Industry Trends: Envestors talks about Always On Fundraising
Old-fashioned fundraising rounds – lasting on average 30 – 60 days – are as over as brokers in bowler hats.
Modern, savvy scale ups know that a longer funding round provides an opportunity to capitalise on any unexpected successes, gives the investor and founder a better chance to find the perfect deal – ‘the right fit’ – and keeps the funding mentality – with its crucial mindset of investor relations – a far greater chance of achieving those funds if it is open 24 hours a day, 365 days a year.
It might seem counterintuitive to mention traditional angel fundraising and crowdfunding in the same sentence. However, in the 20 years since the launch of online fundraising, the idea is now so well-embedded in the funding landscape that for start-ups and scale-ups, creating a digital site is the first port of call when fundraising. The benefits of keeping a funding round open, accessible during the day or night, are undeniable and include:
A greater chance of hitting your target
Sophisticated investors and smart scale ups understand what it really takes to make a funding round truly successful: it takes time. This gives the company the best chance to find the right investor and the investor the best chance to find the right company. A shorter round in which a company must ‘succeed’, can create an unnecessary and additional stress on the founders as they risk ‘failing’ when all you needed was time to gain traction to find the investors who are a ‘perfect fit’. In turn, expert angels know that finding the consummate deal requires Due Diligence and patience: it is a marathon, not a sprint.
Capitalise on unplanned successes
A big contract, an unexpected piece of news, a prestigious hire… anything that creates a buzz is an opportunity to showcase the success of your business and be very attractive to investors. This naturally translates into interest from potential investors: an open round enables immediate involvement, a closed round means the chance is missed. ENVESTORS’ portfolio company, ZAP&GO, are a perfect example. A feature about their superfast charging technology on BBC Click created a new buzz about the business so they smartly capitalised on this publicity and subsequently raised £500,000 within an extended period of six months.
Maintain the ‘Always On’ mindset
If the fundraising is always on, the mindset will be always on. Rather than an intense, time limited period of thinking about and serving your investors, there is a risk that they will feel forgotten or neglected after this sharp stretch of activity. The same goes for multiple funding rounds – the constant need to keep investors sweet can be a full-time job in itself. By creating a round that is ‘always on’, the mentality remains in place and the risk of upsetting shareholders is greatly reduced: if you’ve never let anybody cool off, nobody needs to be warmed back up. Experts know that the investor is king and that maintaining relations and communication is vital to a company’s long-term success.
ABOUT THE AUTHOR
Scott Haughton is COO of Envestors, a fintech company that connects investors and scale-up companies. With its fundraising platform Envestry for Scale-ups, companies get a personalised site to promote deals, raise finance and engage with their investors 24 hours a day, 365 days a year.
Envestry has raised £100m+ for over 200 companies through its own private investor network. Founded in 2004, Envestors is regulated by the FCA and has offices in the UK, the Channel Islands, the UAE and strategic partners across China.