Fundraising 101: How to secure £500k for your startup

You’re selling shares. It’s simply that. Don’t overthink it.

We’re Cuckoo. We’re on a mission to make the internet frictionless. We’re one of the top-rated broadband companies on Trustpilot in the UK. And we’ve got a really awesome team.

We raised capital this year to help fulfil our mission. And while the best capital to raise is from happy customers, the next best is from investors. As a first-time founder/CEO, the process of getting investors to back us was new to me.

So here’s the guide I wish I’d had when I started. So if you’ve got a business plan, a bunch of people doing work, or even some paying customers, but you need more funds to help make it sing, then hopefully this guide will help you. Feedback appreciated!

  • Mindset 🧠 : Why an ambush is a great analogy
  • Targeting 🏹 : Finding the right people
  • Reaching 🚪: Establishing the first contact
  • Converting 🙏 : Practice your drills
  • FOMO ⌛️ : Injecting some urgency
  • Feedback 🗳 : What did people think?
  • Results 📊 : What was the end result?

The right mindset 🧠

General advice

Just as not every customer first looking at your product will buy it straight away, the same is true for investors. It’s a sales funnel! So try to take concepts you understand from sales and apply them to fundraising to develop your personal mindset.

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US Army ambush diagram

What we did

Why did it help me thinking of fundraising like an ambush? It got me in the right mindset. I’m choosing the location and timing of the operation and nudging the scales of chance in my favour!

Targeting 🏹

General advice

What we did

  • Approach angel/seed investors in similar consumer-focused businesses: We tried to find similar businesses (like Bulb or Monzo) and go after their early investors. If they’ve invested once, they might be interested in doing it again.
  • Bankers/professionals with experience in TMT (technology, media and telecoms): This can be a challenge since industry professionals have often ‘seen it all before’ so may be less open to a new perspective.
  • Exited starting team/senior teams of established startups in their later stage: While these people likely won’t have domain expertise, they do have very useful skill sets and/or access to funds.

Reaching 🚪

General advice

What we did

  • LinkedIn messages: A bit like emails, but you first want to ask to connect, and then when they accept you can follow up with a SIP message (acronym explanation in the next section).
  • Twitter messages: An approach we’ve found to work well is initially tweeting at people for their general advice. You can then continue the conversation via DMs.
  • Promoters (typically charge 5% of what they raise): A bit like mini-investment bankers who take a hefty fee when bigger companies IPO, promoters help source capital. They range from single one-woman bands to big networks.
  • Companies House confirmation statements: This is my favourite tactic. If you look at public Companies House filings, you can get the forename and surname of the starting investors of any company. A really useful way to find individuals. See Results 📊 to see how much we raised via this route.
  • Network, network, network: Often investors you pitch to will intro you to their friends. This second and third-order network effect is very powerful (and time-consuming…).

Converting 🙏

General advice

1) The tease: An intro message that doesn’t overwhelm but teases a bigger thread of information. People are naturally interested. Play on that. Cold approaches should be:

  • Short — Keep it simple. Keep it short.
  • Informal — You should make it seem like you’ve typed the message there and then and is not just copy and pasted.
  • Personal — You should reference something personal about the target’s CV or experience. The more investigation it takes to find this information — or the more unique it is — the more likely they are to be impressed that you found it, and then hopefully respond.

2) The deck: Everyone needs this so you kinda need to provide it, often with a five bullets summary to set some context. Try using DocSend so you can track engagement. There’s nothing stopping you from iterating on the deck as the fundraising progresses.

3) The first meeting: This is where you want to wow investors with your story, how you first sought out this market, unit economics and future plans. Most investors ask the same questions, so again try and iterate on the answers.

4) The information dump: You usually then send prospective investors a whole host of information.

  • Investor deck —slides should tell a story
  • Unit economics explanation — how the maths add up for each customer
  • Financial model — how the maths add up over time for many customers
  • Valuation rationale — why our shares are worth a certain value
  • Cap table — what shareholders own, including options
  • Blogs — show what we believe and our world view

5) Follow-ups: This stage is dependent on each investor but can involve 2–3 more calls, references from current investors or even switching to the product! And remember to set up the deal, e.g. via Seedlegals.

What we did

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Our funnel stats

FOMO ⌛️

General advice

What we did

  • Picked a total funding amount that was achievable, then aimed to overfund (selecting the right number is more an art than a science)
  • Marked each investor lead in a CRM and classified them as High, Medium or Low interest, as well as the last time contacted
  • Kept last contact to a minimum 2–3 days with the aim of getting a decision as efficiently as possible so we could move on (i.e. pushing people up the interest chain until they either fall off or convert)
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The condensed timeline we used to push potential investors to a decision

Feedback 🗳

General advice

What we did

“Super strong branding/messaging. Clearly a super determined founder/great hussle. At this early stage, founder determination is critical. You strike me as somebody who will run through walls and won’t stop. Great regular updates. Very good ‘signal’. Willingness to take feedback. Even this feedback request is a great signal. Deck was very good. Very clear and well designed.” 🤩
“Very strong vision, well-drilled narrative and story presentation, humble accepting of advice” 🙂
“Perhaps I wish you were tackling something more interesting” 🙃
“I felt I had to dig around to get to key financials” 😬
“No startup experience vs lots of agency experience” 😔
“IMO you will always be valued off of EBITDA multiple not revenue which makes it hard to build a really big business” 😢

So where did our capital originate from?

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Well, a whole bunch of places. So the learning from this seems to be that you need to knock on a lot of people’s doors. Good luck! 🙏

What are you waiting for? Switch broadband, for good. And if you enjoyed this article, please show us some love by sharing or clapping 👏

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Switch broadband, for good.

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