The Money Train

***WINNER STARTUP/SCALEUP BOOK OF THE YEAR: BUSINESS BOOK AWARDS 2022***

Before you get on the Money Train, here’s what you need to know…

You have a great business idea but very little money. There are investors out there with lots of money looking for interesting new businesses to invest in. On the face of it, it’s a match made in heaven – but beware the details of the deal you do…

You won’t be dealing with inexperienced investors. The standard models that investors impose on start-ups and young companies can mean loss of control, overbearing input, disproportionate reward to the wrong shareholders, or founders being squeezed out of their own businesses. The shape of your investment agreements will drive the future success of your business and your ultimate rewards.

This book prepares you for the investment journey and helps you avoid the pitfalls. Once you choose to get on board the Money Train, it becomes a journey with a pre-determined destination. And it can be almost impossible to stop, change direction, or get off.

David Pattison has considerable experience chairing and advising companies looking to raise funds across a wide range of industries. In this book he shares what every young business needs to know about investors before they buy a ticket for the Money Train journey, meaning you have a better chance of riding up front, in control of the journey, rather than in the last passenger coach, being bounced around at high speed, uncomfortable and out of control.

This is a fantastic book – a preparatory guide to help young businesses and their founders make better decisions when it comes to raising money.

It cuts out all of the dross and gets right to the point. The author has clearly been on both sides e.g. fundraiser and investor and gives numerous examples that are based on their own firsthand experiences.

Having raised investment in the past myself, it’s helped me identify many of the areas where I went wrong, as well as validate some of the things that I’ve been doing right more recently.

If you’re a budding entrepreneur and need some help and guidance with your first, second or even your third investment round, I highly recommend this book. There’s ten key stages, all of which you can flick to and from as you reach that specific part in your fundraising journey. It’s become a reference book for me!

Amazon.co.uk

As a startup founder embarking on my investment journey this book really helped me learn a lot about the investment process and made me feel much better prepared to engage with investors.

I particularly enjoyed learning through David’s personal experiences which made it an easy and enjoyable read.

The book is really well laid out with good summaries at the end of each section, which i’m sure i’ll be referring back to when I need a refresher.

Highly recommended!

Amazon

A business book that is enjoyable to read is no mean feat but David has managed it with The Money Train. Packed full of David’s experience working with small businesses for the past 10 years plus setting up the giant ad agency PHD. David’s explanation on what happened with these businesses are really useful and also interesting to understand the human side of financing a business, all the emotions that come into the room when money is involved. I liked the practical tips at the end of each chapter and will find them useful to refer back to.

Amazon.co.uk

So excited that I read this book at lightening speed (for me) and about to read it again, as it’s so dense with super useful advice – both practical and philosophical – for a start-up founder like me. Already using a lot of it to raise investment for my fashion tech business, and I love how it’s just the right balance of pragmatism and compassion and encouragement, which can only be written by someone who has been there and done it themselves, and helps people do it in real life, not someone who writes business books without real world experience. Best book I’ve found to help me on this exciting and terrifying journey. If you’re an entrepreneur, or want to be, make sure you get this for an easy-to-digest guide to what it really takes to raise the money you need to realise your business dream.

Amazon.co.uk

Having read the book, I wish it had been released when I first launched my own startup 6 years ago. The author has clearly lived through the ups and downs of fundraising and has distilled his knowledge into separate self-contained compartments as the book’s title alludes to. If like me you’re already part way through your journey, you can save time by simply jumping to the relevant section; I read the whole book anyway.

There are lots of must-read books for founders and most advise on how to build products, iterate, sell, etc. However, in my experience the majority of startups fail not because the founders weren’t good at building products or services or selling. They failed because they couldn’t convince sceptical investors to invest in their vision or even if they managed that, they got the wrong investors who forced the founders to go in the wrong direction.

No startup founder dreams about fundraising but sadly it’s what they will end up spending the majority of their time on. They will also spend more time than they’d like talking with their investors instead of working on building the business.

This is the first book (as far as I know) that is specifically written to navigate the minefield that is fundraising and investor relations from beginning to end. My advice, add it to your must-read list and preferably towards the top.

Amazon.co.uk

Insightful and actionable advice written by an author who has seen and done it all. Advice which can be instantly implemented directly into real world scenarios. The Money Train is a great read for anyone who is thinking about raising investment. Condensed key take-aways conclude each chapter, perfect for revisiting because once you’re on the money train, there is more than one stop!

Amazon.co.uk

Readable, memorable, useable and practical. You can tell this has been written by a successful entrepreneur and a skilled mentor

amazon

This book is the voice of wisdom and experience, not theory and spin. The tone is frank and honest and champions the pragmatism needed when seeking investment. It’s a book you want for the journey; a navigation tool – and every entrepreneur should have a copy to hand for those moments when you find yourself suddenly “off grid”.

Amazon

I wish I had this book three years ago – but I’m glad I’ve got it now!

An incredibly in depth, yet easy to read, walk through the minefield of attracting, negotiating and dealing with the different types of investors out there.

Everything is explained very simply, in a way that encourages you to ask questions on what you are looking to achieve from raising investment, and ultimately gives you the information to answer all important questions like “why, who, and how much”

So useful I have bought again to send to a friend.

Amazon

‘The Money Train is the roadmap to a goldmine; David Pattison spills the secrets that are normally kept to exclusive networks or charged for six-figure fees. Set to be the essential guide for entrepreneurs who want to take their business to the next level’.

Bruce Daisley Author of The No.1 Sunday Times Business Bestseller – 30 Ways to Fix Your Work Culture and Fall in Love with Your Job Again

‘This is a brilliantly practical, well-structured book written by someone who has the experience and wisdom to share his knowledge. It doesn’t preach or lecture but has golden insights into the pitfalls and opportunities young businesses face from someone who has witnessed first-hand huge highs and some lows. Every young business and entrepreneur should make this their handbook’.

Dame Carolyn McCall CEO ITV plc

‘Forget theory, this is entrepreneurship told as real-world life experience – one that every entrepreneur, myself included, can instantly recognise. With this book, David has mapped your uncharted territory for you. Take it on your journey’.

Mark Eaves Founder Gravity Road

‘Spending time with David is always time well spent and this book is no exception. What I appreciate the most about David is his razor-sharp questions and practical insights. Reading this book was the same as every conversation I’ve had with David, he’s supportive but there’s no sugar-coating, and for any business considering investment this is a must-read’.

Sarah Ellis Author of The No.1 Sunday Times Business Bestseller The Squiggly Career. Co-Founder Amazing If

‘I have been a business founder and an investor. I have built businesses from scratch and inherited large organisations. I have worked alone and in partnerships. I have used my own capital as well as having investors both private and institutional.

This book takes me back to the early days of being a founder. It made me smile at the memories of some of the situations David describes. His insights and advice are spot on and will help any young business founder to navigate the shark infested waters of the investment world. He charts the positives and pitfalls of taking outside investment. Either way The Money Train is essential reading for any young entrepreneur’.

Steve Parish Chairman Crystal Palace Football Club. Business founder and investor

‘An excellent read, with an easy layout and flow. This book is refreshingly honest and practical for an up and coming entrepreneur or someone raising money. I wish it had been around when we first started our fund-raising processes! David’s experience is clearly demonstrated throughout, highlighting so many of the potential wins and pitfalls, needle moving details and levers that are critical in making a fundraise a success. Highly recommend’.

Dominic Joseph Founder Captify

‘The Money Train is not only a great read, but also a fantastic reference book for founders, when it comes to fundraising. It provides reassurance on the things you’re doing right, as well as guidance on areas that need improvement. I can say this first-hand, as it’s exactly how I use it’.

Paul Grundy Founder Baggl

‘A great idea will never succeed without proper finance. But where to start? The Money Train is an expert guide to raising capital. A brilliantly written book by someone who’s lived every high and low of building businesses. David knows exactly what he’s talking about and after reading his book, so will you’.

David Mansfield Author of The Monday Revolution

‘The Money Train is an incredibly insightful, yet easy read which I’d recommend to anyone going through or thinking about raising investment. The tone is spot on. There are points in the book which I could relate to my short journey so far, but it also highlighted aspects I had not yet considered and could potentially trip me up in the future. The structure of the book makes it simple to read up on quick, actionable advice, whilst the chapter segmentation is perfect for revisiting which I will undoubtedly do during any future raise. The Money Train is effectively like having your own investment advisor in a book’.

Tom Jelliffe Founder Tzuka

’The book really resonated with me. I learned a lot of new details about the investment process and David’s personal experiences really added a helpful context. The section summaries work really well for me and I know I will come back to this book for reference in the future and I expect other founders to use it in the same way. The Money Train is a great analogy because that’s what it feels like’.
Sam Peters Founder Octaive

‘I’ve been hugely fortunate to have had David as my mentor and Chairman and in that time his knowledge and guidance have been invaluable with regards to fundraising and investor relations. This book is the next best thing if you’re not so fortunate and will provide you with plenty of good actionable advice that you will and should keep going back to’.

Prash Naidu Founder Rezonence

‘I really enjoyed the read. Lots of good advice in there with nice anecdotes, quotes and examples to bring it to life’.

Hugh Campbell Partner GP Bullhound

Introduction

This chapter introduces me and gives the authenticity and ‘permission’ to have a point of view on the market. There will also be a brief synopsis of the businesses I have worked with/in and the transactions I have been involved in and the roles I played.

The Market

In this chapter I will explain how the market works:

What is expected of millennials entering the workspace and how that differs from the past.

What the investment ‘model’ is and the stages that businesses need to reach to get funding.

A brief description of the difference between an angel investor and seed capital. Why venture capital is different to private equity.

Why the model is broken and doesn’t really work for investors or investee.

Why trying to do that old-fashioned thing of making a profit and not needing funding is a good thing.

The effect that the current tax regime has on investment decisions. EIS, SEIS and Entrepreneurs Relief.

How investment companies measure success and how they are structured and measured.

The Ten Things

1. Make sure the shareholders are aligned.

Most businesses have more than one founder or shareholder. It is really important that everybody has a shared vision for where they want the company to go. Is it a lifestyle business? Or is it about making money? If so how much? Do we want to change the world? If there are differences then these need to be planned for. Finding money to exit a significant shareholder is very difficult and usually expensive and distracting. If it needs planning for then do it early. communicate and keep talking . You can change your mind but you need to let people know. Investors almost demand that founders/shareholders are aligned. I have three example stories on this.

2. Taking money from the wrong people

Work out what you need money for and what help you need. Do you want a ‘hands off’ investor or do you want a strategic investor who can help you build the business. The easiest money isn’t necessarily the best money. You don’t have to like the investor but it helps if you respect them. Be very clear what you want the money for. In early stage raising well meaning angel investors can be very distracting and over zealous. Three examples here.

3. Don’t believe that investors ‘care’

All investors will claim to be different from the market. None of them are, with the exception of a few who have a little more patience and work over longer time spans. The bottom line is that they only care about one thing, their money. Making sure they don’t lose any and making sure they are first in line for the rewards of the hard earned success. This is the most important thing to remember. If it goes wrong it can be really horrible. Two examples here (including one catastrophe).

4. Don’t leave it too late to raise money

It always, always, always takes longer than you think to raise money. Six months is usually the minimum. Investors will use words like ‘no brainer’, ‘a formality’, ‘right in our sweet spot’. But they still have to do due diligence and get through investment committee. In addition they normally have a raft of deals/potential deals on the go and getting to the top of that list and staying there is really tough. Keeping more than one player involved for as long as possible is imperative, but you will have to commit to one at some point. Don’t do it when the money is running out. Plan the deal at least twelve months in advance if you can. Two examples here

5. Be ready for due diligence

Due diligence is when the investor looks very hard at all aspects of the business. This is not just looking at the finances of the company, it may involve IP protections and psychometric testing of the management team. Its never ‘just a formality’ and there is no such thing as ‘soft’ due diligence. Be prepared for massive distractions and questions that you cant imagine are important to answer. Many aren’t but they tick boxes. From the start of the company, pre investment, impose good governance, have proper board meetings and minuted decisions. Starting with the right governance before you need it will stand you in good stead in the future. Three examples here

6. Cash arriving is the start not the end

After all the work and distraction of the fund raise the money arrives. Phew, off we go. But it doesn’t work like that. This is the first day of your new company with new shareholders with new requirements. This is where the importance of the negotiation comes into play. You will have had to give up some things and agree to other compromises as part of the deal. You will have to behave differently and think hard about board meetings sand shareholder communications. Four examples here.

7. Take targets seriously

There is only one thing that will guarantee that an investor comes looking hard after they have put the money in and that is a series of missed targets. It is very likely that you will have signed up to hit targets as part of the investment agreement. If you miss them consistently there will be penalties. I have known people lose their companies because of missed targets. Depending on the business the targets are usually an annual budget reported on a monthly basis. Miss one month and you will be ok, miss three in a row and that is when the spotlight will start to shine. It is the most important thing to achieve post investment. Keep hitting your targets and you will be left alone, they will focus on the businesses in their portfolio with problems. Two examples here

8. Don’t expect understanding

For the investee the chances of renegotiating a deal after its signed are practically nil. The chances of re negotiating an investment agreement term are virtually nil. Unless there is something substantial in it for the investor. You will probably have witnessed how, in your eyes, unreasonable the investor is through the negotiation process and that isn’t going to change. You need to have fully understood the deal you are signing and what it really means. All investors fall into the ‘a deals a deal’ category with no exceptions. So make sure you know the deal and if there is a need for a change work out how you can do that within the provisions of the deal. Showing the investor you don’t understand the deal is not a good look. Two examples here.

9. Be ready to switch strategies

Having committed to a strategy to achieve the targets it doesn’t mean that you need to stick to it. Markets evolve, products change, opportunities come from left field, threats present themselves. Talking investors through a strategy change is fine as long as you can convince them that you will end up in the same place ie hitting the valuation they want for the business and them getting the financial returns they have planned for. You will need to present an evidence based proposition that can be challenged and still be credible. Two examples here.

10. Get the right advice and help

You will have noticed that there isn’t a chapter here that talks about negotiating the deal. That’s partly because no two deals are the same and most investment deals are pretty complicated. You don’t just need to be a good negotiator you also need to understand the complexities of legalese and the levers of deals. If you don’t understand what a preference share is and the affect they have then no matter how good a negotiator you are you will get turned over, with no escape clause, unless you are really fortunate. The best preparation is to get the best advice and legal help that you can afford. I always say that the person negotiating the deal shouldn’t be the person who will, after the raise, work day to day with the investor. It always gets spikey and irritable. Its time consuming and distracting. Most businesses going through a fund raise suffer a drop in revenue at some point in the process. Ideally a good non-exec/advisor/Chairman should lead the negotiation with support from the CEO/Finance guy. A good lawyer will take a lot of the pain away, although they do have a tendency to extend the process by aiming off for unlikely events. All of this is pricey but good advice at this point will save/make a lot of money in the long run. Preparation and understanding are the two keys here. If you don’t know then find someone you trust who does. Preferably someone who has done it before.

What investors need to know about founders/business owners

To help investors invest without destroying value, it’s helpful to understand what you are dealing with. The emotional ties to a business cannot be underestimated. Whereas the business of investing is almost completely transactional, having your own business is an emotional rollercoaster.. It is their baby, it’s the most brilliant business of all time, its not quite doing the revenue it should because the ‘market doesn’t understand’. Any type of criticism is seen as a direct attack, even if they know there are flaws within the business. Rather like telling people their children are badly behaved, they know they are but will defend them to the end. From personal experience I can describe the way to approach founders and make them feel positive about inputs and ideas. Not just subjectively. What nobody needs is a continual fight between the investors and the existing shareholders. Its exhausting and ultimately the business will suffer. This chapter will, hopefully smooth some of the negotiation. Four examples here.

FORMAT / ISBN / PUBLICATION DATE / RRP

Paperback / 9781788601948 / January 26, 2021 / £12.99

Ebook / 9781788601931 / January 25, 2021 / £7.99

Paperback and eBook Bundle / £14.99

David Pattison

David Pattison left school not knowing what he wanted to do. He ‘fell’ into the advertising industry and made good progress, becoming a main board director at the age of 29. In 1990 he started his own business with two partners that was sold and became part of the Omnicom Group. PHD is now a worldwide brand in eighty markets.He attended Harvard Business School and lived and worked in New York building PHD USA. Before leaving PHD he launched offices in 35 markets including Moscow, Dubai, Hong Kong and Singapore.After PHD he was asked by the founders to sell an independent digital media business, which he achieved successfully just before the world economic crisis in 2008. For the last 10 years David has worked as a chair or mentor for a variety of businesses and CEOs. Investing, raising funds, selling, advising, setting up infrastructure and being a shoulder to rest on. Acting as a ‘wingman’ watching CEOs and companies’ backs and witnessing first-hand the ups and downs of start-up and young company life. He still doesn’t know what to do but he has had an amazing working life trying to find out.