CandidCapital

We've come a long way with Psonar since I last blogged about it in 2009 and I recently pitched the business to the angel panel at the Cambridge Meerkats & Avatars event in September.

I co-founded Psonar, an internet music service, with Rich Urwin and Ray Anderson at the beginning of 2008. I'd left taking the entrepreneurial plunge (bar a half-hearted and abortive attempt to start a toy manufacturing business in the late 1980s) until rather late in my business carer - previously I'd spent 25 years as an early-stage venture investor in Cambridge, originally with 3i and latterly as managing director of ET Capital.

The catalyst for launching Psonar was a combination of disillusion with the early-stage venture process (very hard to predict the long-term winners and very hard to avoid dilution by follow-on investors) and an 'itch' - about time I did it myself rather than watch others do it. So far the venture's gone well: 6,000+ signed up users, 1.3M unique tracks stored on Psonar's servers and some really potent opportunities to monetize music in new ways. To earn some additional cash (starting a business is an expensive habit to acquire) and keep in touch with early-stage investment, I started mentoring some of UFfB's client companies that were looking to raise equity finance. Since the end of 2008, I've mentored 9 businesses of which 4 have received financing offers and 4 of the other 5 look as though they will do so.

Let's not beat about the bush, raising early-stage equity finance in the present market is very tough. Early-stage venture funds are few and far between (I should know having run one) and angels are increasingly, and rightly, selective about what they'll invest in. The critical factors needed to succeed are:

• a well thought-through business model which is clear about how value will be created for investors
• a clear, simple presentation of how the business model works and how an investment will drive it forward
• one or more members of the team who show they understand the business and can communicate its potential convincingly

I've spent my time as a mentor helping my client companies to achieve these three things. Something which is made much easier by the UFfB process. A client company is allocated a mentor after having attended a specialised workshop on equity finance (there are also workshops on grant or loan finance). The mentor can spend up to 1.5 days helping the company refine the business model, make a financing plan and prepare a pitch to investors. After that there is a three stage process in which the founder or CEO receives an intensive presentation skills session, then has a practice pitching session in front of three or four actual angel investors and then, finally, pitches at one of UFfB's presentation days which are attended by individual investors and representatives of local angel networks.

When I went through the process, I'd already had the advantage of seeing some of my mentorees pitching at earlier presentation days. This was invaluable - for instance, I saw how effective it is to have a first slide with an overview of the what the business model is, how developed it is and what investment it's seeking. This really helps the investor panel to focus on the key messages when they listen to the pitch and spend less time having to orientate themselves. I also saw how easy it is to confuse the investors, given the huge disparity in their knowledge of the business, its products and its markets relative to the founder or CEO. But most of all I saw how powerful good audiovisual aids are - some simple screenshots, or a video or a demo all help communicate the basic business idea, and how easy or effective it is, far better than any verbal or bullet-point description.

Finally, I am indebted to Guy Kawasaki for his excellent guide to pitching The Art of Pitching which is a chapter from his book The Art of the Start, the jewels from which I pass on to all my mentorees and which I try to remember and use myself.

By the way, I'm glad to report that we've raised £80,000 out of the current £200,000 that we're seeking for Psonar.

9 October 2010