Momentum v. Team

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

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.

ProductTank

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.

Embracing the global economy

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

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

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.

WeComm Exit

Last week the investors in WeComm, us included, sold the business to Opentext. As usual with these sorts of deals we can’t disclose anything about the terms of the sale but we believe the sale was a pretty good outcome for the shareholders. Opentext proved to be a forward-thinking buyer who could appreciate the strategic value of the technology that WeComm has developed since 1999 and the opportunity that the potential power of a design-once, deploy anywhere platform represents. We wish them good luck with growing the business into their significant customer base.

While we made some money on this investment, we have learnt first-hand why professional investors in Europe are so reluctant to go near early stage mobile software companies. Saying that, we are not discouraged from what we believe continues to be an industry which has extremely exciting prospects. Instead we bear some scars that will influence how we will approach the path to building valuable businesses in this area in the future.