Entrepreneurs and investors – a new understanding
“My company, Intraway, is an international telecoms software firm. We attract funds, but we also
invest in start-ups, so effectively we find ourselves on both sides of the table. I’m a pretty
experienced entrepreneur; despite this, I wanted to gain clarity around multiple rounds of financing,
options, deal structures and evaluations.
“The Financing the Entrepreneurial Business (FEB) programme was a great fit. I
found the case-study approach invaluable – I gained in one week what I would otherwise have
needed years of experience to learn. It gave me a lot of new tools and it really drilled down into
what happens outside of the textbooks. We explored how some start-ups skyrocketed and went to
IPO, others floated, and others fell because of a poor relationship between the investors and the
entrepreneurs. Those stories are really insightful – you learn what can go wrong and how to avoid it.
“It’s relatively easy to find success stories but few people are prepared to stand up in public and
share their screw-ups. Nobody talks about that. This programme gives you rarely discussed tools
that help you avoid some of the common financing pitfalls.
“FEB also illuminated aspects of financing deals that I hadn’t previously considered. Normally the
investor is the one who does due diligence on the company, for example, but I found out how
important it is for the entrepreneur to do the correct research on the investor, because that defines
what happens after the deal.
“I was also really keen to explore how to get a higher valuation for my company. What’s
the right time to ask for finance? What’s the right valuation? And who are the right
investors to bring something extra beyond the funds? Standard valuation techniques are taught on
business masters but this programme went far beyond those.
“We also covered the less obvious, non-financial forces that come into play during financing deals,
things like emotional and strategic factors such as a parent company not wanting to sell to a
competitor. And we investigated things like health-related and family issues – specific situations that
could lead a great company to become a fire sale…but I learnt that not every fire sale is a bad deal.
“I was able to apply this part of my learning right away. Soon after the programme, my company
entered into a restaurant business in which one of the owners was a family member who wanted
out. I was very conscious of the emotional factors affecting that valuation. We kept on bidding even
though some people were making higher bids, because we felt we were better partners, offering a
better journey for the company.
“Another important lesson I took on board was the importance of shareholder agreements, which
can make a smaller deal be worth more than it appears. It was eye-opening. Before the programme I
didn’t pay much attention to shareholder agreements. Now, it’s the first thing I look at. We also
investigated good-leaver, bad-leaver clauses – what happens if a CFO, say, leaves the company,
under different conditions. We have those in all our agreements now.
“FEB is a great programme for both entrepreneurs and investors, because you mix in the same study
group. Both parties get the chance to see the other side of the coin and gain an understanding they
wouldn’t have come by otherwise. I’ve also benefited from what I would call the mind-expanding
perspective that participants gain from being in London. Unlike US business schools, LBS is much
more world-focused. The viewpoint is global and your classmates are from all over the world – Asia,
the Middle East, South America – it’s an international experience.”