How edtech startup Captivation Labs raised finance to scale its business

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The rise of the smartphone camera has ushered in multiple ways to curate and share our photos and videos. But these solutions are mostly aimed at parents. Captivation Labs aims to change that.

The ed-tech startup is developing familia, a child-centric mobile app and digital storytelling platform.

Its aim is to empower children to develop their creative, narrative and social skills through play, at home and in the classroom. It does this by encouraging children to add their thoughts, feelings and recollections to photo and video content, in order to create digital stories.

Captivation Labs is currently conducting usability testing of its product prototypes, and aiming for a closed beta launch before the end of 2017. CEO and co-founder Konstantin Zlatanov describes the venture as “at seed stage, and investment-ready’.

Debt before equity

Established in 2015, Captivation Labs was bootstrapped by its founders to begin developing familia.

In July 2016, the firm raised £70,000 from friends, family and stakeholders, using a combination of equity and debt finance.

A year later, the company issued a convertible note for £10,000 to secure working capital. The founders are currently negotiating additional loans totalling £100,000.

“Debt financing made sense at this stage in our development, when we’re still pre-traction,” says Konstantin. “Equity rounds will come later.”

The founders also opted for debt because, unlike equity finance, it didn’t require a business valuation. “It’s too early for this,” Konstantin affirms.

What’s more, it’s a faster process, with less in the way of legal complexities (and therefore costs). Securing the funding meant consulting legal and tax advisors; negotiating terms; setting out the agreements (using standard templates); then executing the deal.

Pushing forward

The money is being used as working capital to progress product development, branding and marketing, ahead of a proposed launch.

“The aim is to push on with our go-to-market strategy and product release, which will enable us to gain some traction before securing equity funding,” Konstantin explains.

Scaling up the workforce is a task for after the next funding round. But Konstantin already has an eye on this, having joined a Recruiting and Retaining Talent roundtable as part of the Business Growth Programme.

“The programme is a great match for a tech start-up at the stage we’re at,” he enthuses.

A strategic approach

“Fundraising for a business needs a proper strategic focus”, Konstantin affirms.

“You need to start planning your funding strategy early on. Consider the financing options available, and think about which will work for your venture, at which stage in its development.

“Then make time to put your plan into action”, he advises. “Focus your energy on networking, listening to the investment community, and pitching your company to potential funders. Raising finance is a full-time job.

Our Routes to Finance event looks at the various funding mechanisms available for London’s SMEs - from start-ups looking to raise via angel investors, crowdfunding and alternative finance to larger scale-ups looking to take equity investment from VCs.

Join us to learn more about navigating the funding journey, with expert commentary from figures from across London’s finance ecosystem as well as from growing start-ups and scale-ups who have successfully accessed finance.

Date: Monday 29th January 2018

Venue: London & Partners, 6th Floor, 2 More London Riverside

Join us at 11:30 to learn about Finance for Start-Ups, join us at 13:30 to learn about Finance for Scale-Ups, or join us for the full event.

Download this report, which outlines everything you need to know about business finance for start-ups, draws on the expertise of the mentors from London & Partners’ VC Club and its Business Growth Programme, who help London’s early-stage businesses unlock their potential and overcome growth barriers.

Routes to Finance

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