Jamie Murray-Wells, Founder and executive chairman of Glasses Direct
Total money raised: £17 million
“I started Glasses Direct in 2004, going through the traditional start-up route of raising money from family and friends, then business angels. But more was needed to grow the business. We raised our first VC round in 2007, with subsequent rounds in 2008 and 2009, the last of which raised £10 million.
I always understood that raising capital in this way required giving up a degree of control. But for me, the business’s needs are more important. You’ve got to fuel the train with all the coal it needs to keep going. I am still a significant shareholder, and my family invested in the last round alongside our VCs, Index Ventures, Highland Capital Partners and Acton Capital Partners.
We don’t disclose turnover or profits, but we can see profitability in the short to medium term and the company is doubling in size roughly each year. Our strategy was always to forsake short-term profitability in the name of building a great customer proposition, with a strong message of great savings. We’re introducing tools on the website to help people ‘try on’ glasses virtually and get advice about styles, which should drive sales of designer brands.
We’re still just in the UK, but we’ve always imagined the Glasses Direct proposition would be attractive in any market and the board wants to create an international brand. In the medium term we want to be a destination site in the UK, so that whenever anyone goes to get their eyes tested they think of Glasses Direct as well as Specsavers and Tesco.
Even though we’ve punched above our weight in terms of marketing and PR (I once released a flock of sheep into Specsavers because I felt they were fleecing their customers) a lot of people still don’t know about us, so we need to make them aware that we’re out there.”
Joe Cohen, Founder and CEO of Seatwave
Total money raised: $53 million (£34 million)
“From the outset, Seatwave was developed in partnership with our VC, Atlas Venture. I spent three or four weeks in the summer of 2006 discussing the idea of a ticket exchange with the partners, and at the end of that time they said they’d be willing to invest all the seed/Series A money for the company, $3 million in total. That’s why I always refer to Atlas as my co-founder.
From very early on we felt that this could be a truly pan-European business, so our capital requirements were pretty significant. People, infrastructure and running marketing campaigns in different countries at the same time were all very capital intensive. No-one had built a ticketing exchange business in each market, so there was an opportunity to define the category in each country and we decided early on that we were going to invest in supporting that strategy.
At the moment we’re focused on Europe. It’s a big market and we’re still at an early stage. The UK is our largest market and our penetration levels are very low relative to the opportunity. There are 23 million people who buy tickets in the UK today, and every one is a potential buyer and seller of tickets. We’re not profitable yet, but our growth trajectory indicates that we will hit profitability in the first half of this year.
We still have to contend with negative perceptions of secondary ticketing, but I believe we’re winning that battle. In a recent media audit, we found that 97 per cent of coverage of the resale of tickets in 2006 was negative. In 2009, nearly 80 per cent was positive. We can’t always please the football clubs, the promoters and the venues: our job is to please consumers.”
Errol Damelin, Founder and CEO of Wonga
Total raised: $28 million (£18 million)
“Originally, I was going to start Wonga with funding from friends and family. I had a conversation with Balderton (formerly Benchmark) about something unrelated, and we decided to work together. So it wasn’t done by the traditional method of knocking on doors.
The first round of funding for Wonga raised £3 million, reasonably big for a seed round. We had enough capital there to trial the service, but we needed more to scale it, so we raised a fairly hefty round of venture debt very early on. That made sense with our model: we’re a lending business with relatively predictable cash flows.
After we’d proved the model and broken even, we raised our second equity round. The process started in January 2009 and ended three months later, so it was at the peak of the global financial instability. We raised £22 million from Balderton, Accel Partners and Greylock Partners.
The biggest impact our VCs have had on the company is helping us to think big all the time. We take the view that exits will take care of themselves at this stage. I know many companies with VC backing have to give this a lot more thought, but I’ve had no pressure from our investors: we will exit when it is right for the company.
My sense is that there aren’t enough scalable business operations in Europe for VCs to invest in. Entrepreneurs complain a lot about a lack of VC money, but I think there is enough capital. When you understand it, you can see that there aren’t enough opportunities that look and feel like VC opportunities.”
Gordon Sanghera, CEO and co-founder of Oxford Nanopore
Total raised: £50 million
“Our investors are hedge funds and institutions, not classic VCs. We did speak to various UK-based VCs, but we found that this country doesn’t have the risk appetite for complex companies like us. There is no guarantee of a three-year return with this proposition. If a VC had come to us with a five- to seven-year view, we would have entertained them.
One thing I want to do is behave like an American company. I was involved with a UK company called Medisense before this, which got all its money from Boston and ended up being acquired by US-based Abbott Laboratories. The UK never benefited in terms of manufacturing jobs.
We’ve reversed the normal procedure. Whereas US companies normally come to British universities to license portfolios of great intellectual property (IP), we’re commercialising the IP of a bunch of US academics, in addition to what has been developed here at Oxford.
I have to pinch myself sometimes when I remember we have raised £50 million. We’ve done it by doing what they do across the Pond very well, not being afraid to sell the big story. It’s a high-risk, high-reward proposition, but I think people buy into that.
As for the ultimate aim, I have mixed feelings. If we achieve our goal of bringing down the cost of DNA sequencing, [our partner] Illumina would probably be very interested in buying us. On the other hand, we see ourselves as an independent company. If I could choose, we would be a technology company with a sustainable model generating jobs in the UK and returning profits to UK Plc. I would like to put the company on the Main List and show that tech companies here can do it.”
Andrew Fisher, CEO of Shazam
Total raised: £20 million
“We are best known for our music recognition service – you point your phone at music and it tells you what’s playing and how to buy it. We have more than 50 million users in 200 countries and we sign up 750,000 more each week. We used to be distributed primarily through mobile phone companies or handset manufacturers, but we’re now sold in app stores, for example the iPhone app store.
We were founded in 2001, with original investment from [publishing company] IDC and a number of angel investors, among others. More recently we’ve received funding from DN Capital. A year ago we brought in Kleiner Perkins Caufield & Byers, which is quite significant because they invested in Google, Amazon and eBay.
We don’t disclose turnover, but we’re profitable. That’s because, historically, people have paid to use the service. In the brave new world of apps, we do give it away for free. We could not have achieved the growth we have in user numbers by charging. But we are moving to what we call a ‘freemium’ model, where an element of the service is free and there is a premium service for a lifetime charge of £3.
In mobile, there are a handful of companies that will achieve big valuations in the years to come, and our mission is to be one of them.”
Planning for growth
Steve Gilroy, chief executive of Vistage International (UK)
“Entrepreneurs often fail to secure investment because the business case for additional capital was poorly thought through and presented. It doesn’t matter whether the finance you’re seeking is from a VC, a bank, a business angel or an asset-based lender, you need to have sound data about why you believe your business is a solid investment opportunity.
Practice, as they say, makes perfect, and the classic mistake entrepreneurs make is failing to rehearse their investment pitch. If you have a clearly presented business case, you should be able to negotiate better lending or equity terms.
It’s important to find people who will challenge the assumptions you have about your business before you get in front of a lender. That means questioning forecasts and target market descriptions – asking what will happen if there are problems with demand and the assumed growth doesn’t materialise. What contingencies do you have in place if forecasts prove to be wrong?
Too often, entrepreneurs fail to work out the details of their sales and marketing – they stop at a superficial level. Basic preparation is everything when seeking third-party investment. In many cases, entrepreneurs are so focused on getting funding agreed that they haven’t even considered their exit strategy.
A little thought and planning can make life a whole lot easier as your business grows.”