Category Archives: Funding

Startups are hard – cash doesn’t solve the problems!


I meet with lots of founders of startups pretty much everyday. The ones that are successful realise that starting a company isn’t about glamour or fun its a seriously difficult thing to so.

I have been involved (either as a founder or investor) in a bunch of startups, there are always highs and a lot of lows. The one thing that is universal is the struggle and difficulty from taking an idea from a discussion in a coffee shop or pub to a self sustaining business that doesn’t require your constant supervision.

A huge amount of entrepreneurs think that funding is the solution to becoming a successful business, but most successful businesses don’t need a vast amount of funding if they have a successful strategy.

Spending time on the strategy and discussing the obstacles around this strategy is much better than working on a funding document and deferring the strategic discussion until there is money in the bank.

Technology has become massively easier over the last decade and building a product or service for the web has virtually no cost apart from time. Trends talk about “product/market fit” as having a product that customers are willing to use and pay money for.

So as a founder – don’t think that raising money is the best use of your time, bootstrapping your business until you have good product market fit is a much better use of your time resource. It has the advantage of keeping the equity pie complete. If you really have no choice than to raise money leave this as late as possible. Focus on the product!

Unicorpses – who cares?


There is much talk about valuation and the “Death of the Unicorn”. It just proves to me one thing, I am getting old!

I lived and preached the value of the new frontier in the late 90’s, many people scoffed at the “Tech Bubble” of the dotcom era. We then turned our attention to bankers, bashed them and now we are bashing the next wave of technology companies.

Valuation at any point in time is just a reference to what a group of investors think the potential cash flow of a business will be in the future. It can be modelled in a number of ways and we can agree or disagree (by investing or passing) on the number.

Technology investing is not for the faint hearted, if you want something with less risk (and reward) then think about another sector, perhaps something that you know lots about. I don’t know much about anything but I have seen lots of technology and I do really love the “New New Thing”.

So I choose to invest in technology, if I knew more about property I might invest in that, but my public and private investments are very heavily skewed to technology, mainly because it is something I think I know something about.

I am also a realist, things that go up must also come down and historic valuation metrics are no indication of future ones. It takes time for most people to catch up and I continue to see astounding valuations for businesses that have little revenue, let alone future cash flows. This, as my mother used to say – “Will end in tears”. It might not be this year or next, but it will at some point.

I have a philosophy of investing with at least a decade as my view point. I have never managed to “flip” an investment and generally prefer to invest early rather than later. It isn’t a great philosophy if you are a fund manager, but as a private investor I can stick to my investment diet and not worry about what others think.

Realistically the only thing I am learning from all the press about Unicorns (or death of) is that I am really getting old. (Kevin Dorren, Age 47)

2015 – A year in review


2015 end of year review

It seems that the year has flown, so it’s worth looking back to see what was achieved in 2015.

Diet Chef

When we started Diet Chef we never thought it would get to the scale it has. It has massively out performed our expectations both from a customer perspective and financially. We were faced with a very tough decision in 2015 either to sell Diet Chef as we had a (great) private equity investor that required an exit or buy the company ourselves.

There were many hours of discussion on this, but standing back from things, most diet companies have been around for over 15 years and none of the macro economic factors would suggest that there is any likelihood of a company like Diet Chef disappearing overnight. So funded by a large chunk of debt we have bought out our existing investors and plan to keep Diet Chef for the longterm.

That doesn’t mean there hasn’t been changes, most of the infrastructure investments we have made (people, systems and geographic) have been reversed over the last 6 months. We are back to a controllable cost base and our plan for 2016 is about growth. This is coming from two areas – acquiring more customers and making the ones we have happier!

There was a drive for profitability over the last 12 months which was the right thing to do if we were seeking an exit with third party, but we lost a lot of our customer focus in this drive. This has been reversed and the customer has become king again within the organisation and our drive is all about making the customer experience better and allow our customers to self serve as much as possible.

In addition we have launched another brand (Diet Now) that allows customers who cannot afford Diet Chef to be able to buy a product from us. As we have grown our costs of marketing have grown, so getting more bang from the buck on our marketing spend is pretty important. Our market entry strategy for this is very much like Diet Chef in the early days. Test, learn, listen to customers, iterate!

So I am very excited to be hitting the 2016 diet season ahead of expectations and with most of the important infrastructure issues fixed.

Investments – Private

It’s been a bit of a rollercoaster of a year on this front. As you have followed I love investing in really early stage tech or consumer businesses. I was looking at a very health return on Fanduel based on they’re recently reported $1b valuation, but the power of TV (more on that later) has put them into the regulators crosshairs. I am sure this is nothing more than a blip, but pushes any return off for a bit (not that I am really worried about this, it’s a great business led by an outstanding team)

TVsquared continues to go from strength to strength. An amazing team with tons of experience are making it look easy to grow quarter on quarter (significantly!) with more depth into existing customers. I think this could be another significant investment but really the time to ramp up the sales organisation to cope with the demand. (see here)

Flavourly continues to grow and has significant cash resources following its successful crowdfunding last year. Like all businesses it is dealing with the growth factors in terms of physical space, staff and product. Looking very promising in 2016!

I am currently looking for one investment for 2017, same characteristics, ideally consumer focused with an international market opportunity.

Investments – Public

Have disposed of some of the investments in my portfolio in 2015. Mainly Lloyds Bank, Tesla & Nestle which I have reinvested fully in Amazon. I am currently sitting on a large position in Amazon and Alphabet (formerly Google) both have had exceptional performance (49% and 51% respectively). Electronic Arts is up 19% (thanks DJ for the tip), The only loss for the year is Jardine Matheson Holdings, down 14%, it’s a very long term hold so no plans to sell any of these stocks in 2016. Remember that this is not a short term investment strategy.

The outstanding investment for me this year is Amazon. They are growing both in terms of traditional retail, but also AWS (Amazon Web Services) is a significant growth driver. I love the fact that Bezos has a very long term view and is re-investing in the business for growth and efficiency (Amazon Logistics, Cargo Planes, Same Day Delivery) all to improve the customer experience.

Crowdfunding for Debt

I have been following the crowdfunding market very closely over the last 12-18 months.

One area that has fascinated me is the use of crowdfunding for debt products. Interest rates at 0.5% don’t really support the income requirements of lots of individuals in the UK. Crowdfunding (which I accept is more risky than bank deposits) is an interesting area for consumers who feel that they are willing to take a little more risk.

The size of business and the serviceability have been a big issue over the last 12 months, but we are seeing more mainstream businesses adopting crowdfunding for their needs. This is a classic example of disruption of financial services (traditionally people and infrastructure heavy) to marketplace models.

Although not for everyone we managed to complete a £1.5m debt finance with LendingCrowd recently that helped fund a management buyout. We were attracted by the ability to introduce funders that would normally have to provide the whole part of the debt to the deal.

You can read more about this at The Scotsman.

There is an excellent video about the future of crowdlending by Samir Desai

Edinburgh Scotland is now a tech hub!


© Mrdoomits | - Edinburgh Castle Photo

The recent announcement that Fanduel has raised over $275m in investment brings new hope to technology startups in Scotland.

It has been a long time coming but a few “unicorns” are appearing with Skyscanner and Fanduel leading the way.

The great thing about this is that this tech revolution will inspire others to take the leap to startup themselves.

I was lucky enough to be the first angel investor in Fanduel way back in early 2008 when it was called Hubdub (they then changed the focus to daily fantasy sports). What always impressed me was the team of Nigel, Lesley, Tom, Rob and Chris. They had a very good shared vision and a great working relationship with clear leadership from Nigel.

One of the first things that I love to invest in is good teams, and it was clear from every conversation in a coffee shop on Marchmont Road (which unfortunately isn’t there anymore!) that this was a great team.

Late 2007 and early 2008 was not a great time for tech investing. Most of the angels had l”left the building after nursing losses during the dotcom bust. Luckily I had a few great contacts to share the first angel round with in Ian Ritchie and Andy Allan who both were impressed by the team as much as me.

It is still early days for Fanduel and there is much to do in a much more competitive landscape than a few years ago (Yahoo and Pokerstars both are entering the space).

I am really hopeful that we will see more activity from other tech companies such as TVsquared (I am also an investor here), Mallzee and a bunch of other companies at Codebase. Good luck to them all

The Angel Investment Diet

I was lucky enough to be invited to join the table of Startup Grind Edinburgh at the EIE15 conference this week.

I talked to Phin quite a bit about investing and some of the selection criteria I use.

The most important tactic I have found for angel investment is “less is more”. I am sure this will not be popular with angel syndicates, crowdfunding site or gatekeepers but I certainly have found it to be a very important part of my investment strategy.

So a simple rule of investing in one company per annum has certainly been good for me. I mainly decided to do this as a way of me being able to cope as an angel investor. If you invest in a company the founding team do expect you to help – and being a full time executive means I have very little spare time. Investing in multiple startups at the same time is the same as starting multiple companies – a big no go to investors.

The reason investors spend time pulling together shareholder and employee agreements to restrict the number of things you do is the same strategy I use in angel investing.

So the next time you get a plan or meeting request across your desk, think if this was the only thing I could invest in for the next 12 months would I do it?

Just like dieting – less is more!


If you make the $1b valuation club you become a Unicorn.

There are not that many UK based (or even Scottish Unicorns). It looks like Fanduel is driving it’s way to join this club.

I met Nigel, Tom and Rob in Black Medicine in Parchment in around 2008. I will dig out exact dates, but I was instantly impressed by each and everyone of them. Rob and Tom were friends from Wales that had design and coding experience, Nigel was a St Andrews grad that had worked at McKinsey, Betfair, Flutter and Johnston Press.

They had the drive and vision to build something big. Never in my wildest imagination did I think that 6 years later they would be joining the $1b club.

I visited Nigel and Rob recently at their UK offices in Edinburgh. The facilities were up there with any other silicon valley start up I have visited. The drive and confidence has grown over the years and they are at the top of their game.

It just shows that a small amount of funding can be the baby step to building an amazing business in a few short years. It is truly amazing!

Scottish Edge Final – 9th December – RBS Gogarburn


I had the honour to join the judging panel for the Scotedge final at RBS Gogarburn yesterday.

It was an inspiring day and lots of fun to take part in. Most importantly there were fantastic companies that had great ideas they were trying to execute.

Sometimes the first small amount of funding when there are no other traditional sources of finance to turn to are the best.

I personally remember when Ian Ritchie wrote his £20,000 cheque to invest in Orbital Technologies all those years ago. It seemed like the largest amount of money we had ever seen (as an equity investor it probably was!).

The rules around EIS and SEIS have helped business angels invest in companies, most angels invest as part of syndicates which I personally don’t really like.

There is nothing better than the small amount of money and the credibility and invest-ability that a good angel can give a startup company.

It is usually just the beginning of the road – but investment like Edge is a great way to bridge between personal, friend and family funding – and traditional sources like the banks.

Good luck to everyone that won yesterday.

Sticking at it..

Lots of startup businesses give up at the first sign of problems. This is a great pity, as running a business is really an endurance race rather than a sprint.

Unfortunately most business stories we read about skip over the years of effort, planning, experience and knowledge that go into most startups. Founders are often looking for short cuts for growth or get rich quick schemes.

I know from personal experience is that although it takes much longer to get to a comfortable business state when a journalist speaks to me I skip conveniently over the years of hard work and obstacles that you need to overcome.

The excitement of starting up is usually dulled by the focus, knocks and diversions that happen in everyday business.

The simplest way to get over this is not to set unrealistic timescales – something that entrepreneurs really struggle with – they are all optimists.

When will it get easier when running a business – the answer is really never!

But we don’t do it for an easy life, if we did we would be working in a nice comfortable cozy job, clocking off at 5.30 and not taking the worries and issues home with us everyday.

It sounds attractive, but I would much rather forge my own destiny.