28 April 2021|Fundraising, Latest Posts
By Andy Sutton. I’ve been involved in a variety of start-up and scale-up businesses since 2005. So the recent crowdfunding raise I launched with my latest business venture, Catipilla, isn’t the first time I’ve sought funding to grow a successful business. Over the years I’ve worked with Business Angels, Venture Capitalists, banks and government grants, as well as securing funding from friends and family.
While this experience gave me a wealth of knowledge when it came to crowdfunding for Catipilla, it didn’t change the fact that it was hard work, time consuming and a lot of effort. Finding funding for your business always is. You need to have a thick skin and be incredibly resilient. I always say that you need to kiss 1,000 frogs before you find your prince!
Same but different
While there are some similarities across the businesses I’ve started and grown, every single one is unique. At Catipilla we design and manufacture luxury cat furniture – wall mounted scratchers, climbers and resting places that allow cats to do what comes naturally, while looking great and saving space in the home. And the pet care market presents a completely new set of challenges for me when it comes to funding.
The first and perhaps most significant is summary dismissal. Investors will often immediately discount the business because they have no interest in the pet industry. Catipilla doesn’t tick the buzzword boxes of shiny new tech or Artificial Intelligence, and it’s not going to be a $1Bn+ unicorn in 3 years’ time. However, Catipilla is a really good opportunity to get a great return on your investment. And anyone who takes the time to look beneath the surface will see that it makes sense.
Timing is key
Let’s look at how to overcome these challenges and get in front of investors. Particularly in the capitally intense manufacturing sector, where tools and re-design cost time and money, and the safety net of a quick and easy pivot isn’t an option. It’s all about timing. With Catipilla, we self-funded through the preparatory stages to manufacture our first products, make initial sales and secure some growth.
It’s hard to convince investors when you don’t have a story, and this initial cash injection gave us the beginnings of a good story to sell. Being patient and waiting until you have a genuine and authentic story in place, containing all the right ingredients, will get you further than empty words, inflated valuations or projections. Exaggerated claims always get caught out in due diligence.
When we were ready to seek funding for Catipilla, we had a variety of options. Here’s a summary of some of the pros and cons we went through before deciding on our next steps:
Government grants – For obvious reasons this is a highly sought after option, as you don’t need to pay back a grant. However, the reality is that most government grants tend to be focussed on tech, climate or the environment – quite rightly – so we were unlikely to find an appropriate grant for pet products. In my experience the grant application process is time consuming, requires a huge amount of detail, and the grants available to small and medium businesses are normally quite limited in terms of size.
Bank loans – Banks are risk averse. In the early stages of the business lifecycle they are unlikely to take on the risk, and a young business is unlikely to have the assets required to borrow against. I also believe that the burden of a loan should never be taken on lightly. You will need to pay interest and eventually pay back the loan – it can be a black cloud that will be a constant presence for your business. It might impact the decisions you make and potentially hold you back.
Venture Capitalists – It can be hard to engage with a VC. If you don’t work in tech, getting through the door is the biggest challenge. Personally, I have yet to meet a VC who is passionate about pet products. Most VC’s are hunting the unicorns and they tend to have a strong preference for subscription based models, which drive high valuation multiples. For Catipilla, VCs definitely fall into the category of summary dismissal.
Business Angels – This is a great source of not only funding, but also knowledge and expertise. We secured Business Angel funding for Catipilla in 2019 and it was invaluable. As with VCs, the challenge is finding an Angel, and we experienced a lot of rejection along the way. My best advice would be to go through your own network to find an Angel who might have an interest in your product or industry. This worked for Catipilla – a contact put us in touch with an Angel who is a cat lover and really bought into the business.
Crowdfunding – For a company like Catipilla, this route is particularly relevant as our audience is the general public. And most people can relate to cats. Our product isn’t technical and people easily understand what we’re talking about. We’ve all seen ugly cat trees, if not in our own homes then in other people’s. Crowdfunding also presents us with an opportunity to offer our customers the chance to invest in the business. We already have a community of loyal, engaged cat lovers who give us feedback about our products. Why wouldn’t we want them as shareholders?
Have a plan
The added benefit of crowdfunding is that it provides a great marketing opportunity. Catipilla sales during our crowdfunding campaign reached an all-time high, with those who didn’t invest often going on to buy. I would stress however that this isn’t the easy route. You need to do a lot of preparation and put the work in, before, during and after a crowdfunding campaign. But if you get it right, the power of the crowd is exceptional. We raised £185k from over 200 new shareholders – way above our original target.
We went into the crowdfunding raise with the goal of taking Catipilla to a place where we don’t need to raise future funds. We had a detailed plan well before entering the raise. This established how much we needed to raise, based on what we want to do to grow the business and how much money we need to do it. There’s always a caveat though – we have a plan for Catipilla but we’ll always stay flexible and agile. As an entrepreneur you never know what’s coming up around the corner, or what opportunities you might be presented with. That’s what makes it so interesting!
About the Author
Andy Sutton founded Catipilla in 2016. He is an entrepreneur, former NASA engineer and business leader who genuinely cares about cats. With an MSc in Engineering, Andy was a top performing salesman at IBM and Oracle for over a decade, Oracle UK’s youngest ever VP, and the founder of successful wealth management and e-commerce businesses. After holding a variety of senior interim and Board advisory roles, he now brings his passion and unique experience to Catipilla.
· As a cat lover, Andy understands what cats (and their humans) need.
· As an engineer, he knows how to develop products that meet those needs.
· And as a businessman, Andy knows how to successfully bring those products to market and grow a highly successful business.
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