Why every founder should book a plane ticket to Silicon Valley. A conversation with Dan Swygart, founder, entrepreneur, board advisor and mentor.

Tips for raising investment and navigating term sheets

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In this episode, Legislate meets Dan Swygart, founder, entrepreneur, board advisor and guest speaker on entrepreneurship and raising investment. Dan shares some learnings from building his first business, Alpacr, including how he took out a credit card and flew to Silicon Valley in order to raise investment. Dan also explains how to navigate term sheets and avoid red flags.

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Charles Brecque: Welcome to the Legislate Podcast, a place to learn about the latest insights in trends and property, technology, business building and contract drafting. Today I'm excited to welcome Dan Swygart to the show, Dan is an entrepreneur and founder, board advisor and guest speaker on entrepreneurship and raising investment. Dan, thank you for taking the time. Would you like to please share a bit of background about yourself and what you're doing as an entrepreneur?

 

Dan Swygart: Yes, pleasure to be here. So, I started my first company at 21, straight out of university which was Alpacr, a social network for travel blogging. We raised a significant amount of investment for that at seed and we launched all across Europe, Southeast Asia, but at one point in time we had an investor which dropped out last minute. They were meant to invest a quarter of a million pounds, but they didn't. So, I ended up going $30,000 in personal debt in order to keep paying my team and struggling to keep moving forward. In the UK, I was finding it really hard to raise investment, so I took out a credit card, flew to Silicon Valley, and I was living in Silicone Valley in a garage. I was paying $1,000 a month living with other tech entrepreneurs, some of them went through Y Combinator shortly afterwards. I was living off spaghetti and tomatoes, the cheapest food I could find. I was literally on the streets with a sign saying, we're raising investment, and I was 5 minutes from Facebook, Google, Mark Zuckerberg's house, and after 3 months there we managed to raise our investment and I flew back to the UK. A year later, COVID came, that completely killed us in the end, being in the travel industry. But since then I've been lecturing in universities and accelerators and mentoring entrepreneurs especially around raising investment and basically how to start, the starting steps for building a successful start-up. Right now I've just come to the end of my experience on Entrepreneur First which is one of the world's top start-up accelerators, it's similar to the YC of Europe, what a lot of people call it. So I'm building a new start-up through that right now.

 

Charles Brecque: Why go to Silicone Valley to raise that capital versus in Europe? Why the US instead of Europe?

 

Dan Swygart: So, with my first company Alpacr, we were a social network and has anyone ever heard of a successful social network not in the US? There's not many. So, that kind of business model, where it's all about user focus and growth is only in the US, so we really struggled to raise from European institutional investors. Most of our funding, or almost all of our funding, came from angel investors in different parts of the world. The US was this amazing place where dreams could come true and the contacts you meet there, the people you meet there, for example one day I was in a coffee shop and I met a guy called Rich Page. He's one of the guys who set up Apple with Steve Jobs. On my plane over there I met the guy's wife who created the touch screen for the first iPhone, or iPod, at the time. Yes, so it's just an incredible place, and incredible people so that's what brought me there, was the need to raise money. But when I was there I found this incredible ecosystem of entrepreneurs, the sense of entrepreneurship in the world, and it's just incredible, the calibre of people who you meet and the pace everyone moves there, and the knowledge and the networks people have.

 

Charles Brecque: What tips would you give to a European founder trying to discover their ecosystem?

 

Dan Swygart: Book a flight, go over there, meet as many people as possible. If you can and if you're able to, live in a hacker house. So, there's a group of guys in their 20s and 30s all working for start-ups, a lot of them, they're co-founders, and that's a good way initially in. Or just go to as many networking events as possible. There's always something going on in the Bay area, and as soon as you meet one person, they introduce you to 10 more. So if you're over there for 3 months, you keep getting higher in these inner circles and it's just incredible who you meet and how quickly you meet people.

 

Charles Brecque: So, I guess from that journey, what was your favourite moment?

 

Dan Swygart: So, with Alpacr we actually, before that happened, we launched across Europe and Southeast Asia. So, I had a team of 12 people and we travelled to all the big hotspot locations for backpackers, travellers, tourists, and we promoted to thousands and thousands of our earliest users. We did big events and nightclubs, we had beach parties with divers' clubs attending on beaches in Bali. So, that whole experience of just meeting our users, seeing them love the platform and then being in Silicone Valley meeting people, for me it's all about the journey. So, it's who you meet and what you learn along the way. Those 4 years of Alpacr taught me everything I know now, got me introductions to the right people in the right place, and just the journey of being with my team on that journey, that was incredible. For the ultimate highs and the ultimate lows, they stuck by my side throughout all of it.

 

Charles Brecque: What do you wish you'd known before starting out on the journey 4 1/2 years ago?

 

Dan Swygart: Yes, it's always, this question's always asked, and I never have a good answer. Because I always say I did what I did, was the best at the time. But every single day in entrepreneurship, you're learning more and more, so I think everyday I'd do something differently. But I think the big thing is raising investment is one of the hardest things in the world to do. You're selling a dream on a piece of paper, and it took me 4 years to master how that process works, and now it's why I mentor and lecture on and advise people on. So, that's one thing I wish I'd known years ago because that just would've made my life so much easier. I could've done what I did in 3 years in 1 year, and more in less time, in 6 months. That's why now, because I've got a fresh start with a new start-up, I have these massive corners which before would've taken me a long time to learn and go through. That's the same with my new team, we're all second time founders, so I'm seeing the same with them, like they know what to do, we all know what we're doing, we're all moving forward much faster. Whereas when you're a first time entrepreneur, especially if you're straight out of university, like I was, you know absolutely nothing. Arguably, I still know nothing but know more than I did back then. Yes, sorry, not a direct answer to your question there.

 

Charles Brecque: What tips would you suggest to someone starting a business or wanting to apply to a accelerator?

 

Dan Swygart: Good question, to be honest every accelerator is different, and Entrepreneur First is very unique in that they accept individuals, not teams. So, you go in as an individual, like I went in as a CEO and they match you with 80 people. Half are CEOs, half are CTOs. The CTOs have all worked for Google, or they've got PhDs in AI. One of the guys in the programme, he helped build Alexa. He'd worked for Amazon. The CEOs are mostly second time founders who have worked in McKinsey or other places. Everyone's from Oxbridge or Stanford, apart from me. But everyone else was. So, there's an incredible calibre of people and then you're in a room for 3 months and you've got to find an idea, form the idea, then pitch to them and they invest. So, it's quite a unique structure. Most accelerators are much different where you apply as a team and you get in based on your traction. But you've got to be careful, a lot of accelerators aren't that good, and there's only a few which really add value, so you need to understand what value they add. Usually it's the content they provide is massive, that's hard to tell beforehand. But more so it's the external viewpoint. If they're backing you, if they're investing in you, how does that increase your sort of, your demonstrations of your higher value? Like how valuable you are. So, investors will naturally invest more into a start-up which has been through a top accelerator, even if it's an identical start-up not on an accelerator. So, those are important but you need to make sure you choose the right one for you and then make sure it's adding value. It's meant to accelerate you so make sure it does accelerate you.

 

Charles Brecque: Where would you ideally see yourself with your new business in 5 years?

 

Dan Swygart: Good question, hopefully unicorn status. This new idea is go large or go home, so hopefully we will have pulled it off by then. Yes, it's super exciting. It's web free, in the web free space which is a hot topic right now. I mean we're getting some nice traction with it, so we'll see. Probably will go back to Silicon Valley, we're based partly over there, partly over here. Or potentially New York as well because we do need a US influence on it. So, yes the journey continues even though that's one chapter for one start-up, it's the next chapter for next one, so it's nice to see the-, It feels like it's still moving forward, it's just it's changed name but it still feels like the same start-up, even though it's completely different, if that makes sense.

 

Charles Brecque: What are the main contracts that you've encountered and what are maybe some areas of friction that you find that are common across those contracts?

 

Dan Swygart: Most of the contracts, personally with me, has been investment purposes, and yes it's mainly just making sure the terms sheet is nice. There are a lot of sharks out there especially with a lot of angel and VCs, there are a lot of sharks and if they dictate the terms then it could end up nasty in the long term. As a first time founder as well, it's quite daunting, these different terms and what it means, and they're dangling a carrot in front of your face so you just want to take the money. But actually there's a huge downside if you take the wrong deal. So, just making sure you choose the right deal for you and not just accept the first cheque which gets offered to you basically. There's quite a few investors we've turned down based off of that, so that's probably the important thing which I've learned, is to work with lawyers to understand the terms, or you create the terms yourself, which is better because you can understand it.

 

Charles Brecque: With those terms, what should a founder be looking out for? What is a red flag for you?

 

Dan Swygart: Good question. There's a lot of stuff on there, things like anti-dilution. There always needs to be dilution, never anti-dilution. Some angel investors try and wriggle it in, but it's just going to damage you long term. But it's also in the preferences upon exit, like who gets what. I remember there was a famous story a few years ago of entrepreneurs who sold their company for 100 million, but they didn't receive a penny because the terms were fixed, so the VC got all the money. So, just avoiding situations like that. My legal jargon and legal knowledge isn't that good to explain exactly what happened and what went wrong there, but it's just things like that that you need to make sure you avoid, just to make sure the terms are friendly. They're founder-friendly terms.

 

Charles Brecque: If you're being sent a contract to sign today, what would impress you?

 

Dan Swygart: We're going to go into fundraising mode soon, so a nice terms sheet, following on from my previous answer, would be nice. Yes, to be honest that's the best kind of, I think, legal documents, money coming in. You're giving a piece of paper and you get money back. So, that's the best kind of legal document, I think.

 

Charles Brecque: Perfect, best of luck raising that investment.

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