Why one British company looked to the Chicago Angels Network
6 min read
31 March 2015
Knocking on the doors of business incubators and venture capital firms can prove both exhausting and fruitless. Undeterred by this, the entrepreneur in Jaydeep Korde decided to take his pitch to the Chicago Angels Network and received the backing he needed.
Jaydeep Korde had his parents to thank for the idea behind Valueform, his successful food packaging company – and a US university for helping him make it a reality.
“My mum and dad were convinced that food packaging in the UK could learn from India and the developing world, where fast food is served on banana leaves and not polystyrene boxes,” he explained to Real Business. “They developed some patents and my father won a £500 research grant with Reading University that turned into a £1.8m research project funded by the British government’s Technology Strategy Board. This project allowed us to work with customers and universities to develop our technology.”
Valueform processes food packaging, which is often wasted, from paper and plastic, into cereal waste materials that conform to the latest international commitments to environmental standards. It has brought participation from big name supermarkets like the Co-op and Marks & Spencer.
Korde is an engineer by training, but has worked extensively in IT selling his own software business and also working as a consultant to banks, pharmaceutical companies and to the government.
Despite this impressive track recording, funding for his new company was hard to attract. He approached incubator programmes, green technology funds, and venture capitalists. “Their predominant response was, great idea, but come back when you have £2m in revenue,” he said.
However, the company’s CFO was an alumnus of the The University of Chicago Booth School of Business and it was through the School that the team was introduced to the Chicago Angels Network (CAN), a group of investors, mentors and business experts aligned with Chicago Booth.
“CAN represented ‘smart money’ which, for us, meant that not only was there the prospect of investment but also the expertise and an incredible network to support our growth,” said Korde. “Pitching at CAN put us and our business model through its paces, giving us confidence where we were on the right track and correcting us where we needed it.”
But for Robert Rosenberg, adjunct associate professor of entrepreneurship at Chicago Booth, it was not just the pitch that encouraged CAN to invest in Valueform.
“A disciplined angel group looks beyond a fundraising pitch,” he said. “They get to know the management team, the business model, the competitive space. They look to assess value comparables, who will fund the next round, and exit. This type of due diligence is essential.”
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As a result of its due diligence process, CAN was impressed by the management team at Valueform, as well as its progress in supporting manufacturing capacity and gaining customers, its intellectual property profile, its ability to improve on currently available products (more ecologically friendly) at a lower cost, and its plans to expand product pipeline as well as geographic reach.
“The valuations on a company like Valueform also come into play, and CAN was able to negotiate a deal that offered appropriate upside and served to benefit the company at this stage of its development,” said Rosenberg.
He advises other British entrepreneurs who might be interested in approaching CAN to ensure that they can describe the problem that their product addresses. They should also know their key first market, and why they win against competition and substitutes.
“The company should be able to show a working prototype of minimum viable product, ideally review results of prototype tests or early market activity, and have research data about customers,” said Rosenberg. “Management should understand the company’s core competencies, its weaknesses and holes, and any intellectual property or trade secrets that it has or needs.”
CAN will also expect to see a two- to three-year business development plan that has key milestones, expenses and revenues and that is up-front about uncertainties and risks.
“Angels invest in management teams with which they are comfortable and for whom they can add value,” said Rosenberg. “An ongoing, open discussion of problems and opportunities provide for the investing group to invest smart money, not just funding. Valuation and terms are part of a negotiation, and the company should be prepared to provide comparables to justify valuations that, at early stages, are a highly inexact science. The company should be willing to have angel representation on the board, either as a member or as a non-voting board participant.”
Korde concluded: “In part thanks to CAN we have some very clear metric targets for success in 2015 which is a mix of product sales and new customers. But at a macro level we see growth and raising more money, our confidence to do both is greatly enhanced through the support and investment we have got through CAN.”