If one story tells you just how much the environment for raising equity finance for startups has changed, it’s that of Amer Hasan and minicabit. He’s secured funding from a top technology accelerator and from a group of business angels. He has made a successful appearance on Dragons’ Den. Right now it’s crowdfunding on Seedrs.
With a career in the mobile industry behind him, in 2011 Hasan decided to take the minicab industry into the digital age.
Minicabit is a price comparison site for licensed minicabs nationwide. Customers get quotes from minicab operators from both their pick-up and destination venues. The cab operators set their rates with minicabit taking a ten per cent commission on the fares booked. So, Hasan says, “we only make money when they do.” (There’s no signing up fee for a cab firm to be on minicabit).
His pitch to the cab firms has plenty of strong arguments – that they could save money on advertising, that it was more efficient than fielding many time-waster calls for quotes – but the challenge was how to break the classic startup dilemma: how to attract sufficient paying customers to make it attractive for cab operators to sign up, and how to attract sufficient numbers of cab operators to provide the nationwide service in order to attract customers.
To address this, Hasan established partnerships with major travel websites and big venues. By the time he made his succcessful pitch to join the O2 Wayra UK Accelerator, he had venues such as the O2, Wembley Arena and Earls Court Olympia as well as Expedia signed up.
In July 2012, Wayra invested £50,000 which financed office space, Hasan’s first full-time employee, and the scope to develop the website and app. Wayra also provided him with valuable mentors. “The investment was a small amount of very smart cash,” says Hasan. And it gave him the credibility to talk to the cab operators. “Six months before we were an unknown quantity; now they were hearing that we had been backed by O2.” It also helped minicabit secure more partnerships, such as London City Airport.
Towards the end of his nine months in the Wayra Academy came the pitching day, when Hasan and other entrepreneurs had the opportunity to present to angel investors and venture capital firms.
It was a memorable day. During it, Hasan was approached by a BBC scout who asked whether he would like to appear on Dragons’ Den. In the evening he met Angels4Angels, a Cheltenham-based angel investor network. One of these groups was to end up being an investor in minicabit.
“I went on Dragons’ Den because I wanted to raise the capital,” says Hasan. But the other big attraction of appearing on the show was that it would send a great message to the cab operator constituency. “It would give me even bigger legitimacy.”
Hasan’s session – which he describes as being “like an investment meeting except all the investors were wearing makeup – was successful. Peter Jones, Deborah Meaden and Piers Linney all made offers. Hasan shook hands on a Jones-Meaden joint bid. But ultimately – as often happens outside of the Den – the deal wasn’t consummated. “We tried over the next few months but it didn’t work out,” says Hasan, “but we remain on good terms.”
But the successful appearance had a hugely positive effect on the business. “It engaged our customers,” explains Hasan. “It took us two years to get our first 100 cab drivers signed up, and another year to get the next 100. So when Dragons’ Den was broadcast, we had about 200 cab operators. We doubled that in the space of two months. Customer sign-ups to our app skyrocketed.”
The Dragons were in, but the benefits of Amer Hasan’s appearance on Dragons’ Den were not confined to offers of investment
For finance, though, he went back to Angels4 Angels and agreed a deal. The experience has professionalised the business, he says. O2‘s Paul Lawton, who was a mentor for minicabit during its spell at Wayra, has become the lead investor and non-executive director. The company is benefiting from sharper management accounting disciplines, board governance processes, as well as coaching and mentoring.
Right now, minicabit is raising money on the crowdfunding platform Seedrs. But this is not so much about capital raising; it is about Hasan’s desire to widen share ownership of minicabit among the nation’s cab operators and drivers. “Very early on, I thought it would be very important to bring the cab sector into the future of the business. Seedrs is exactly the right platform. More shareholders means a bigger army of advocates for minicabit.”
It’s been a remarkable ride. And it shows no signs of slowing down. Rather, Hasan is picking up more passengers. New tools and apps are in the pipeline. He has also taken on the former Transport minister Steven Norris as an adviser. A new partnership has been signed with regional media owner Johnston Press. “I want minicabit to be considered as a transport option alongside national transport networks such as thetrainline.com and National Express.”
Visit the UK Business Angels Association to find out more about angel investors. To learn more about other sources of finance for your business:
- Business Finance Explained from GOV.UK provides guidance for companies on options for finance
- use the My Business Support tool to get a report of resources and schemes to start or support your business
- Better Business Finance is an impartial source of information about private sources of finance
The Business Finance Advice Scheme is run by the three participating accountancy bodies, search their directories to find an expert finance adviser in your local area:
- Institute of Chartered Accountants in England and Wales (ICAEW)
- Association of Chartered Certified Accountants (ACCA)
- Institute of Chartered Accountants of Scotland (ICAS)