Venture capital ought to be in popular demand today rather than at its current low ebb. The publication of Angels, Dragons & Vultures, a down-to-earth blueprint by a veteran investor and entrepreneur, could not be better timed to spur renewed interest in entrepreneur-led, venture-backed businesses.
This lively and comprehensive guide should encourage other entrepreneurs to look twice at a market dragging itself back from the brink. By definition, the author concedes that venture capital “carries a high element of inherent risk and needs to offer its provider the potential of a reward high enough to balance that risk”. Do you really want venture capital? Is there no other way of achieving your objectives? Do you raise it successfully, and manage your new partner?
Simon Acland, the author, who has more than 20 years’ experience in the field, and directorships in 23 companies, knows all the tricks of the trade. A former managing director of Quester, one of the UK’s early-stage technology investors with £250m under management, he has also been involved in many successful trade sales and stock market flotations. And he admits: “I have seen as many companies destroyed by venture capital as made by it.”
One of his best pieces of advice is “never get into a position where you have to consummate a particular deal”. At the same time, he writes, “always having an alternative is a theme I hope is beginning to echo as often and as loudly in this book as a leitmotif in a Wagnerian opera”: in short, never get into a position where you have to complete a deal, let alone where you have to accept investment from a particular investor.
There is also some pertinent advice on the new relationship between the investor and the company in which the investment is made. The new investors, as viewers
of Dragons’ Den will recognise, inevitably like to boast about their experience in building businesses and their useful contacts when it comes to the next funding round and the next exit, promising access to a black book of the good M&A brokers and investment bankers in return for choosing to use their services. And of course, he says, they will claim to be able to help you get known in China. Obviously that depends on the type and strength of such contacts and their assessment by your professional advisers.
Acland makes it clear it is definitely worth spending time with your new vulture, angel or dragon in informal meetings away from the office, as you probably would with a new partner. But avoid long, extravagant lunches or an expensive box at a sporting event. Whatever entertainment or meeting you organise, Acland stresses, “make sure your investor is briefed first about who is who and what it is you want to achieve.”
Above all, if and when you are looking for money, be prepared. The author quotes the example of a company he used to work for that received one thousand investment propositions every year, or about 20 every working day.
“We rejected approximately half of the incoming plans immediately on the grounds that some simple criteria excluded them – size, location, stage, sector. Or they might simply be completely batty.” A well-argued business plan clearly helps.
For anyone looking to expand his or her business or planning to launch a new one, this book is a must read.
Angels, Dragons & Vultures is published by Nicholas Brealey Publishing, £16.99