I’ve lost track of which month these last few columns of 2012 relate to, but it’s about November sometime. Full PDF etc here.
As I’ve mentioned in previous columns, the process of seeking investment for Dizzyjam has taught me more about business in one year than I learned in the previous ten. Nothing makes you question your assumptions like hearing the difficult questions of successful potential investors.
One of the most interesting things I’ve learned is how much cultural naivety there is around investment in Cardiff’s startup community. I suppose it’s to be expected, given that so few local companies of our ilk have either sought investment, or managed to get an investor to open up their wallet. I can count maybe two or three creative, tech or digital companies in the city that I’m aware have been using someone else’s money to grow.
The most obvious impact for me of this local naivety about the finer workings of the investment process, is that I feel like I’ve been starting from scratch. Despite reading countless blogs and articles about it (invariably published from the financially fecund fortress of Silicon Valley), I’ve not had anyone pull me aside to whisper the dark secrets of what they learned when they went through the process. Nobody gave me the benefit of their wisdom. Nobody told me that it would be easier to raise £1 million than £100k.
Sounds counter-intuitive, right? Of course, on first glance it makes no sense. But it’s true. In a search for £100k you are in the territory of raising money from “angels”, high net worth individuals who are giving you their personal cash, and in so doing will scrutinise every single penny that you intend to spend. I’ve genuinely been asked what I’m likely to be spending on phone bills in three years. However, when raising £1 million you are dealing with venture capitalists, who are very often investing other people’s money, or spreading large amounts from a pension or hedge fund across a number of different companies or investment opportunities. They care less about the tiny details, and more about the big idea. Also, the bigger the investment, the more that risk is mitigated. In other words, it’s relatively easy to fritter away £100k with little to show for it. A few new members of staff, a bit of office furniture, some new hardware, and that money is all but gone. It’s much harder to spend £1 million without having built something of future saleable value. Whether that’s building something that has inherent intellectual property, or having many staff to build a brand that has global recognition, with that kind of money you’re much less likely to be able to blow it all on poor decisions.
This is just one example of knowledge that’s incredibly scarce in Cardiff, and that would totally have changed the way I approached investment if I’d have known. Whether it’s imparted in a government seminar, or by a friend in the pub, this “inside information” is vital for the success of the startup community in general.
In this month’s 60-second Q&A, NEIL COCKER talks to Evan Rudowski (pictured right), co-founder of SubHub, another Cardiff start-up making waves…
Q: So, what does your start-up do?
A: We provide digital membership solutions for associations and not-for-profits.
Q: What makes your start-up special?
A: We really understand membership – how to manage member information so that associations can provide members with a better experience, increasing renewals and retention, and freeing staff from mundane manual data management.
Q: What made you realise you had to build this company?
A: It’s been a series of gradual realisations based on trial and error and customer feedback. The way we describe and
manage our business today is entirely different from what we thought when we started.
Q: How’s business at the moment?
A: We’ve developed some very specialised membership management solutions. We’re also signing larger deals, and more frequently.
Q: What’s the key to your growth?
A: Lead generation – the more people we reach, the more we’ll convert into customers. Associations are crying out for better ways to manage their membership information.
Q: Where would you like SubHub to be in five years’ time?
A: Scores of membership associations and not-for-profits will be telling us, and their peers, how much we’ve improved the way they work and contributed to their success.
For more subhub.com