Since selling Pooch and Mutt I get a lot of investment opportunities.
Most want my money to spend on these things, or need it because they have spent too much on them already. These are my big red flags:
1) BRAND: You do NOT need to spend £££ on a big agency to get started. Use Fiverr , or a friend. Get selling, get feedback, see what works. THEN take all this knowledge, along with income from actual sales and spend that on your brand. No big agency’s strategy work will be as valuable as 6+ months experience. And agencies that offer ‘discounted’ work in exchange for equity at early stages should be shot. Go too early on brand work and it will look good, but it will not look right, and that’s vanity.
2) WEBSITE: You do not need a custom built website until you have £m’s in sales. Use off the shelf solutions like Shopify (Easol for events). A $100 shopify template may not be perfect, but with a few plugins will be good enough. Use this to build sales and to know what you would fix if you go for a custom solution later. If you are starting out and spend over £5k, let alone £50k+, what are you fixing? How would you know? It will just look pretty. That’s vanity.
3) MERCH/ ACCESSORIES: I’ve been pitched investment in multiple supplement brands that want to spend on bottles, jars, merch etc because that’s what AG1 do. Not only is this a waste of money, it also adds opps issues. Your job for at least 6 months is to prove there’s a problem that customers want fixing, and to prove that they will pay for your product to do fix it. That’s it. The add-ons come later. If you’re spending on products that aren’t the products that you’re are selling, then you’re only doing it to make that product look better, and that’s vanity.
4) BIG BRAND CAMPAIGNS: Paul Lindley OBE from Ella’s Kitchen told me years ago, “The best marketing is your product, then the packaging, then the shelf space, then what you do in store. Think of everything as ripples away from where the product is available to buy”. This stuck with me. DTC changes it slightly, but only slightly. Spend marketing money where someone can click on the product and buy it. Until you have HUGE distribution, big campaigns are vanity. It’s lovely to be in the national press, and to “get people talking about you” or go viral, but these are not efficient ways to get sales, and without sales you go bust, or take an investment deal that you think makes you look good, but actually screws you.
5) RAISING TOO MUCH TOO EARLY: Raising money is not success. Having a business that doesn’t need to is. Founders should need to have their equity clawed out of their cold, dead hands, but often give it away too early, because it sounds good. Then what happens? They a) need to spend it and b) are beholdent to investors. You should raise as little, not as much, as possible, or it’s vanity. You should know how you will spend every penny and what results you’ll get from it.
