How To Raise Money, by Andrew Rickman
Andrew Rickman made his fortune by founding Bookham Technology. When he IPO’d the company in 2000, it went straight into the FTSE 100. He has some trenchant views on dealing with investors.
“Only finance to the next milestone otherwise you’ll be diluted out of sight,” says Rickman, “never take any investment in your company other than in common stock – never take preference shares – you want everyone shareholders and staff to be aligned to the same agenda and if they have different classes of stock they have different agendas.”
“One of the most important lessons I’ve learned is to make sure everyone’s interest are aligned,” adds Rickman, ” for instance make sure your backers’ interests and your needs are aligned with the same agenda, or you might find they want to liquidate their shareholding at a possibly damaging time.”
He’s a strong advocate of grants. “When we were making the first prototypes, there wasn’t enough money to do it we were £5,000 short,” ,” he recalls, “I felt I was on the verge of having to go back and get a proper job, and then I won a NatWest/Sunday Times Innovation Award which was £5,000.”
“The grant mechanisms at the DTI and within the various Research Councils are there to be used. They’re not the easiest systems to tap into, they’re bureaucratic and they have difficulties but they’re not impossible.” The great benefit he sees in government grants is that they’re not dilutive.
More funding came from the EU. “In 1993, we started a contract with the EU to develop fibre optic components for access to the home. That gave us an advance of about £160,000. For four people, £160,000 in up-front funds was better than we’d ever expected.”
“At the end of the first year, we were summoned and asked to present the status of the programme,” recounts Rickman, “I did it, probably rather arrogantly, and most of the academic research community thought we were bonkers anyway, so I got a roasting from the European academics. Then they went off for lunch, and, when they came back, for some reason or other, their tune had completely changed and the project went ahead with doubled funding.”