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Perspectives

How to find the right funding

Dion McKenzie works with the tech economy to make it more diverse and transparent – he’s also a part time investor and has done a number of talks on how to get investment. Here are his top points for finding the right funding for your business.

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Dion McKenzie, co-founder of Color in Tech

I started Color in Tech three years ago out of frustration, and an appetite to change the technology industry for the better. I had been in venture capital working for investment funds for more than ten years and I had noticed the lack of BAME representation within the tech industry, but very little was being done to highlight the issue, let alone rectify it. So my business partner Ashleigh Ainsley and I set about with the intention of doing something to change that, which was how Colour in Tech was born.

The first year of Color in Tech was bootstrapped by myself and Ashleigh. We crafted what it looked like, established an office space, set up our company website and began hosting events, all of which was funded out of our own pockets.

To date, we now have investors that range from the smallest of start-ups to big tech companies such as Google, to not-for-profit foundations. We received our first round of funding after a year of starting Color in Tech, which brings me round to the crux of this article – how to find funding.

Based on my own experience of raising capital for Color in Tech, and also from being on the other side of the table (in my work as a VC – Venture Capital), this is my experience on how you can find investment, but most importantly, on how you can find the right investment.

My bit of advice is this:

Get better at story telling

Craft your story before you even think about fundraising for capital. Paint a picture that people can believe in so they can visualise and understand the ROI (in our case, this was our social impact). Try and demonstrate something more than just profit – try and get inside the investor’s minds to understand what they are looking for.

"Craft your story before you even think about fundraising for capital. Paint a picture that people can believe in..."

Everybody underestimates how long it actually takes to fundraise

It is not necessarily how long the process takes, but it is how long it takes to prepare what is needed to get funding and capital. Having established ourselves within that initial bootstrapped first year, and thanks to my own background in VC funding and investments, we received inbound opportunities – people who had spotted what we were doing, and wanted to get involved, but for the outbound opportunities, one of the biggest challenges was finding the right person within that business, especially within the bigger companies.

Often conversations began with people who were advocates and liked what we did, but weren’t necessarily the decision makers or had the power to push the conversations we were having over the line into funding.

It was great that we were getting such a positive reception, but it was a challenge to navigate and decipher who were the budget owners were and had the ability to write the cheques. Ergo – time-consuming.

Lastly,

It’s about finding the right kind of investment

I’m not talking source (a loan vs. a grant type of funding… we’ll get to that later) but it was about finding the money that feels right for you to take. For us, as a social not-for-profit, we knew from the get-go, it was key for our investors to have aligned values.

"My advice for any business - not just social enterprises or not for profit - is not to risk moral bankruptcy over financials."

There were instances where we were approached by organisations and individuals who were willing to invest sizeable amounts, but their day-to-day businesses were misaligned with our own values. Despite this offering us significant financial security and opening up opportunities to expand Color in Tech, we made the decision to decline, as we knew long-term, we wouldn’t be able to have the positive working relationship with them as our investors. My advice for any business – not just social enterprises or not for profit – is not to risk moral bankruptcy over financials.

So if you get to the point where you are a pro storyteller, you are getting to grips with how long the process will take, you are navigating who the decision makers are, and you know what kind of investors you would like, what next? Is now the right time to seek investment?

I believe that it’s never too early to engage. Yes, you might not be exactly where you want to be just yet. But I see that as an indicator in itself.

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Get a heads up on your money

We are building an app that can help you manage your cash flow.

Take Color in Tech. I started it out as a side project to tackle a problem I saw, with the hope I could make a positive change in an industry that I knew could do better. But now, we have the ambition to reach thousands by the end of this year, whereas we only had the ambition to reach hundreds initially.

Be mindful and take notice when your ambition surpasses the ambition you started out with. An increasing hunger for expansion can be seen as a marker, a moment to start riding the wave of looking for sources that enable you to put more gas in the tank and start figuring out the sources that might be available to you.

Secondly, navigating those sources. Build a framework and map the pros and cons. There are such an array of sources out there, but I promise you, there is no source of investment that is 100% ‘pro’.

Take a bank loan – pro: capital, con: interest. Even a foundation has a con. You are accountable and answerable to another entity when you might only be used to answering to yourself. Even receiving funding from a foundation can change that dynamic, and you need to ask yourself if you are ready for that step change.

But it’s okay that there isn’t a ‘miracle’ compromise-free scenario, you can still find what is right for you by asking (and honestly answering) two key questions:

  1. Which works for your business?
  2. Which works for you?

So to round off, this is my ‘checklist’ for how to go about finding the right funding:

  1. Get better at storytelling
  2. Don’t underestimate how long the process will take. If anything, overestimate!
  3. Get an idea of what the ‘right kind’ of investors are for you
  4. When your ambition grows, start considering what funding you need to scale your business that matches those ambitions
  5. Engage with investors early
  6. Make a framework to navigate the sources available to you, weigh up the pros and cons to guide you
  7. Always ask yourself ‘Is this right for me?’ ‘Is this right for my business?’