Library of Things
Putting Purpose Before Profit
with Emma Shaw, co-founder of Library of Things
Putting Purpose Before Profit
with Emma Shaw, co-founder of Library of Things
Emma Shaw is one of 3 co-founders of the Library of Things: a business borne out of her background as a plant scientist, environmentalism and her passion for using business models and leadership to create good in the world.
Library of Things combats consumerism by offering users a rental service for items they may only need once or twice a year, such as sewing machines, drills, carpet cleaners, etc.
On their Unique Structure:
Library of Things started completely bootstrapped, operating similarly to a volunteer-run non-profit for 4 years before becoming grant reliant. This funding strategy didn't allow for long-term planning.
Working with a lawyer and a social investment advisor, they restructured with a mission lock and a guardian share - allowing them to raise capital while keeping control of the company with the directors.
Guardian Share: A small group representing the wider Library of Things community, bringing different stakeholder perspectives to major strategic decisions.
Mission Lock: The guardian share is has created the mission lock - putting the business mission first and locking this in with all stakeholders, including investors
Library of Things has many stakeholder groups: the community of borrowers, partners, the planet, and investors. Investor interests can't come before everyone else. Emma and her co-founders are empowered to balance those interests.
£££ Money Talks £££
1st Raise: Half a Million, from 22 individuals + 1 institution. Lasted 2 years
- Grew their business from 1-7 London Locations + built their technology and platform.
2nd Raise: 1 Million, same structure + equity crowd funding.
- Total: 275 Investors
- Helped grow investor network
Emma emphasises the power of offline connections made through face-to-face networking during the early stages of fundraising. She describes it as feeling like a "friends & family +++ round" - an organically grown network of investors who align with Library of Thing's mission.
Current investors all range between £10,000 to £50,000 per person. Raising large funds (£100k +) from institutional sources is still challenging.
The 1st raise came after 4 years of bootstrapping - they had traction, but everything else was unknown. During the 2nd raise, they demonstrated what they did with the half a million 3 years ago, proved to fence-sitters that they were the right people to deliver Library of Thing's mission and point to the evidence.
Why didn’t they go down a traditional route?
“We accidentally ended up raising non-traditional funding, but it wasn't like we set out to do that."
A word: INDEPENDENCE.
Emma and her 2 co-founders are mission-driven; Library of Things is predicated on creating long-term, sustainable and healthy revenue generation to serve their purpose. They wanted to focus on the business model itself, not on the end goal of selling the company for an exit.
“In trying to do the traditional route, we realised that we were losing our integrity, compromising it or selling out, or being beholden to this other stakeholder that really had power over us rather than shared power."
The team holds control & ownership of Library of things - not just co-founders, but the people with day-to-day input in delivering their missions. These are the people poised to make the best decisions.
Going down the grant funding, debt funding, or venture capital amounted to losing independence, whether to a VC's exit ambition or to a grant funder's mission.
“Our offer is really about our investors committed to putting the mission first before financial interests, but as a result of us delivering that mission and delivering our purpose, we can share in the financial success of that with them."
On the challenges of fundraising as a woman:
Emma and her 2 co-founders are all women. This, along with the unconventional, purpose first structure of Library of Things, compounds the challenges she faces during fundraising. She describes her experience at networking events as feeling like “her dad’s work do…there’s a specific demographic of generally older white men who hold a lot of capital to invest.”
“I think fundraising is really about hope, telling a story of hope, and sharing that you can be part of this."
Emma gives an example of fundraising going wrong during COVID while pitching to a group of angel investors. The pitch went well, but all it took was one voice to accuse the company of lack of ambition, of asking for philanthropic money/donations, of promising returns too small and not understanding risk or reward.
“I think a lesson for angel investment in particular is that when you're pitching to a group, there can be a kind of pack behaviour, where they're looking to each other for sharing that kind of vetting process. It’s quite hard to not let one person affect the rest of the conversation.”
How did you find the “right” investors?
It's like dating. You have deal breaker things, and then your nice to haves. We wrote that out like a scorecard! When we send out emails to investors, we would say, "Hi, I'm you know, we're Library of things and we're looking for X Y Z. Are you that person? Do you know somebody? This was what we were offering? Can we chat?"
And when they come back with, "we want to invest in you, but these are our terms", we could say, "is that one of our deal breakers or is that something we can negotiate on?"
One of our hard terms was our guardian share in our legal structure - an absolute failsafe that we stay true to the mission as the company grows. For example, selling the company is possible with our structure, but it can only be done in a way that furthers the mission. This was a major deal breaker for us - many funds would want to invest, but with the ability to sell the company to the highest bidder, regardless of who they are. We turned down quite a few investors because of that.
Some investors will be more value-aligned. It's like a marriage - we didn't want people who were going to micro-manage us - we wanted them to trust us to make the right decisions, but offer up their expertise and advice when we needed it, for example, people with expertise in retail tech.
Regardless of how much evidence, traction or credibility we had, regardless of the funky structure, the primary reason people invested in us came from their trust in us personally and their willingness to back us specifically.
When is a good time to fundraise?
There's definitely a tipping point. You'll probably know when you get there. The most helpful thing you could do is Bootstrap, and grow the company through revenue. You know that you've worked on the business as hard as you can to get it to that point.
It's reasonable that you'd need a cash injection, but it's not the first port of call, and to be successful in fundraising, demonstrating that you've got traction, you've got customers or potential customers, and that your costs are kind of relative to that is essential because you'd have people looking at the financial side of the business.
Bootstrap as long as physically possible.
Given your structure, what are the limitations on grant funding or social investment in the UK?
Even though we are a purpose-driven company, we can still make and distribute profits. That makes it difficult for us to get grants from traditional charities, trusts & foundations - their funds cannot lead to private wealth creation.
Social Investment in the UK is very niche and limited - comprised of mainly the same trusts & foundations with investment strategies looking to get their money repaid. Sometimes it's hard to fit what we do within specific social investment scopes.
We are eligible for research, development and innovation grants - we are building tech, after all.
Impact investment is generally more from the venture space - and we don't fit their criteria because, generally, they're looking to make a huge return and some incidental impact instead of the other way around.
Have you become a B-Corp?
I wouldn't rule it out in the future, but it wouldn't add much value. It signals to customers, partners, stakeholders, and investors that we're serious about the mission but doesn't go quite far enough for us regarding how that is set up. Our structure is on that deep design point and much more transformational than B-Corp.
Watch the video above for more details about Emma's funding journey.
- Aunnie began her career in investment banking but realised they wanted to use finance differently after being asked to prioritise bonuses over patient care.
- Aunnie emphasises the importance of creating revenue alongside seeking external funding and suggests that consulting and advisory work can help sustain a business.
- They also caution that VC funding is best suited for fast-growing, highly-scalable, technology-enabled companies.
- The venture capital (VC) model is like playing roulette, where investors bet on multiple companies and hope one will succeed.
- The VC model doesn't work for all businesses, especially those not trying to be the next Facebook.
- Female entrepreneurs are more aware of the downsides of equity and are more likely to seek alternative funding options.
- Angel investors are less sophisticated and invest earlier based on relationships, making them a good source of funding and mentorship for early-stage startups.
- Institutional VCs have less flexibility in their funding options, and it's essential to know your investors and not waste time on ones outside your scope.
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