FOUNDERS IN FOCUS (Part 2) with Dugald Macdonald (Sportable Technologies Limited)- Becoming Investor Ready

Founders in Focus is a series exploring the typical lifecycle of a business in the sports industry – from formation to exit – where we will consider some of the key commercial and legal considerations along the way.

For our second instalment, we talk with CEO and co-founder of Sportable Technologies Limited (Sportable) Dugald Macdonald to examine the initial growth phase of the business and what it takes to become ‘investor-ready.’

Building an investible product

In the early growth phase, Dugald and co-founder Pete Husemeyer arranged meetings with friends and family with protypes of their technology aiming to secure support, advice and investment. As Dugald notes:

“We always knew we needed to raise money from Day 1 – it’s impossible for a hardware business like ours to grow without financial backing.”

Sportable has therefore always been focused on investment and has successfully managed to raise millions to date. As we touched on in our first instalment, proof of concept is essential for any new business. However, Dugald and Pete were not just selling their concept, but the physical technology itself and any initial growth depend on the durability and functionality of the product.

Dugald and Pete went above and beyond the mantra of ‘seeing is believing’ by scrumming in shopping centre car parks and exploring outer edges of airports to evidence how their technology worked and that it worked in all conditions. Nonetheless, every unorthodox meeting location was only possible after countless hours on the pitch testing with balls to demonstrate and refine their tech.

With any product, and in particular technology, Dugald highlights how customers and potential investors want something tangible to be able to investigate, which then forms the basis of their assessment of the business. The product is the core of the business and founders should put their best foot forward to show how the product works and instil belief that it is sustainable.

Attracting and retaining customers

One of the immediate challenges Sportable faced was that every customer was demanding and expecting a real-time return on their investment. There was no grace period – whether it was coaches, leagues or broadcasters, Sportable had to show an immediate impact and demonstrate value. This is a tough threshold, but one any growing business must seek to achieve, as Dugald highlights, in order to become credible and gain trust.

A concurrent issue faced for any growing company while building this customer base is its sensitivity to leverage and market forces – the wind needs to blow in your direction to allow you to take off, or else you’ll stay grounded. Dugald credits Sportable’s take-off through this period to the strong relationships that were formed early on, which turned out to be long term and stable, as well as the commitment and hard work that was put into certain pathways and workflows. The solution to the risk for any fledging business is to entrench your customer base as much as possible, form wider partnership groups and establish trust within the industry.

Expanding the leadership team and retaining talent

While Dugald and Pete were the driving forces behind Sportable’s initial growth as a business, they actively sought new faces to strengthen their leadership team and professionalise the business. Dugald highlights the important decision to identify the first chairman – a key step for any business to ask ‘tough’ questions of itself and gain legitimacy within the industry.

Many of these new additions to the leadership team were tied to funding rounds and investor-based appointments, involving a fresh division of responsibilities. As each new appointment brings scope for disagreement or conflict, Dugald noted the importance of a commitment from each investor to the core message of the business, in order to  facilitate decision-making.

Incentivisation at employee-level was equally at the front of Dugald’s mind, but after putting an EMI option scheme in place, he reflects that:

“While an incentive, it has to carry serious upside to change someone’s life and be a key driver to a handful of people rather than everyone.”

Protecting and maintaining intellectual property and data

Dugald references the importance of engaging with dynamic lawyers and advisors early on in order to navigate and protect rights around intellectual property and data. Sportable took an aggressive approach in developing its patent portfolio from day 1 in order to safeguard its technology and business – Dugald himself refers to “building a moat” around the Sportable IP and ensuring it is a leader within the space.

While securing legal protections for its IP, Sportable sought legal advice to implement data protection policies and navigate everchanging legislation as it grew in size and began to hire more employees and handle greater quantities of employee, client and customer data.

Taking the step to bring in investment and what to look out for

Taking all the above regarding contracts, IP and data into account, Dugald reflects how having an investible entity is key to all those ‘internal’ actions, while remaining an appealing prospect from the outside. He looked back to how prior to arriving at a roadshow in the US, Sportable raised money before the roadshow started. Dugald highlights how this set the tone for the whole conference and showed the business to be a compelling and investible entity.

When asked what other businesses should consider at their first stage of significant growth, with investors becoming interested, Dugald highlighted two key points:

(1) Raise more than you think you need – cash is key and raising more than is required allows you to build in room for error for the inevitable mistakes and problems that occur in a business’ early days; and

(2) Have a simplified message for investors and be ready to be examined – make sure your final choice is guided by the business’ core traits as well as alignment on business model and customer base to ensure the business and founder benefits as much as possible.

As the theme throughout this article has been, early decision-making is key for any growing business, and that choice of the identity of early investors perhaps tops all. Looking ahead, Dugald and the team remain focused on growth and attracting investment into the business, while keeping these core messages in mind that have guided Sportable to date.

***

Onside Law advises Sportable on a range of its corporate and commercial workstreams, including its funding and investment rounds, and looks forward to continuing working with Dugald and the rest of the team going forwards.