Materials Market & early-stage fundraising rounds

A few months ago, Materials Market received a £1.5m investment in their Seed funding round led by Fuel Ventures. The company will use the funds to accelerate their growth and expand their digital building materials marketplace.
We spoke to co-Founder Samuel Hunt who shares invaluable insights about fundraising rounds and some valuable advice for Founders who are about to begin early-stage fundraising.
What is Materials Market?
Materials Market is a platform that looks like a normal e-commerce site. When a customer visits the site they are shown the best price and lead time available at the time. Then when they place their order, we make sure that it’s allocated to one of our supplier partners as quickly as possible.
It’s a fast and efficient distribution module that allocates supply based on demand. And because of that, we can do things with the price and lead time that the others can’t.
Tell us about the origins of the Materials Market?
The idea came from my first job after I’d dropped out of university at the end of my first year. I used to call up to 10-15 suppliers a day to try and get the best price and quickest delivery time on building materials. I quickly realised it was a very laborious process and that there had to be a more efficient way to connect with the suppliers who could offer the products I was looking for.
As a buyer, it’s very hard to generate competition if you’re always going from one person to another saying he says that, and she says that. In the free market, competition relies on supply and demand.
What my co-founder Andrew and I wanted to do, was to create a platform that allowed both parties, buyers and sellers, to trade seamlessly with each other.
What was the most challenging aspect of early-stage financing?
This was our second investment round. We had a pre-Seed investment round in September 2020 for £130k and then this Seed round of £1.5m.
The biggest challenge is contacts and connections. It can be very hard to find people who are willing to actually put money in. In the early days when I was raising the pre-Seed, I found a lot of people who were willing to talk to me and who thought my idea was great, but wouldn’t invest.
The challenge is finding someone who has cash and is at that point in their life when they’re willing to take a risk on something because they believe in it. When you’re raising pre-Seed and a Seed round, knowing people is the hardest thing because you’re generally flying under the radar, and as a first-time founder you haven’t yet proven your entrepreneurial credentials.
How do you go about finding that golden connection?
You need a great pitch deck, and one that’s not too long. I love detail so putting something into 20 slides was tough! And to be honest, we should have kept it to 11-15 slides. You need to be brief and to the point.
In terms of approach, draw up a list of everyone you know. And I mean, literally everyone you know! Investment comes from strange places. I’m fortunate in that I had a lot of contacts from school to who I reached out to but from whom I didn’t get a single investment!
The person I ended up getting investment from came from a meeting with a friend of a friend of my Dad’s who he played tennis with. He then referred me to a lawyer, who then referred me to another lawyer, who then referred me to someone in the construction industry with a finance background and who loved the product. People know people, and people don’t always know the same people.
You must find your product champion. You have to find someone who loves your product and who will invest in it. When you find them, hit them again and again with more spreadsheets, emails and double down on them. At the end, I got in the car and drove to meet the guy I was speaking to on Zoom, and I ambushed him in his office! I kept him there for three hours, gave him a 50-page report and left him with a bunch of reading to do. And in the end, he kind of gave up and said, “Yes, fine, let’s do it.”
In the early days, your money is probably going to come from angel investors, as there aren’t a huge number of VCs who will touch you at pre-Seed with no traction. So don’t waste time speaking to them because firstly, you’re not going to get their investment, and secondly you might burn a bridge that you may need later.
How did your Seed investment round happen? And what is the difference from pre-Seed to Seed?
Pre-seed and seed rounds have very different dynamics. In pre-Seed, you generally have a product but no traction, but at seed stage, you need to have demonstrated a certain amount of traction. That traction is the key thing that’s looked for in seed. You must have a product and you must have sales, preferably on a graph moving up and to the right.
In terms of your pitch deck, while product demos and team photos are important, there is one slide that everyone looks at more than any of the others, and that’s the sales and growth slide. You must understand the way these VCs operate: they are looking through hundreds of decks a month, always searching for those startups that are showing good traction.
For instance, you have 50k or 100k in the bank. Think: how I can use that money to gain the most traction in the shortest space of time? Don’t try to do too much too soon to make that happen. For instance, don’t try and launch three products at once – we learnt this the hard way! Our first business model performed so badly we had to pivot after two months. Luckily, we pivoted early enough and had enough cash in the bank to get it right the second time around.
When you were meeting with Fuel Ventures, what were the timescales?
We started contacting VCs in July 2021, after eight months of consistent growth. We had a good record, but we were quickly running out of money. So, I collated a list of all the eligible VCs in London and reached out to them online via their websites. We got a response fairly quickly from Fuel Ventures, who was pretty high on our target list.
I did what I did the first time. I just didn’t leave them alone! But the timeline was very quick. They responded to us in early July, and we had the term sheet in our inbox by the end of the month.
The VCs have different approaches. Generally, you have a meeting with them to discuss the product and if they don’t like it, they won’t go any further.
At each stage, you get to a checkpoint that moves you that bit closer to the term sheet. Most companies fall out at one stage or the other; we were one of the few who made it to the end.
How did you handle the financials, sales, and marketing?
VCs and start-ups talk in a certain language – they use a lot of marketing terminology that it’s important to know. Make sure that you have a good grasp of essential marketing metrics such as CAC, LTV etc. You can often gloss over the content by showing an ability to understand the main factors at play.
Even if your numbers aren’t particularly good, just Google ‘start-up marketing metrics’. Some of ours weren’t particularly good but we demonstrated that we understood them and where we wanted to get to.
There is so much you can extrapolate from the data that you have – even if you have only customers, sales, and months. What’s my repeat purchase ratio? How often is each customer buying in a month? What’s my lifetime value?
It’s so weird, in the start-up world, you’re always being asked crazy questions like, “When are you going to sell”? Your thinking, “our value is in the low millions, if that, so why are they talking about billions?” But you can’t be phased by that – you must engage with it and behave like you truly believe that your business can be a unicorn.
Just because you have a limited amount of money don’t be scared to go through all sorts of crazy ideas for the future and play around with revenue projections.
How important is the chemistry between you and the potential investor?
It’s hyper important. If people don’t like you, they won’t invest in you. It doesn’t matter what your numbers are. And this is where your team is very important.
Different people are better at different things. If you have someone who is naturally talkative and gets on with the investors and can make a few jokes, it really does help. Don’t go on these calls wearing a suit and tie and pretending to be someone you’re not; the industry has evolved and it’s a lot more relaxed than the traditional business world. We had good fun with our investors when we were chatting. We weren’t scared to make fun of ourselves and vice versa, but we also demonstrated that we knew our stuff.
We had everything ready in folders so that when they said, ‘’What’s the customer value from here to here?’’ we would reply immediately with a report. So, they knew that this was stuff we were tracking. You must be a real number junkie or, if you’re not, have a co-founder who is.
Do you think VCs want to see how you handle and respond to all those questions?
Definitely. There were some numbers we didn’t have which they asked for, but we had the resources to get them and the expertise to understand them. I know that it might sound like a cliché, but they invest in people at the same time.
The funny thing is that when we raised the pre-Seed round it was for a product that ended up not working at all. It was a great idea on paper and everyone loved it and told me it would work, and we raised £130k off the back of it. Two months in and we realised the idea that was great on paper didn’t actually work in practice!
So, we were sitting there with £100k in the bank and a product that didn’t work. What were we doing? Give it back or try and come up with something else?
So, we scrapped it, rethought the module, and relaunched it with a different product. Within a month it took off.
Five years of thinking about one idea that didn’t work, then a couple of months pivoting to something that did. We were worried that investors would be concerned about our initial lack of success, but they loved it. They said, “We’re investing in your ability to make those decisions. If a year down a line we see something that isn’t working, we’ll want you to change that as well.”
Amazon has this expression, it’s a bit corny but they say, “It’s always day one”. It’s true in the start-up world. As soon as you stop innovating, you’ll be left behind. Very quickly.
What role did Finerva play in this?
The main thing about Finerva is that they are an accountancy firm with in-depth start-up experience.
All the jargon that I’ve mentioned, they are fluent in it. If you try to talk to a typical accountancy firm about those kinds of concepts, they’d be lost. With Finerva, there’s an immediate understanding of what you are talking about. They move in the same spheres, so they have good connections to VCs and other tech start-ups that are potentially beneficial.
During the process, we were implementing Stripe for online payments, so Finerva was heavily involved with finding the right Stripe solutions for our marketplace. We switched to Finerva as we needed an accountancy firm that was familiar with the start-up world and with things like R&D Tax Credits, not just a standard accountancy package.
With Finerva we don’t need to go to three different people to get what we need; our excellent account manager Magda Braglewicz points us in the right direction.
What’s your advice for someone just starting out on their pre-Seed round?
Do one thing well. Literally just one thing.
Don’t be scared to admit that something is not working and pivot if needed. You will get a lot of advice from a lot of people. A lot of it will be good advice, but some of it won’t be. Only you know your product and your sector, and ultimately it’s your responsibility to determine your company’s future.
Don’t think that you need to listen to someone because they are older than you, have more experience than you, or are better educated. If you keep listening to other people, then you won’t succeed in the long run anyway. If you think you are right… just go all in and make it happen.
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