23. How Funding is Like Ice Cream with Martin Spiller

23. How Funding is Like Ice Cream with Martin Spiller, Paladin Partners

Hannah Munro: 0:48 

So, hello everybody and welcome to this episode of CFO 4.0. And today we're going to talk about everything funding. And literally the title I've been given is how funding is like ice cream. So, it's going to be a fun one. So, I'd like you to introduce you to our guest. So, an experienced CFO, Martin's worked with a number of high growth businesses. He's also a visiting fellow at Cranfield University's Bettany Centre for Entrepreneurship, where he teaches two courses on both entrepreneurship and entrepreneurial finance to MSCs and MBAs. He's also spent several years on the committee for a seed investment fund, as well as having been appointed as a non-exec director on a number of different companies to assist them in their growth and development. So, welcome, Martin. Great to have you on the show. 

Martin Spiller: 1:30 

Thanks for having me, Hannah. Proof that social media can bring people together. 

Hannah Munro: 1:36 

Absolutely. So, tell us a little bit about yourself and your journey and how you ended up doing some of the things that you're doing today. 

Martin Spiller: 1:43 

Yeah, it's definitely what you'd call a random walk. There's not a lot of structure to what's happened in my career. So, I started out at Arthur Anderson and then Deloitte by default. I was originally a scholarship student in corporate recovery and then I joined corporate finance where I started out in the deal origination group because I thought it sounded cool to be a dog. And then I ended up in food and beverage. Hopefully it was because I was okay at origination, not because I'm just fat, but it certainly helps to be fat in the food and beverage sector. I stuck around for a year after we merged with Deloitte before I left to co-found a giftware business. So, giftware is everything from teddy bears, key rings, mugs. And I co-founded it with a very experienced guy, and we grew pretty well from nought to 15 million in four years. But I'll be honest with you, Hannah, it was a bit boring in industry for me. So, after a couple more years of that and stabilizing the business to deliberately not grow anymore, so, we just made it more profitable, I got bored and sold out my shares to my second-tier management team and went off to become a barrister. So, I'm both a qualified barrister, but not practicing in case anybody is a lawyer listening. I don't give legal advice, but I am a barrister and I've worn my wig once and I thought I looked quite dashing in it. And then I've kind of focused for the last, it's getting on now, but it's the last 10 years, kind of split my life in three. So, a bit of investing. both for a fund, as you mentioned, but also for myself, realizing that not all of my investing is good because I'm not Charlie Golden Potatoes and I've had a few failures along the way. I've also been a kind of consultant CFO where I've gone into companies on an interim or part-time basis or as a non-executive director. And then, as you said, I've been fortunate enough to be picked up by an amazing professor, Stephanie Hussles, who's the head of the Bettany Centre, and it's her title. So, it's nicked from her with her permission, but she says funding's like ice cream. So, I can explain that later on. 

Hannah Munro: 3:43 

I was going to say, so, tell us a little bit why funding is like ice cream. You can't leave us hanging on that one. 

Martin Spiller: 3:49 

Okay, well, it's pretty simple, and it's her stuff, but she said I could use it, so, credit to her. Basically, funding's like ice cream because everybody has their own kind of favourite flavour. But you don't want to take too much because if you take too much funding, you get indigestion. But equally, you don't want to take too little because I don't know what it's like where you are, Hannah, but where I live in Chiswick, if you take too little, you've got a big, long queue to go and stand in line. So, you need to get it right. So, funding's like ice cream because it's not everybody's got the same flavour requirements and you don't want to take too much, but equally, you don't want to take too little. So, that's the kind of basic where it goes. And it's something that seems to resonate with people. And it's stuck with me ever since I saw it. So, I wish I'd known about it before, but it's all down to her. 

Hannah Munro: 4:34 

So, tell us a little bit about, because obviously you've been on both sides of the table. So, both applying for funding and also giving out and deciding who to fund. So, with that sort of that investment fund hat on, what is it that, you know, what is it the funds are looking for in terms of, you know, companies to invest in? What are they watching out for? 

Martin Spiller: 4:55 

Well, it kind of breaks down. So, Firstly, if you're sending in your pitch deck or your business plan, you've got to be interesting. So, there's a great piece of stat from a TechCrunch article in June 2015, which says that the average time an investor will spend looking at a deck based on that, they did some research using DocuSign, where they were sending documents through, is 3.44 minutes. and an average deck of about 20 pages for a seed round, which in America is obviously a bit bigger, but about $1 million, up to $1 million. So, you've got to stand out in order to get in the room. So, the first thing is you've got to be in interesting sectors or within an interesting spin. And then when you're in the room... it's all about whether you think as an investor you can work with the team. Because most startups, as I'm sure you have covered in some of your other podcasts, most startups where they start and where they end are not always identical. And there is that need to kind of, I don't like to use the pivot word but change your business plan as you find out more about it. So, that kind of difference between a startup and a scale-up, I guess. But in order to get in the room, you’ve got to have something that's interesting, and you've got to communicate it in a fast and easy way. Again, when we kind of talk about it, there are exceptions that prove every rule. But for me, it's such a congested space. So, we invested in the time that I was on the fund in about 100, 110 businesses, all SEIS, £150,000. But in order to get to the pitches, we saw about 2,000 businesses 2,500 business plans to see about 500 pitches to make about 100 investments. Wow. Not all of them were us rejecting. Some of them rejected us when we wanted to, but that's the kind of maths that you're looking at. Therefore, there will be exceptions that prove every rule. But if you want to run the numbers, which I guess as any good CFO would want to do, then you have to kind of understand 3.44 minutes and you're one of many. And the more... The more mature the space has got, the more defined it is. 

Hannah Munro: 7:05 

And that's really interesting. So, from your fund, 2,000 applications, about 100 awards, that's about 5% of applications are actually getting awarded. 

Martin Spiller: 7:14 

Yeah. And I think, bear in mind, when we first started out, we were one of the first SEIS funds in 2012-13. We're there to invest. This is a tax-based fund, right? So, initially it was a fixed term. It's now an evergreen fund, but it's a fixed term fund. So, within the tax year, we had to invest because SEIS is all about deploying. So, if you're in the room, we wanted to invest in you because we'd already said yes. What a lot of entrepreneurs and founders then did was talk their way out of investment because we'd already said yes. And what they spent their time doing was proving how we couldn't work together. 

Hannah Munro: 7:51 

So, so, what sorts of things, that's a really interesting point. So, what sorts of things would they say that would give you the, like where the warning flags would go up and you'd be going, no, this isn't a good, this isn't a good team to work with. 

Martin Spiller: 8:04 

Okay. So, we did a piece of interesting analysis on ourselves. Is it a case of We were judging our decision to say yes or no based on what we really liked, or was it ex post facto where we're rationalizing our decision process? But for me, the things that really stood out were not a team. So, we've got some rules at Cranfield. So, the first rule is cash is king of entrepreneurship. The second rule is entrepreneurship's a team sport. So, the one thing that would immediately stand out is when you don't have a team, when you have one individual that dominates. And I'm sad to say it's usually... male that try to be that kind of Donald Trump-Esque entrepreneur. The second thing is an inability to listen because at the end of the day, when you get a fund, even more than perhaps sometimes with an angel, you're going to have somebody sat there who's going to watch you and you're going to have board meetings. So, somebody like me and our fund was largely focused on CFOs. But remember, in the UK and Europe, the venture capital community is dominated by accountants. Less so, in America, but they are financially based. So, not able to work or listen and therefore benefit, so, they know it all. And the third and final thing, which I guess relates to what we're talking about, is not knowing their numbers. So, often they can't afford it. It's a big problem for growth businesses being able to afford a decent CFO. or getting one on board. So, often people spend a lot of time on the words, but not a lot of time on the numbers, and they don't match. And they make changes to their business plan, but they don't change their model. And the first page I always used to start was read the executive summary, then look at the financials to see if they stack up based on what I know. And most oftentimes they've given it to some outsourced accountant or somebody who really didn't pay attention they really didn't talk to them and that's the biggest red flag because that means that you've got entrepreneurs who don't really have enough care about their business plans. 

Hannah Munro: 10:03 

I haven't understood the importance of the financial element and got somebody with a decent financial knowledge on their team so, 

Martin Spiller: 10:10 

hopefully we respect that it's difficult because yeah you know good finance people are not cheap and, but you know ones that are brought somebody on and maybe looked at giving equity in return for the fact that they can't afford them. But yeah, not having numbers that match up their business plans is a huge red flag because it is at the end of the day for an investor about a financial return. 

Hannah Munro: 10:32 

Yeah, absolutely. And I guess the question and the challenge then becomes how, and we've talked about this before on the show about, you know, how do you get that sort of that talent on board from a financial perspective? And for those CFOs listening that are considering getting involved at that early stage, what sort of advice have you got for them? Because obviously you've done this for a number of years. 

Unknown: 10:56 

Yeah. 

Martin Spiller: 10:57 

Yeah, I mean, it's interesting. I always hate giving job advice because I've only ever done one job interview. I got the scholarship program when I was 18, and I haven't had another single job since. I've obviously won contracts or been brought into different ventures, but I've not won one. So, I always feel a bit worried about giving advice. From my perspective, you need to think about, A, what your skills are. and where your background is, because just because you've been a great CFO in a larger business or medium-sized business doesn't mean you're ready for startup land. And the second thing is what the team needs, because like I said, entrepreneurship is a team sport. So, what does that team need? Does it need a commercial CFO that's going to help the sales initiative by helping keep them on track and negotiating contracts in a B2B environment or helping make sure that They focus on the sales engine for a B2C environment. Or is it that you've got all of that and what you need to do is help support the kind of infrastructure build? So, I think it depends on what you've got as a team, but also what's critical for that business. And in startup world, the very biggest focus I see is being able to understand what you need to do well, because you don't have resources. So, medium and larger companies have the chances of resources to fail. Cash is tight. It's going to be really tight. Back to the flavours of funding. You don't want too much because then you'll waste it. But equally, at the same time, if you have too little. So, you need to really focus on that. I've got this kind of fixation with five pieces of information because the human brain can deal with seven, plus or minus two. I always go for the easy option, so, the five piece. But most businesses, I think, have five critical success factors that really make a difference. And then you need to, as a CFO, you need to put in place good KPIs to monitor them. But the ability to understand what they are, I think, is key. And be honest with yourself, because not all CFOs are suited to startup world. It's kind of difficult. You don't have much support. You have to be able to get your hands dirty from time to time and I don't know, all my friends used to laugh at the fact that I would actually be able to put things into an accounting system when I needed to, whereas I've never really done that in my own startup. Yeah, it's just a different world. And you need to be honest with yourself because not all people understand it. And not like I don't understand public company world, for example, that fills me with dread. 

Hannah Munro: 13:28 

Yeah, it's about what excites you, isn't it? And I think there's this... There's this expectation that everyone that wants to be a CFO wants to do it for like a massive PLC. And that might be the case for a lot of people. But I think there's a real adventure in working with startups and scale-ups. 

Martin Spiller: 13:45 

The idea of working for a PLC makes me want to cry. Having to do those 300-page annual reports and all the risk analysis and having my underpants measured in terms of salary and board meetings. No, thanks. No, I'm not sure. I'd much rather graft it out. If I have to put in some numbers into a P&L occasionally and do some debits and credits for my living, then I'd rather do that, get my hands dirty. It's a 

Hannah Munro: 14:13 

trade-off. And for those PLCs, the FOs listening, we do actually have an upcoming podcast on writing very exciting annual reports. 

Martin Spiller: 14:21 

Oh, yeah, some credits too. It's insane. knowing where to stay in your lane. I'm totally full respect. I've got some mates, like one of my best friends who I trained with, he's gone into that kind of footsie 250-ish world. Amazing guy, totally respect him, but his skillset and mind could not be more different. 

Hannah Munro: 14:38 

But I think that's it, isn't it? It's where your passion lies. And I think it's like you say, where your skillset and certainly with your background in law, as well as your experience starting that entrepreneurial mindset that you have, that's kind of what you bring to the table. I 

Martin Spiller: 14:55 

qualified as a lawyer for that reason, though, because as an entrepreneur, I wanted to be a barrister, but I couldn't afford to be. But one of the things as a CFO in a startup, getting good legal advice at a price that works on a commercial basis is super difficult. So, if your contract's worth $50,000 and the legal advice costs $10,000, that's your profit margin gone. And I did have some struggles getting good legal advice. So, I thought, you know what? A, I wanted something to go back into academia. I didn't want to do an MBA because I'd been teaching on those. So, I decided to do the law, but it also helps to be able to at least give contracts a first pass, know what areas you need support and not have to go to a legal advisor for every single thing. It is about being that kind of one-stop shop for everything other than the CEO. So, that idea of the CEO 1.5 in a startup. 

Hannah Munro: 15:44 

Love it, love it. So, you mentioned that five pieces of information. Can you give us some examples of how you put that into practice? 

Martin Spiller: 15:56 

Yeah, so, when I do consulting CFO work, invariably you can, you know, when you've covered a lot of sectors and covered a lot of spaces, you can tend to see not necessarily where all the problems are, but you get a pretty good idea when you get old and grey like I am. And things like I went into one business where they had, I don't know, 40 or so, KPIs. Now, I've got a semi-ish photographic memory. I remember everything I write down. But nobody can track 40 KPIs. And to my mind, 40 KPIs, there's not 40 critical things you have to do in most businesses. So, there are certain things you need to get right. So, for me, it's taken a step back. look at working on the business, not in it, which I was spectacularly crap at when I had my own business, but trying to identify what things really matter, what things that we do really make a difference to our end consumer or our end customer, and do them and monitor them. And the rest of it, you know, you can... So, for example, in giftware, we could have a really bad year, providing we got Christmas right, we do okay because Christmas is 40% of my year. So, we can have a bad Valentine's Day, a bad-ish Mother's Day because we did quite well at Mother's Day. Father's Day didn't matter. We didn't do Halloween. But as long as we nailed Christmas, we were okay. So, therefore, you know, around your five things, one of the key performance indicators, you've got to get enough into Christmas and get the stock right. Cool, then I know that. Then I can have a really good year even if I make a mess of the rest of it. So, these are the things that matter. And again, you know, I've been involved in different things like consulting. So, consulting is all about utilization of your staff. So, you need to get that right. Or if you're sales led, have you got a pipeline? These are the things where every business I think has five ish things. And I'm yet to be proven wrong when you boil it down, but, happy to have a debate if you've got people listening to the podcast who think differently so, 

Hannah Munro: 17:59 

yeah, at some point I am actually going to open up live questions on these podcasts I'm not quite brave enough to do that just yet. 

Martin Spiller: 18:05 

well, I'll come back if you want Hannah, I love being put under the spotlight like I've joined Clubhouse recently and it's been quite interesting. 

Hannah Munro: 18:14 

yeah I definitely think there is a there's a piece around sort of a funding Q&A so, coming back to sort of our topic around funding so, we talked a lot about seed funding and I know you've a lot of experience there but what happens you know what is the funding landscape like once you go past that seed phase 

Martin Spiller: 18:32 

I don't think it changes there's masses of money slushing around because we've currently got a marketplace where or an environment where we've got, ignoring the pandemic as a kind of blip at the moment, but even then, you've got negative interest rates effectively. So, there's plenty of asset classes where money wants to go. So, there is record levels of private equity around, and the UK has done a spectacular job of putting itself way higher than it should be by size because of the tax breaks like SEIS, like EIS, and up until recently, the entrepreneur's relief, which now looks like it's under threat. Obviously, but even there, there's plenty of money around. The difference is that at the startup end, you still need some kind of proof of concept because there's so, many opportunities that the old days of a blank sheet of paper doesn't really fly. So, you need to prove that you've got it. But the difference is from a startup to a scale up, in my mind, you've basically sorted out your sausage machine. so, that I know now the money that I'm putting in. You've made mistakes, but you've got a pretty good idea that you put the money in the top, crank the handle, and money will come out the bottom. That is the only difference between seed. There'll still be things you need to sort, but if you're talking about serious fundraisers, so, in businesses that I've passed on when I've moved away, when you're starting to raise the half a million, the millions, and into the bigger numbers, they've got their sausage machine sorted and the investors can then pump money. They know where to put it in marketing and what bits of the team you need. And that's the difference. That's the difference between seed. Seed investors get tax breaks that allow them or take equity stakes that allow them to adapt that change, whereas scale-up investors are much more. It's like a horse race that started, and you start to bet when the horse is halfway down the track. And that's the difference. You now need to prove that your horse has got the advantages that you said it, whereas a seed investor will probably understand that you don't know how it's all going to work, but you've got a really good idea with some proof. 

Hannah Munro: 20:38 

Yeah, so, the expectations at that sort of that next level are much more stringent, particularly around the finance side, I think is what you're saying, is that they really need to be able to stand up and justify where they're getting the numbers from. And, you know, you need, that's important during obviously the initial phases, but it's absolutely critical in those second phases. 

Martin Spiller: 21:00 

Yeah, so, I was on the board of a company called Equus, and I don't think they'd mind me saying it was an MBA presentation at Cranfield. I went along when I first started to get involved with it. Cranfield. And it was an MBA, exec MBA presentation day. And I didn't know if they were real funding requirements or if it was just a project to get your MBA. And Equus had basically invested some of their own money. And I can't forget exactly, Hannah, but say bought £25,000 worth of stock. And it was all about equine products. So, jogpers, whips, hats, boots, and now they do everything, including fly nets and things. And they've invested £25,000 of their own money. Steve and Kim, fantastic husband and wife, now duo. Steve was doing his MBA. They did the project. Kim was the kind of equestrian person who'd had horses all her life. They bought £25,000 worth of stock, and they'd sold it as part of the project. So, we've got some idea of an average basket and what it costs to acquire. So, you've got sort of... CAC, you've got your CAC idea, and you've got your basket value ish. And then we invested 150,000. It didn't go that well initially. So, we struggled to get a kind of sales engine going, balancing out the cost of Google, Facebook, and everything else to acquire. But about two years ago, I think it was, two and a half years ago, we raised another amount of money, a more serious round of Because by that point, we got it sorted. We knew exactly how much it took to acquire a customer. We knew what the lifecycle customer value was. And what we needed to do was therefore raise money for building the team, which they'd grown a bit, but they've now grown a lot. And the business has gone from doing, again, a few hundred thousand into millions because we got it right. And now you're just putting money in the sausage machine, investing in stock, investing in staff and investing in marketing. Now, if they go for another round, and I stepped off the board at that point because I think I'd done four years on my job. If Steve and Kim, and I don't know what they're planning to do, if they go for again, they'll have an even more defined model where series B round could go in and really take it to whatever level they wanted. But it's literally exactly what I say. Plus, we've got years of numbers to review. So, yeah, it's all about the numbers at that point. 

Hannah Munro: 23:22 

Absolutely. I think this is really interesting for those interested. And funny enough, I'm a, you know, I won't say I'm an equestrian. I'm an equestrian wannabe, so, I know exactly the brand that you're talking. 

Martin Spiller: 23:31 

about. Well, you fall into the happy hacker category that they have in that book. dressage diva and happy hacker and 

Hannah Munro: 23:38 

yeah, everything try you know all the gear no idea is how they describe me to be very. 

Martin Spiller: 23:45 

fair it's an expensive one to have all the gear in so, 

Hannah Munro: 23:48 

yeah absolutely yeah I think i've got a few small bits from them but no at the end of the day I think if we go back to um you know taking the horse side of things out because I could talk about that all day um and go back to the funding cycle so, I think what's really interesting is and I think one of the pieces that a CFO has to understand is where they're at and like you say what funders are looking for you know are they are they proving the concept or are they proving the numbers and the potential I think is what you're saying there um and I guess the question is on the flip side is like you say there's lots of money around how do you find the right funder for you as a business what should you be thinking about when you're looking for a funder 

Martin Spiller: 24:30 

Well, the first question, and it's really annoyed me. So, I've been on Clubhouse for about a month now, and I've heard some really dodgy advice, and I wanted to get up on stage and shout at them, but I didn't think that was the way to go. So, I've largely refrained. But there's a lot of these kind of business coaches and things who are talking about this. From my perspective, the first question is, do you need equity funding at all? Because it's not, back to the ice cream point, it's not right for everybody. So, unless it's going to turbocharge your business... then equity funding isn't for you because it's super expensive. So, if you're trading away, and I say trading, not giving away, which is what a lot of entrepreneurs say, if you're trading away 20% to more of your business, you need it to make the pie bigger fast. Otherwise, it's a really expensive way of losing control of your business. So, the first question is, is it right for you? So, if you want a business where you control it, you don't want to exit in five, seven, nine years' time, then don't take equity funding because you're going to have to do an exit. If you want your lifestyle business, then it's not for you. That's the first and starter. And there's so, many people who are trying to raise money when it's not right for them. They're doing it because they think they can pay their mortgage. That's not what equity funding is about. Look at other ways. Bootstrap. Do the Raman profitability where you build the business slowly. But unless their business is going to really grow, don't do it. And to give you some kind of focus, Bohurst, a great source of information on scale-ups. Skyscanner, which was a backed business, is the biggest exit of a funded business. Did its exit in 30, sorry, Skyscanner versus Synergy, which is the growth company, is 13 years versus 27 to get to your exit. Or in terms of IPO, backed businesses get there in 11 years versus 26. So, it's turbocharging the business, but you know you're going to have to exit. If it's not that, don't start. Then in terms of if you've identified it can turbocharge your business model and you're prepared to exit, then you need to look at whether you're going down the angel route, whether you think that they can add something like the reggae, reggae sources, the one I always use, stopping Levi Roots from wanting to make his own kitchen and becoming a brand that he sells to people who control that supermarket space. Brilliant. And the Dragons did that. Is it that you want to but remember that dragons can be a pain in the ass, angels can be a pain in the ass because they think they know everything and they're going to be on your board. Whereas venture capital professional investors tend not to be as intrusive because they're running a fund, not running your business. And then think about whether they understand your business at all. But having said all of that, Hannah, we can say do your homework and look at them and speak to them. What most people do is go to the place where they think they can get funding because most entrepreneurs forget it takes six to nine months to close most rounds from start to finish, if not more. And they're desperate. So, they often get investment at kind of desperation and repent at their leisure because there's often a mismatch. So, I would suggest you do your homework and really seriously consider it. But I know for the most part, People are desperate for money because they've either left it too late or they've seen the opportunity, and they just want to go. And there is this kind of entrepreneurship hustle thing going on where everybody's in a big hurry. And to my mind, I'm all for going big early, but you need to think about where you're at. 

Hannah Munro: 27:58 

And do you know what? I think that's a really interesting point. And it comes back to our discussion around funding being like ice cream. That initial round of funding needs to give you that breathing space for your second round, doesn't it? You need to know when you're going to start your next funding round so, you know how much capital you need. And from what you were saying, you need space to make mistakes in that first funding, that seed funding round as well. 

Martin Spiller: 28:25 

Totally. I mean, the idea that some entrepreneurs have is that we'll fund them Yeah. I don't know what the exact numbers are because nobody wants to analyze them because that would probably reveal too much. But the fundamentals are you need to build in some slack, and you also need– it needs to take you somewhere. So, when I advise friends or clients– If you're in the room, so, you've passed the test, you're in the room, you've got an interesting concept. The next question is, can we work with this management team? Like I said, don't talk your way out of investment. The third question then becomes, have you raised enough to take you to a meaningful milestone? Because what we saw when they launched the seed enterprise investment scheme was a lot of business plans that used to be wanting to raise 500 under EIS, 500,000 pounds, suddenly repurposed to 150,000. Well, Anna, we might be green, but I'm not a cabbage, and we're not idiots, and we can see when it doesn't stack up. And what they were trying to do was force through business plans because it looked easier. But what you really need to do is look at what you actually need to raise to get to a meaningful next stage to go back to your point. then we understand what our numbers are a bit better. It's a refinement process at every level. And we can mostly see through it. I'm not saying we're geniuses, but you've got lots of experience and the numbers don't really lie when you really get into them. 

Hannah Munro: 30:11 

So, when you're actually figuring out that sort of how much do you need, what sort of things should you be considering? 

Martin Spiller: 30:22 

For me, it's back to that kind of MVP process. So, when you're looking at MVPs, if you want to build a car, what's the minimum viable car? You don't start with a bike or a pogo stick. So, what do you actually need to prove to the next level? So, how can I prove– and it totally varies between– so, if it's an e-commerce site, how do I prove that my market exists, what my basket value is, and what my cost of acquisition is so, that I can refine that, pour more money into marketing, get more customers? If it's a technical product– What is the next hurdle from a proof point of view that the product works? So, Cranfield have got a company called Corrosion Radar, which is a piece of PhD research about, and I don't understand, Hannah, how it works, but it looks quite cool, about checking pipes for corrosion without having to physically inspect them. It looks cool. I have no idea. But that is... fundraising to prove that the next stage that they can keep rolling it out and prove that the theoretical part works. And I'm not involved at all, so, I have no inside track, but that's my outside observation. But for me, it depends on the sector, but at all points, you've got a mile post. And for most of the businesses out there, I would say your seed funding probably has to run you for a year at least. And if you're cutting it too fine and it doesn't stack up, then most investors will see it. 

Hannah Munro: 31:46 

Yeah. And I think there's this assumption that I think sometimes, is there a problem when people are applying for funding that actually they're focusing too much on the technical side? Because you just stood there and said, I don't know how this product works, but it looks awesome. And, you know, how much technical knowledge do most investors have or don't they? And actually, they're more reliant and more interested in the numbers that are behind it. 

Unknown: 32:13 

Yeah. 

Martin Spiller: 32:14 

You'd be surprised how much technical knowledge they have, especially across an investment panel. So, I would always focus on the commercial side because I'm a rare CFO who used to be in charge of sales and had the biggest account when I had my giftware company under my book, so, I looked after them. But you'll be surprised, and especially when you're talking Series A, Series B, and onwards, the investors that are likely, they've got some pretty smart people working on their boards and doing commercial due diligence. That said, we also know that most startups and scale-ups fail not because the product's not very good, but because they can't do business development. So, of the 100 or so, businesses that we invested in whilst I was on the panel, I'd say five or six were on track with the sales that they said. Then there's obviously a bunch that had died because that's the whole point of seed enterprise investing. And in between, there was a bunch of zombie companies that were maybe sorting themselves out to ones that are getting back on track. But the single common factor was that they weren't able to sell. And a lot of people focus on the product, whereas the research at Cranfield shows that the biggest determining factor, if you want to focus, is on business development, selling your product rather than constantly trying iterating on it. So, for me, yeah, it's fine. Don't presume your investors don't know anything because some of them know a lot more than you. 

Hannah Munro: 33:44 

Awesome. 

Martin Spiller: 33:47 

They're not necessarily technical experts. 

Hannah Munro: 33:51 

But it's interesting, actually, to hear your perspectives. And it sounds like there's a lot of variety. And I guess it goes back to what you're saying. It's about knowing where you're getting your funding from. 

Martin Spiller: 33:59 

Yes, your flavour. Every time, it's always about flavour. Which is the one that's right for you and for them, by definition. 

Hannah Munro: 34:07 

And you made a really interesting point just at the start of the podcast about the fact that actually too much funding gives you indigestion, like too much ice cream. So, what... Because most people will be sitting there going, how can you have too much funding? So, talk us through the logic behind that. 

Martin Spiller: 34:25 

Okay, so, I don't know how you work, Hannah, but you mentioned about your horse-riding enjoyment. And if you've got loads of money, you tend to want to spend it. It doesn't mean that you're spending it in the right area. So, classic examples being the whole startup office space where they've got a table tennis table and a– There's one office, I think, in Shoreditch that used to have a slide, and two or three very heavily funded startups have been through it. You waste money. So, you can waste it on fripperies like the beer and the office and this and that. You also can often recruit too fast. And I know that sounds strange, but if you're a team of five or six, taking on 20 people, which is in your plan, is actually quite hard to do to find the right people that don't derail you. And you could also make some pretty bad marketing decisions. As we all know, the internet, I think, is a pretty fabulous thing, but it has its faults. And one of the faults is you can spend so, much money on Google and things that don't get you a return. So, for me... Having too much. When we funded my giftware company, I think we had about a million pounds of committed loans from two investors and the management team, of which there was two of us. But we invested in stock. So, we didn't have, we had cash flow. And in the giftware world, you're always cash flow negative because it's bought in China, shipped to the UK. And then you're on 60, 90, 120 days with different retailers. So, the bigger you go, the harder it is. But the good thing about that is it makes you really focus on cost. So, I mean, aside from the fact that I live in London, I am a Northern CFO, which means I'm from Yorkshire and I'm super tight. So, in the entire time I ran my business, my first business, I never made a single transfer to any supplier other than ones in the far east and I never bought even I promised to send first class stamps I never used a first class stamp in my entire life because the check would come in the post on a second class stamp because we were always tight for cash there is something in that about being lean I really love that whole ramen profitability thing about bootstrapping even when you're raising funds not wasting money so, you can have too much and you can get indigestion because you waste it And the hardest thing, I think, is growing a team. I don't think a growth business can really take on more than two or three people at any one time because otherwise they lose that whole vision and mission and values because they're not embedded properly. Once you're bigger, it's a lot easier, I guess, when you've got systems and structures. But initially, you end up hiring the wrong people. And hiring people is the biggest single problem. 

Hannah Munro: 37:06 

And you know what, I think that's really interesting for everyone to think about when they're in that early stage. And even when they get to scale up, think about the pace of change, because people won't just come into your business and get it. They're not going to come in with that same vision that you have. You have to take them on that journey. So, I think that's a really, really good observation. 

Martin Spiller: 37:27 

And that's where a lot of businesses lose it. because they take on too many people. And the other thing is they tend to go back to where they used to work from a lot and take on groups of people that are not. I went to Deloitte, and Deloitte's a wonderful place to work, probably nicer than Anderson, but I wasn't a Deloitte man, so, I didn't really fit, and I didn't like it as much. I mean, and I don't want anybody, it's a fantastic firm, probably nicer than Anderson was, but I was recruited at Anderson, not at Deloitte. And therefore, you don't always fit. Again, with the startups, a lot of mistakes are taken by taking people from the wrong space. So, big corporate people who've got used to systems versus startup people. And also, there's a lot of malign stuff about Gen Z and younger staff. But actually, I think they're brilliant. But you need to do things a different way. They're not the same as me. I'm mid-40s. I'm not going to say exactly because I'm skating into 50 and I'm not massively happy about it. But They want different things, and you have to align with values and vision. And like you said, those things can change if you take on people and you don't bed them in properly. Not always a bad thing but often can derail. And remember, it's quite hard to grow a business, as I'm sure you know, being the MD. It's not as easy as it looks and therefore little things get in like grit in a shoe, can't they? 

Hannah Munro: 38:46 

Absolutely. And that's one of the things that we've learned over the years is that, you know, and it sounds obvious, but people are your most important asset. And if you get the right people, and for us, it's finding the right mix of excitement and energy of that younger generation with the experienced, knowledgeable people and getting that balance right. And I think once you get that, then you're on to an absolute winner. So, that's my top tip if anyone's listening. Just think at both levels. You can't just take in a shed load of graduates and expect them to thrive. You need to balance them out and mentor them and support them. 

Martin Spiller: 39:20 

I think it's like the more people you have it's like a jigsaw puzzle and it gets harder you've got to find the right piece and that means there's more sides to touch I know I don't want to talk like an American management consultant but it genuinely is the harder it gets because you've already got a team and they've got a value system and the value system comes from the top initially but then it has to be replicated from the people you employ and there was somebody who said something recently about retail where he said or she said, it was interesting that the lowest paid workers who are on minimum wage are the people that interact with your customers on a daily basis. And I think there's something to that. The more people you've got in a team, the more touch points, you've got to marry them in. And so, for me, things like the best tip I ever got was my customer service team told me I was crap at recruitment. So, I gave it to them. And their first pick was the worst one they've ever picked. And they came to me two weeks later and said, we need to get rid of her. And I said, well, okay, get rid of her then. Well, we can't do it. You employed her, you get rid of her. Now, the benefit from then on was we worked together, but actually it was a great tip. I'll meet the first candidates, select a shortlist, and then hand them over to the team to select. And it worked because then they're invested. They've got to make them work because they've picked them and they can't blame me. But actually, it's important because that whole thing of knitting together a team can make or break. And it's a fine balance, especially if you're relying on B2B sales and things where they're going to represent the brand. 

Hannah Munro: 40:53 

Absolutely. And I think we could probably do a whole another podcast on finding the right team members. And it is such a hard thing. And for finance teams, I think it's a really good shout to just think about that balance, that vision that you have for your team and making sure it fits. I love, yeah. 

Martin Spiller: 41:12 

Back to the indigestion point, which is where the indigestion usually comes, scaling up on people. Scaling up systems and infrastructure and stuff is relative. Now versus, say, the dot-com boom of 2000 is relatively straightforward. The Amazon stack exists. The Rackspace exists. All of these things are easily scaled. The hardest thing is getting the team to do it. And you will have some false starts. That's why I think indigestion comes about. That and marketing. Wasting money on marketing where you try different things that don't work. So, that's where you get indigestion from having too much money, in my view. 

Hannah Munro: 41:47 

No, but I think it is a good point, is that you're not getting... complacent with the safety net of the funding, I think is what we're saying here. Even if you've got funding, still bootstrap it. Invest wisely. Make sure you know. 

Martin Spiller: 42:02 

Yeah, and I think the CFO's role has changed over time. We're not just involved in the numbers. We are part of that whole managing the vision and values piece. You have to be present. You have to be involved. You can't just outsource HR resources You can have outsourced HR support, and you can have outsourced all sorts, but they aren't going to be a source of a unique selling point. And they're not going to be a source of... You know, they can't bring the internal stuff. They can help deliver it, but they can't deliver it themselves. You have to be present at that. And I think it's a whole management team effort. And that's where the kind of CFOs who used to just do the numbers and the legals and stay out of the rest in the modern-day age, especially with sharing information and providing presence, they have to be involved in all of that. So, you know, it's a changing feast for us. Being involved, being part of the team and being a presence and a face is important as well as... being able to do good numbers because it's more than that now. especially when most of the numbers are produced by machines. So, you have to make sure that they're right, but you don't have to do the double entry bookkeeping of the old days. 

Hannah Munro: 43:07 

Absolutely. And I think that's the exciting thing is that that CFO role is shifting into what is the interesting part of finance. I certainly wouldn't have wanted to be there in the days where you had to check the ledgers. That's not what the exciting part of finance is about. And I think that's what's interesting, like you said, about that CFO for a startup role is it's a much broader job description Thank you so, much. 

Martin Spiller: 43:48 

Whichever way you want, really. I'm on all of the social media. Don't follow my Twitter if you don't like swearing. I occasionally swear a lot when somebody tries to knock me off my motorbike or something. But, I mean, from my perspective, I'm happy for anybody to reach out. Like, we met via social media and LinkedIn. I think it's a good source. I don't like the LinkedIn Messenger very much because it tends to be full of spammy, lots of salespeople, and you have to kind of filter out the good stuff. But luckily, we managed it. But I'm happy to talk to anybody. From my perspective, I would like to move finance away from being seen as the boring bean counters. And I think we've got some PR to do for ourselves. There was an article I read when I was at university doing my undergraduate that said marketing to accountants was the equivalent of farting at the dinner table. And I don't think we've necessarily come that far in proving it differently. We need to start stepping up. 60% of the FTSE 100 students CEOs or ex-CFOs. We can do it. We are really valuable, but we also need to make numbers interesting. So, for one of my roles, the management team weren't particularly numerate, were admittedly not numerate and didn't like it. I put kittens and dogs on my management accounts so, that people, and broke the numbers down into what matters rather than just presenting a spreadsheet. And I know it sounds twee, but it actually made them laugh for the first time they saw it. And it broke that barrier between there's a spreadsheet with loads of lines, start to identify. And again, it goes to startups and scalpers, but it applies across the whole SME space. Make numbers accessible. We need to stop this industry where we keep it all to us. Equally, I don't think you should share everything. I'm not into that whole give my entire, because that can scare teams and things that people don't understand. A little knowledge being a dangerous thing, but being present and making numbers accessible Yeah, people don't necessarily like them, but it's a fundamental part of even the not-for-profit sector. We need to understand numbers. We need to educate people. And rather than this whole put my arms around my homework stuff, actually make them accessible to people, make them understand the implications of the decisions, the successes and the failures. And that goes from scale-up startups through to more established businesses that you're dealing with. We as finance professionals need to understand step up our game, I think. 

Hannah Munro: 46:14 

Absolutely. And I think that's a great way to sort of step back and look at, you know, and end the podcast is actually that focus on communicating numbers about educating and actually knowing who you are as a business. It's, you know, it's wider than just, you know, the profitability line. So, thank you so, much, Marcy. It's been really interesting for sharing all of your insight and your knowledge into this, particularly around the funding side. It's been fascinating. So, thank you so, much. 

Martin Spiller: 46:40 

Thanks very much. Really appreciate it. New experience for me doing a podcast over the internet. So, I thank you. 

Hannah Munro: 46:47 

very much. It's been great.