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By Florence Robson
ippa Lamb is an angel investor and Partner at Sweet Capital. Named one of the top 12 most powerful female VCs in UK tech, her angel investments include Clubhouse, The Pattern and The Stack World. In the first edition of the Ask an Investor series, Pippa gives her take on pitching a social impact business to potential investors, identifying angels who will support female founders, and nabbing yourself that dream job in a startup.
When you’re pitching a social impact business, how much do investors value impact metrics versus metrics that prove return on investment? And regarding the former, what kind of metrics do they want to see?
I’m not totally clear what’s meant by “social impact” business or “impact metrics”. Many startups build an element of positive impact into their overall business model but don’t necessarily define themselves as a “social impact” business, so I would hesitate before saying that there is a separate set of metrics investors would expect to see. Ultimately, if you are pitching to an investor rather than a philanthropist, you are still going to be judged as a commercial business and the potential return you can deliver on their investment.
Speaking more generally of early stage metrics to consider: as with any business, it is important to outline the specific problem you’re solving and prove there is sizeable appetite for solution. Any metric that demonstrates consumer demand for your product is important.
If you are describing companies in climate tech or sustainability, I would say it’s a great time to build. For a host of reasons, corporations need to commit capital to affirm sustainability credentials, which has created a viable business opportunity for startups to play in the space across multiple sub-sectors.
“The quickest way to find relevant investors is to do your homework on the criteria that matters most to them.”
What is an angel investor’s typical investment size in cash for equity?
It’s hard to give a “typical” investment size – that’s like asking how long is a piece of string. It depends on many factors, In the recent deals I’ve done the angel cheques have ranged anywhere from £5k-£250k, with most sitting around the £25-50k level. The amount of equity the investment equates is a function of the company’s valuation at the time of the fundraise.
In terms of how to set a valuation yourself or with an investor, there are a few ways to think about it. One would be to put together a basic financial forecast of how much you expect your business to earn in the first year or two and use that number as a basis for what you feel it is worth. It can also be helpful to consider what comparable businesses in the market are or were worth at a similar stage. Lastly, when deciding how much you should raise it can be helpful to work out your costs over the period in question and backsolve, along with considering the level of ownership dilution you’d be willing to take.
What are your thoughts on entrepreneurship programmes like On Deck? Are they a good route into meeting investors?
Generally, I’m a fan of anything that gives you time to focus on your company and give it a proper shot. It takes a lot of guts to build a startup and there are programmes out there designed to give you a chance to test out your idea in a supportive environment. One piece of advice would be outline the fine print to understand how much equity they are asking you for in exchange, or any terms that seem very aggressive; there’s no hard and fast rule but I’d say anything above 20% requires very careful thinking. Certainly, one founder told me she’d be asked to pay to attend one of these programmes, which was a massive red flag.
If in doubt, I often point to Y Combinator as an industry standard benchmark – their website has plenty of helpful resources that you can use as a reference point.
“I’m a fan of anything that gives you time to focus on your company and give it a proper shot.”
What London scaling startups are you excited about at the moment? I’ll be job hunting soon so I’m looking for opportunities!
It’s a great time to be looking! The European startup scene is thriving, despite the difficulties of the pandemic.
First, have a think about whether you want to work in a startup at the very early stages or when it’s a bit more established. One way to locate roles is to look at VC websites to see the companies they have invested in and which ones are hiring - often there is a dedicated page.. In terms of scale-ups, check out Crunchbase and TechCrunch to see when funding rounds are being announced. Once you have narrowed down your list, I would just reach out! Founders are generally always looking to meet qualified inbound candidates. Be specific about why you’re interested in that particular company and what skills you can bring. You need to be very hands-on at the launch of any startups so the quicker you can communicate how you can help the better.
How do you identify angel investors that support female founders, especially of colour?
There is a proportion of angels that self-identify as being specifically supportive to women and diverse founders. Generally they will tell you about it! Look at LinkedIn, look at Sifted (who recently ran some relevant list pieces), look at The Stack. Alma Angels has been getting a lot of traction at the moment and is focused on female founders and people of colour.
The quickest way to find relevant investors is to do your homework on the criteria that matters most to them. In venture capital, many (but not all) are on Twitter, have a website, or list their investments on LinkedIn. Do your research, then get in touch.
From a VC’s perspective, we always appreciate it when someone has been thoughtful about reaching out.
Whether you’re prepping for a fundraising round or trying to find your first job in a startup, it helps to ask an expert for their take.
By Florence Robson
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