December 2, 2011 Leave a comment
I was persuaded to pop in to “TechmeetsCity” last night. Clearly there are a bunch of bankers who will be struggling to identify good places to squirrel away ill-gotten gains. From what I know of this market most of the real risk takers from this type of background don’t want to take much risk with their personal wealth as they view themselves as taking enough risk in their day jobs. So I’m a little sceptical but it’s worth a shot. Naturally there will be exceptions and the 50% tax rate definitely provides a bit of lubrication, as do the improved EIS tax breaks.
For me the more interesting part of the panel discussion was around skills/experience fit between the “City” and entrepreneurs as it plays into a broader issue. We believe there is still some way to go before we have enough recycling of talent to just invest and leave the team to their own devices, however it’s important to have a match between the skills and experience gap and the investor skill set. A mismatch normally does more harm than good. Clearly the “City” can contribute some sector experience but that’s where it ends – they generally can’t add the operational experience, market awareness and empathy that professional investors who deal with startups day and day out can. So the self-promotional comments about funds being the way to go are probably right, although studies prove that operational experience is less important for later stage deals than for early stage. So perhaps this is all totally back to front and the tax breaks should be for the large private companies, and VC’s should concentrate on early stage!
Building companies is hard & entrepreneurs need investors who are not only on-side but can contribute at an operational level if needed as well as strategically. Angels who are new to the field will do well to ensure that part of their syndicate will be proactive on this front.