Case Study: Sonic Academy raise £500,000
"As the rejections mounted it was becoming increasingly difficult for the founders to continue, but deep down they knew that underpinning what they were doing there was a market, people were buying Sonic Academy’s video content online and they knew there was something there worth chasing" - Kevin Traynor, CEO
In the last 12 months Sonic Academy has raised over £500,000; here is our story:
Sonic Academy was set up by Kevin Traynor in 2004 as a Belfast based training facility for DJs and music technology enthusiasts. From this stemmed http://www.SonicAcademy.com, a now globally popular hub offering high quality music technology tutorial videos and resources, features, news, reviews, and a thriving community filled with like minded music moguls and maestros.
Starting up
In the beginning, like most start-up companies, Sonic Academy relied heavily on the generosity and support of friends and family to get the company up and running. Founder Kevin Traynor initially invested his own personal savings into the venture and managed to persuade his father to help buy a van to get the business started.
Kevin’s start up funding included access to a £4K Prince’s Trust loan to help get the business off the ground (which eventually led to Kevin being awarded the Prince’s Trust Young Achiever of the Year Award). Sonic Academy also qualified for some initial funding assistance through Invest Northern Ireland’s “Start a Business Programme”.
In 2006, Sonic Academy won Northern Ireland’s Department of Enterprise, Trade and Investment’s “Broadband Content Initiative” with the most creative digital content design. The award’s subsequent funding helped to launch the company’s website.
Sonic Academy’s core business continued to grow steadily and generate profits, however it was apparent early on that online businesses can absorb vast amounts of cash, operating at an unsustainable loss despite a steady rise in online sales.
Sonic Academy would need outside funds and assistance to continue growing as a business.
Preparing for Angel Investment
Kevin knew that obtaining private investment would give Sonic Academy the required capital to expand the business and help realise the company’s true potential. He also believed that securing private investment would have a strategic effect in changing the overall complexion of the company, grooming it into an attractive opportunity for venture capital and bank funding in the future.
The Sonic team began preparing for private investment by refining the company’s business plan and gathering comprehensive financial records including a complete breakdown of revenue and future financial projections. They also ensured that all necessary policies were in place including health and safety policies and employment contracts.
The founders had initially thought that they would dovetail getting the next round of funding either through angel investors or venture capital investors with the website going live. However the tough economic climate made it a very challenging time to seek investment and the company experienced many closed doors as angel investors and VC firm funds dried up.
The Investment Process
After many months of pitching and persevering, Kevin and his business partner, music producer Phil Johnston, met business angel Robbie Wright at a halo meeting in January 2009. Robbie immediately saw the potential of the business and was attracted by Kevin and Phil’s enthusiasm, commitment and energy to make it happen. After a few months of getting to know each other and conducting due diligence, Robbie decided to invest £100K in Sonic Academy.
Sonic Academy quickly tapped into Robbie’s wealth of experience and expertise to tackle some of the issues the company needed to fix in order to progress. While Kevin had ensured that health and safety policy and employment contracts were in place, the company's legal structures, processes and accounting needed work.
Sonic Academy also benefitted from Robbie’s extensive network of contacts and recruited a reputable board of advisors of high level business people including Stephen Lusty, Google's head of operations in Dublin.
As Kevin had anticipated Robbie Wright’s angel investment and expertise had helped to turn the company around and mould Sonic Academy into an attractive investment opportunity for venture capitalists and bank funding.
Kevin’s strategy was realised in August when Sonic Academy became the first investment for the newly launched £5m Invest Growth Fund (funded by Invest Northern Ireland). Sonic received a total investment of £200K, which comprised of £100K provided by the Invest Growth Fund and a further £100K from Robbie Wright. This also unlocked further funding of £70k from Invest NI, £70k from the Arts Council NI and £75 of bank funding.
Sonic now had the vital capital necessary to take the company to the next level. They no longer had to worry about getting investment and could concentrate on making improvements to the web-based business to meet the increasing global demand for video content as well as to support the growth strategy of the existing core business.
Sonic Academy’s top tips for Angel Investment
• Always ensure to fully protect your IP
• Be prepared for the due diligence process of angel investment by ensuring all necessary policies and contracts are in place and you have comprehensive financial records for your company
• Be realistic and open minded about the division of equity of your company especially in the current economic climate, remember it may be more strategic to own less of a company that is worth considerably more in the long term.
• Be sure to really use the advice of your angel investors and advisory board, they are bringing a wealth of experience, expertise and network of contacts to the table.
