Entrepreneurs urged not to ‘skimp’ on key hires
Entrepreneurs shouldn’t ‘skimp’ on investing in the infrastructure and key hires if they want to achieve their full potential.
That’s the view of Guy Weaver, director of Praetura Ventures, which is raising £10 million for its second Enterprise Investment Scheme (EIS) fund after its record-breaking £15m maiden EIS fundraise less than six months earlier.
Weaver was previously a director with KMPG and has helped raise £1.5bn in debt funding for North West businesses.
He said a lot of start-ups don’t scale successfully because the founder hasn’t invested enough in the right infrastructure systems and hires at the right time.
“If you want to scale to be a large business you have to invest up front in the infrastructure and CRM systems etc before you make the big hires,” he said.
“Once you have the right product to sell you bring in your sales team. If you want to go global and you want to hit large PLCs, you’ll probably need to go after a former director of a PLC with a bulging black book of contacts and they’ll probably cost a minimum of £250,000.
“It’s not a ‘one hat fits all’ approach but one mistake we see is hiring a sales director who doesn’t have the black book or the experience required at a lower salary.
“If the entrepreneur has exhausted all their contacts for sales growth then they’ll need to bring in someone externally and that costs money,” said Weaver.
Weaver is speaking at the ‘On A Stick’ business event in Warrington on October 7 which is aimed at entrepreneurs, high-growth businesses and digital transformers.
Weaver said founders shouldn’t be afraid to give away equity to attract the best people.
“If you think your company is going to be a £1 billion business, even if you’re left with 20 per cent of the equity, that’s a £200m cheque to take home,” he said.
“Start-ups can’t match corporates in terms of salary but they can incentivise their staff by giving away equity. When it comes to attracting the best staff what sells is the dream and the passion. They shouldn’t skimp on key hires. Investors like teams to invest in.”
Praetura Ventures has made significant investments in North West businesses including Sorted, SteamaCo and Dr Fertility, and Weaver said getting the right sales staff and finance director were critical.
Weaver said as well as being prepared to pay for experienced sales staff he said some founders were being short-sighted in not investing in a finance director.
“We won’t invest unless a head of finance or finance director is in place as part of our investment,” he said.
“They can seriously help founders and their role is often underestimated.”
Praetura’s 2019 EIS Fund is expected to be fully deployed by November 2019. Its 2020 fund will back exciting, early-stage businesses in the North ‘and beyond’ with between £500k and £2m per business.