❓To crowdfund or not to crowdfund?
Founders Factory Startup Bulletin #1 (August 2021)
👋 Welcome to the Founders Factory Startup Bulletin. Each month, we bring you a round-up of startup and investment stories, key learnings from founders, and insights from the Founders Factory team.
If you’ve followed our newsletter before, you’ll notice we’ve now moved over to Substack. This is our first edition - so if you find it interesting or insightful, please feel free to subscribe and share it with anyone else!
In this month’s newsletter:
Why you should (or shouldn’t) consider crowdfunding your startup
Advice for CEOs from former Evernote CEO and serial entrepreneur Phil Libin
News of the latest fundraises and acquisitions from our portfolio
Our monthly reading list - from tales of startup unicorn failure, to the next NFT craze
💡 Key learnings for founders
To crowdfund or not to crowdfund?
Equity crowdfunding was once viewed as “dumb money” by VCs—a last resort if you have no other way of funding your business.
Now, crowdfunding is seen as a strong way to build engagement with your customers and build long term brand loyalty - alongside raising capital. In 2018, Monzo raised £20 million in just two days through Crowdcube. BrewDog still holds the record for biggest crowdfund, raising a whopping £126 million in 2018.
Here’s some words of advice from our senior venture portfolio manager (and ex Crowdcube employee) Darren Mulvihill:
If your only reason for crowdfunding is to raise capital, it’s probably not for you. Startups tend to crowdfund for one of two reasons:
Turning existing customers into investors, deepening existing relationships with your community.
Capturing new investors (and customers) around a market trend while building wider brand recognition
There’s a three stage process for launching a crowdfunding campaign - with the ultimate goal of pre-raising 50% of your target before you launch
Private launch for lead investors: this will help you to raise at least 50% of your target through VCs, angels, friends & family
Private launch for pre-registrants: around two months before your launch, target your customers to register interest in investing. This is known as “book building”. You should then open your crowdfund early to this community.
Public launch: With 50-70% already invested, kick off your main launch with momentum, and hopefully tap into investor ‘FOMO’ (fear of missing out)
Valuation should come from lead investors
Avoid relying on your crowd (your community & customers) to be the first investors in and to price the round
Valuation needs to reflect the risk an investor is taking, so having a lead investor before you go live is ideal
There’s a range of benefits you can offer to incentivise people to invest, each targeted to attract different volumes of investment
Once you’ve launched, there’s still a lot of work to be done."You have to be on the pulse promoting it from your own brand and personal social accounts every single day pre, during and post the campaign." Will Harris, co-founder of Entale, who crowdfunded £300k through Seedrs
You can read Darren’s full article here
🧠 Founders Insights
Lessons for CEOs, from former Evernote CEO Phil Libin
Phil Libin is no stranger to starting, scaling, and running successful tech companies. Once Evernote’s CEO, Phil has launched his own product studio, All Turtles, the company behind game changing technology products including video chat tool mmhmm. Here’s some excerpts from when we sat down with Phil last month:
Distributed working gives you superpowers
Employees never have to waste time commuting again
You can employ anyone you want, wherever they are in the world
Don’t focus on the negatives around working from home: focus on the positives, then problem solve the pitfalls
Products should be useful and fun
Biz Stone, co-founder of Twitter, says the litmus test of new products is whether they’re ‘fuseful’ (fun and useful)
Useful - making the world a better place.
Fun - this builds muscle memory, which is what makes people use a product again and again.
Building (and maintaining) your team is a measure of success
Ask any CEO - the hardest thing you have to do is hiring and keeping brilliant people on your team
Ultimately, board members and investors don’t care about the things I’m doing, they care about what I’m getting out of my team
Investors in tech products look for two things
They understand the big picture of what you’re trying to do (and find it plausible)
They want to use the product straight away
There’s no point getting consumed by fear of failure
You have to accept the reality of failure in a startup - it’s actually okay if you do fail
Listen to your worries, address them, but don’t let them impact how you make decisions
You can read the excerpt or watch the full video of Phil’s fireside chat here
📰 Biggest news this month
💸 Eka Ventures has become the largest impact-driven VC fund in the UK, after closing a $95 million fund
Their new fund has three key investment themes: sustainable consumption, consumer healthcare, and the inclusive economy
It includes investment from the British Business Bank, Big Society Capital, and Planet First Partners
🔓An investigation uncovers global hacking operation by Pegasus spyware
A report by The Guardian has unveiled that thousands of political leaders, journalists, human rights lawyers, and others were targeted by the spyware operated by Israeli company NSO Group
Targets include French President Emmanuel Macron, Pakistani PM Imran Khan, FT editor Roula Khalaf, and Pavel Durov, founder of Telegram
🖥 Zoom has acquired cloud call centre service provider Five9 for $14.7 billion, ranking among the biggest tech acquisitions of all time
The video conferencing platform was one of 2020’s biggest successes, and the acquisition (set to finalise in 2022) is likely to further boost its value
Five9 has already provided call centre support for companies including Salesforce, Siemens, and Under Armour
🐦 Tweet of the month
💸 News from the Founders Factory portfolio
💊 Telehealth startup Honest Health has been acquired by US brand Hims & Hers
Read the full story of how founders Pavlo and Sam founded, scaled, and exited Honest Health in 30 months with next to no funding
🌍 Sustainability startup Bower Collective raised $2.1 million in its recent seed round led by Oxford Capital and Doehler Ventures
⌨ Secure messaging platform Worldr raised a $3 million seed round
📰 Black Ballad crowdfunded £338k (from a £250k target) via Seedrs
♻️ Oxwash closed a £2m seed expansion round led by Future Positive Capital and Holly Branson & Sam Branson - bringing their total raised to £5.2m
💡 Nate announced a $38m Series A led by Renegade Partners
👩⚕️ Qumata (formerly known as HealthyHealth) closed a $10 m Series A led by MMC Ventures
📚 What we’ve been reading
The Metrics You Need to Launch a Series A (Initialized Blog)
Key milestones by which you can measure success for different business models including D2C, marketplaces, and enterprise SAAS
The Opportunities of Remote Work (eFounders)
As Phil Libin says, think of the superpowers that remote working gives you
Discover the opportunities that remote working has opened up across productivity, collaboration, communication, and other dynamics
The We That Didn’t Work at WeWork (Wall Street Journal)
A sneak-peek behind the rollercoaster partnership of WeWork’s Adam Neumann and SoftBank’s Masayoshi Son, which ultimately led to one of the most notorious IPO failures in history
The Top Trends in Tech (McKinsey)
McKinsey predicts that we’ll see more technological progress in the next decade than in the past century
From process automation to distributed infrastructure, they breakdown some of the next supertrends in tech
Infinity Revenues, Infinity Possibilities (Not Boring)
Dive into the exciting world of Axie Infinity, a new NFT-based game that’s projected to make $150 million+ in revenue this month
“One of the main criticisms of crypto so far is that it has no real-world value or application, but Axie makes you reconsider what real-world value is. In Axie’s case, the value comes from providing meaning, income, and opportunity to the players directly.”
🗓 Opportunities for founders
How To Become a B Corp (September 1st) - hosted by Founders Factory and B Lab
Learn how to do Employee Equity the right way (last Tuesday of the month)
Join Tech Zero - a free initiative for innovative UK tech companies committed to tackling climate change
See you next month 👋
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The Founders Factory Startup Bulletin brings you a round-up of startup and investment stories, key learnings from founders, and insights from the Founders Factory team.