Insights into investing and entrepreneurs

Where does “TechmeetCity”?

kduk — Fri, 02 Dec 2011 14:01:45 +0000

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.

Momentum v. Team

Antrak Capital — Thu, 03 Nov 2011 11:53:54 +0000

Following on my note on rating ideas against execution, I’m thinking about what gets funded and why. While many people view the three key areas of product, market and team – the truth is that the third one of these is very hard to evaluate. This is where the whole momentum criteria comes into play. To a degree, momentum trumps all the others but that’s a potentially short-sighted approach.

If you have track record that is relevant (clearly there are shades of grey here) then investors can make a judgement that assumes a level of execution capability based on the past. And I’m sorry but you can’t look at the board’s track record as a substitute for management track record.

If this entrepreneurial track record is missing it’s very hard to assume any level of ability to execute in a small business environment on any basis other than what you are achieving with the resources at your disposal right now. Put momentum and track record together and you probably get a bumper valuation. If you have one or the other you get a good valuation, with neither you probably won’t land a professional investor.

To compound the disadvantage that a first time entrepreneur faces, the repeat entrepreneur has both some of his own capital to make initial progress and then the ability to raise more to achieve momentum.

So if you are entrepreneur scratching your head at capital raises that you hear about, perhaps this helps to explain why the lucky just keep getting luckier. However a lot of the biggest success stories come from first time entrepreneurs who are hungry and innovative so that’s not necessarily the right recipe.

Entrepreneurship in uncertain times

rmpender — Mon, 17 Oct 2011 20:28:14 +0000

We recently had the pleasure of presenting at the Alpha Tech 5.11 run by Alpha Version. The topic was about both the challenges and opportunities of building innovative technology businesses in the midst of an economic storm. Clearly given the volatility of the world around us, it was topic that entrepreneurs and investors can relate to. If you are interested in taking have a look, you can find the presentation here.

If only I could come up with that great idea..

kduk — Thu, 06 Oct 2011 17:36:08 +0000

About 6 years ago I exited corporate UK and “ventured” into the startup world, initially into my own startup and after that into the business I’m lucky enough to be helping build today where I invest in and help teams I hope will be the technology leaders of tomorrow. One of the throw-away comments I hear from my former colleagues and contacts is that they’d love to run their own business, if only they could find the right idea.

I’ve been reminded of this perspective a fair bit recently when bumping into businesses that are pursuing ideas that I’ve thought of in the last 6-12 months. Of course we see a lot of innovation on a daily basis which is bound to kickstart those creative juices (this will hopefully help the companies we do work with) but two in particular rang a distinctly familiar bell. JobOn is a business that uses video to lubricate the recruitment process and Foodity is a company that aims to allow you to create weekly menu’s that automatically populate your chosen supermarket shopping cart with the required ingredients.

Whether or not these turn out to be successful businesses is obviously still to be determined (I’ll obviously track them with interest) but I’m grateful that my ideas are not that hare-brained that no-one else is pursuing them. Assuming I’m not the only person in the world who is having this type of experience (a given), this reinforces for me the perspective that no idea is totally unique but an extension of the ideas and innovation that are already out there. So the next time a VC puts you in a holding pattern, you’ll know what they are thinking – execution trumps idea 9 times out of 10.

Markets are recovering, but should VC’s be bold

kduk — Tue, 16 Aug 2011 10:29:39 +0000

I enjoyed this post last week that reflected on how relevant stock markets are to VC investors. A few notable angels could be heard claiming that stock market behaviour isn’t relevant, but given their reliance on later stage investors that’s hardly an impartial view. My view is that there is no doubt that they are relevant. Later stage financings will have keener pricing as a result of any deterioration in the exit market and that will need to be factored into the financing path as it is traced backwards.

The antidote to this impact is disruptive potential. A truly disruptive company can drive acquirers to pay prices that are “strategic” – in other words abnormal multiples that can’t be justified on a comparable market basis. By virtue of the fact that these multiples are in any event disconnected from the stock market – the closer you can get to these types of opportunities in the next few years the better.

The problem for European VC’s is that they are, on the whole, undercapitalised. The impact of this tends to be a lack of daring, more cautious investing in difficult times and taking money off the table early. Perhaps, though, the answer is the opposite, be bold, find yourselves some smart VC’s that you can team up with, and help create disruptive companies.

If there is anything that this era of serial debt crisis has taught us, it’s that the solution that offers the least resistance is often not the best.

ProductTank

rmpender — Sun, 10 Jul 2011 16:36:38 +0000

A few days ago I had the pleasure of speaking at the July Product Tank event held at techhub. The topic was a venture capitalists perspective on product management, so I thought I’d pitch up and share the Antrak perspective on the critical role of product in development stage companies. Adding some great perspective to the event were two other speakers, Alex Hoye of Latitude Digital Marketing and Rob Kniaz of Hoxton Ventures.

I guess our participation in the event suggests that we believe allocating capital to build a world-class product team is vitally important. We work actively with our portfolio to help create a culture where great product management can thrive.

And to that end, we are really grateful for the work that Martin Eriksson and his team at ProductTank are doing to help develop a great pool Internet savvy Product managers here in London. We’ll look to attend more of these events as a way to get to know some of the talented and growing community of product managers in London.

b2b marketing using social media – a dark art?

kduk — Wed, 15 Jun 2011 16:36:01 +0000

With all the buzz around social network valuations I imagine that more and more attention is being focussed on the business cases for these applications. I spent Monday at a workshop hosted by the Innovation Warehouse trying to get to grips with this – particularly from the perspective of “non-brands” who are trying to gain visibility and qualified customer leads, a perennial issue for early-stage companies. The case for brands is much easier to see, as is the case for business areas like customer services.

So a quick & dirty methodology that I have stitched together from these talks are as follows:

Figure out what your market vertical is that you are trying to target
Identify the social media tools that best identify the thought leaders and influencers in that market. These can be leaders of LinkedIn groups, active contributors to Twitter or Xing or regular bloggers.
Track those people & get to understand them – what do they influence, what are they interested in, what’s currently topical & how do they engage in social media
Tracking them online will obviously allow you to track them offline too
Engage them in conversations that are topical
Engage them in discussions that tie into the needs that your products address
Don’t refer to your company or product
Identify the cost drivers they face

Hopefully this process will spit out some qualified leads. Your participation in these types of forums will also raise your profile and hence the visibility of your business.

I came away with a few conclusions:

All the normal business principles obviously apply. Plan carefully, resource, execute in part, measure & adapt
It is not necessarily cheap – particularly when you start and perhaps until you reach a critical mass of followers
I suspect you get increasing marginal returns from the investment in social media over time versus decreasing returns from push marketing
You need to reach buyers where they are – so an important goal in engaging with them is to connect the content you are going to create with where they are consuming content

This is probably somewhat simplistic – but at least it is starting to feel like a viable tactic to me.

Embracing the global economy

kduk — Fri, 20 May 2011 11:42:09 +0000

I had a really interesting opportunity to talk about one of our favourite topics yesterday at AlphaTech covering how to build out a tech. company in today’s global economy. From discussions around the coffee table & responses afterwards people really seemed to buy into our belief that you should embrace the relative strengths of capital, talent and customers in different geographies in building a business that is as powerful and valuable as it has the potential to be. If you’re interested you can take a look at the presentation which is attached.

AlphaTech_presentation

New Investment: Cognitive Match

Antrak Capital — Wed, 18 May 2011 15:00:26 +0000

We are very excited to announce that we have recently made a new investment, and have added Cognitive Match to our portfolio.

Over past several months, we dug deep into this business, and to the innovative solutions it is bringing to market. The company has built a very compelling offering that allows its customers to increase revenue and drive higher conversion rates online by intelligently targeting and optimising both onsite and offsite creative content. Alex Kelleher, the CEO is proving to be thought leader in this space, and he has assembled a world class team that we believe will push this business to new heights. Cognitive Match have made news on several occasions lately, announcing industry accolades, key hires, and a new focus on building a commercial hub in New York City.

We look forward to working closely with Alex and the team at Cognitive Match over the coming months as they achieve greater success.

EIS Changes Create Opportunities

Antrak Capital — Tue, 29 Mar 2011 03:00:29 +0000

Following last week’s UK budget announcement regarding Enterprise Investment Schemes (EIS) we have had a lot of interest from high net worths who see this as a potentially interesting way of mitigating the 50% marginal tax rate. The new rules permitting companies with gross assets of up to £15m and up to 250 employees to raise up to £10m per annum will broaden the spectrum of suitable companies and more importantly bring development stage companies with good management and some tangible assets increasingly into the frame. We are looking at how we can structure a suitable product for investors which will allow them to utilize the annual limit (£400k) but spread their risk over a number of different investments. The regulations still require parliamentary approval and won’t come into effect until 2012 but we will keep you posted.