Part 2 - The Middle – VC wasteland and some serious progress

Let me start this 2nd part by sharing some stats from our raise:

Number of VCs at the top of the funnel - 65?

Number of next stage meetings (2nd, 3rd, 4th i.e. before the IC stage) - 20?

Number of ICs/final meetings - 9?

Number of investment offers - 6?

Number of lead term sheets - 1?

Final deal structure:?1 lead VC (￡825k)?2 supporting VCs (￡310k)?and a group of industry Angels (￡865k)?

Funding round target size: ￡1.2-￡2m?

Final round size: ￡2m

Note: This ignores all our angel investor calls, of which we had c.400!

Seeing those numbers makes it seem fundraising is simply a case of putting enough in the funnel at the beginning to get a round together at the end. This isn’t true and certainly wasn’t the case for us.??

At one point, towards the middle of the raise, we thought we had ￡1.8m committed, and we then lost ￡1m of commitments in one afternoon. That was a very tough pill to swallow.

Our investment committees didn’t all come together within a few weeks in a neat timeline, they were actually spread out over quite a long period of time. Each time we had an IC, we thought, “this was it”, and every time they didn’t materialise into an investment, you get knocked back emotionally.

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At the same time that we started engaging with VCs, we also started engaging with brands, discussing our proposition with them and listening to their feedback on what their experience was with China ecommerce and whether they would use a solution like ours. Fortunately, the answer, for the brands that were big enough, was a resounding yes.??

This really speaks to the importance of getting champions early: These brands were not only saying yes to us, they were also agreeing to join conversations with any VCs we were speaking with to advocate for us and help us secure the funding to build the service they needed.?

Whilst progress with brands was being made, we also locked down the technical details of our solution and we were able to create a video demo of what the front end of the product would look like. With our improved pitch, we were getting more and more Angel commitments and by June we had security close to ￡800k of funding commitments. We also attended The Seed Stage , which gave us great exposure and interest from a lot of smaller VCs and some top Angels including one personal ￡100k commitment. Momentum was with us.?

We had a VC that wanted to invest ￡500k in the business and an investment committee with a family office. Additionally, the investment director of a High Net Worth Financier told us that he wanted to invest ￡500k of his own money and that we were only waiting for his return from holiday before confirmation. By mid-June we had ￡1.8m of commitments and one more investment committee to go. We thought we were going to be overfunded ahead of schedule. It was all looking good...until it wasn’t!??

Unfortunately, the investment committee with the family office didn’t go well. During the online meeting, their owner was totally disengaged, pottering around his apartment on the video call. I couldn’t tell if he was listening or not and therefore knew to expect a no.

On the same Friday at the end of June 2022, I followed up with the family office, VC and the high net-worth financier hoping for firm answers from each. The plan was to start the weekend with ￡1.8m in commitments confirmed and rest well, knowing that I could start to put the legal documents together on Monday.?

Instead by mid-afternoon, the family office confirmed they were out, the VC told us that they had failed to raise from LPs and the financier came back from holiday and “wasn’t feeling it” any more.?

Just like that, we went from ￡1.8m committed all the way back to just ￡800k.

We had been actively and relentlessly fundraising for 4 months and were nowhere near our target. Feeling a bit hopeless, we started considering just taking the ￡800k and cracking on, but we knew it wasn’t enough funding given the time it would take to get operational set up in China.?

Whilst it was the easy route, we would just be wasting people's time and money.?

What we needed was a solid, top-tier lead investor to bring the round together.

We turned our focus to doing just that…

Part three next week.