100 Stories of Growth - Insights from Entrepreneurs

The future was looking bright for upmarket online bespoke shoe design business Upper Street as the company continued to scale. But lack of robust financial planning and an unexpected funding crunch would eventually take their toll. The company’s principal investor Venrex Investment Management had invested about £750,000 alongside £250,000 from the British Business Bank. Upper Street had raised another £230,000 from a crowdfunding round. And Venrex was about to invest even more in the company. “But at the 11th hour Venrex didn’t follow on with its funding,” explains CEO and co- founder Julia Elliott Brown. Any further investment would have taken Venrex over its Enterprise Investment Scheme threshold. But Venrex hadn’t realised until the last minute that investing in Upper Street wouldn’t be technically possible. Elliot Brown and her co-founder and sister Katy Chandler made the very tough decision to close the company. “When you’ve got investors, customers, friends and family, and suppliers who are the ones investing in you and putting their faith in you, and then it doesn’t work. This can be very tough for entrepreneurs.” — JULIA ELLIOT BROWN, UPPER STREET While Elliott Brown says she had written “a really comprehensive business plan”, it had focused less on financial forecasts. “We didn’t really have a quick enough plan B or plan C when Venrex decided not to follow on their money,” she says. Good financial planning can safeguard a company’s future UPPER STREET Financial planning: always have a plan B and plan C A key lesson learned by multiple company founders in our research is to seek out aligned capital providers that understand their vision and sector. And also capital providers that are willing and technically able to commit their capital for a mutually acceptable funding time period. We’ve heard many stories from high- growth company founders about clicking well with an investor or being impressed by a financier’s track record. All very good foundations, but immediate attraction needs to be backed up with more robust due diligence by any founder, especially when the funding stakes are high. As much as capital providers carry out due diligence on companies, we believe that companies should also undertake similar research into their capital providers. This type of financial capital due diligence is intrinsically part of good financial planning. It is important for founders to have those transparent and communicative relationships with any financial partner. Sometimes though, poor communication, unexpected outcomes and lack of credible investment or finance options can be have devastating effects. A complete surprise for online designer footwear company Upper Street’s investor was enough to end in the business cease trading (see Upper Street story on page 59). While financial planning is certainly a very valid requirement for all entrepreneurs, our research findings indicate that there needs to be more of level playing field for women and men. Raising capital: bridging the male/female divide While both male and female respondents in our quantitative research study ranked equity funding as a top-three driver of the company’s scale-up success, some differences exist. We’ve observed a more bullish approach to raising equity among men compared to women. Many women entrepreneurs we have spoken to tell us that they have felt they have to convince, mainly male, prospective investors about how they will manage the downside risks associated with growing their business. Conversely, male entrepreneurs report that they are often encouraged to be bullish or optimistic by prospective investors when they discuss their growth plans. 61 60 INSIGHTS FROM ENTREPRENEURS FINANCIAL CAPITAL THE FEMALE FOUNDERS 18% of men but 40% of women think it’s difficult to know where to source equity from