I've written before about losing my company, and one question keeps coming up: why was my VC funding such a bad deal?
Ultimately, when you die in business it's usually "death by a thousand papercuts". There isn't one thing. It's a combination and culmination of a lot of bad choices and decisions compounding over time. So here were some of mine.
Four mistakes that compounded
- A bad VC deal. I agreed to tranched funding. It also had debt repayments, plus extortionate funding costs, so what I thought I was getting and what turned up in my bank account were very different. I then had an exclusivity clause that outlasted the second tranche, so even if I wanted to, I couldn't raise from other sources without defaulting on the initial agreement. There were lots of other small, nasty clauses that didn't sound like much but in reality can get difficult to manage.
- Bad VC advice. Although we had been trading profitably with a lean team for two years, we were told by the VC they would not invest without an operations manager joining the business. We had never paid a £60k salary up to this point. We were also told explicitly not to wait until the cash hit the bank. The funding was delayed, and delayed, and delayed, so by the time the cash did hit, we had scaled our team but stressed our cash flow too much.
- Under-resourced. We were running a national service, with cars arriving daily from Aberdeen to London. Our work was complicated: we would take a brand-new luxury car and strip it to its bare bones. I took my eye off the ball. The funding was supposed to be easy, but it wasn't. It was a rollercoaster, and I didn't have the resource required to land it whilst running a demanding operational business.
- Lack of knowledge. To be honest, I had never really heard of VC funding before I engaged in the process. I had no previous experience in fundraising at all. I didn't know what was normal or not, and the "team" I had around me was all provided by the VC.
Get a team that has your interests at heart
I have spent over 10,000 hours supporting funding rounds since my company went under. With the proper support and guidance, I believe I could have gone all the way.
Don't be like I was. Take your future into your own hands, and get a team around you that has your interests at heart.