Meaningful Business (MB:) What has been your experience in trying to raise capital during the pandemic?
Steve Butterworth (SB:) Very positive! Neighbourly closed a Series A round last month, which took six months from appointing advisers to closing the deal. We weren’t planning to start the process of raising money until this year but we decided to bring our timetable forward on the basis that: 1) We didn’t need the money to survive – always better to raise money when you don’t need it, 2) We didn’t know how easy it was going to be to raise money in 12 months time, and 3) We could see an opportunity to accelerate the development of the platform at a time when the demand was more than likely going to increase (and it has).
MB: How have you seen investor sentiment change over the last year?
SB: The rise of the ESG agenda has meant the investment community has a rapidly growing appetite for finding businesses that make a positive impact beyond pure play short term profit making. This is not philanthropic investment – these guys want to make a return on their investment, just like any other investor, but for many it is no longer about ‘profit at all cost’.
The shift we saw during our process was the level of interest coming from those who were NOT impact investors by definition but were more traditional investment houses with a clear mandate to invest in more responsible businesses. It is not for everyone, but it is a really exciting time to be in a space that is getting attention from investors that is long overdue.
MB: What were the challenges and benefits of fundraising in a remote environment?
SB: I’m a people person so I wasn’t convinced that a whole process could be run remotely without any face-to-face contact. However, we soon got comfortable with running a completely remote process and knew that if we didn’t there would be no deal.
We had great advisers who ensured potential investors were engaged and aligned with our values, and it was all very smooth. On the basis we have all had to adjust to working in a virtual world, everyone simply accepted it as being what had to be done and got on with it. I still haven’t met our new investors in person!
MB: What were you looking for in an investor, beyond purely capital?
SB: Beyond the obvious criteria (i.e. are our values aligned, do they really understand our proposition, who can they introduce us to, etc.), for me it was all about the relationship: Are we going to get on? It sounds simple but you are about to bring an unknown entity into the inner sanctum of your business. What happens when something goes wrong (and it will) and how will they react? Are they going to be supportive, collaborative and help resolve problems or stand on the sideline and throw stones? As the saying goes: “No plan survives first contact with the enemy” – make sure your investment partner is on the journey with you and is going to be a genuine help rather than a hindrance.
MB: What advice would you give entrepreneurs looking to raise funds over the next year?
SB: You don’t know it all! Find advisers you like and respect, listen to their advice and make informed decisions. Also, fundraising is a time consuming and tiring process but if you’ve decided you are going to do it, don’t wait!
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