically funded. They also, as a network, could provide most of the round, which played a big part in our decision to go with them. After the pitch meeting we spent a little time with the angel from the network that was going to lead the round, and on the surface things were looking good. Queue suspense music and a few months’ worth of headaches; the… falafel… was about to hit the fan.
Once terms are agreed on any angel/venture deal, the money is transferred into an escrow account and all investors are given a cooling-off period – a buffer to ensure there are no last-minute regrets on the investment they’ve just made. Day 7 of the cooling-off period, and my ‘official’ first day at work, I stepped out to lunch to run an errand and returned just over an hour later to Gonçalo waiting for me in one of the office rooms of the shared space in which we were then based, a look of pure desperation on his face. My initial thought was that he had timed my lunch and was about to lay into me for taking more than an hour (note: I’ve never seen him lay into anyone, but back then I just didn’t know). If only it had been that simple.
Here’s what actually happened.
A few minutes after I’d stepped out to lunch, Gonçalo received a call from one of the lead investors, who was incoherently sputtering gibberish. Something about pulling out of the investment unless we agreed to the terms set by one of their business partners, who wanted us to merge with their own company, which they believed would be entering the market soon and would give us no chance of succeeding. A lot of random ideas that didn’t make sense to me, but given there were just a few investors in the group, all the other investors in the syndicate were responding by cancelling their investment effective immediately. Months of work, blood, sweat and legal costs down the tube – and to add shame to the mix, we’d have to call everyone else who’d agree to come in on the round, explain the situation and pray they didn’t pull their own investment as we try to sort it out and find another lead.
We left the office and headed to the pub
Not hell bent on drowning our sorrows (just yet), but the office walls felt stuffy and we needed to think, fast. A plethora of phone calls, a dead phone battery and a bag of crisps later, I trudged back to the train station feeling the weight of the situation set in. Just over a month prior I had confidently turned down the last of my job offers, my fiancée and I had started planning our wedding, we’d just signed a lease on the first place we’d rent together – and now I was worried about how I’d afford even the cost of travelling to work. Trying to think through how to break the news to her, and then everybody else who’d cheered when I’d seemingly stuck my fingers up at ‘the man’ to strike out my own path, filled me with ever more dread.
Side note: In my effort to put a positive spin on things, I attempted to rationalise that a failure now would not be the worst outcome, because going bankrupt would let me write off not just the personal debt I was accumulating, but the student debt I had racked up to get on the MBA. Probably not the way my missus would have looked at it, but it was getting hard to spin a silver lining for what was shaping up to be a black stormcloud.
That night I tried to hide my anxiety and the anger that had built up towards the group trying to pull a fast one on us. I failed miserably. Pacing the room and hardly touching my food, I just felt like crap and the fact that I felt like crap started to spiral. If I hadn’t such an amazing fiancée and a group of friends who let me vent before helping me re-focus, I probably would have thrown in the towel and crawled back, cap in hand, to ‘the man’ pleading insanity and offering my services at a reduced rate. Queue Queen, and another one bites the dust. But then queue Forrest Gump, Falafel Happens, box of chocolates, keep running.
Fast forward a few weeks
Having agreed to keep at it a while longer (what’s just a little more debt to wipe off? At this point, a drop in the ocean), we’d made countless phone calls and sent even more cold emails. And we got lucky. We were put in touch with an angel who’d been on holiday when we first rang, but had just returned and wanted to chat.
Put on the good clothes, brush the teeth, jump in the car and go.
We arrived early and were treated like royalty while we waited
Not something we were accustomed to, but a good lesson for all entrepreneurs: first impressions, whether customer, investee or whatever, go a long way. Beads of sweat formed as we were called into the room, all too conscious of the fact that we were running out of moves. We sat down. And we were immediately put at ease.
One thing I’ve learned since then: good investors don’t aim to be intimidating, they aim to be constructive and, if they do invest, helpful. Entrepreneurs shouldn’t fear their investors; they should be able to trust them and be transparent. Fear leads to asymmetric information, which is no good for either party. (It also leads to hate and the dark side, but that’s neither here nor there in this narrative.)
We laid out our plans and were honest about our situation
Things weren’t good from our point of view; the delays to funding had set us back and that hurt, but it was the truth. The conversation – it wasn’t ‘pitching’ per se – carried on for a while and at the end of it both parties knew each other better, together with the aspirations, potential and risks involved.
And, while we left that room not knowing if we’d made enough of impression to win investment, both sides of the table had gained an appreciation for what the other was trying to do. We even got a free ice cream on the way out (once a week in the summer an ice cream van shows up at this company and everyone who wants one can have one), which would have been sufficient consolation had the meeting not gone so well.
What followed was typical investment follow-up. We had a few more chats on the phone, one more in person, a period of negotiation and ultimately – huzzah! – investment. Then followed four years of actually growing the business, ultimately employing 30+ people, and championing access and transparency to the early-stage investing world in the UK. It’s remarkable to remember that, without that one angel trusting and believing in our vision, SyndicateRoom might never have existed.
We’re still not out of the woods
There’s a lot we can do better and a lot more growth potential. And while our story is not the worst out there, it was the terrible falafel we had to swallow that made us want to succeed that bit more. So, bring on the next challenge. We can handle it.