How can Josh Hough find the right investor for his business?

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Josh Hough, who seeks advice on how to find the right investor

IoD member Josh Hough, founder of a cloud-based rostering and monitoring platform set to revolutionise the domiciliary care sector, has already expanded his company internationally despite only launching this year. But how can he find the right investor to help take the business to the next level?

Josh Hough recently returned to his former college to give a talk about the options for students after A-levels, besides university. Having failed to win a place at Sussex University to study law with business despite good grades, Hough was forced to find an alternative, and opted to set up a business instead. During his talk, Hough’s former economics teacher revealed that he had always known university wasn’t the right path for Hough, because he was clearly determined to find his own way through life.

Hough had learnt this resilience the hard way. Suffering from rare muscle disorder minicore myopathy, which causes acute muscle weakness, he spent much of his time at school in a wheelchair: “Not because I had to be, but because it made it safer.” As a result, he had to find other forms of entertainment than the physical sports his classmates played. “As a child I was very fortunate, because we had computers to play with,” he says. “That is where I got into computers and computer games.”

Going into business wasn’t a completely alien experience for Hough, who had set up a publishing company with his sister at the age of 13 called Mad About Stuff. Their parents even incorporated it for them, but with GCSEs looming Hough had to dissolve it. After his university setback, he put his computer skills – honed at school while studying computing, electronics, economics and law – to good use and started MAS Design (MAS being a homage to his former publishing company), which provides graphic and web design services and mobile apps for Android and iOS.

After a client asked Hough to go further and install network systems in its new offices, in 2012 he incorporated MAS Team – later renamed to MAS Technicae Group (International) – and subsequently set up MAS Networks, the arm of the business that provides servers, desktop PCs, workstations, telephone networks and cloud computing.

That same client, a domiciliary care agency, then had another request: could MAS Group build an electronic call monitoring system that it could use to monitor carers’ visits to clients’ homes? It was a challenge for which the company was well-placed: “Because of MAS Networks we were partnered with a wholesale company so that we could provide broadband and other services, and they also offered this wholesale mobile model, which led to us working with Vodafone.” By combining both sides of the business (MAS Design and MAS Networks) Hough realised the company could go further and provide a service catered to care agencies.

Since 2012, he has been working on building Care Line Live, a cloud-based rostering and monitoring platform for domiciliary care agencies. When care agencies purchase Care Line Live, every carer receives an Android phone – on the Vodafone network – loaded with an app which carers use to check in and out of clients’ homes and access timesheets and client information. Meanwhile, managers can track carers and keep accurate records of all visit times. “As a manager you can run the whole operation just from a tablet or a laptop. There’s no more complicated stuff, it just works wherever you are.”

Care Line Live was launched in January, and in February was nominated for the Gatwick Diamond Business Awards in the innovation and technology category. “We were not only the smallest company ever to enter the awards, but I was the youngest person ever to enter, let alone get through to the final stages.” Four months on from the promising start of the business in the UK, Hough opened an Australian office in Melbourne. “Having been to Australia many times, I’ve spotted how similar their care sector is to ours.” He managed to secure a similar wholesale deal with Vodafone in Australia – but, he admits, with an office that operates in a completely different time zone comes added strain.

Turnover in 2015 was £250,000, and to date Hough has spent around £75,000 on developing the product. Apart from a £15,000 grant in 2015 from West Sussex County Council as part of its Be the Business scheme, he has had no outside investment. Cashflow is a concern, and with only three staff (including Hough) working across Care Line Live and MAS Group, he admits that maintaining Australian office hours without losing copious amounts of sleep is tricky. “I’ve got to think about how I’m going to sell it overseas when I’m not there, and when I can’t really afford to go and employ someone full-time to do it for me.”

Hough is considering outside investment, but he’s wary of giving up a portion of ownership. What’s more, he knows that he’s come this far with little help, so why release equity if it’s possible to succeed on his own? “But I’m open to discussions, and if somebody said they’d give me money to hire a full-time salesperson in Australia and they’ll take a small percentage, I would consider that if I had the option to buy it back off them.”

Hough’s biggest concern is that an investor won’t understand the business and how it was created from scratch. “If we were to get investment it would be really important for me that it would be from someone who has built something up themselves as well, so they’d understand the position I’m in.” For Hough, the experience and track record of the investor would be key: “If I had the right venture capitalist, that might be the right kind of person I would ask.” What advice will this month’s panel offer?

carelinelive.com

Josh Hough is a member of IoD Sussex

Care Line Live asks: How can I find the right investor who understands my business?

Jay Dias, who gives his advice on how to find the right investorJay Dias Founder, Leela Capital

Once you have decided to seek investment the first thing you will notice is the number of options available to you. Therefore it’s important to find somebody who believes and has an appetite for both you and your company.

Seeking an investor who understands your business is about building and managing relationships. There are many platforms that allow you to meet potential investors and I would recommend you prioritise these as an initial tactic. Whether these are networking dinners or panel discussions held by business incubators, you should make the most of these as a way to start talking about your business in an informal setting. These meetings allow you to effectively communicate your business to potential investors but also gauge whether they are right for you.

Eventually you will end up with a shortlist of potential investors. Once you’re in this position you should maintain regular contact so they know you are still active. You should be prepared to receive negative feedback, so try to understand the reasoning behind this as you refine your pitch. Remember the tenacity you showed getting your business started as it’s crucial to keep knocking on as many doors as possible.

leelacapital.com

@njaydias

Jay Dias is a member of IoD Central London

Jan Ward, who gives her advice on how to find the right investorJan Ward CEO, Corrotherm

It appears that you are only looking for enough to employ one person in Australia, but you should make an evaluation of all the costs for this and what other investment might be needed for that office to be sustainable – and where else you might want to expand. You could limit growth by not taking in enough initial investment.

Ultimately, as long as you keep a controlling share, your overall shareholding will be worth more. You must be realistic about buying shares back from an investor who is also going to give advice and support. On the one hand you’re looking for someone with a long-term outlook and who is going to support you, but you
also want them to be agreeable to a buyout on a shorter-term basis. You are right to want a small investor who understands the sector and an angel investor in the tech space who would be prepared to offer mentoring could be ideal. There are also angel investor groups that invest in collaboration together which give support and advice. If ownership of the whole company is an absolute for you, look at debt rather than equity.

corrotherm.co.uk

@Corrotherm

Jan Ward is a member of IoD Hampshire and Isle of Wight

Nick Cronin, who gives his advice on how to find the right investorNick Cronin Corporate finance partner, Bean Partners

Having the right investor on board at this crucial time is imperative. The investment ecosystem has evolved as the cost of development has reduced – this means investors want to see a more evolved business before investing. Early-stage investors are also more sophisticated than in the past, which means that the investment process is more akin to a larger institutional round of funding – so expect due diligence.

Strategic investors are a good option for an early-stage investment; the value is not just monetary and you also have the opportunity to potentially leverage their networks, benefiting the bottom line of the company. Having a clear exit vision even at this early stage is also important; knowing where you want to take the business means you can be clear on the steps you have to take along that journey and, specifically, you must be clear about the use of funds. The uplift in value by accelerating growth when taking on investment generally outweighs a slight dilution – think about how long it would take the business to get to the same point through organic growth and also make sure the business is SEIS/EIS-registered ahead of engaging with investors.

beanpartners.com

@DrCronin83

Nick Cronin is a member of IoD Kent

Hough’s response

These answers are really good, thank you. I obviously need to reconsider the way I looked initially at the level of funding required for international growth as I’d not factored in, as Jan says, the additional costs of an employee. I had assumed that if I got £20k and that was someone’s salary it would be OK, but that’s not the case! Aside from insurance etc. you’ve got mileage and travel to pay for, so that could be another 20 per cent on top. I hope that the product we already have shows how much we’ve done and how far we’ve come as I also know that people don’t jump on board as easily as they used to. However, with Brexit and the value of the pound dropping, hopefully our company being UK-based could become a more attractive proposition for overseas investors.

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About author

Hannah Gresty

Hannah Gresty

Hannah Gresty is the assistant editor of Director magazine. She previously worked on a local news website and at a fashion PR company before joining the Director team in 2016.

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