by Real Business - Wednesday, 15th October 2008 - (1) comment

What’s the difference between a porn baron and a venture capitalist? According to QuickTV, the venture capitalist won’t give you seed funding but the porn baron might.

Newcastle-based QuickTV is a VC-funded, broadcast technology start-up, founded by Nick Bell and music industry mogul Tod Yeadon. The company has raised more than £1m from private investors and funds, to pioneer an exciting new digital platform concept that's set to revolutionise video production for the web.

Bell and Yeadon were introduced at a party by a fellow entrepreneur. They hit it off immediately, came up with the idea for QuickTV and developed a business plan within days.  

Soon after, they approached NStar regarding its Proof of Concept fund – a European fund dedicated to regional investment. They were given £60,000 to test QuickTV and prove its business plan. This went well so the duo was then invited to pitch to the co-investment fund, which is administered on an entirely commercial basis.

The Co-Investment fund required QuickTV to reach a certain amount of private investment in exchange for a percentage of the total money sought. The hunt for further funding began.

Yeadon and Bell started by targeting private investors in a bid to find the matched funding they required. They quickly discovered that in spite of their rhetoric, venture capital firms are often reluctant to give seed funding. They changed direction and began to investigate angel sites and local groups of high net worth individuals.

Their investigations led Yeadon to meet with a supposed private investor one morning in a London hotel. Over breakfast, the potential investor, dressed in a three-piece suit and looking quite the dignitary, spoke at length about his wealthy lifestyle, the penthouse where he lived and, bizarrely, the American Civil War and its consequences for contemporary England.
 
He occasionally broke from his lecture with statements such as: “I’ll give you £200,000.” He upped the stakes from £200,000 to over a million during the course of a two hour meal. 

Not long after, Yeadon and Bell were invited to meet the investor in Eastbourne. After a quick meeting in a seafront hotel, the investor said that his one stipulation was that they use a particular telecommunications company for their phone and internet use.
 
Yeadon and Bell agreed in principle, and the excited investor marched them three miles across Eastbourne to a particularly grubby looking telecoms shop to broker a deal for a £100/month phone package. 

Yeadon and Bell were understandably suspicious and made their excuses about needing to think things over and left. They later followed up on the address of the supposed penthouse where the man lived to discover it was a half-way house run by the DHSS. The investor? A complete fantasist with no real money to invest.

Other business angels encountered along the way included a porn baron who wanted to use the QuickTV service to make videos of naked men running around a dog track.

However, Bell and Yeadon eventually found BiG, a forum for high net worth individuals in the North East looking to invest in local businesses. BiG gives entrepreneurs the opportunity to present to local investors who, if they’re interested, then follow up with them directly. Finding BiG was a major breakthrough for QuickTV, allowing Yeadon and Bell to meet with genuine investors and to network more effectively through their region. It also taught the pair a lot about what investors are looking for. 

Yeadon says that for many investors there are two key factors: “The first is that they can see, immediately, that you and your business partner have a strong relationship and can work together to build success.

“The second is that you’ve got some skin in the game. They need to know that you’ve got a lot riding on the success of the business and that you’ll suffer if it fails."

QuickTV now has nine private investors, alongside more than £500,000 from the NorthStar Co-Investment Fund.

Yeadon’s tips for raising finance
1.    Many entrepreneurs go national in their search. Don’t ignore regional funding opportunities on your doorstep.
2.    Don’t expect seed funding from VCs but try to start a conversation with them anyway. Most VCs are very open to talking to start-ups and can be a valuable source of information and a source of further funding once your business is up and running.
3.    Look outside of your sector.  If you’re a technology company, tech investors aren’t always the best place to start. We had a lot of luck with high net worth individuals and landowners who didn’t really even understand the business.
4.    Be prepared for setbacks beyond your control. For example, one of QuickTV’s original funds fell apart as the investor has a large portfolio which was affected by Northern Rock crisis.
5.    Remember that first impressions are more important even than the business plan, trust your gut instincts.

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