Josie Lipman, Josie Lipman Consulting
There has been a lot of conversation around MTUK’s headline finding in the Sound Investment Report: more UK music tech companies are securing seed investment than are making it to Series A. The reason I’m not worried about this is because knowing clearly now where the problem sits means we can start finding solutions. It is an uncomfortable read, though that is usually how things feel on the precipice of change.
The problem is not the idea
Most of the conversation around the gap between seed and series A funding lands on commercialisation: that the problem is finding product market fit, or getting the offer right. However, I would argue that this is a no brainer and I suspect most founders reading this are already trying to figure this out, or are sitting there thinking “I’ve done that and investors still aren’t biting”. As a fractional operations director, I don’t think commercialisation is what’s holding these businesses back. It’s the business operations.
Here’s what that looks like in practice and what I’d recommend if these are true for you:
- Dependency, not resilience. Take the founder out of the business for a month and it slows down or stops completely. That is not a company an investor can scale, it is a person they would be betting on.
What to do: Delegate decision making power, document company knowledge, and plan to change this dependency with the money raised. This shows you are mitigating the key person dependency risk now where you can and plan to solve it in the future.
- Decisions made on stale data. Numbers get pulled together for a board pack, not looked at in the weeks in between. By the time a problem shows up in a report, it has already cost the business money.
What to do: Decide your company’s key performance indicators and create live, easy to read dashboards that are regularly checked to see indicators of problems before they occur.
- Technology thinking that stops at the product. The product gets every hour of engineering attention because it faces the customer. The processes running the business behind it, finance, onboarding, reporting, are run on spreadsheets, gut feelings and knowledge held in peoples heads.
What to do: Apply the same rigour to the internal systems of the business as you do to the client facing ones, whether that means off the shelf tools or systems built in house. Your internal efficiency will help you personally with your time, your investors see scalability, and your customers feel consistency.
- No operational line in the funding ask. Decks often shout about tech and headcount for product and sales and marketing, but nothing for the systems or people needed to run the business at the next stage.
What to do: Name a line for operational investment in your funding ask. It shows an investor you know what running the business at the next stage actually takes and you’re not expecting to do it all yourself.
The right processes for the right stage of your business
Operations is not about putting in a rigorous process in place for everything. There is a fine line between a business not having enough process and over processing to the point of hindrance. Operations is about company wide standards and a plan to maintain them, with or without the founder in the room.
So why doesn’t more money going into ideas than businesses worry me? Because from talking to MTUK members, I know the products are strong, I know the passion is real, and I know you are already working on commercialisation. Good operations are not hard to put in place. They can be learned, and if you do not have the time to learn them, they can be bought.
Good operations are like business insurance
The classic saying is that people invest in people, and this still stands, but enthusiasm and passion are not enough when investors already treat the music industry as high risk. As an industry, we have more to prove than most, and I believe de-risking your business through good operations is how we bring more money into music tech, and keep it here.
Ask yourself honestly: how many of those four things are true of your business right now? If the answer is more than you’d like, feel free to get in touch.