The clock isn’t always ticking
Podcast transcription - 27th february 2019
Alan Cowley: Welcome to another Invested Investor Podcast. I'm sat opposite Inger Anson. I've known Inger for a few years now through connections in Cambridge. Inger is a partner at Harrison Clark Rickerbys, but we're going to concentrate a little bit more during this podcast on your advisory role in start-ups. So Inger, first off, let's hear a little bit about your background, please.
Inger Anson: Thanks Alan. Yes, I'm Inger Anson. I'm a partner at Harrison Clark Rickerbys, head of the Cambridge office here in Histon, and I qualified in 1999 in a small town called Nantwich in Cheshire. I qualified in litigation initially but didn't really like litigation very much. You've got to think on your feet and do it quickly and at the time, as a newly qualified lawyer, that wasn't very easy to do.
So, very quickly I moved into corporate, which I loved. The good thing about corporate is you've got to know a little bit about a lot of stuff. People tend to think it's fairly specialised, and it is because you're doing corporate transactions, but you need to know a little bit about employment and a little bit about property and a little bit about everything really as part of any transactions. These things are part and parcel. So, I’ve been with Harrison Clark Rickerbys probably about 15 years now, and yes, just worked my way through the ranks. Moved to Cambridge, they very kindly, allowed me to open my own office.
Alan Cowley: Set up shop there.
Inger Anson: It's going well. Yes, absolutely.
Alan Cowley: How long's that been now?
Inger Anson: So, I've been in Cambridge with an office 18 months, but I've been working in and around Cambridge since 2009, really. That's where the investment side of the work I do really started. Before that, I focused predominantly on mergers and acquisitions, which I still do, but I've developed a bit of a specialism I suppose in angel investing work.
Alan Cowley: Okay, so this is corporate investment as well? Or, is this angel investing in start-ups?
Inger Anson: Bit of both. So, I think it started with people saying, "We know these guys. They need a lawyer. You're a nice lady. Should we introduce you?" Yes, great, and it, kind of, went from there. So, I started acting for predominantly start-ups, London, Cambridge area, and yes, it was great being part of that team from the beginning. That's what I loved about doing that work. So, I did that for a good few years, and built up a network of angel investors, start-ups, entrepreneurs who perhaps weren't angel investors and then became angel investors. So yes, it's been a nice journey since 2009.
Alan Cowley: Okay. What exactly is your role with start-ups?
Inger Anson: The first thing is just being part of that team from the beginning. That's the beauty of being involved with a start-up is that you see it right at the start, and you can help them right from the start. That's really the draw, to start-ups. They don't have a lot of money. They can't pay lawyers lots of money, but that's not what it's about. It's just about seeing that passion and that drive with this team and being part of that team. The real kick that I get out of it is that with most of these teams, they call me just whenever. The clock isn't always running. They know that, and they just pick up the phone, "Inger, we need some help," or, "What do you think about this?" They actually ask me for my opinion, which is great. I love it, as a part of the team, not just as an outside lawyer that they're frightened of paying for.
Alan Cowley: Does Harrison Clark Rickerbys have similar setups elsewhere across the UK?
Inger Anson: In terms of what I do?
Alan Cowley: Yes.
Inger Anson: Probably not. I'm probably unique within the firm in the investing sphere. We've got great lawyers who do investment work, but I'm probably the only one that does genuine start-up work.
Alan Cowley: Is that just because you're interested in it?
Inger Anson: Yes, I think so. I think also because the other members of the team know that I like doing that and they just think I maybe have something a bit special on it, but I don't really. It's just about being a nice person and getting on with people.
Alan Cowley: So, wanting to help the entrepreneurs basically?
Inger Anson: Yes, you've got to want to do it. You've got to want to do it, and sometimes you don't get paid. Maybe that's why the lawyers don't do it. I don't know.
Alan Cowley: So how many start-ups have you helped along the years?
Inger Anson: Gosh, in the last nine years or so? That's a good question. I don't think I can answer that. I mean, teams that I've started with and retained and kept and who continue to instruct me, probably anything between 10 and 20.
Alan Cowley: So, you start early stage, and then do they then move onto a different law firm at some point, or do you like to keep them onboard?
Inger Anson: Yes, I absolutely like to keep them onboard. It's a strange mix, really. So, mostly I do keep them onboard, but sometimes they drift away because they move to the US, a lot of them, so then they have US counsel, or they are told by a VC investor that you should use our lawyers. And of course, if somebody else is paying for it, there is a bit of pull there, but I think the ones I've got have fought pretty hard to keep me onboard, and then I've got to know their investors and their investors are then very happy. It's all about who knows you and getting to know the people that advise you, and everybody has their pet lawyer, so everybody's going to try and push that.
Alan Cowley: At Invested Investor last week, we had a connecting week were we pushed these connections in the network and building relationships within your connections. So, it's good to hear. So, let's go back to the advisory role. What does a lawyer bring that's different from, say, an investor sitting on the board or someone that knows about the industry? What do you bring to the start-up?
Inger Anson: I think it's the, I don't have an investor hat on, and I don't have a founder team hat on. I have a fairly impartial, independent view, which is bolstered by the fact that I've seen a lot of other founder teams. I know that entrepreneur investors also see a lot of founder teams, but they see it from a different angle. They see it from their role as an investor. So, the role as a lawyer is very much about making sure that the guys understand the remit within which they can operate.
I think the biggest issues that I come up against are the have a go culture. That's where somebody like me sitting in your board meeting or if you're just able to pick up the phone to me, try not to have a go because it can often lead to mistakes, which can be costly later on down the line, but it just means that you have a different perspective on your role as a founder really because that's generally who I'm acting for. What the founders see is we must do everything we can to grow this business, and that's great.
The bits that kind of get forgotten about are the slightly dull, boring bits of what they would deem as admin, the sit in the background, but which are as important. So I can kind of help do that. Angel investors, much the same. They are very focused on helping the team push the business forward and so the things that seem to be a bit dull, a bit not important kind of get lost.
Alan Cowley: What are the usual culprits that get forgotten?
Inger Anson: We are touching, probably, on the tips for entrepreneurs and tips for founders, but one of the things I think is that they'll have their lead investor. That person will probably, be doing some of the due diligence before they invest and will probably be running the legal’s, for the other investors.
One of the things that you see time and time again is a small example, EIS and SEIS as you know is incredibly important to angel investors. They generally won't invest unless they've got that advance assurance, but all they're asking to see is the advance assurance letter from the revenue, and what I would always say to angel investors is, ask for the application. Don't just get the advance assurance letter. You don't know what information the company's put to the revenue. You don't know how that application was made, so ask to see the application as well, because there's a lot of information that needs to go to the revenue for them to decide whether in fact the company qualifies and whether the investment qualifies. So, just ask for that information.
Alan Cowley: You work with entrepreneurs, angels, and then do you work with any VCs as well?
Inger Anson: Not as their advisor, me personally. The firm do. So we have lawyers who work with VCs, but traditionally, I'm acting for the company where the VC is investing, which I think is a role I prefer. Yes, I just like staying with the company.
Some of the VCs I've worked with, they're great. What I find is that certainly with people like Cambridge Innovation Capital, Octopus, they genuinely seem to have the founder team's interests at heart and the company's interests at heart. So, Yes, that's great to see, but I try to stay on the founder side if I can.
Alan Cowley: The advisory role is obviously hugely important to you, and also, important to start-ups, growing and building. The big question, why should start-ups have advisors at all?
Inger Anson: Well, it comes back to the “have a go” culture. I've seen a lot of things go wrong at the very early stages of an investment, which never looks great, never reflects well on a founder team. Angel investors or VCs looking at a founder team, one of the things they're looking at is, do these guys have their house in order? Do they understand when they should be taking advice and why they should be taking advice? Because, that's part of the business journey. You know what you know about the business you're trying to run, what you need to accept, is that there are things you don't know. It's understanding the things you don't know and when to tackle them and take advice.
One of the things I say to investors, founder teams, you choose your advisors carefully and don't be frightened to ask them for help. So, when you're choosing them, personalities is a big thing. Make sure that the person you choose is somebody that you would get on with in the pub. Quite literally, is this somebody you could sit down and have a drink with and spend the evening chatting to? Because that's going to make the relationship a lot easier.
Don't be afraid to ask for things. Don't be afraid to ask your lawyer, "If I ask you to do X, Y, and Z for me, are you always going to charge me for that? If I picked up the phone and I had a question for you, are you always going to charge me for that?" Just ask them the question, and ask them things like, "Is your billing within your remit? Are you the person that's going to deliver the invoices, or am I going to get an invoice from your accounts team who I don't know, and, who have no idea about my business? I need an advisor who understands the cashflow restraints that I'm under, who understands that this is a very personal thing because we're a very young company."
That's the sort of stuff you should be asking your lawyers. Recommendations are great, and by all means, go with those, but still ask those questions. Go even further if you like and ask lawyers if you can speak to some of their clients, because they will let you. Clients are very happy to talk to individuals. If they've got a great lawyer, they're very happy to say, "I've got a great lawyer, and this is how we work together." So Yes, just do that.
Alan Cowley: So how many advisors would you advise an entrepreneur or entrepreneurs to try and build up around them?
Inger Anson: I would say if you're looking at professional services then definitely try to get a good corporate lawyer onboard, because coming back to corporate lawyers have to know a little bit about a lot of stuff, they would generally in my view be your relationship partner when it comes to legal advice. Let them source any other legal expertise that you need, and get them involved in things like selecting other providers, other suppliers, because you'll be amazed, again, if you find a nice person, how much they're willing to help. Get a decent accountant onboard. Again, the same rules apply. Find a nice person, somebody who genuinely understands and wants to be part of that small team.
If you see your advisors or view them as people who sit in an office somewhere that you occasionally call on but you'd really rather not, then you don't have the right person. They should be the sort of person that you imagine sitting next to you in your office that you can just tap on the shoulder and, "What do you think of this?" That's the sort of advisor you should have.
Alan Cowley: Okay. So you've touched on getting the best out of them by just asking them questions. Seems quite simple when you say it.
Inger Anson: Well, it is. It is. It really should be.
Alan Cowley: Are there any other ways that you could get the best out of advisors, whether or not it's a lawyer, or whether it's someone else?
Inger Anson: Getting the best out of us. I think I had one client who absolutely got the best out of me. That was because he kept me involved. That is key. Keep your advisors involved because if they feel involved, they feel vested in your business.
The ways that this client did this was that he simply took me to events with him. He asked me for advice when I knew he didn't really need it. He gave me things. He gave me stuff in terms of ... He wouldn't even mind me saying who he was, but he would offer me the opportunity to call along to open days at the business and to have experiences in the business, because at that point, how could I possibly do anything other than my best for him, and if he asked me to discount a fee, oh well, "Simon, on this occasion, I'll do this." It really worked. It really worked. I've never seen somebody get as much out of their advisors as he did. Be nice to them.
Alan Cowley: Be nice to them.
Inger Anson: Be nice to them. Yes, Yes.
Alan Cowley: And people will be nice to you.
Inger Anson: Yes, absolutely. Get them involved with the business. Make them feel like this is their business. Yes.
Alan Cowley: Yes. There is a large stigma, isn't there, to the persona of a lawyer and what you get from them, so this is absolutely perfect to hear this for entrepreneurs that are listening and angel investors or anyone else in the ecosystem. You touched on a success story there. Let's hear some more stories and some things that haven't gone wrong and why, why haven't they gone wrong? Also, why haven't they gone right?
Inger Anson: Yes. So I think recently, it wasn't completely disastrous, but it wasn't great. Founder team came to me probably just a little late in the process. They'd already signed up to their articles with their investors. They hadn't taken advice on the documents. The documents were produced by one of their investors from a deal that he had done before. I always have to caveat that. You need to be really careful about doing that because they are drafted. They may seem like templates. Most people think they're templates we drag off a shelf. They are to start with, but there is a personal element of thinking and customising those documents to work for that company and that team, which believe it or not takes into account things like personalities.
In this case, the documents were fairly generic. They'd been produced by one of the angel investors from a deal he'd done before. He said, "Well, I took advice for these documents. We took advice on them at the time I did this on the last deal I did, so they're fine." They were fine until they weren't. So, the client came to me and said, "There were three on the team. One of us isn't really pulling our weight, and we are going to have to do something about it."
So, at that point, they said, "Could you have a look at the documents? We are pretty sure we'll have provision so we could claw their shares back." Great. Okay. We looked at the documents and sadly they didn't. They thought they did, but there is one line that routinely should be in documents which surrounds somebody leaving as an employee, and that's the trigger for getting their shares back or forcing them to resign as a director.
Without those critical three words, they did not have the ability to get the shares back, because although they could fire the founder as an employee, they couldn't force him to resign as a director. He was entitled to be a director just because he had shares, so every time they fired him, he could just reappoint himself. In fact, in this instance, he appointed his father, so we ended up with a potentially disastrous situation where they were about to go for a fundraiser and had to explain why they had their old founder's father on the board.
So, don't rely on documents that you haven't had specifically tailored for your own personal exercises, or in this case as a founder, don't rely on documents that an angel investor has given you because they may not work for you. But if the smallest thing you do is ask somebody, a lawyer, ask the question, "What can you do for 500 pounds?" And just get somebody to have a quick look.
Alan Cowley: Why do you think that happened, though? Why do you think the entrepreneurs got to that situation?
Inger Anson: Unfortunately, I think it's because they are frightened of engaging lawyers for fear of the cost. I think the single biggest reason is that a lot of people perhaps don't see lawyers as particularly transparent or they are frightened of being confrontational with lawyers because, by their very nature, they're lawyers, but actually what you should probably know is that lawyers are the worst people for wanting to be confrontational. The reason you get an invoice that you didn't know about is because they don't want to pick up the phone and talk to you about it. So, you ask them.
The one thing I absolutely do is talk to my clients about fees because it means I never have a disputed bill. I think that's it. They're frightened of picking up the phone for fear of every six minutes, a chunk of cost goes down, and it doesn't have to be like that. You need to be more bullish with your advisors and you need to be confident with them and get the best out of them.
Alan Cowley: Do you also feel that, because entrepreneurs are just trying to grow this business and keep going, they see some money come at them and they don't stop to think, "What do I need? Do I need some counsel here? Do I need some advice?" Or do you think they just go head on into it, in this instance for example?
Inger Anson: Some do, but that's, I think, genuinely because, they didn't realise they had the need. They didn't think it was necessary. I think that's the mistake that some teams make, is they see lawyers as an unnecessary evil. They have to have accountants, so everybody has an accountant. They don't necessarily feel they have to have a lawyer. For me, I think a lawyer is as critical as your accountant. Don't keep them at arms’ length. If you want to get the most out of them, as we've said all along in this podcast, and you don't want to be charged for everything that they're doing, bring them in. Make them part of your team. Don't be frightened of them. They are just people. They will respond if you treat them as such.
Alan Cowley: So, I'm an entrepreneur and sat in an office and looking to go for funding. What would you say to me?
Inger Anson: Probably the first thing is I'm assuming at this point that you've got a good business plan, and if you haven't, find somebody who can help you put that together. Investors don't want to see reams and reams of paper. They like it to be as short as possible, and make sure that people know who you are.
Kind of the next thing after that, that's very early stage, is have a good term sheet, probably. So, one thing that investors, certainly angel investors want to see is a well thought out term sheet. There are lots of precedents online. Some good, some bad. You may not know what is good, what is bad. So, unless you want to have a term sheet put on you, have one ready. Make sure that what you have in it is the things that you want to see in it that are good for you. It's fair, but that work for you.
Alan Cowley: What sort of stuff would that be?
Inger Anson: So, I would certainly say things like, be very clear about valuation, which will come out when you're pitching to investors, so that'll probably be blank to start with. That's the negotiation piece. But certainly, things like, be clear about your position as a founder and where you are now, and where you want to be. Think through the things that might go wrong and where you'd like to be if things go wrong, or if things go well. That's not necessarily legal stuff, but it helps to make sure that the documents we put in around the investor help to bring about the conclusion or the result that you want.
So, specific things, like your ability to sell the board, what your service contract might look like, how you want to see your employment terms evolve, whether you're looking for any sort of incentive if things go really well, and what happens if things go bad. If you're a leaver, you'll hear a lot of talk about good leaver, bad leaver provisions. I would say don't get bogged down in the detail. Just think about what would happen if a year down the line, you got ill or a member of your family got ill or you just got a bit bored. That's not necessarily going to be a good reason to go.
So, think about the stuff that's personal to you so we can build it in. But, a good term sheet is certainly, something that I would talk to a lawyer about, who understands angel investing.
Alan Cowley: Do you see people miss that sort of thing out quite a lot?
Inger Anson: Yes.
Alan Cowley: ... because you're looking at the negative?
Inger Anson: I think what I see, is founder teams not doing it because in some cases they don't know they need it. They perhaps think they don't need it and they're just going to move straight into deal documents, or, more often, than not, angel investors have produced the term sheet for them. They're often fair, but sometimes they can have an investor bias to them. At that point, it becomes difficult or harder to negotiate in the things that you'd like to see there. They may not be drastically different but it's worth talking to somebody about at that stage because the term sheet, it does really form the basis of the legal documents, and very rarely do people, certainly investors, agree a term sheet with you, I very rarely see them veer away from that and to try to agree to anything different. So it's a good starting point.
Alan Cowley: So, there's some tips for an entrepreneur. Have you got any more for founders?
Inger Anson: Try to keep your house, as in order, as possible. Founders do have a tendency sometimes, they're smart, bright people who have these great ideas and just want to run with them. That's brilliant because that's what people are investing in, but just try to have one eye on what is going on in terms of your paperwork and keeping it tidy so that there is a trail to follow.
Alan Cowley: That's boring, Inger.
Inger Anson: It is boring, Alan. It's really boring, but that's why you try and find somebody like me who can take the boring away, but at as little cost as possible. If you find a good lawyer most of them would be pretty happy to help, and it is really dull things, like, do you have registers. You cancelled some shares last year? Well, who did that paperwork for you?
It all seems very easy and you can Google it all online, but just recently, I'm an investor myself, and in the process of investing in a company, I as a corporate lawyer looked at the history and it was pretty messy, which really was a big deal for me. Don't underestimate your investors' backgrounds and what they do and the bits that they're going to take interest in. If you've got lawyers investing or accountants investing, they're going to look at the things that matter to them because that's what they know. So Yes, I did, and, it kind of, did put me off a bit.
Coming back to picking your advisors carefully, make sure that if you've got an advisor who is acting for you on an investment with angel investors, that they don't have their own agenda. Just recently I worked on a transaction where the lawyer acting for the company did have their own agenda, and the investor stepped away not because of the founder team, but because of their lawyer. So, take that onboard as well.
Alan Cowley: So due diligence from every angle, basically.
Inger Anson: Yes. If you've got a lawyer on the other side telling your investors that they should go away and come back when they've done their homework, that's not great.
Alan Cowley: You're also an angel investor.
Inger Anson: Yes.
Alan Cowley: What are your tips for angels in this scenario?
Inger Anson: I think it's, not a loaded question, but it's a tricky question because angel investors are seasoned, experienced individuals who know an awful lot. We like to think that we know a lot and we're very clever, but sometimes we're not as clever as we like to think we are. Perhaps sometimes what we try to do is maybe complicate things a little, but founder teams have a tendency to do that as well. Nobody really just wants to talk down at basic level. So, let's just talk at a very basic level and not pretend to be smarter than we are sometimes, which makes the job an awful lot easier.
Alan Cowley: Well, Inger, I think to everyone that's been listening to this, it's something that we haven't heard from before, and the tips that you have given are very different from what we've heard before, and I think that's going to be hugely helpful entrepreneurs and angels. So, thank you very much.
Inger Anson: You're welcome. You're very welcome. Thanks, Alan.
Peter Cowley: Thanks for listening to another Invested Investor Podcast. You can subscribe to all future podcasts via our website, InvestedInvestor.com, or via a number of podcast platforms online.
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