At what point after you started the business did you start to look for funding?
We considered funding at the outset and went to meet a number of venture capitalists (VCs) including Barclays Capital and Elderstreet Investment.
I naively thought that it was a necessary part of the process in getting a start-up going. Luckily, from my point of view, we went to market as the dot-com bubble burst and received rejections at every point.
While I could understand their point of view, which was that our timing was poor and we didn’t have a track record, as a former City-based investment manager I know that there’s no reward without a degree of risk. They seemed to want to have their cake and eat it!
I often refer to the rejection process as being the best thing that never happened to us as I ended up funding the business myself and own a large share of the equity and still have a job in the thing I helped to create, which I doubt would be the case if we had taken VC funding.
In fact one of my biggest motivators in this period was receiving a flippant email from a Barclays VC who told me that we were doomed as the ‘gorilla’ in our market would eat us for breakfast.
I believed that he was ignorant and didn’t realise how disruptive our model would be – which is exactly as it’s turned out!
So how did you actually the raise the initial funds to get it off the ground? What did you use the money for?
I put my hand in my own pocket and we bootstrapped the business. Fortunately for me I had bought a farmhouse with a range of barns around it a number of years previously that I had managed to get planning permission for.
Selling these to a developer provided me with the cash to see us through the first four years, however it was a close-run thing as I was spending the equivalent of a new car every month to keep the business afloat.
When did you realise you needed more money and for what?
As the finance man – the one putting his hand in his pocket – I was very sensitive to what we were paying out.
I remember looking at everything in relation to opportunity cost. For example, our leased line cost over £20,000, a necessary expense at the time, but I saw it as having to forego an extra pair of hands in the office.
These days my mindset, along with that of our CTO, is that we need to employ more machines as they are less trouble. How things change!
I relied largely on previous City contacts and friends for investors, however, I’m delighted that nothing ever came of my conversations.
Were you ever worried about going over budget/how did you ensure the money you raised was used in a focused manner?
Bootstrapping a business makes you far more sensitive to what you’re spending your money on.
For example, I ditched a local firm of auditors over a £500 bill that I wasn’t expecting as I didn’t feel that they understood us and weren’t prepared to work with us in what was a difficult period.
Self-funding also helps to cement trust, if you can see it through, as well as strengthening your convictions.
In short if you’re laying half a million of your own cash on the line you need to be pretty certain that you’re doing the right thing as it will place unimaginable strains on all of your relationships if it doesn’t work out!