Coconut: How to deal with investors and find the right employees

Published · 5 min read

Want to get investment for your business but not sure how best to go about it? In this interview, which is a part of a series in partnership with content creators the Startup Van, the CEO and co-founder of Coconut shares his experiences of dealing with investors and finding the right employees for his business. He also shares tips that will help with your company’s financial challenges.

Many businesses have started because the owners have searched for a product or service and found there wasn’t such a thing on the market. In many ways, it’s the perfect start: you find a gap in the market and fill it.

That was the case for Sam O’Connor and Adam Goodall. They are the co-founders of Coconut, a current account built for freelancers and self-employed people that takes care of business admin such as expenses, getting paid and tax.

Sam and Adam began their careers as chartered accountants at PwC. However, the pair soon realised the corporate life wasn’t for them, so they started a fintech company called ProConfirm.

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Joining the freelance community

ProConfirm connected banks with accountancy firms to share information about clients. Sam and Adam later sold the business to Confirmation.com in 2014 and entered the freelance world.

Sam, Coconut’s CEO, says: “We couldn’t find a decent way of automating our bookkeeping and tax. So we figured out how we could do it and created Coconut.”

Coconut is a business current account, not a bank. It does not present itself as, in fintech parlance, a “challenger bank”. And in the company’s own words, it was born out of a sense of frustration, one felt by the majority of freelancers on a daily basis.

The team at Coconut understands that freelancing and entrepreneurship is more than just about money – it’s a way of life that’s taken on for a number of reasons, either by choice (for more work/life freedoms), or because maybe a regular position has stopped.

People who work for themselves face challenges on a daily basis and the objective of Coconut is to free them up to focus on the important stuff, such as growing their business or taking time for themselves.

I ask Sam, to date, what has been the greatest challenge the company has faced?

He says: “Initially, we built the product using only freelancers on the tech. While it was a good way to stay lean and flexible, it’s useful to have tech knowledge on the team in the long run.

“We got really lucky when we met Allistair Crossley, our CTO, because incredible tech people are in very high demand. Ali’s one of the family now and it’s amazing to think that it was just the three of us at the beginning and now we’re a team of 16. We’re currently expanding the tech and product teams and we have some incredible talent.”

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How to fund a business

We then turn to the question everyone has when they start a business: how to fund it.

Sam says: “We had a bit of money saved up from the sale of our last business, which kept us in coffees while we were starting out. Since then we’ve been lucky enough to raise over £1m and we also won £250,000 from Nesta’s Open Up challenge.”

Once a business has been funded of course, it doesn’t stop there and the thought of getting external investors involved looms large.

Sam and Adam always knew they needed external business support, because their type of company requires capital to reach scale and become profitable. The other thing they wanted to do was bring people into the business who provided specialist expertise and support.

So they decided to go out to investors when they couldn’t fund development costs anymore themselves. But they were always clear that each bit of money went into proving an assumption, or reaching a milestone. Sam says they are lucky to have a super smart and engaged group of investors, who help them with everything from compliance to growth.

Coconut is a current account built for freelancers and people who are self-employed
Coconut is a current account built for freelancers and people who are self-employed

Early days of fundraising

So when did Sam and Adam start the process of fundraising?

Sam says: “I went out to a few people that I knew and asked them if they wanted to invest. Luckily one said yes with a £5k cheque and kicked the whole thing off. Our first investor is still one of our most trusted advisers on some of the specialist areas of banking.

“Although actually before he came on board, I told my mum what I was doing and she gave me a cheque for £100 – so maybe that was the starting point. She now uses Coconut for all her self-employment finances, which is remarkable for someone who’s not all that tech savvy – she really loves it.”

Having been through a fundraising process before, I’m intrigued to know what Sam would do differently next time.

He says: “Raising funds for your business takes a lot of time and preparation. I think you need to be very clear what you’re raising funds for and the types of investors you want. It’s easy to look at the startup news and assume that venture capital [VC] money is right for your stage of business.

“In reality, other types of funding such as angel investment are often better at an earlier stage. If you target the wrong type of investor for the stage of your business, you can end up spending a lot of time in meetings that don’t lead to a cheque at the end.”

Top investor tips from Coconut for businesses 

I then ask, if Sam had to provide a key tip for other businesses as to how to deal with investors, what would it be?

He says: “I think it’s worth spending some time planning your investment process and the business and fundraising milestones you want to hit throughout. Investors like to see momentum, so if you’ve achieved something new every time you interact it shows that things are progressing quickly.”

As for business in general, what two other bits of advice would he give someone who was starting a company and looking to grow it with external funding?

Sam says: “Raising funds is such a big time suck for the person running the process, usually the CEO, that it can actually hinder the business. Decide on one person in the business to run the fundraising process. Get it done as quickly as possible and get back to growth.

“It’s also worth looking at lots of channels for fundraising and how you can engage your network to promote your business. For example, what we’ve decided to do is get our customers involved in our fundraising. We have a really engaged community and they’ve helped us along the way, so it makes sense to get them involved.

“We launched our recently pre-registration and got 600 pledges in the first three hours. It was great to see such engagement and crowdfunding can be a really powerful tool to help growth alongside the capital because all the investors become promoters of the business, even if they invest £10.”

Sam and Adam have big ambitions for Coconut
Sam and Adam have big ambitions for Coconut

Future ambitions and hiring the right employees

After the question of funding, I ask about the future ambitions Sam has for the business. He’s quite clear about the company’s target: to free 20 million people worldwide from business admin via a simple product. Alongside this, they want to help their customers with financial well-being and security, which is sometimes missing from the entrepreneurial lifestyle.

It’s an ambitious target, so how easy or hard have they found it to hire the right people and grow a team that can develop their business?

Sam says: “We’ve been very lucky with our hiring and have a great team. We’ve used recruiters and when you find the right recruiter, they can be a godsend. Hiring is another area that can be a huge time suck so you need a good hiring process, strong values to hire against and you need to get a good funnel of top quality people so you don’t end up settling for the wrong person.

“We’ve got some amazing skills and experience on the team including machine learning from banking, scaling customer operations from Deliveroo, an influential product designer and the former CEO of the British Bankers’ Association [now UK Finance] on our board bringing deep banking sector expertise.”

Does Sam find it hard to keep the team together?

“We have a very hardworking but fun culture,” he concludes. “We’ve not struggled to keep people but we’re still a very young business. However, we do make sure we spend time together outside of work so we build strong relationships.”

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Facing business challenges and want some inspiration to overcome them? In this free guide, a group of business owners share their experiences and offer advice that can help you keep moving your business forward.

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