Giving up equity in your business is a difficult choice. While there might be offers on the table, they will often require you to sell big chunks of a company you have built up from nothing to investors who can have different priorities. And each time you raise a new round of equity finance, you dilute your ownership of the business and therefore the potential rewards from a sale or through dividend payments.
Yet it can also be the perfect way to secure the funding you need to move to the next level of business growth. Many companies use external investment to fund areas they would otherwise not have been able to address, such as digital marketing, stock distribution or bringing new people into the business.
We talk to two start-up founders about their recent experiences of taking equity investment.
Case study 1: Jim Biryah, co-founder of Birtelli’s
Birtelli’s is an artisan pizza business based in Leamington Spa, which sells pizza meal kits to make at home as well as operating a more traditional takeaway business. In the summer of 2021, it raised £500,000 from the Midlands Engine Investment Fund, which is managed by Midven.
“We were looking to expand in the home meal-kit space before COVID-19. We started looking at crowdfunding options and talked to our network of potential private investors, who pushed us towards venture capital (VC) investors. The consideration was two-fold: first, did they meet the funding requirement set out in the business plan, and second, what level of effort was required on our part to manage the raise via crowdfunding or VC.
“It can take a long time to get a deal done. We started business planning in December 2020 and were looking to get money into our bank account by May 2021. In the end, with the VC, it took longer – primarily because of legal contracts – and it came in August.
“There is an important question for all entrepreneurs to answer when it comes to the balance of upfront marketing effort required with private investors/crowdfunding versus the increased effort for contractual negotiations with a VC.
“We couldn’t stop running the business while we were looking for the investment, so we had to somehow find extra hours in the day. We were trying to run two businesses – the meal kits and takeaway – and do the capital raise.
“The interest from the VC was all about e-commerce. That’s where the exponential growth is and that’s where we’re investing. The investment has allowed us to build a proper e-commerce website that went live recently and is proving a great asset. We’ll also use the investment for digital-marketing expertise and operational capability.”
Case study 2: Lina Barker, co-founder of Aaron Wallace
Launched as a brand in 2019, Aaron Wallace is a market-leading grooming brand for men with Afro hair and skin. It began in a barber shop in 2016, and its products are now sold in ASOS, Sainsbury’s, Saks Fifth Avenue, Zalando and Liberty. The business has raised capital through two equity sales – first to an angel investor and second to private-equity firm Salonica Maroon.
“Our first raise was by accident. We knew there was a really big opportunity, but we thought there was no way we’d be able to convince investors. We met an angel investor by chance, who was interested in backing us. It helped us prove the concept and gave us great confidence.
“We officially launched the brand in 2019 as the Black Lives Matter movement was gathering momentum and retailers were beginning to recognise they were not serving the needs of their customers.
“We were starting to sell more and more products, but we realised we were cash-strapped. All our money was going into stock, and nothing was going into marketing. We needed an investment to maximise the opportunity.
“It was tough at first to find anyone who was willing to invest. The pandemic meant it was much more difficult to build a rapport with potential investors because meetings were all via video calls. It’s essential to build that rapport when you’re looking for investment.
“We were approached by Salonica Maroon, a private-equity firm, and completed our fundraise earlier this year. It has allowed me to build a team and start investing in marketing. It also let me take a salary for the first time. I was previously working full-time in sales while trying to build the company. I’m now free to be creative and free to think. It’s a big weight off my mind.”
Giving up equity in your business is a difficult choice. While there might be offers on the table, they will often require you to sell big chunks of a company you have built up from nothing to investors who can have different priorities. And each time you raise a new round of equity finance, you dilute your ownership of the business and therefore the potential rewards from a sale or through dividend payments.
Yet it can also be the perfect way to secure the funding you need to move to the next level of business growth. Many companies use external investment to fund areas they would otherwise not have been able to address, such as digital marketing, stock distribution or bringing new people into the business.
We talk to two start-up founders about their recent experiences of taking equity investment.
Case study 1: Jim Biryah, co-founder of Birtelli’s
Birtelli’s is an artisan pizza business based in Leamington Spa, which sells pizza meal kits to make at home as well as operating a more traditional takeaway business. In the summer of 2021, it raised £500,000 from the Midlands Engine Investment Fund, which is managed by Midven.
“We were looking to expand in the home meal-kit space before COVID-19. We started looking at crowdfunding options and talked to our network of potential private investors, who pushed us towards venture capital (VC) investors. The consideration was two-fold: first, did they meet the funding requirement set out in the business plan, and second, what level of effort was required on our part to manage the raise via crowdfunding or VC.
“It can take a long time to get a deal done. We started business planning in December 2020 and were looking to get money into our bank account by May 2021. In the end, with the VC, it took longer – primarily because of legal contracts – and it came in August.
“There is an important question for all entrepreneurs to answer when it comes to the balance of upfront marketing effort required with private investors/crowdfunding versus the increased effort for contractual negotiations with a VC.
“We couldn’t stop running the business while we were looking for the investment, so we had to somehow find extra hours in the day. We were trying to run two businesses – the meal kits and takeaway – and do the capital raise.
“The interest from the VC was all about e-commerce. That’s where the exponential growth is and that’s where we’re investing. The investment has allowed us to build a proper e-commerce website that went live recently and is proving a great asset. We’ll also use the investment for digital-marketing expertise and operational capability.”
Case study 2: Lina Barker, co-founder of Aaron Wallace
Launched as a brand in 2019, Aaron Wallace is a market-leading grooming brand for men with Afro hair and skin. It began in a barber shop in 2016, and its products are now sold in ASOS, Sainsbury’s, Saks Fifth Avenue, Zalando and Liberty. The business has raised capital through two equity sales – first to an angel investor and second to private-equity firm Salonica Maroon.
“Our first raise was by accident. We knew there was a really big opportunity, but we thought there was no way we’d be able to convince investors. We met an angel investor by chance, who was interested in backing us. It helped us prove the concept and gave us great confidence.
“We officially launched the brand in 2019 as the Black Lives Matter movement was gathering momentum and retailers were beginning to recognise they were not serving the needs of their customers.
“We were starting to sell more and more products, but we realised we were cash-strapped. All our money was going into stock, and nothing was going into marketing. We needed an investment to maximise the opportunity.
“It was tough at first to find anyone who was willing to invest. The pandemic meant it was much more difficult to build a rapport with potential investors because meetings were all via video calls. It’s essential to build that rapport when you’re looking for investment.
“We were approached by Salonica Maroon, a private-equity firm, and completed our fundraise earlier this year. It has allowed me to build a team and start investing in marketing. It also let me take a salary for the first time. I was previously working full-time in sales while trying to build the company. I’m now free to be creative and free to think. It’s a big weight off my mind.”
Giving up equity in your business is a difficult choice. While there might be offers on the table, they will often require you to sell big chunks of a company you have built up from nothing to investors who can have different priorities. And each time you raise a new round of equity finance, you dilute your ownership of the business and therefore the potential rewards from a sale or through dividend payments.
Yet it can also be the perfect way to secure the funding you need to move to the next level of business growth. Many companies use external investment to fund areas they would otherwise not have been able to address, such as digital marketing, stock distribution or bringing new people into the business.
We talk to two start-up founders about their recent experiences of taking equity investment.
Case study 1: Jim Biryah, co-founder of Birtelli’s
Birtelli’s is an artisan pizza business based in Leamington Spa, which sells pizza meal kits to make at home as well as operating a more traditional takeaway business. In the summer of 2021, it raised £500,000 from the Midlands Engine Investment Fund, which is managed by Midven.
“We were looking to expand in the home meal-kit space before COVID-19. We started looking at crowdfunding options and talked to our network of potential private investors, who pushed us towards venture capital (VC) investors. The consideration was two-fold: first, did they meet the funding requirement set out in the business plan, and second, what level of effort was required on our part to manage the raise via crowdfunding or VC.
“It can take a long time to get a deal done. We started business planning in December 2020 and were looking to get money into our bank account by May 2021. In the end, with the VC, it took longer – primarily because of legal contracts – and it came in August.
“There is an important question for all entrepreneurs to answer when it comes to the balance of upfront marketing effort required with private investors/crowdfunding versus the increased effort for contractual negotiations with a VC.
“We couldn’t stop running the business while we were looking for the investment, so we had to somehow find extra hours in the day. We were trying to run two businesses – the meal kits and takeaway – and do the capital raise.
“The interest from the VC was all about e-commerce. That’s where the exponential growth is and that’s where we’re investing. The investment has allowed us to build a proper e-commerce website that went live recently and is proving a great asset. We’ll also use the investment for digital-marketing expertise and operational capability.”
Case study 2: Lina Barker, co-founder of Aaron Wallace
Launched as a brand in 2019, Aaron Wallace is a market-leading grooming brand for men with Afro hair and skin. It began in a barber shop in 2016, and its products are now sold in ASOS, Sainsbury’s, Saks Fifth Avenue, Zalando and Liberty. The business has raised capital through two equity sales – first to an angel investor and second to private-equity firm Salonica Maroon.
“Our first raise was by accident. We knew there was a really big opportunity, but we thought there was no way we’d be able to convince investors. We met an angel investor by chance, who was interested in backing us. It helped us prove the concept and gave us great confidence.
“We officially launched the brand in 2019 as the Black Lives Matter movement was gathering momentum and retailers were beginning to recognise they were not serving the needs of their customers.
“We were starting to sell more and more products, but we realised we were cash-strapped. All our money was going into stock, and nothing was going into marketing. We needed an investment to maximise the opportunity.
“It was tough at first to find anyone who was willing to invest. The pandemic meant it was much more difficult to build a rapport with potential investors because meetings were all via video calls. It’s essential to build that rapport when you’re looking for investment.
“We were approached by Salonica Maroon, a private-equity firm, and completed our fundraise earlier this year. It has allowed me to build a team and start investing in marketing. It also let me take a salary for the first time. I was previously working full-time in sales while trying to build the company. I’m now free to be creative and free to think. It’s a big weight off my mind.”