Episode 3: When to consider investment to grow your business - and how to prepare for it

Mia sits down with Carolyn Breeze,  CEO of Scalari Partners and Christie Whitehill, co-founder of  Intu Wellness to discuss how to know if investment is right for you and how you can prepare your business and start pitching to investors.

Transcript

Mia:

The Small Biz Fix is your one-stop shop for actionable advice. Get insights from industry experts and real small business owners who've been there, done that, and can show you how to thrive. Tune in and learn how to launch, run, and grow your business the smart way.

So if you tune into any form of business news at the moment, it's pretty often that you'll hear about some small exciting company who's just raised millions through investment.

Maybe you are wondering if investment could be an option for your business, or you might already be researching how you can get a slice of the funding pie. But what these news stories about successful startups often don't show is the hard preparation that begins months or even years before a deal is struck. The reality is, if you're considering investment for your business, you really need to be preparing yesterday. In this episode of The Small Biz Fix, we'll discuss how to know if investment is right for you and how you can prepare your business and start pitching to investors.

I've just sat down with Carolyn Breeze to talk about everything I just mentioned. Carolyn is the CEO of Scalari Partners. She's an investor herself and she mentors small businesses and startups who would like funding in the future. I'm super excited to have you on Carolyn. Thanks for joining us. 

Carolyn:

Thank you so much for having me.

Mia:

Awesome, exciting. So Carolyn, you're an investor, but from our little phone call before the podcast, you're also quite q uick to encourage business owners to consider other forms of funding first. Investment is obviously just one way to fund your business. What maybe are the signs that it could be the right way forward for you?

Carolyn:

Yeah, that's a great question. I think because of the way we talk about small business success, particularly in the startup sector, it's really, I think, easy or culturally kind of accepted that maybe VC funding or a capital injection is like the silver bullet to growing your business. And I think we've almost put it up as a bit of a sign of success. But you know, what we don't talk about when we see these articles with people raising big amounts of money is how much of their business they've actually given away for that capital. So not just in the percentage of the business that they own, but also then some of the control and potentially the influence over the trajectory of the business. 

I think the other thing that is probably worth thinking about when you're thinking about different forms of capital for growing your business and how long you think you'll be in your business for and what you think you're going to be able to achieve within a certain period of time is that with the traditional VC funding model the way they're structured is they have like a maturity within the fund. So if they raise capital into a fund and they promise their investors that in a 10 year period, for example, they're going to see returns and they spend typically the first three to four years deploying that capital then they help nurture those companies. 

And then towards the end of the maturity, closer to that 10 years, they start to see exits where those companies are either acquired or they might list whatever that exit may look like. There's a time pressure on your business when you take VC funding that you need to be meeting certain milestones and heading towards a certain exit in a certain amount of time. And if you change trajectory during that period and that exit is no longer going to happen in that time, it's not quite where you want the business to go you're in this kind of time pressure tank. So I think those things aren't talked about enough.

Mia:

Yeah, all really good points. And just to kind of give our listeners a bit of context or maybe even a bit of a mental image. What does a business sort of look like that might be a good candidate for investment in terms of like how mature the business is, know, product market, are they generating revenue, etc.

Carolyn:

Yeah, so at Scalari, when we invest, also preface this by saying we're not a fund model deliberately, because we don't like that time pressure piece. So we write our checks off our own balance sheet, which means we're not limited to those. And when we're looking for companies to invest in, as an investor, we want to know that when we inject capital into a company, we're helping that founder grow and scale their business. So we look for organisations that are already generating revenue.

Even if the pricing framework isn't quite right, we know there's been a value exchange which shows us some level of product market fit, right? So customers, your customers are prepared to actually pay for the product or service that you're providing. And they need to be able to show that they can repeat that and gain traction. So they know that every dollar they spend in marketing or customer acquisition is going to result in X amount of dollars in revenue. 

And we can see that repeatable kind of pattern and that they're growing and meeting those milestones. And that's really what investors want to see, because they want to see that any capital put into the business is going to be returned at some point, right?

Or it's going to eventuate into something. So if you've got product market fit, you've started scaling your business, you've built a repeatable go-to-market model, and these things evolve and change over time, right? But you've got a good starting point in knowing what works for your business and how to get it in front of your customers and how to convert it, then that is a great time to get capital, because then you know exactly where those dollars are being spent and what that will turn into.

Mia:

And what about some signs that other forms of funding might be for you? I know we've talked about a few of them. Maybe if you're not quite clear on where your business is going or if you're quite early on in your growth journey, what might be some other indicators to go after those other options first?

Carolyn:

Yeah, so if you're really unsure about your valuation, you might have a really strong pipeline, some expressions of interest, some clients that are saying that they really want to work with you and sign up for your product. And you can see the horizon to some kind of revenue and some wins pretty early. I would hold off if you can, because it means that your business is going to be worth a lot more post those customers coming on and using your product or service. And so therefore giving away something now versus giving it away later could be really material to you and your personal wealth creation. 

I think another thing that I see sometimes is people come across looking for investment because they have secured a large client or they do have interest from a large client, but in order to secure that business, they need to finish the last piece of their product or they need to hire three people to deliver the work or they need to, if it's a hardware business or a manufacturing business, they may need to invest in product in order to be able to deliver it. In my opinion, those are times to go for lending right? 

Because it's all it's right around the corner. So you can lend against the invoice and the future work, you can lend against your existing business and the existing revenue, because all you're using that capital for is to secure that kind of next piece of revenue versus giving the business away. And then when it comes to grants, there are a lot of fantastic grants out there in the market.

It is really hard to stay on top of what grants you should be applying for. It can do with where you're based, telling you've been in business for, what vertical you're in, right down to the gender of your founders. But there are some great resources out there like Grants Hub, where you can go and actually put in a bit about your business. It'll tell you what's applicable to you. And some of those grants are completely non dilutive and they're just to help you scale your business. Others are what they call matching grants. So, okay, I am going to bring in an investor and that investor is going to put in a couple of hundred thousand, but ideally I'd like half a million. Once you can raise that, then you can seek matching grants where they'll actually match that amount with non-dilutive grants so that you don't have to dilute the whole amount that you're going to the market for. So there are definitely options around that as well.

Mia:

Yeah, it sounds like there's a lot out there that you could go for if you feel like investment isn't you know You're not quite at that stage yet .So let's say that you've weighed up the pros and cons and you've decided that this is the right way for you to grow What do you need to do to prepare your business before you actually start going and pitching to investors?

Carolyn:

Yeah, so when you start talking to investors, if they're interested in your business and it fits their investment mandate, they're going to want to know some pretty basic information very quickly. So they're going to want to be able to understand your P&L. They're going to want to understand your financial forecast and modelling and how this capital will play a role in the growth. 

So for example, you know, you can show them a financial model that says, if I keep ticking along the way that I am, this is my growth trajectory and where I'll be in 6, 12, 24, months but with a capital injection this is where I plan to deploy that capital and spend that capital and therefore you know here is where I'll be which is you know four to five times further ahead than where I am today so they're going to want to see that you understand that and that you can articulate it. 

They'll need to obviously have a really good grasp of your business and your ambitions and where you're going and so having a basic kind of data room ready which is really just a fancy word for a file with all of your information in one spot right they just got to want to see your P&L, your financial model, understand your business, your cap table if you've had some early angel investment or family and friends come in, your shareholders agreement and get a good understanding of your tech. 

One thing that I find is if you're not ready to have those conversations, sometimes you'll meet an investor who is ready to learn more and if you're not ready and it takes you three to four weeks to come back to them with what they need, sometimes they've moved on to the next thing right, so don't have those conversations unless you're ready to move quickly in the instance that that does happen.

Mia:

Okay, so it sounds like you really need to understand where your business is going, but also where it would go if you were to actually get that injection from the investor.

Carolyn:

That's exactly right.

Mia:

So your business is ready for investment, let's say. What are the options when you're starting to actually look for your pool of investors? Given there's so many different types of investors out there, how do you know what to look for?

Carolyn:

Yeah, I love this question because I don't think that founders spend enough time on this part of the process, which is actually doing a little bit of reverse due diligence and researching the investors that you're going to talk to. So you know, investors come in all shapes and sizes and investors have particular mandates. So some are fintech investors, others are climate investors, others are health investors, and they'll also have different stages and types of businesses they like to invest in. 

So it's no use pitching to investors and organisations that aren't interested in your type of business. At this point in your journey, your time is almost as valuable as the capital that you're going to get hold of. So it's worth spending some time doing some due diligence and really understanding who are the investors that would be right for my business and I would meet their mandate, which is basically their criteria for investing. So that's what they've told their investors they're going to invest in. So an example might be, I'm going to invest in early stage fintechs that are generating a million dollars in revenue, that are working in the financial literacy space and have an eye on the US. That might be their mandate. 

So it's no use rocking up as a climate tech you know, pitching your business to them. And so it's worthwhile knowing who you're talking to, what the mandate is. The other thing is also researching who you're talking to within the organisation.

The Scalari Partners is a great example of that. We've all got various backgrounds in certain verticals and strengths in certain areas. And if I was pitching for capital into Scalari and they were interested in the business, I'd make sure that the person I was talking to at Scalari was the one that had an understanding or experience in my vertical. And so you can research the partners. And just going back to the earlier point about their mandate, the best way to understand an investor's mandate is to go to their website and instead of hitting the pitch button or submit an inquiry for investment, hit the investor button.

Right, and it'll take you to a different journey that'll show you if you were investing in that funding company, you know, what are they telling you as an investor they care about? What are they telling you as an investor that they're going to invest in? So it's a really good way to understand and then, you know, make sure you kind of verify that when you talk to them. So that would be the first two. And the other one would be to make sure that they're actually deploying funds. 

So, a lot of funds - they will obviously meet you. They love getting to know tech. They live and breathe it. And they want to get to the end of the year and say they've met X amount of tech founders and this many were diverse backgrounds and this many were whatever and we invested in three or whatever it may be. But not all funds, depending where they are on their five to 10 year journey, are deploying checks at the moment but they'll meet you anyway. So you should always ask like, when you, I've done some research into your business, it seems like my business is a good fit for your investment. Here's why I think so. Is that correct? Yes, it's correct. It seems like you've got a good grasp of my business because I've had a look at your background. Your background is XYZ. Yes, that's correct. Are you deploying funds at the moment? It could be that they're not. Yeah. Yeah.

Mia:

Good question. Yeah, fantastic. And so where exactly, like what are the platforms where people are finding investors? You know, is this something that you Google? Is it a website sort of thing or are you networking or is it like a word of mouth? You know, how do people come to you and how would you recommend that business owners go looking?

Carolyn:

Yeah, there's obviously you can just do your kind of Google research. There are companies that put out reports a couple of times a year on the different kinds of investors that are in the market. I know Airtree put out a fairly comprehensive report. My favorite would be Cut Through Ventures, which is a really good report for both sides of the market, investors and founders. So not only does it show the different investment kinds of themes and things that are happening in the market and trends, but it talks specifically to numbers of investments that are happening, which verticals are punching above their weight, how many checks were deployed and for how much in a quarterly or an annual kind of report. So that's a really good one to look at. But then there are actual platforms that help you connect with investors. So a good one is in-house ventures.

So can jump on as a founder, you can record a pitch video and let people know about what you're raising. They actually categorise based on the investors that they know or are interested in your type of investment and deploying checks. And they'll send that out to their, you know, they've got over 12,000 investors on their platform. I think they've brought in 2500 lots of capital for founders in the last 12 months alone. So they're really good at kind of getting you out in front of the right people. So I would use a platform like that to start with.

Mia:

Yeah, okay, really helpful, thanks. All right, so let's talk pitching to investors, because I'm sure you've sat through a bunch of pitches in your time. What are your top tips for a perfect pitch?

Carolyn:

Yeah, good question. When we invest in very early stage companies, they are generating that revenue, but they're new, they're just starting to get scale, and they're looking for that capital to actually accelerate their growth. And a lot can change in a business over time, right? As it grows, as it enters new market segments, as the product develops, you know, maybe as they move international. And so one of the things that I really look for over and above the product market fit and the that's being generated and the milestones that are being hit is the founder themselves.

What kind of person is the founder? Is it someone that I'm going to, are they coachable? Is someone that I'm going to be working with? Do I believe in them and the leadership team in how they execute? Because really you're on the journey with the founder themselves, right? So you want to know that they're in it. And so I love hearing about their personal story. Why did you start this business? Why does it matter to you? 

And I lean into the ones that have a real conviction around why they're doing it over and above the financial reward at end and the success, like they're emotionally involved in the problem that they're solving and they understand it deeply. They've done the research and so I love hearing about that. I think you should always put a bit of yourself into the pitch. Then being able to really articulate the problem that you're solving and why it matters and showing that that solution that you've created is gaining traction and why. Being able to articulate how you get it to market and what that cost, right? 

That cost of acquisition of a client, that cost of getting revenue into the business and that you've proven out a model that gets that product or solution into the right hands. And also being able to talk about what you don't know and where you need help because when we make those investment decisions, we want to know their businesses where we can have a material impact. If you've been able to do X, Y, Z by yourself and get to this point on your own. That's fantastic. But then with our help, if we can help amplify that and accelerate that, well, then that's an absolute win for us and a huge tip for us. So, you know, not being afraid or shy about sharing where you do need help, what doors you need opened and where we can be of service, I think is really important as well.

And then lastly is around that financial acumen. And some founders need support with this and that's nothing to be afraid of, right? And it's not everybody's cup of tea. It's highly unlikely that every great founder out there also happens to be a chartered accountant, right? We get it.

But being able to articulate and have an understanding of dollars and cents and how to manage capital within the business and show that you're really considered about where and how you deploy funds and for what return is really important. And if that's an area that's not a strength of yours, like if you're a business that's always outsourced, you're bookkeeping, you understand how many customers you need to be successful and you're all about the customer and the solution and the product, that's great. You can always get companies like Scalari and others out there to help you with that financial modelling piece before you go and pitch to investors.

Mia:

Okay, yeah. And would you say that it's quite important to be across all of these aspects of the business, just even to protect yourself potentially from, you know, not great arrangement? Like, is that something that you'd really recommend, you know, to maybe a business owner who's used to outsourcing everything?

Carolyn:

Yeah, absolutely. Particularly at the time that you're capital into the business and particularly if it's non dilutive because that means sorry, if it's dilutive because that means you're bringing people into your business. They're to be owners in your business with you. They're going to be on your cap table. They're going to be shareholders of your business. And so you want to understand their expectations. You want to understand what you're giving away. You're going to want to understand their expectations around how you deploy the funds and how much influence they're want to have in your business so you really need to be on top of those numbers.

Mia:

Yeah. All right. So let's say you've started to get some options on the table and people are interested in you. How do you actually know if something's a good fit for you and if you're getting a good deal?

Carolyn:

Yeah, so, I think not asking for support in these times is an absolute false economy, right? There's only so many times in your business's journey you're going to be doing this. So lean on experts around you. know, if you do have to invest in people to help you with your financial modelling and pitching, if you do have to invest in people to help you with the data room and your legal documentation and help you interpret things, this is the time to do it. 

It can't be reversed kind of down the track. And so that's the first thing I would say is that sometimes raising capital into the business can be costly in itself, not just because it's taking your time out of the business because it's very time consuming, but also you want to make sure you get these things right. And I think over and above the kind of documentation and getting expert advice around the legal documents and the contract is also to think about is this somebody that I can work with. Because once someone's on the cap table it's very hard to get them off, you know, is this someone that I can work with? 

And over and above, is it someone that I can work with? What I'm seeing more and more in the market now is business owners and founders looking for what we call smart money.

So they're not just looking for passive investment. They're looking for investors who can open doors for them that maybe operate in the industry that they're in, that can maybe offer them advice and can help them actually grow and scale their business. So it's more than just the money. If someone's joining the cap table, the ideal scenario is that you're bringing someone into the business who you would want as an advisor or someone that can help you grow your business or open doors for you. 

And so I think that's really important got options to really consider the right investor for that as well. Sometimes it might mean giving a little bit more away to get the right investor on the table but knowing that it'll pay back dividends and how they can help your business accelerate and grow.

Mia:

And what about negotiating offers? Is this something that tends to happen after an investor has made you an offer?

Carolyn:

Yeah, absolutely and I think that's a bit of another kind of bugbearer of mine is that I think business owners and founders think that because they do have an investor at the table and it might have been really hard to get to that point. You know, it might be their 99th pitch or whatever it may be. They kind of forget that they are in a position where they can negotiate. You can negotiate the valuation that you land on. 

So you might believe your business is valued and you would have had some support to get to this, but you might believe your business is valued at five million and you're raising capital and giving 20% of your business away. Of course an investor is going to tell you they think it's worth three million and they still want 20%. Right, because they get more as your business grows and so you are in a position to negotiate the valuation, you're in a position to negotiate the percentage of the company that you give away and you're also in a position to negotiate the terms of that agreement.

And if we're going back to kind of thinking about VC funding as an example, there are usually three vehicles or mechanics that people use. There's convertible notes, there's safe notes, and then there's straight options or equity. It's really important that people understand the difference between the three and how they can play out over time and how they affect future fundraising opportunities and how they affect the business moving forward. And it's really important that you understand the terms and conditions in those agreements. 

And just because a convertible note offer from VC number one looked like this doesn't mean it's the same from number two. It's really important that you get some legal advice and read through all those terms and conditions because they can vary and be different. And it really can matter later on down the track when you go to look for further funding. 

So I'll give you an example of that. There are some safe notes and convertible notes in the Australian market that have rights for the investors that in future cap raises they have to agree.

that the company can raise money. And so if your first check is a $50,000 check from one of these investors, and then two years down the track, you're raising $2 million in the US. In the example I'm giving, this poor founder had to wait over a month for the Australian investor to sign this piece of paper for them to raise money. And that's just crazy, right? So it's just kind of understanding those different loopholes in the agreements. I would definitely get some advice at that point. It's too important.

Mia:

Mmm, yeah, I mean, we all see this kind of negotiation stage play out on, you know, Shark Tank and it's this sharp, quick back and forth and etc. I would imagine in reality, and correct me if I'm wrong, it's a little bit more, okay, my lawyer's gonna look at this and you know, this expert's gonna come in and look at that because it seems like this thing, yeah, it really has to be done slowly, right? You wouldn't really want it to be short and sharp and debatey just like we see on TV.

Carolyn:

100% as soon as that paperwork, the term sheet comes across, then the real work begins. We're just really standing those bits and pieces.

Mia:

Yeah, all righty. I always ask this question because people love to approach things from the negative angle. What are the biggest mistakes that you see business owners making when they're looking for investment?

Carolyn:

I would say bringing capital into the business too early and too much capital, so giving too much of the company away too early and then not being able to deliver on the milestones and actually deliver the numbers and the expectations that the investors wanted. And again I think it ties back to the way we celebrate success in this industry I think is a little bit askew like instead of talking about companies going offshore and having success or hiring new people or launching a new product or whatever it may be, we're very quick to celebrate when capital is injected into a business. 

And we hear these big numbers like such and such raises 25 million or 5 million or 10 million. And I immediately go to my goodness, how much do they have to give away to get that? And it's a nice big fat rounded number. But I do think you can raise capital at the wrong time. I think you can raise too much or too little capital and you need to be really clear on how you're going to deploy that capital and what it's going to return to you and your investors.

Mia:

And if you're a small business owner listening or a startup founder listening and you want to kind of get into looking for investors, where's a good next step from here in terms of getting the advice that you need?

Carolyn:

Yeah, so I think I would probably jump into something like in-house ventures. They've also got a founder's library, which is a really good resource for understanding a lot of these things. And I would reach out and get some support where you can. Scolari is one of many companies that offer this type of support for startups. And I think just any kind of education and accelerators and things you can get on accelerators though, I'm all for accelerators that don't take equity.

If you can find an accelerator or a growth program that doesn't necessarily take equity, I think that's a really good way to go about it as well. But there are lots of resources out there and I think just don't be afraid to ask and show up to meetups. Another really good way to learn and the founder community is pretty strong is to ask other founders about their own journeys. I think we talk about enough and that they'd be more than willing to share their own stories and where things have gone wrong and where things have gone well. And I think just like when building your business and taking your products to market, do as much research as you would when you're raising capital, because it's so important.

Mia:

Now that we've talked to an investment expert about how you can get investment for your business, it's time to chat with a small business owner who's been through it themselves. Christie Whitehill is the co-founder of the beauty and wellness brand Intu Wellness. And she's joining us today to talk through her business's investment journey. Hello, Christie.

Christie:

Hello, thank you for having me.

Mia:

It's a pleasure to have you on the podcast. So I wanted to start from the beginning because I think this episode is really aimed at people who are just considering investment for the first time and sort of weighing up whether it's the right option for them. How did you personally know that investment was the right way to grow your business? Why not other forms of funding, especially non-dilutive forms of funding?

Christie:

So we chose investment over non diluted funding, although in saying that we do have that option too in our business. But it was more because when strategically it was growth money. And so I'm just such a believer in you raise for growth versus needing operational cash like funding your inventory or working capital. And I think that is really great when you do need to fund that working capital and inventory purchases and things like that. But this was growth opportunity. It was for the new products to market marketing. And that kind of made sense. And then just bringing on people that in the business that had some stake that smart money. so strategically, we needed that support because I don't think businesses can grow on their own. The founders is is one person of the business. It grows because of whole heap of people believing in it and making it happen.

You know, in the past, I've raised capital for previous businesses, but also bootstrap businesses. So I do know both journeys very well. And I think that there is definitely a right time and wrong times to be seeking capital. For INTU Wellness – for us – It was a growth opportunity that was the reason why we were looking to raise any capital. 

Both my co-founder and I, when w e co-founded INTU, we both injected our own funds into the business to start with. And it was probably about 12 months in when we were looking at developing our next range of products, where we were looking at, okay, if we were going to grow this business, what does that look like? How much capital do we need? Do we have enough in the bank? And strategically, we had brought on a really great advisory board. And, you know, for our kind of strategy of what we were wanting to achieve in the time that we were building the business, raising was definitely a big part of it because it allowed us to grow a lot faster than what it would if we weren't raising capital and we were just continuing to fund the business through the sales and the revenue that was coming in.

Mia:

Okay, yeah. And so just so people have a little bit of context, how was the business doing at that point when you were sort of thinking about bringing investors on? Was it in like a healthy place? 

Christie:

Yes, it was. It was in a very healthy place. We'd had some really great traction in the market. Sales and revenue was fantastic. And we also had our contract with Mecca on the table. So it was looking very good. And I was able to pull together a really great, I guess, growth story for the brand and where we were going. that gave the investors who invested some confidence into what we're doing and the kind of return that they would get potentially in the future. So those kinds of things and I think if you are considering raising capital when the business is in a healthy place, when you're not desperate for money, that is the best time to start raising.

Mia:

And it must have taken quite a bit of preparation and work both to get your business to that healthy spot, you know, with the exciting opportunity on the table with Mecca and also preparation to actually pitch to investors. Could you tell us a bit about how you got your business to a place where it was actually ready for investors?

Christie:

Yeah, it was about a two month process just to pull together the documents I needed. And that was me working full time just on the cap raising process. So it's definitely a time consuming process. Anyone that is thinking about it, it doesn't happen overnight. And so I had to pull together our financials in terms of historical financials, as well as a projected financial forecast to show investors based on the opportunities, based on the revenue, based on the new products, the contracts, and also other milestones that we're wanting to hit. This is where we think we can get the business to from a revenue perspective.

If they were to invest their money, what would that then get us? So obviously I had to set that budget and then pull together financials. That's number one, like knowing your numbers is so important, knowing all the past metrics, historical levers and the cashflow, all of that kind of stuff is so important for you to just really really get into the detail and understand. 

The other thing is pulling together your pitch deck. So showing historically what traction have you generated in the business so far and then what is the opportunity and what are they investing in and I think if you can show the market opportunity who your customers are the problem you're solving the products that you've developed or service it could be and Why you, why is you why are you and your team the best team to execute this vision and? With the money that they're going to invest. What are you going to spend it on and why and what kind of return and revenue are you going to generate with that money?

Mia:

And do you mind sharing a little bit about what that was like for you? 

Christie:

Yeah, so. I mean, for us at the time we were raising for, bringing new products to market and also marketing and growth expansion. So really for us, it just being able to articulate that story for them. You know, the two products we brought to market was our gut and skin rejuvenation powder, as well as our energy and skin radians. And so, you know, I had to really demonstrate that we'd done our market research. We'd spoken to our customers. We knew that these products were going to be a market leading product.

So showing the data on that, the research behind why these products, why our customers were asking for it, testimonials of our previous product, the sales, the history, what we were able to achieve with what we'd launched the business with, and then what we can do for these products. We also had a contract with Mecca about to land at the time. So we had some projected forecast revenue from that contract that we were able to demonstrate,

Mia:

I know that you had an advisory board already in your business, and that was quite fundamental to actually getting investors on board with you. Can you tell me a little bit about how that worked and how you got that advisory board set up?

Christie

So very early on, I built the advisory board with people who had built this kind of business before. So I brought on a really great advisor, Tony Cody, who had co-founded Macro Whole Foods with her husband in her previous life and now sits on some pretty amazing boards and the reason I brought her on is her background in FMCG, logistics, supply chain, product, market, all of that kind of stuff with this kind of business. Not only that, she's just got that amazing commercial mindset. And so she kind of really bolstered on some great credibility for the brand. 

So the other person that I reached out to, she had actually been the GM of Sephora ANZ. And so she agreed to join our board. Unfortunately, she didn't join long term because she ended up getting a conflicting role in another company. she was able to give us in a short time, she was able to give us some really great guidance to help us get those contracts in meetings with Mecca and Sephora and all the other retailers. And then later on, we brought on another advisor as well who supported our capital raise.

So majority of our advisory board did invest and also you're getting strategic help to support the business growth, which is really important when you are raising as well as growing the business.

Mia:

This really bleeds nicely into what I wanted to talk about next, which is actually finding these investors and looking for opportunities. Because it sounds like you really had this lined up before you sort of actually raised the capital, quite a long time in advance. But where else did you look? Like, were you searching for other opportunities across the board? And can you tell us about how you did that?

Christie:

So I start the process of speaking to investors and building my network well before we actually need the money. So what I do is I'll go out and I'll reach out to people in the industry who I think might make a great investor, who I know invest in my type of business and I say, hey, I just want to have a coffee or 15 minute call. I just want to tell you what we're working on. You know, it'd be great to get some advice from you. And so they always say ask for advice, not investment upfront. And if you can ask them for some advice and they like what you're doing, you say, can I stay in touch and keep you updated as to what we're doing? then so when we are looking to raise capital, maybe you might be interested in investing. Find out then and there.

And if they say, if they are interested in the future, they might go, yeah, great, keep me updated. And then you can send them an email once a quarter or something with, hey, this is some of the things that we've done and this is attraction we're getting. yeah, that way you've built that rapport because at the end of the day, is all based on relationships, people investing in other people. Yeah.

Yeah, so the journey from going, okay, we're gonna start raising capital to actually raising the capital was about eight months for us. And early on, as you're out your financial debt, your financials, your deck, all of the things that you need in order to get ready and your documents for the deal room.

At the time we're also putting together our list of potential investors and there are plenty of channels that you can search for finding investors You know, it's always Always try to look for people who have invested in businesses like yours previously And or know your space or your industry I think especially for those of you who are like early stage like small business looking to grow and expand you're probably going to be looking at angel investors as well as maybe family, family funds or some private capital maybe later on depending on the size of the business. It can depend on the type of investor that you're trying to look for. So for us, wellness, beauty, FMCG.

I had e-commerce investors, people who'd invested in this type of business before. I mean, I go on LinkedIn, I start looking for people, but also Airtree Ventures as well has a really great list of investors. And it's also your network, I think the first couple of rounds of investment.

Don't be afraid, ask friends of a friend. I was standing at my kid's soccer game and I was telling one of the moms about what we were doing and how much, you we're going to raise some money. She's like, I would invest. And she's, she's an amazing corporate woman. You know, she, she sits pretty high up and understands the market. So she ended up investing some money. 

Mia:

Is there anything else that people should consider when they're looking for approaching investors?

Christie:

I think especially in the early stage, interview the investors as much as they're interviewing you and drilling you for questions because again, having the right people on your cap table who can support versus make it stressful for you. I always say no when there's not a right fit. You know, I've said no to capital in my business previously. I remember about eight years ago sitting down, well actually an investor, I had reached out to an investor and they said that they could only meet on this Thursday. And I said, I have my son on those days with me. 

You know my son, obviously I was trying to settle in and get the iPad out and do all that kind of, she kind of was getting quite agitated with me. So it made it really uncomfortable, really hard. But by the end of the meeting, she actually said that she wanted to invest. And because of the way she was reacting with me having my son there, I was like, do you know what, I actually don't want somebody like this in my business. So ended up turning the money down, it was about $50,000. 

And I said, no, because I think it's important, especially as a female founder for those women who might be listening, think you know, juggling multiple things and family and business, it's hard and you've got to have the right people who are there to support. And sometimes you need to go drop everything to go pick up your kid who's sick. And that's just life, you know, and I think, yeah, for me at the time I had young kids, I needed people in the business that were more supportive of that kind of, you know, that's where I'm at in my stage of life.

Mia:

That's a really interesting story about how you turned down that deal. And I was actually just about to ask you about how you personally weigh up whether a deal is the right one for you. So in that case, it was obviously just not a personal fit, but are there any other factors that you go through when you receive an offer from someone?

Christie:

Setting evaluation for business is really hard. It comes down to, there's so many different ways you can value a business. for us, we had revenue and traction and a forecast that came into play. So when you do have a historical revenue, it's easier to value the business because you can do a multiple of the revenue. You can do a multiple of your EBITDA and or include a forecast there, also depending on the contracts that maybe you might have in place, whether that's for service, product, retail, whatever industry you're in, right? Or if you're SaaS business, what's your subscription revenue? What's your monthly recurring revenue? What's your annual revenue?

It really depends. And so it really depends on the industry as to how you value the business. I look at market data as well. Were there other businesses that sold recently? What kind of multiples were they getting? Are there other companies that raised recently? What kind of valuation did they get? And if you can find out that information, it might be calling people to say, hey, I saw  you sold your business. Can you give me some insights?

When I create my pitch deck and the deck and everything, just make it so easy for them to understand and read through that they don't really come to me and ask me that many questions because they just kind of get it. And you can give them the data and the insights, the easier it is to get the money. And at the end of the day, raising capital is really a storytelling sales process. The better you are at telling your story and your why and here's the traction and proof, the easier it is to get money in.

Mia:

So I think we'd all be curious to hear about the end result of your raises. So once you got some investors on board, how did your day to day business operations actually change?

Christie:

Got busier. Well, once you've got the money, you just start spending it. And do you know what? Because of our first round was very much, you've already got the plan, the budget, what you're spending the money on. And so you just start executing and we're able to hire somebody with marketing and start the launch of the products. So that was really exciting. It did get busier. We were just able to start doing what was executing the launch with Mecca. was, yeah, it just got busier really.

And so yeah, business as usual, but then it gets busier. And the same goes for, you know, with this next raise for us again, it's new products coming to market and marketing. hi, two more hires, be staff training. It'd be yeah, new marketing strategy. We launched a podcast recently. So that's growing as well as part of our strategy. And yeah, I think it just keeps getting bigger about your problems change, think as well. And for us, it's also now we've got investors, it's reporting back to investors.

And so depending on your shareholders agreement and how you set up your legals, all of that kind of stuff as to how often you have to report to shareholders and investors, that's obviously something you could talk to your legal, get legal advice on. As you grow, bigger the round, the more investors will dictate those terms are, what the shareholders agreement looks like, what the voting rights look like, all that kind of stuff. Before VC funding, you typically don't have to, yeah, it's reporting once a year usually, you know, but we have, obviously we have board meetings, monthly board meetings, but yeah, reporting gets way, way more once you raise bigger amounts of money.

Mia:

Because I think that's really what people want to know when they're considering investment is you know how much control am I going to have over my business once I let these people in you know they got just going to dictate everything that I do but it sounds like in your case things are still quite small and you've still got you know the the lion's share of control over your brand with your co-founder of course.

Christie:

Yeah, yeah, definitely. Yes. We, we, that's why I'm a very big advocate for only raising what you need at the time, because you don't want to dilute your business too much. I've, I've definitely heard some horror stories and friend of mine, I know gave away for the same amount of money that we raised. We gave away, you know, 10% of our business verse, I know she'd given away 30%. And yeah, so it's kind of like, the more people you can surround yourself with that can help you to do the raise, if you haven't done it before, the better. 

Because you definitely make mistakes and they can cost you a lot of money, it can cost you control in your business. And so it's really important to surround yourself with the right people to help you.

Mia:

Yeah and it sounds like you had some legal advice on your side when it came to you know, advocating for you. Is that something that you recommend to others?

Christie:

Yeah. Yes, definitely. know, think getting a good lawyer to help support with the documentation. Don't try to do it yourself. You know, you can pull together your pitch deck and your financials and everything yourself. But I think when it comes to legals and just doing the final documents, just making sure that that's done correctly.