Week 5 to 6: The Start-Up Fund – Tales of blackmail, Interpol, the SAS and Scams
With a backlog of pitches to hear and follow up meetings to attend, my calendar suddenly became a solid block of back to back meetings from 5am right up until 9pm on a daily basis. I was hearing pitches from all over the world and seeing how we could bring them to the UK. It was busy, it was tiring, but I have got to say, incredibly interesting. We were receiving a real mixed bag of proposals. Some were extremely interesting and there were others where you questioned either the sanity of some people, or of yourself, for perhaps being out of touch with ‘current’ thinking – which after some research really was not ‘current’ thinking at all!
Since the launch of the start-up fund, two aspects have become very apparent. First is the effort, or perhaps lack of effort, that some entrepreneurs were putting in when sending proposals. We were receiving some very well thought out pitches, and at the other end of the spectrum, we were receiving one line pitches along the lines of “I need £250,000 to buy some vans for a window cleaning business I want to go and set up in Cyprus.” It’s a bit hard to tell from one liners like that whether it is a serious business proposition, or someone looking for a nice holiday!
Whilst I try to give everyone a chance, and sometimes we do go back to some of these one liners asking them to send us another one or two lines to fill in the gaps (!), in most cases they get rejected with the same level of effort with which they were created. A proposal is the first impression we or any investor gets of a business as well as the people behind it. As an investor who has to hear many pitches a day, I would rather focus my time on those that have shown a degree of credibility when completing the proposal form. I am sure most investors are the same.
The other aspect which has become very apparent is either the desperation or naivety of entrepreneurs seeking investment. Some not just request, but almost demand a decision in a matter of days! This means that they have left seeking investment too late and are now in financial difficulty, or that they have not researched the steps an investor will take before making an investment decision. With government statistics showing that anything between 50-80% of start-up businesses will fail within the first 3-5 years, any good due diligence will always take anything between 4 and 12 weeks. It’s something businesses need to allow for.
However, for some, our lack of willingness to take a ‘punt’ on an investment before any kind of due diligence was just not acceptable! This led some people trying to force our decision by labelling us a scam, questioning my integrity and even blackmailing us by threatening to report us to, and I quote, “Interpol, SAS, FED, banks and authorities for blacklisting.” This latter person adding that deciding not to invest in his idea meant that we were not genuine because he could see no reason why any genuine investor would not want to fund his $25 million idea!
Whilst I am being very tongue in cheek about these threats and comments, there are sadly some underlying truths. The first, as mentioned above, is that some people are leaving the decision to seek funding too late resulting in the risk that they may not be able to survive the length of time a good investment process will take. Secondly, it is clear that some businesses really do not understand the progress they need to show before seeking the level of funding they do. However, with the right amount of planning and research businesses should be able to avoid these pitfalls.