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Why these two entrepreneurs reject venture capital investment at every turn

While often lauded as the best way to grow your business quickly, venture capital investment has not had the same allure for two entrepreneurs in particular.
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Patrik Arnesson, CEO and founder of Forza Football, and David Armstrong, CEO of HolidayPirates, tell Real Business why venture capital investment is not all its cracked up to be.

1. Please tell us a little about your business

Patrik Arnesson: “Forza Football is one of the world’s biggest football apps. Our mission is to democratise football and to put the sport back in the hands of the fans.”

David Armstrong: “HolidayPirates started out initially as a travel blog in 2011. The blog proved popular amongst millennials and students, and after growing incredibly quickly, it was then turned into a company in 2012, with the launch of a free-to-use travel platform and accompanying apps.”

2. At what stage of growth is it at right now?

PA: “We currently have three million users, but with the eventual aim to cover every single football match in the world, we want to grow this number to 300m. With another 297m users to go, we have only traveled one per cent of our company journey.”

DA: “Our business is profitable and continuously growing. Currently, we are focusing on further establishing our presence across the ten international markets in which we operate, as well as investing in the technological development of our platforms. In 2017, we passed the 200-employee milestone, and we now have staff based in six cities.”

3. Why did you decide to not go down the venture capital investment route?

Patrik Arnesson, CEO of Forza Football

Patrik Arnesson, CEO of Forza Football

PA: “First of all, it was always about the freedom. If you resist venture capital money, you remain in control of your own destiny.

“Secondly, to run a business you will need to make money. By not relying on venture capital money, you are forced to find or create a unique business model that actually works, and can be profitable.

“Finally, if you intentionally limit your resources, you will naturally focus your attention on the most important aspects of developing the business. Having access to an additional £100m will distract you, and you will end up doing a lot of unimportant stuff.”

DA: “Since day one, HolidayPirates has been recording a steady and profitable growth rate. Fortunately, the continued growth of a loyal user base has allowed us to secure our position within in the travel industry, and we were never in need of backing from a venture capital to speed up the process.

“Our business model is heavily focused on retaining customer engagement through inexpensive methods of community building, and innovative use of social media. This strategy proved successful early on, and so the necessity for venture capital money to cover large marketing campaigns to attract, or to keep our users, has never been an issue for us.”


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4. What stories had you heard from others that put you off?

PA: “Our decision to not go down the venture capital investment route isn’t based on any horror stories, but simply on common sense, and on what we want to achieve as a company.

“Ingvar Kamprad, the founder of Ikea, managed to build the world’s largest furniture company without any venture capital money. If he could do that, we should be able to build the Forza app without it too.”

DA: “There are both miracle and horror stories out there in relation to venture capital money, but the most important thing for us was always to never have to base our strategic decisions on external expectations.”

5. Did you have investor appetite that you turned down?

PA: “Many, many times. However, not a single venture capitalist who has offered us investment has managed to explain what we could do with the money that we can’t already achieve without it. That really is the main deal breaker for us – if neither of us can answer that question, then there’s no reason to take money.

DA: “There is constant appetite from investors, and every month we are approached by three or four growth and private equity firms. It is no secret to them that we do not particularly want, or need their funding right now. However, they are all very keen to keep reminding us that in case we ever change our position, they would like to be first in line.”


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6. Has not taking this funding slowed your growth?

PA: “As far as we’re concerned, we’ve grown exactly at the rate we wanted to. If you look at our competitors, they have each raised over $20M in venture capital money, and despite their financial backing, we all have about the same amount of daily active users.”

David Armstrong CEO of HolidayPirates

David Armstrong CEO of HolidayPirates

DA: “Our traffic growth has been eight figures year-on-year since 2011. Hypothetically, if we had taken a few million in equity, we could have put it into marketing initiatives such as TV, which would have definitely boosted growth to some extent.

“It’s easy to spend a lot of money if you have it or if you have received it from someone. But in the long-run it’s extremely difficult to work out whether this model is sustainable or not.”

7. What is your best piece of advice when it comes to the funding process?

PA: “You have to ask yourself: ‘Is it impossible to achieve my goals without funding?’ If the answer is yes, then take the money. If the answer is no, then resist the temptation.”

DA: “The best advice I can give to anyone looking for venture capital investment is to ensure that you go to people who have a good track record within the industry in which your business operates.

“This way, you can benefit from an investor who does not only have the money, but also the right knowledge, expertise and contacts within the field in which you want to succeed. That is the value that makes taking money from investors different to a loan from a bank.”

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About Author

Hunter Ruthven

Hunter Ruthven is the editor of Real Business. He is also the editor of Business Advice, a title focused solely on a section of the business community currently underserved – micro companies. Alongside this, he is part of the team that hosts the Growing Business Awards, First Women Awards and Future 50 initiative.

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