In this episode of Cosmic Conversations, I sat down with Andy Hall from Pembroke, an early-stage fund investing £2-5m into British companies across business services and technology. We spoke about what makes a company venture-backable, why not every business should raise capital, and the return maths founders need to understand before setting their valuation.
You can watch the full conversation above or take in the best bits in the short summary of Q&As below.
Q: What do you do at Pembroke and the types of companies you invest in?
I’m part of the investment team at Pembroke. We’re an early-stage fund with over £250 million under management and we’ve invested in around 50 companies over the past decade. We typically invest between £2-5 million into British businesses across consumer brands, business services and technology. Most of the companies we back are revenue-generative, so we’re not usually investing at pure idea stage.
Q: What mistakes do you see founders make when they kick off a raise?
Founders try to compartmentalise fundraising. They focus on product and sales for 6 to 12 months, then realise cash is tight and flip into “fundraising mode.” I tell CEOs to always be fundraising. Keep conversations going with investors and angels every week. Two or three thoughtful emails or coffees is a good rhythm because this is a seven to ten year journey.
Q: Not every business should be venture-backed. How should founders think about that?
I completely agree with that. There are loads of really good businesses that just aren’t fit for venture capital and that’s absolutely fine. Venture capital comes with certain expectations around scale and growth. If a founder is building something more lifestyle-oriented or something that’s steady and profitable without needing to grow aggressively, VC might not be the right route. Taking venture capital changes the trajectory and the expectations around the business.
Q: When you’re looking at a business, what makes it venture-backable?
Ultimately we’re backing founders. We want to see someone who has developed a strong niche within their market that is scalable. We’re looking for founders who really understand their space, who know how the market works, where the opportunities are and where the pitfalls might be. Then it becomes about how we scale that business efficiently using our capital in a way that can generate a return.
Q: How important is founder self-awareness when scaling?
It’s huge. In the early days founders are doing everything themselves, from product to sales to finance. But if you’re going to scale a business properly, you can’t hold onto every part of it forever. There needs to be self-awareness about what you’re good at, what you’re not, and who you need to bring in to help grow the company. That willingness to relinquish certain responsibilities is important.
Q: What mistakes do founders make when it comes to valuation?
One of the biggest challenges is when valuations are disconnected from reality. You sometimes see pre-seed companies trying to justify very high pre-money valuations. While those stories make headlines, the underlying maths still has to work. From an investor’s perspective, whatever valuation we invest at needs to generate a multiple. We’re looking to at least triple, five times or even ten times our money. So founders need to think pragmatically about whether their business can realistically grow to the size required to deliver that outcome.
Q: How should founders think about fundraising itself?
sales?
It really comes down to knowing your customer. If you view the VC as a customer, you need to understand what they invest in, what stage they focus on and what good looks like for them. Getting to know investors before you formally raise is helpful. Fundraising is a professional process and founders who treat it like one tend to perform better.
Q: How do you think about story versus metrics?
It depends on stage. If a business is doing a few million in revenue, there should be clear data points to show what’s working. That might be customer acquisition efficiency, contract values or how effectively the company is scaling. If it’s earlier stage and under £1 million in revenue, there may be fewer hard data points and more reliance on the founder’s story and the market opportunity. Over time though, the numbers have to back up the narrative.
Q: What’s the one thing founders must understand before raising capital?
They need to understand the return maths. If you raise at a certain valuation, the business has to grow significantly beyond that to deliver a meaningful return for investors. So founders should ask themselves whether the market is big enough, whether the business is scalable and whether the valuation they’re setting allows room for that growth. If the maths doesn’t work, the deal won’t work either.
Key takeaways from this Cosmic Conversation:
- Venture capital comes with clear growth expectations. Founders need to understand the scale and outcome they are signing up for.
- Return maths underpins every investment decision.
- Strong founders stand out. Deep market knowledge and the ability to scale beyond yourself are critical.
- Story matters early, but metrics matter more over time.
- Letting go of certain responsibilities is part of building a bigger business.
- Fundraising should be approached strategically. Knowing your investor and their focus improves alignment.
- Market size determines venture fit. A good business is not automatically a venture-backable one.
If you enjoyed this conversation with Andy, check out our other recent Cosmic Conversations with leading VCs.
Connect with Andy Hall on LinkedIn and find out more about Pembroke VCT.
