On Monday 4th March, Movemeon and Techspace held a joint event: Scaling a Startup: The Challenges & Solutions. It was a tremendously interesting and informative evening, and we’d like to thank our brilliant panel of speakers – Rachel, Founder of Koru Kids; Tamara, Co-Founder of Live Better With; and Bernadine, Co-Founder of Vastari – as well as the audience, who asked some excellent questions in the lively Q&A discussion that followed. Below is a whistle-stop tour of our speakers’ journeys, followed by Q&A highlights.
About the speakers
Rachel founded Koru Kids in March 2016 after experiencing first-hand the astonishing gap in the market for quality and affordable childcare. She had previously been CEO of a leading online pharmacy, and worked as a consultant at McKinsey. The first major challenge Koru Kids had to face was a product pivot; Rachel quickly realised after an early wave of success (and a seed round of £600,000) that an even more viable opportunity existed in what had initially been a (guiltily pursued!) side project. With full support from her investors to change direction, Koru Kids has subsequently seen tremendous growth and has raised a total of £3.5m. The main learning? Mission and purpose are essential for a founder’s long-term commitment and drive, but investors care less about an idea than they do a strong market and a viable solution to a problem.
A fellow McKinsey alum who worked in the healthcare sector for 11 years, Tamara noticed that while medical care for chronic conditions was very well taken care of, there was no single place for people to find help in living with their conditions day-to-day. Live Better With began as an information resource, but has since evolved into a multi-faceted platform offering well-reviewed products, content, a community forum, and services (e.g. cancer travel insurance). In common with all three-panel members, Tamara’s profit-with-purpose business means that she can be confident that they’ve helped people (75,000 of them and counting), regardless of everything else. The steepest learning curve to date has been the classic challenge of balancing growth and profitability; while there is no one-size-fits-all answer, Tamara is clear that it is difficult if not impossible to go after both after the same time, so a choice does have to be made.
Bernadine co-founded Vastari in 2012, having discovered that museums’ and galleries’ barriers to identifying ownership and availability of pieces were giving convenience too large a role in exhibition curation. With a passion in art, and an education in Art History, Bernadine and her co-founder felt strongly that this was something they should tackle; collections and exhibitions ought to tell the story of human history, and this story is restricted when the most relevant pieces are omitted. Vastari was therefore founded to connect individuals and exhibitors globally. The biggest challenge, in the beginning, was finding a for-profit business model in an industry dominated by a non-profit approach; hence Vastari’s evolution from a database of art that people could request, into a platform dealing with the many other facets of art (who pays shipping; how do you pay for rent; when are pieces available; what space does it need).
Below is a sample of some of the questions that came up in the Q&A, with paraphrased insights from each of the founders:
On early fundraising, the difficulties of raising as a sole founder, and shareholder structure
Rachel: There were three ingredients to success with investors: team, market, and idea, in that order. If anything, the ‘idea’ was irrelevant to investors in comparison with the first two. Regarding ‘team’, one investor did walk away due to the absence of a technical co-founder – for most though, Rachel’s track record at DrThom (she took it from £6m revenue to £20m and £5m EBITDA in 3 years) did the talking. Having evidence of a good market is also absolutely indispensable, no matter how good the team.
Bernadine: Strong counsel is not to raise too early and give away too much equity, which is what happened at Vastari the first time around. The shareholder structure ended up being too restrictive – requiring Bernadine to restructure the business entirely. Her advice is to bootstrap as much as you can in the beginning, and not to treat investment like validation for your idea; in seeking funds, you need to go out with the terms you want, and then do what you need to do to prove the valuation.
On investor relations and governance in the early years
Tamara: Tamara was glad to have had investors to advise and support her at the idea stage. She feels that even the disagreements have well-intentioned reasons behind them, which is important to remember in the moment of debate! Investor relations are something it’s essential to work hard at, as both sides will be best served by a strong long-term relationship. Tamara recommends managing investor relations separately from board relationships and bringing on a Chair as a Non-Executive Director.
Rachel: This is an area of development, as she would like to work on her communications with her investors. Koru Kids has a fairly large number of really excellent investors (6 VCs across £4m of funding) and she could make more use of their advice. She also commented that more broadly, the internet has democratised advice and expertise, so VCs don’t have the monopoly of startup experience that they had previously – she expects VC relationships to evolve further over the next decade.
On exit strategies, and when to think to start thinking of them
Bernadine: It’s really important to think about your exit plan when you’re fundraising. Investors often expect a 10x return; if there’s no precedent for a £100m exit in your space, then raising at £10m is not entirely sensible – so think about your realistic exit valuation goal from the outset.
Tamara: You should think about who potential partners might be for a future exit – for Live Better With, this might be a healthcare company, or it might be on the consumer side. If there is potential with a particular partner, it’s worth building relationships early, but the focus should be less on who the exit is going to be with and more on what is going to drive valuation for exit, and the seeds that should be planted with that in mind.
On moving from the domain world to a tech-focused and male-dominated environment
Bernadine: Building a tech company is incredibly exciting but you need to accept what you don’t know. For example, data security is key to Vastari. You need to educate yourself and your customers, but most of all you need to bring in the right know-how. She has reflected more recently on the industry being typically male-dominated; in retrospect (particularly from observing others’ journeys), more opportunities might have been forthcoming had she not been a woman.
Tamara: On the issue of domain transition – tech is incredibly wide. It’s most useful to find similar companies and learn from them. Also essential to hire great tech people! As far as being a woman goes, Tamara thought until around a year ago that she hadn’t faced many blockers in this regard. However having recently read about a blind study at TechCrunch that demonstrated the greater emphasis on asking for proof directed at women, this did resonate with her own experience. Having good hiring practices in place early on has also helped them develop a diverse team, which is essential for innovation and growth.
On pitching, and striking the right balance between articulating a problem and articulating the solution in a tight timeframe
Rachel: Rachel found that when her explanation of Koru Kids occasionally wasn’t landing with people, it paid to spend more time on explaining the problem instead. For her initial seed round she pitched around 100 times, and believes the first 70 or so were terrible compared to where she has ended up. So it took plenty of practice, and being open to feedback – she recommends asking explicitly what wasn’t working.
Tamara: For Tamara, the key to a good pitch was also feedback – she received plenty from investors. She structures pitches very tightly to demonstrate pain points and corresponding solutions. Iterations are inevitable and she also believes her pitches have improved vastly from where she started!
Thanks again to all three speakers – we heard some truly invaluable insights, and the above is just a snapshot! Thanks also to Techspace for hosting us at their brilliant event space.
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Movemeon.com was founded by McKinsey colleagues, Nick Patterson & Rich Rosser.
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