Georg Westin, Founder and CEO of Hero Gaming
The fundamentals of getting the funding you need to get your business off the ground, by serial entrepreneur Georg Westin.
Raising money for a company for the first time was one of the steepest learning curves that I have ever faced in my entrepreneurial journey.
Since then, however, I have gone on to found two more successful businesses, and I am now an investor myself. I amtherefore in a position to share some of my knowledge on what works and what doesn’t to help fellow entrepreneurs build, run, optimise and scale a business.
The first company I raised money for back in 2012 was Casumo – an innovative start-up in the gambling sector, which focused on combining gamification with gambling. I had founded a business before Casumo,but I had never gone through the process of raising funds. Previously I had always taken my own savings and put them into my next project, but this time we needed more capital to get the business off the ground.
Over the years, have distilled the secret of my funding success to three core principles, which I believe will set any start-up on the right path.
1.Focus on reaching the next milestone (and always overestimate!)
The main challenge I faced was figuring out how much money I needed and what was a reasonable valuation.When you are new to the world of start-ups,figuring out how much capital is you requirecan be very difficult and, as we have seen time and time again on BBC’s Dragon’s Den, it is all too easy to get it wrong and put investors off.
Having been through the process a few times now, my advice for young entrepreneurs would be to think about calculating how much you need to raise by looking at your businessthrough the lens of the nextmajor milestone in your business plan. For example, if you are at the genesis of your business, and want to showcase your idea,the next step would typically be building a prototype of the productand getting your first customers on board.If you have a product ready to go to market, you may want funds to invest in branding and marketing.
Whatever the goal is, plan out how you are going to get to that point, then calculate how much it will cost to get there. Take this budget, then add an extra 30% on top.It is impossible to anticipate every obstacle and you will inevitably miss some unexpected costs, so it is always wise to overestimate.
When it comes to percentages, in the first round I usually give away between 25 and 30% of the company.This enables me to keep enough of the company for myself and my team, whilst also giving enough equity for the investors to feel they will have a strong return. It is important to remember that your shares will be diluted over time, so you shouldn’t give too much away right at the start of your journey.
2.Narrow down your target market
The next key lesson that I have learned in my capital raising experiences is that it’s crucial to define a realistic target market. Investors get frustrated when entrepreneurs have an addressable market that is too wide.
Much better for start-ups is to narrow your focus and target a specific group, demographic, or area. This can be expanded over time, but starting off narrow initiallyshowsthat you have done your homework.
3.Surround yourself with a good support network
Being an entrepreneur is not an easy way of life: money can get tight, the pressure isintense,and every decision can feel incredibly high-stakes. It can be tough, but it’s essential to fight it out, keep your cool and power through. As a result, having somebody to talk to and bounce ideas off makes things a lot easier. Finding yourself a mentor can be transformative in bringing clarity to your decision-making processes.
If possible, it is always wise to get in touch with people in the relevant sector before you begin raising funds. From a personal perspective, I was lucky in that before I started Casumo I had already established strong relationships with people in the industries I was targeting.I spoke to people I knew I would need help from when I went live, and they gave me some great advice.
Saying something out loud can help you get your thoughts in order and make you feel like you are making the right decisions, which is why it is crucial that you surround yourself with good people. Be honest, recognise your weaknesses and recruit to plug the gaps.
I truly believe in the importance of finding and nurturing great people and giving them the motivation and environment to go out and create great things. That is why I am one of many investors out there seeking to fund the next generation of innovative technologists.If you take the necessary steps at the outset and get your funding right, you will stand yourself in good stead to succeed in the future.
By Georg Westin, Founder and CEO of Hero Gaming
