Being able to walk away is key to funding rounds

After a tough 18 months, there are brighter times ahead for companies looking to raise external capital in the UK. The economy is growing and the government has confirmed that initiatives such as the Enterprise Investment Scheme, which rewards investors for taking risks with early stage companies, has been extended.
Yet raising investment is still a trade-off many businesses never make. After all, you’re giving over a financial slice of your company to someone else, and in some cases a say in how it is run. On the other hand, there’s an opportunity cost to not seeking external finance. It stops you from scaling your business at pace.
For Dash Water, I knew that to get our brand out there, we required cash. Investment let us hire our first team members, who joined my co-founder and me treading the streets selling Dash to independent stores. It enabled us to build relationships with supermarkets. And as demand has grown to three million cans produced per month, further investment has allowed us to keep up the pace.
But things certainly haven’t always been plain sailing. Here are three key lessons I’ve learnt about approaching investment.
On the list of things you don’t want your lawyer to say, “I’ve never seen that before” is quite high up. Especially if you’re at crunch time in an important investment round.
Unfortunately that’s the situation we found ourselves in at Dash in 2022. The economy had come out of Covid, but not without significant damage. In fact, we were about to enter a period of rampant inflation and some of the most difficult operating conditions since the 2008 financial crisis. It was imperative that we closed our funding round quickly in order to prevent being caught up in this downward spiral, and also because my wife and I were expecting our first child in two months’ time.
This fragile macroeconomic environment alarmed many investors focused on the short term. Despite strong interest in our funding round, we weren’t immune. We had one investor send us a terms sheet only to withdraw it the next day because their investment firm had put a blanket ban on all investments (prompting that comment from our harried solicitor).
Fortunately we were in a position of strength as Dash was hitting its sales and growth targets and we had enough cash in the bank to survive if the round collapsed entirely.
The lesson for those seeking investment, especially growing businesses, is not to bet the house on a single round. You need to be able to walk away if necessary.
When I started Dash, I was 24 with a degree in economics but pretty much zero idea about how to run a business or raise capital.
“Starting blind” like this is a significant risk. You can easily end up with the wrong terms or the wrong investors without this process of due diligence.
We nearly got burned twice by mismatches. But pretty quickly we established that our investors and their experience had to add significant value, and that’s steered us right ever since. David Milner, for example, is our chairman and an industry veteran, having been chief executive at companies such as Tyrrells, the premium crisp brand, and the upmarket pet food brand Lily’s Kitchen, as well as the bakery St Pierre. Who wouldn’t want someone like him on their side?
People say the test for an investor is, “Would I go for a drink with this person?” For me, I think the relationship goes a lot deeper than that. So make sure that anyone who ends up investing shares your values and vision for the company.
In 2017, soon after launching exclusively into Selfridges, we got a text out of the blue from someone whose wife had purchased a can of Dash the day before. He wanted to find out more about us but was leaving for a trip to America in 48 hours — could we chat tomorrow?
It would have been easy to say no to a speculative approach like that. Instead we met for a drink, and another the day after. It turned out that he had 20 years’ experience in the beverage industry and later that year he became one of our first investors.
You need to be deliberately choosy when it comes to your investors. But never forget the merits of talking to everyone, in every situation. For one investor meeting, I had literally minutes before they walked out on stage for a rock concert. Thankfully, we made a connection and they’ve been incredibly supportive off stage ever since.
Time meeting with new people is never wasted. You just don’t know where things might lead.
Alex Wright is co-founder and chief executive of Dash Water, a £26 million turnover healthy soft drink brand sold across 25 countries