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In search of a halo: Why patience and determination hold the key to attracting angel investors in a startup's early days

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Grand plans: William Conaghan co-founded Change Donations with Lizzy Hayashida

Grand plans: William Conaghan co-founded Change Donations with Lizzy Hayashida

Grand plans: William Conaghan co-founded Change Donations with Lizzy Hayashida

Everything about raising money is tough: the language, the numbers, the conversations, the nuance. Cash is king and your company needs money to expand to reach the potential that you believe it to have. Here, I aim to break it down to make it a little bit easier.

Let's start with what most people know: angel investors and seed investment. Almost anyone trying to start a business is looking for an angel investor or some sort of seed investment.

Where most people go wrong is in believing that this is the start of the entrepreneurial journey.

Most entrepreneurs have some version of the following as their plan: 'I'll get an angel investor and take that investment to Enterprise Ireland. Then Enterprise Ireland will match the funding and I will be on my way.'

That's certainly what we thought. But we were young. We were naive. And we were wrong.

Let's take a step back to find out what we did to get on the radar of angel investors and Enterprise Ireland.

1. Timing

If you're planning to chase an angel investment, assume it will take you between 18 months and two years to get there. What do you need to do to make sure your business can survive until you close your first round of funding? For most, this means that the ideation stage and research stage will overlap with your current employment or schooling. And that means late nights and sacrifices in order to build your business.

For most businesses, this time period is filled with relatively low-cost activities: market research, market segmentation, customer validation, client validation, mapping out your lean canvas, breaking down competitors and eventually writing a full business plan.

Six months is probably an inaccurate description, depending on your current status. Think about it like this: 'I need to dedicate 1,000 hours of my time to fully flesh out this idea and create a viable business model.'

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2. Execution

Once you've refined your idea, it's time to move to the execution phase.

There are many ways to approach this, but we'd recommend trying to get into an incubator, pre-accelerator or accelerator programme if you're along in the execution phase.

Most universities will have some sort of programme. But there are also government-sponsored ones through the NDRC, Dublin BIC, Guinness Enterprise Centre, and workshops through your Local Enterprise Office (Leo).

During your incubator programme, you'll have access to advisers, industry experts and resources that will help you lay down the framework to build, grow and sustain your business. Most importantly, the accelerator programme will most likely be your first introduction to the angel investor network.

Angel investors like these programmes because they make their lives easier. Angels are looking for great new companies to invest in without having to turn over every rock to find you.

These programmes put you in front of investors, helping them to narrow down their search. Investors like to see progress before investing in a company and the progress that you make while in an incubator is a great indication of what you and your team are capable of.

3. So what was our timeline like?

We turned over every rock, did our research and came up with a formidable business plan, laying out detailed strategies to execute within six to nine months.

We went through an initial incubation programme (Launchbox through Trinity College) for three months and got into our second incubator (New Frontiers, another three months).

We had our first interaction with an investor during our time in Launchbox and our first interaction with Enterprise Ireland a little over a year after launching our business.

It's important to remember that the time between meeting an investor and getting investment can be between six months and a year.

4. State-backed organisations

The Government can provide resources, work space, mentorship and funding to new businesses. It's useful to know the main players in the space, as well as how to get started. The Government has laid out the foundations for a path to profitability, but it's not working alone.

There are State-run organisations and private companies working together to create the Dublin startup ecosystem.

The main players (excluding university programmes) are the Local Enterprise Offices, Dublin Business Innovation Centre (BIC), National Digital Research Centre (NDRC), Guinness Enterprise Centre, Dogpatch Labs, New Frontiers, Social Entrepreneurs Ireland and Enterprise Ireland.

To help categorise them, we'll place them into clusters, based on when you should contact them, and then highlight what each organisation does in the section below.

Phase 1 (no equity required): Local Enterprise Office, Dublin BIC, Guinness Enterprise Centre, Dogpatch Labs.

Phase 2 (no equity required): New Frontiers, Social Entrepreneurs Ireland.

Phase 3 (requires equity or debt financing): NDRC, Enterprise Ireland.

The Leo is your biggest ally early on. The Leo is made up of regionally run offices that provide grants to new businesses in their district.

The grants are structured so that you front the costs and they reimburse you for the expenses.

The Dublin BIC provides the infrastructure and support systems to help you get your company off the ground. They are the eyes and ears of the startup scene, helping you get investor-ready and giving you advice on finance, incubation space and support groups.

New Frontiers (backed by Enterprise Ireland) is one of Ireland's premier programmes for startups. A two-part scheme spanning nine months in total. Part one is an unpaid programme helping you refine your idea and buttress your assumptions through market research. Phase two offers a €15,000 stipend and takes you through an intense six-month scheme where you build out a full-scale business model and construct detailed execution strategies.

Enterprise Ireland is the most well-known entity within the startup environment. In addition to funding, it focuses on two main areas: international expansion and job growth. Its roots run deep both in Ireland and abroad, and its support can help open doors and expand your business across the globe. For most, the goal is to get 'high-potential startup' (HPSU) status from it. HPSU status means you have a seat at the high table.

You're still a small fish, but you're out of the fish-tank and into the wild. There is still a lot of work to be done, but you now have a powerful ally who has stamped its seal of approval across your brand.

5. The startup ecosystem

So what do you need to know in terms of other accelerators and incubators?

(a) The Guinness Enterprise Centre, Dogpatch Labs and Huckletree all operate primarily as shared co-working environments. However, these organisations offer much more than that. Apart from working side by side with some of Dublin's best new startups, these co-working spaces provide entrance into the startup ecosystem and access to industry experts, finance, mentors, and free conferences and lectures.

(b) Social Entrepreneurs Ireland offers a similar programme to New Frontiers, but is only available to social enterprises. It provides funding, support, mentorship and offers two top-notch programmes in its Awards Programme and the Academy.

(c) NDRC is housed next to the Guinness factory, and provides €100,000 in funding, work space and access to industry experts in exchange for a 7pc equity stake. This is a top-notch programme and well-respected by the Irish angel network.

Our journey

Even knowing the players and a rough idea of a timeline, we know that it's still hard to contextualise the funding journey. Here is our timeline, from a funding and support perspective. We had some successful funding-related applications, as well as applications that were denied. Some of the supports were not funding-related.

September 2017 - Change Donations ideation stage begins

February 2018 - 'Dragons' Den' pitch competition finalists

June-August 2018 - Launchbox accelerator programme (€9,900) and introduced to our first VCs

July 2018 - NDRC accelerator programme (€30,000 for 10pc, denied)

August 2018 - Won Launchbox competition (€3,500)

September 2018 - Best early-stage startup, Responsible Innovation Summit (€1,000)

September 2018 - Joined Dogpatch Labs

September 2018 - New Frontiers phase one

September 2018 - VC and angel discussions begin

October 2018 - TCD Tangent programme in New York (€2,500)

October 2018 - Term sheet signed with angel investor

October 2018 - Initial outreach to Enterprise Ireland

November 2018 - Ladder Design sprint, seven-week process

December 2018 - All Ireland Business All-Stars Accreditation

January-June 2019 - New Frontiers phase two (€15,000)

January 2019 - Startup Boost through BoI and Tech Stars (denied)

January 2019 - Loan note deposited from angel investor

February 2019 - Feasibility grant from Leo (€8,000, six months after application)

February 2019 - CSF (€50,000, denied)

February 2019 - Social Innovation Fund (€150,000, denied because we are not a charity)

March 2019 - Dublin BIC Ones2Watch Finalist. Photo shoot and 'Irish Times' article

March 2019 - Ones2Watch winner, Futurescope; 'Ireland's Best Business Idea' (€2,500)

April 2019 - Dublin Tech Summit

April 2019 - EI CSF second application (€50,000, denied)

April 2019 - Social Entrepreneurs Ireland Awards Programme (€40,000, denied)

May 2019 - First contact with US investors

May 2019 - MVP product launch

June 2019 - EI CSF third application (€50,000, denied)

June 2019 - Ireland Funds Business Plan Competition (€15,000, denied)

July 2019 - Google Adopt A Startup (€10,000 in Google Credit)

August 2019 - Verbal commitment from US investors

August 2019 - Approved for priming grant (€7,000)

September 2019 - Original angel investor converts on loan note to equity investment

September 2019 - EI officially engages with us

September 2019 - CSF fourth application (€50,000, approved but we declined and opted for HPSU)

October 2019 - EI moved us to HPSU committee

October 2019 - Written commitment from US investors

November 2019 - EI HPSU investment committee approval

December 2019 - EI official investment agreement received

February 2020 - Seed round of investment closed

The Irish Government has laid out the infrastructure necessary for startups to thrive. Enterprise Ireland, Local Enterprise Offices, Dublin City Council, New Frontiers and so many other great organisations are unbelievable resources that are here to help you succeed.

So engage with them, help them, work with them and use the tools they provide to help expand the startup culture in Ireland. Don't get discouraged when you get denied or rejected.

We were denied for CSF funding by Enterprise Ireland three times before we were accepted. This acted as a catalyst to move to HPSU status.

What you don't see here is the number of angel investors that chose not to invest in us. We met with dozens of investors and VC firms looking for investment.

One of the investors left us with the following advice: "We meet with 300 companies each year and only invest in nine of them. When I say meet, I'm talking about an in-person meeting. We go through hundreds of pitch decks, phone calls and referrals before we narrow it down to 300 companies. And still, of those 300, we only invest in 3pc."

The lesson? Stay determined, stay upbeat and keep working hard.

  • William Conaghan is the co-founder of Change Donations (changedonations.com), a Dublin-based startup that lets donors round up their purchases and donate their spare change to the causes that they care about. It recently secured €800,000 in seed funding through Enterprise Ireland and Elkstone

A ROUTE TO FUNDING FOR A STARTUP

1. Ideation. This may take months of refining until accelerator programmes believe you have a well-formed idea. Identify a need and provide a solution; write a business plan and provide structure around your idea.

2. Engage with your Local Enterprise Office and BIC.

3. Apply to an accelerator programme — Huckletree, Launchbox, NDRC and the like.

4. Refine your idea and focus efforts on customer validation.

5. Apply for all possible Leo funding: feasibility grants, travel vouchers, innovation vouchers (through EI) and priming grants.

6. Apply to New Frontiers phase one.

7. Join a startup co-working space (if you can afford it).

8. Apply to New Frontiers phase two.

9. Apply for the Trading Online Voucher (Leo).

10. Apply for the Priming Grant (Leo).

11. Apply for CSF (Enterprise Ireland).

12. Begin discussions with VC firms, angel investors and other investors. If you have interest from investors before this point, engage with them; find a way to get a warm introduction.

13. Apply for HPSU. In order to qualify for HPSU, you need to be trading and can show that your startup has significant user traction, and adequate demand to operate at a sustainable level and scale accordingly.

14. Engage in co-investment with EI and external investors.

Hopefully, this helps you take the first step in the long journey towards fundraising. This is a marathon, not a sprint.


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