At Startup Funding Club we are approached by many entrepreneurs asking us very similar questions about our process. This article goes through the steps that follow application and should answer the most important queries you might have when you visit our website hoping this is where you will find an investor.
Step 1: Application Form.
The Application Form is always the starting point regardless of wether we already know you or not or you were introduced by someone we know. This step provides us with the most basic details about your business and makes sure that you’re getting in the “process”. While responding, you should keep your answers short and straight to the point. There is no need for long descriptions and explanations – as an entrepreneur you should be able to say things in a concise and clear way.
Reviewing your application form might take as little as 1 day or as much as 1 month – 2 weeks on average. This depends on the number of startups applying, the amount of work we have, and complexity of your business (we might need to consult third party experts). We will always inform you about the outcome, so please double-check your email if you haven’t heard from us.
Step 2: Questions and clarifications.
The Application Form can’t tell us if a business is going to be successful, but it can often tell us if a business is at a too early stage or is simply not good enough. If that’s not the case, we might ask you a few more questions to better understand your business. We can also request your full business plan and financial forecasts for this purpose.
If the Application Form is clear and your business looks promising, there might not be any more questions. In this case, you might receive an invite to our office straight away.
Step 3: Direct Meeting.
If you’re successful with the first two steps, you will receive an invite to our Selection Day, which happens weekly. Our invite gives you a few options to book an appointment and it also provides details on what to prepare and what to know before your meeting with us – please read it carefully! A direct meeting is the best way to meet the founders and understand how they approach business and if they are the right people to work with an investor.
Direct meetings last for 45 min. You have up to 10 min to present your business and we then ask you more questions about your company.
Step 4: Feedback and Due Dilligence.
There are three potential feedbacks that you might get: (1) Refusal – it means that we can’t see a way to work together, (2) On Hold – we like your business but for some reason we have to wait and you should get back to us for/with an update, (3) Acceptance – we like your business and we offer you to work on your fundraising. If your case is the latter, we send you our Letter of Engagement – a sort of commitment between our businesses. If you are happy with it, you have to sign the letter within 3 days from the day you receive it.
Once the letter has been signed, we will ask you to complete your profile (this is what investors will see first) and provide answers to the Due Diligence Questionnaire. Only then we will move you to the next stage.
The feedback might come straight after the meeting or a few days later if we still need to analyse your startup (e.g. see details of your business plan, financial forecasts or market and competitors).
Step 5: Introduction to investors.
Once your profile and DD form are ready, we will:
- Present your profile to the first group of our most active investors.
- Include your business in our Newsletter to Investors.
- Consider you for one of the Investor Sessions (a bigger networking event or a smaller office meeting).
- Put you on the list of SEIS Fund candidates (if you are raising the SEIS round) – Fund representative will be present at the same event that we organise for angel investors.
- Show you as a candidate for T1 VISA Investment coming from foreign investors.
- Share your profile with our Partners who have their own networks and funds.
It is worth mentioning that we normally share investment deals, e.g. we source funds through our network and our Funds or through crowdfunding and our Funds and/or investors. We are also keen of joining investment rounds led by investors outside of our network.
Step 6: Results.
There is no guarantee that fundraising will be successful. You need to take into account that there are a lot of factors that will contribute to the final result. The most important one is how you collaborate and how you respond to the questions. If you are not available for meetings, not clear with your answers, not flexible or you’re simply not nice and likeable, your chances are reduced.
We are always there to support you and we assist with the process: we help you in talking to investors, organize the meetings with them, chase them, try to understand their concerns and yours, and we also rehearse with you if you’re pitching at our events. We do our best to make you successful – and if you’re not successful, then there is no reward for us.
At Startup Funding Club we work on a success fee basis – we charge you if you receive an investment offer and you decide to go ahead. We send you our invoice only when the money is in your account.
It is difficult to say how soon you will get an investment. We know cases when a deal was closed within a week, but it can take even a year. On average you should expect results (positive or negative) within 3 to 6 months from the moment the Letter of Engagement is signed.
Our basic success fees range from 6% (angel investment) to 6.5% (fund investment). In case of Fund investment there are also management fees (from 1.5%/year to 2.5%/year).
Some fixed fees might be necessary in case of due diligence (£500+ VAT) and participation in pitching events (£150+VAT/event).
It is important to underline that all the fees above are strictly related to the work and effort that we have to put to help you fundraise, as well as the costs that we need to cover to run events and funds. We do not charge companies for anything that doesn’t result directly or indirectly from our work.
The information about the fees is presented to you in details in the document attached to the Invitation email.
Fundraising is not easy and sometimes becomes a full time job for an entrepreneur. Our Letter of Engagement is non-exclusive on purpose – you need to explore all your options and see what you can find out there. If you’re raising £150k you might raise half of it with us and the rest, for example, through crowdfunding. There are no rules. In any case, even if you’re not successful after first attempts – bear in mind that this is also a feedback on your business (it might be too early or there are issues to solve first) and/or on your approach (your valuation might be wrong or your attitude is not OK).
I hope you found answers to your questions and now know what to expect from us. I invite you to apply and I hope to see you in our office soon!
(Article by Angelika Burawska – COO of Startup Funding Club)