By Eoin O'Hara
Cally Russell has had the kind of startup journey that most technology entrepreneurs dream of one day emulating. He is the founder of online shopping app Mallzee, the self-styled ‘Tinder for Fashion’ that allows you to create a personalised online shopping experience and hold over 100 high street shops in your hand.
It’s fair to say Cally has had quite an exciting time of it lately, from turning down investment on BBC’s Dragons Den, to growing his user base by hundreds of thousands. But his most intriguing achievement has come just recently, with the announcement of £2.5 million investment in Mallzee by a group of tech entrepreneurs, angel investors, and the Royal Mail Group.
I took the opportunity to have a catch-up with Cally, and pick his brain on some of the finer details of becoming investable, raising investment, and how to handle the challenges which come along the way.
So, at this stage of the game you have secured a substantial amount of capital investment across a number of funding rounds. Can you give us an overview of this to date?
We’ve now completed three rounds of investment starting with a very early stage angel round in 2013, and now 2.5 million pounds with a corporate backer taking part.
What do you think are the qualities that have made Mallzee into such an ‘investable’ business?
It’s the team, the product we’ve produced, and the fact we’ve always delivered what we said we would. We’ve grown to hundreds of thousands of users in a short time, whilst spending a lot less than many companies in our space. Many startups simply don't know where to begin when it comes to raising capital through an angel investor.
What practical advice would you give to someone to help them take the first brave steps?
My first advice would be that it’s going to take a long time and you should be ready to face plenty of rejection along the way. Also, you need to get out and meet investors; you can’t expect them to come to you. You must be certain that what you have is investable and that you have enough traction to show an understanding of what you are doing. If you’re starting from scratch, give yourself six months to do a funding round and be realistic about who is going to back you at this stage and what size of cheques people will be willing to write. I think I wasted three months pitching people for £150k who never wrote cheques less than £1m. I spent a lot of time learning how investors think and understanding the tax benefits they can access as well.
What have been the benefits of raising funds through angel investment? Do you think that this has moved you in a different direction than equity crowdfunding might have? Have there been any drawbacks?
The level of support you can get from angel investors is just fantastic. Our backers have built massive businesses both online and off and having them involved in the business helps on many levels. They can provide a sounding board, offer introductions and help in many other ways. Taking investment should be about so much more than just the money.
People may have seen you pitching on BBC’s Dragons Den earlier this year; Peter Jones placed a valuation of about £500k on Mallzee, much less than your recent investment has indicated. Can you share any useful insights on how to accurately assess the value of your business, and how to remain firm in the face of a low valuation?
Yeah, Peter tried to get a bit too much of a discount and that’s why we had to say no to him. When the show was filmed we had recently raised so we had to make sure we stuck to that valuation. I think you should always price a funding round fairly and try to find a level that you're comfortable with, but that also gives investors a chance to generate solid returns. You’ve got to know your value and the level you’re comfortable with. Think about where you want to be in three, five and 10 years' time, and then work back from then.
Many early-stage start-ups struggle to demonstrate in their business plan the worth and scalability of their venture, especially within crowded marketplaces. Are there any kernels of wisdom you can share on this matter?
Don’t just try and demonstrate it in the business plan, demonstrate it in the actual business. Hustle like crazy and show that you can make something big, even before you take any money. If you can showcase that you’re able to make things happen then a lot of people will want to be involved because they think you’ll be able to disrupt even the most crowded market.
You have recently teamed up with Royal Mail, as a startup how do you summon up the courage to have conversations with such industry giants?
We also work really closely with Samsung and a lot of very big retailers. It all just comes down to having confidence in yourself, your product and your team. You need to set a clear direction and vision. When you have this in place, then you can work with any partners, no matter what their size.
Where next for Mallzee?
We’re more than doubling the size of our team in the next 3 months, scaling our user base, launching more international countries and bringing a couple of groundbreaking new features to the market. Our ambition is that within 18 months we will be the number one shopping destination on mobile.
Eoin O'Hara is a business developer at Startacus.net. He has a background combining arts and culture with strategic business development. Follow them at @Iamstartacus