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The Accelerator Group (TAG)



Working with entrepreneurs and world-class venture capital firms to create and build fast growing Internet services, eCommerce and Digital Media businesses.



Updated: 2017-11-03T08:29:34.321+00:00

 



Startups' biggest mistake - Avoid it. Please.

2015-12-24T17:28:07.551+00:00

Startups’ biggest mistakeThere are many mistakes that can and are made in the challenging pursuit of building a great company.Here is a list – not exhaustive of course. I’d love to see yours-       Choosing the wrong co-founder? -       Marketing before product has been validated? -       Choosing the wrong technology stack? -       Addressing a market which is far too small to build a substantial business? -       Incorrect pricing model? -       Deferring monetisation for too long?-       Monetising too soon? -       Appointing the wrong CTO? -       Not appointing a CTO? All these are significant potential pitfalls, certainly. But none is irreversible – provided you have raised enough money.Without question the most common mistake we’ve observed in funding well over 100 startups is not raising sufficient capital. About 20 years ago, my wife and I were fortunate to have the opportunity of building our own award winning home. It was an ambitious project and we were determined to create something exceptional. A good friend of ours, a property developer with years of experience came around to see how we were getting on – about half way into the life of the project. His summary, after walking around, nodding sagely: “there’s nothing here that can’t be solved with time and money!”Without money, you’ll run out of time – and if you take to long, you’ll run out of money.Unfortunately the process of raising funds is neither enjoyable nor particularly instructive. There is a tendency of angel investors to want to invest as little as possible and to encourage reaching breakeven as early as possible.Neither of these is a good way to go for an ambitious founding team.I’m not recommending a high spending approach – on the contrary achieving a lot with very little is one of the clear indicators of future success.But the Series A crunch is a very real phenomenon and even in the hottest markets, will always be a feature of the funding landscape.Ideally the Seed round should aim to fund the business to a brilliant Series A – ie one with a top tier investor, a Series A that takes weeks – rather than months – to raise. The speed and ease of the raise is directly related to how much progress the business has made and how well prepared you are for the process.So, how much should be raised at Seed? The answer is: enough to ensure that the necessary Series A milestones can be reached – comfortably.Allowance should be made for the ‘speed bumps’, the ‘pitfalls’, the ‘pivots’ etc.And never assume revenues in these calculations – unless they are 100% assured. Even then, the ability to focus entirely on building a product that will delight customers without distractions is very liberating.We’d generally say that 18-24 months of runway is what is needed. Expecting – or hoping – to dash for a Series A, after 6 or 9 months , will often result in a frustratingly long, painful A round process. This is typically followed by difficult conversations with inside investors to lengthen the runway, raise a bridge or similar.Eighteen months goes by pretty quickly and there is so much to do. The last thing you want is to be spending hours with potential investors on raising money – what a waste of time that is! I’d rather spend hours recruiting the best team – any day. [...]



"Approaching the 'Uber Moment' in Financial Services" - Antony Jenkins

2015-12-14T10:03:03.517+00:00

Approaching the 'Uber Moment' in Financial Services: How Technology Will Radically Disrupt the SectorThis is a guest post by Antony Jenkins, ex Group CEO of Barclays Bank.Antony has had a glittering career to date as one of the world's pre-eminent bankers.[Wikipedia: Antony Jenkins began his career in finance at Barclays as a graduate in 1983, but subsequently moved to Citigroup and rose to head the company's branded credit card business. In 2006, he returned to Barclays to take over the company's Barclaycard division. In 2009, Jenkins was promoted to chief executive of the retail and business banking group and asked to join the executive committee.[1][4]Jenkins was appointed as the group chief executive of Barclays on 30 August 2012.[5] In February 2014, Jenkins announced he would be declining his bonus for 2013 following a series of scandals.[6] On 8 July 2015 it was announced that he had been sacked by Barclays after a dispute with the board over the size of the investment bank and the pace of cost cutting]We've been fortunate to spend time with Antony talking about the future of Fintech and specifically about some of the more exciting developments. Antony's view is that we are the very beginnings of a revolution some of which is taking place right here in London.The post below is a speech which Antony delivered at Chatham House, London on 24. Nov. 2015. Extracts received wide coverage in the UK press - here it is published unabridged.It is an honour to be here tonight at Chatham House, an institution dedicated to building a sustainable, peaceful and just world.I have worked in financial services for over 30 years, in many different businesses and places around the world, and have been privileged to observe first hand the impact of technology on financial services.When I began my career fax machines and electronic typewriters were the order of the day. Portable computers weighed 20 pounds and were called “luggables.” And mobile phones were the size of bricks.Email arrived in the late 80s and it was provided to senior executives who of course had their PAs print them out so the boss could hand write a response. Which was then typed into an email by the long-suffering PA.And I remember in the mid 90s building a business for corporate customers to electronically display certain financial documents. The business case hinged on whether the economics would support two so-called T1 lines, which are lines to carry data and phone conversations. Today those lines would only cost somewhere between $200 and $1200 per month, a fraction of the price back then.But I also experienced how new technologies started to make consumers’ lives easier. I remember how in the mid 2000s, contact-less payment systems started to transform the way we all travel on the tube and bus.And during my time at Barclays, we launched Pingit, a market leading system to send and receive money via mobile phones.All these experiences have made me a passionate believer in the transformative power of technology. It is an unstoppable force which often has a hugely positive impact on the way we live, work, consume and learn.Many wonder how these new technologies will transform the financial services industry, a sector which is already being reshaped by current and prospective macro economic weakness as well as regulatory change. You might ask who the winners and losers will be.10. It’s an important question, as an effective, fair and transparent financial services sector is vital for economic growth and also for a functioning and healthy society. That’s especially true as the industry itself has not always delivered its side of the bargain.I’m predicting that over the next 10 years we will see a number of very significant disruptions in financial services -- let’s call them “Uber moments’’ -- driven by companies in the so-called Fin Tech sector, the world where financial services and new technologies link together.We will see massive pressure on incumbent banks which will strugg[...]



Lets tackle inequality NOW

2015-05-24T20:05:41.053+01:00

A graph of the UK's National Minimum Wage over time. Information taken from The Low Pay Commission - Historical Rates. Low Pay Commission. Retrieved on . (Photo credit: Wikipedia)I’m not an economist but it seems to me that we have a great opportunity, here in the UK and across the developed world, to improve the lives of millions of people by simply increasing the minimum wage and actively promoting the payment of a “Living Wage”.The Living Wage is an hourly rate of pay, calculated according to the basic cost of living in the UK.It provides an acceptable standard of living for employees and their families and a benchmark for employers who are able to pay more than the National Minimum Wage.There are two Living Wage rates, the UK Living Wage and the London Living Wage. New Living Wage rates are announced in November each year and published by The Living Wage Foundation - amongst others.The current minimum wage in the UK is £6.50/hour and the Living Wage (set independently and annually) is £7.85/hour and £9.15/hour in LondonI have worked in, evaluated and invested in many companies and right now, I feel that the circumstances could not be better — nor the arguments so cogent — for companies to pay a living wage and for the Government (and the Low Pay Commission) to raise the National Minimum.We can afford some inflationary pressures:The spectre of deflation hangs over many economies, although the implications are not fully understood, some rises in the cost of production and services can certainly be passed on to consumers.Much of the additional wages paid will be re-cycled through the economy by consumer spending, fuelling much needed growth in demand.With unemployment rates low and employment levels at their highest, there is real competitive advantage to be gained by companies being seen as good payers and attracting the best workers.Paying a living wage (not just the minimum statutory) can have positive effects on staff wellbeing and team morale.It can mean increased productivity, reduced absenteeism, better retention and improved quality of work.Front line staff, like shop assistants for example,  are absolutely key to the performance of the business. The recruitment training and retention of these people comes at a huge cost and their motivation, how they feel about their jobs is crucial to the delivery of the brands' promise.Clearly putting the salaries of all low paid workers up will add to the cost burden of such organisations and this is where the Government’s role in setting minimum wages at a “Living Wage level” is needed to level the ‘playing field’ for companies competing with one another.The counter argument runs that many companies will be forced to reduce their work forces (or invest in increasing productivity?) — the alternative is of course to raise prices.With a Conservative government in power, a move to push for further increases in the minimum wage could be seen not as ‘anti-business’ but simply the right thing to do — there are too many in our society who despite having jobs, struggle to get by from day to day.Most of the readers of this post will be working for companies that already pay a Living Wage — and a rise in the statutory minimum will make no impact. We can however do a lot to influence others.This is what we can do, today:1. Ensure that we and our service subcontractors are paying a living wage (eg cleaning companies)2. Lobby Government to increase the minimum wage and to give a commitment to keep its increases well above inflation, closing the gap on the Living Wage.3. Use Social media to spread the message @livingwageuk, become accredited to the Living Wage Foundation #LivingWageRelated articlesminimum wageThis country has the best minimum wage in the worldLow Pay Commission will ensure workers take home 'decent' wageIreland 'losing its edge with fourth highest OECD minimum wage' [...]



UK Election - its importance to the Innovation Economy

2015-05-08T08:34:15.841+01:00

It's that time again. Elections in the United Kingdom (or disUnited Kingdom if you prefer).It's the time when Politicians and the Media seem to be on the edge of hysteria, the time when love/hate relationships become strained due to ill-judged pronouncements and sorting out who believes in what is extremely difficult. I'd be preaching to the converted were I to stress the importance of all those eligible casting their votes.  I consider myself privileged to being able to do so as a UK citizen, having qualified some 36 years ago. Like many who were not born here, I'm profoundly grateful for the opportunity to live in this open, tolerant, free society and to be able to contribute in some way to it. It seemed like that to me, even on our arrival in the UK in December 1976 - a time of depression, 3 day weeks, strikes, the winter of discontent etc.What a transformation we've been through! From the "sick man of Europe" to the heart and soul of Enterprise and Entrepreneurship in Europe in just a generation.  During this time, I've led the building of 2 successful companies as Entrepreneur, invested in more than 50 startups in the UK ...(and a fair few in the US and Europe) and helped Saul in the formation of Seedcamp (Europe's premier accelerator program) so I have 'lived' this transformation through its ups and downs.There is still much wrong, still too many under-educated, under-employed, too many clinging on to past glories. Too many of our leading FTSE 100 companies have yet to embrace or recognise the impact of the digital revolution and are under-investing in transformation.Nevertheless, the cultural shift towards Enterprise and all that it's capable of delivering has been profound.For this, some credit must be given to successive Governments who have helped create the framework in which we now operate.My own experience of involvement in "Tech City" has provided some insights into how governments can enhance or hinder progress. When Tech City was conceived -or rather named- in November 2010, I was one of the sceptics. After all, Silicon Roundabout had been named by software designer Matt Biddulph, of Dopplr (later sold to Nokia) in the Moo shared workspace on the Old Street Roundabout some years previously - in 2007. Those of us in the startup tech scene had seen the cluster building rapidly for at least 5 years. We'd been banging the drum for London as a global centre for Tech development since the turn of the century.It seemed to us "insiders" that the Government was jumping on a bandwagon, using their large megaphone to drown out the other noise and claim the credit for itself. All of which it did very effectively.Tech City sat inside a framework of a larger ambition which seeks to make Britain "the best place to start and build a business" - the fact that Europe's brightest and best keep setting up here must mean we are on our way to achieving this aim.Tech City was simply a brand, a name to give a set of policies designed to encourage enterprise,  get government out of the way and encourage a mutually supportive community. Some of these policies have had a profound effect.Tech City proved to be a forum in which No10 (and 11) could listen to people in the industry from which many of the policies were derived.Some examples of these policies include:The EIS scheme has attracted many millions to the startup world by channeling tax incentives via angels directly to individual companies - far better use of funds than some government agency investing in companies who can't obtain funding elsewhere. The entrepreneurs visa continues to bring talented, enterprising people to these shoresEntrepreneurs tax relief. ....10% capital gains tax for foundersEncouragement of the LSE to create the "fast growth sector" Promoting successful entrepreneurs as role modelsFacilitating regulations enabling new Fintech models such as Funding Circle, Transferwise, CrowdFunding platforms, P2P lend[...]



SecondHome - changing the way we work

2015-03-09T12:55:09.167+00:00

One of my passions is Architecture.I'm a firm believer that one's environment is fundamental to state of mind and informs our attitudes and thought processes.Today, this seems pretty self evident but its remarkable for how long work (and home) spaces had been designed for minimum cost, maximum return without sufficient thought to how effective and productive the users of these spaces could be with imaginative space design.Shared workspaces have proliferated, clusters are recognised as drivers of innovations, serendipitous meetings in the corridors, kitchens and coffee bars increasingly result in positive collaborations.Now Rohan Silva and Sam Aldenton with the active support of a few hand picked investors and Selgas Cano, Madrid based architects have created SecondHome with the mission to move the whole concept of "Cluster" on a decade.And what a debut SecondHome has made!The members love it, the press loves it, Selgas Cano have been selected to design this year's Serpentine Pavilion, even the in-house restaurant gets rave reviews ..eg:Our fabulous in-house restaurant @jagorestaurant bags 4 stars from The @Telegraph. Well done, guys! http://t.co/KANLFYyXGg— SECOND HOME (@SECONDHOMELDN) March 6, 2015But its not just the design of SecondHome which has been so appreciated. The team that manages the East London based first SecondHome are really engaged with the members, nothing is too much trouble - all delivered in a relaxed, friendly and efficient way.Its hard to put one's finger on exactly what it is that makes you feel happy inside SecondHome.It could be the 1000 indoor plants. I could be that every chair and lamp in the place is of mid-century design and is different from every other one.Or perhaps its the use of colour, light, transparency.The permanent studio members, in SecondHome, Hanbury Street includeUS companies like: Survey Monkey,  Task Rabbit,  Artsy ,  Four Square,  General Assembly,  Blue State Digital;Creative Agencies like: Fuelled, Visualise, Rooster Punk and Klein & Sons andHome grown startups like: Kovert Designs, Chineasy and Signal all find they're in good company with Santander's $100m Fintech fund and Christian Henandez's VC firm WhiteStar CapitalRead what the press have said about SecondHome...SECOND HOME - SELECTED MEDIA COVERAGE "Second Home is a workplace of the future." - Evening Standardhttp://www.standard.co.uk/lifestyle/london-life/are-you-cool-enough-for-this-workspace-why-second-home-is-a-workplace-of-the-future-9902677.htmlSecond Home offers a different way of working... There is something hugely seductive about Second Home... You want to work here." - RIBA Journalhttp://www.ribaj.com/buildings/second-home-offers-a-different-way-of-working?previewId=6io9qki"Tucked away inside a former carpet factory in trendy east London is a futuristic office space that London's most innovative companies all want to join." - Business Insiderhttp://uk.businessinsider.com/second-home-london-office-2015-1"It is sometimes said that the more virtual the world becomes, the more the physical is needed as its counterweight. Second Home is an elegant demonstration of this idea." - Observer architecture critic Rowan Moorehttp://www.theguardian.com/artanddesign/2014/dec/14/second-home-review-london-office-selgas-cano"Located in a former carpet factory in Shoreditch, Second Home is a collaborative workspace, featuring transparent acrylic walls, over a thousand plants and a so-called 'flying table'." - Dezeenhttp://www.dezeen.com/2014/12/08/second-home-selgascano-london-office-orange-tunnel-flying-table/"A new co-working paradigm." - Architizerhttp://architizer.com/blog/second-home-coworking-space/"How 1,000 plants, a greenhouse bubble and Stella McCartney could change the way we work." - Fast Companyhttp://www.fastcompany.com/3041976/how-1000-plants-a-greenhouse-bubble-and-stella-mccartney[...]



Growth champions are different from other businesses

2014-12-07T11:40:47.581+00:00

I recently had the opportunity of working with Margaret Exley of SCT consultants and we started talking about the characteristics of hyper-growth companies and how they differed from others.Margaret's client list is the who's who of giant British business - a decent chunk of the FTSE100. She advises them on improving board effectiveness generally and specifically on increasing their strategic focus.She has conducted a very interesting piece of research which has many lessons for the slow growing giants as well as those early stage companies aspiring to becoming hyper-growth businesses.The paper, entitled Designed to grow has not been made public before and is reproduced below by kind permission.Thank you Margaret.How growth champions differ from other business and what it takes to become oneSummary of researchThe research surveyed 214 companies across the USA and Europe to identify high growth companies, and what makes them different. The overwhelming majority of senior executives said organic growth was a primary goal for them and their organisations. However, only 12% had exceeded their organic growth objectives in the last three years. Barely half rated themselves as having been effective in achieving growth in the same period and a majority believed that creating growth from within will become harder in the next three years.We identified 23 companies who are growth champions. All had consistent year on year growth as a distinguishing feature. Most had consistently delivered growth in revenue, net operating income and share price over a period of five years, at twice the rate of the rest.The growth champions have six practises or types of behaviour which clearly distinguish them from the rest. Differences between the growth champions and the rest are clear, marked and statistically significant.These practices do not include some of the things which have been said to be important by consultants and others in the past, eg creating radically new products and services, risk taking, having an internal venture capital process, or financial incentivisation.The growth champions transcend sectors, geography, size and business model. There is a mixture of public and privately owned businesses and the growth practices are key differentiators. They work together to give a distinctive footprint. Practices include: creating clarity on sources of growth and well articulated profit models, combined with disciplined execution of those strategies backed up with strong measurement and feedback to the team.Growth champions focus on a few things and make clear trade-off decisions. They are able to grow because they have few management levels, develop their own leaders and create a culture of continuous adaptability. They are disciplined, focused and minimalist rather than risk-taking opportunist or complex. Not only are the practices mutually reinforcing, but they reflect a clear difference in priorities between growth champions and other businesses. They put companies at a significant competitive advantage. They can be measured and they can be learned.As a result we are now able to assess companies against the high growth practices, identify where they are weak and focus on the specifics needed to drive organic growth. Our starting pointProfitable growth is central to the creation of any company’s economic value, providing the cornerstone for ongoing competitiveness. In turn, successful company growth fuels the wider economy and therefore has broader benefits for society. But in the Conference Board’s recent study of the top priorities for CEOs (the CEO Challenge Survey, 2006) over 650 CEOs rated sustained and steady top line and profit growth as the top two challenges for them in 2006.We have been looking at the characteristics of companies who achieve high ratios of organic growth, ie growth which does not rely on acquisition. Whilst much has been wr[...]



Cash is still King - or should be!

2014-10-08T16:06:52.773+01:00

I’ve been reading the great posts on the subject of ‘burn rate’ of late and found myself nodding furiously in agreement with Marc Andreesen,  Fred Wilson and others.In this age of very well (and over) funded startups,  I’ve almost forgotten the Number1 piece of advice to new CEOs.“Have your closing bank balance put on your desk first thing every morning.”Firstly, why single out this of all the possible KPIs?Many will find this very curious piece of advice.Simply because there is no better way to have your figure on the pulse of the business by understanding the flows of cash – in and out.Secondly, why have someone else involved. Why not just look at your on-line balance. Yes, you should do that too – to see the movements - but making it another person’s job means that 2 of you will be aware of this ultimate, most important KPI.Most startup CEOs keep an eye on their cash only in terms of ‘length of runway’. They also have a decent idea of their ‘burn rate’. Assuming that this number is constant and will follow the cashflow forecast done in the budget is dangerous. Its often the case that founders tend not to look at cash balances when they have more than 12 months cash left. Its amazing how one month later, 12 month’s cash suddenly becomes 9 months (and then 6 months when closure costs are factored in)The daily movements of cash prompt closer examination of cost and revenue areas, working capital movements, spikes in and out. Like a really good Medical Doctor who can tell the health of a patient via very few vital signs, a good CEO in close touch with his/her company’s vital signs – the most important of which is CASH..In all but the simplest of businesses, the ‘length of runway’ is not just cash on hand divided by cash consumed in the month. Most businesses have elements of some or all of the following: payments in advance (received and paid), security deposits, accounts receivable, payable, inventory etc.A daily balance sheet would answer all the questions, but this is simply not a practical way to manage. The daily cash balance tells (and digging into the changes from the previous day) will tell you most of what you need to know.Most of all, don't take your eye off the cash ball just because you've raised a chunky round.Further reading: Fred's post from December 2011 and New York's No. 1 VC Has An Ominous Warning For The Tech Industry [...]



Lost in Translation?

2014-11-28T15:14:34.252+00:00

This post originally appeared in Techcrunch ..http://techcrunch.com/2014/05/03/lost-in-translation-dont-mistake-british-reserve-for-lack-of-ambition/   May 3rd 2014.This post has been ‘brewing’ in my mind for a number of years now. It’s only taken a shape worthy of publication thanks to Julian Rowe, principal at Horsley Bridge (that Blue Chip investor in the world’s great tech VCs). During a recent meeting, Julian and I were talking about the cultural differences we’d observed between the US and UK, and discovered how much we agreed on. The words that follow are largely Julian’s, the thoughts are ones we share.It has often been said that Silicon Valley is not a place, rather a state of mind; a state of mind that celebrates ambitious innovation, coupled with a healthy disregard for fear of failure. As Britain’s tech start-up scene has blossomed in recent years, there are signs that something of a Valley mindset has evolved with it, with the very best British tech entrepreneurs now seeking to build companies as large and disruptive as anything emerging from the West Coast.However, as the Irish playwright George Bernard Shaw observed, Britain and America are two nations divided by the same language — an observation which points not only to what each understands by ‘gas’ or ‘pants’, but also to how they expresses themselves more broadly. British reserve and American exuberance may be well-worn clichés, but like most clichés they carry an underlying truth. While British and American entrepreneurs increasingly harbour similar ambitions, when it comes to articulating them, cultural norms have a tendency to reveal themselves. In pitch situations, this can materially hamper British entrepreneurs’ ability to raise money.As a broad generalisation, US entrepreneurs tend to be adept at treading that fine line between confidence and arrogance when pitching their ideas and ambitions. Clearly there will be exceptions to this in both directions. However, the proportion of US entrepreneurs who can articulate a big idea, while demonstrating the energy to execute, is remarkably high.The evidence is mounting that in Britain there are growing numbers of entrepreneurs with the talent and ambition to go toe-to-toe with the best from the US. Yet after years of sitting in pitches with both British and American entrepreneurs, it has become clear to me that Britons struggle to express their drive and ambition more often than their US counterparts. This is certainly not to say that they don’t have the drive in the first place. Rather that where a British VC (or, like me, an investor who has lived in Britain for many years) may recognise a steely resolve lurking below the surface, US VCs can be left scratching their heads and underwhelmed. Much is lost in translation. Even European VCs with high levels of exposure to US entrepreneurs – and to investing in the ‘West Coast’ style — may not be attuned to a British entrepreneurs’ more reserved approach.To be clear, it is not being suggested here that entrepreneurs should go into pitches with VCs promising the world (unless, of course, you have a clear plan that demonstrates that you can actually deliver the world). Rather that an understated ‘under-promise and over-deliver’ type of approach does not always work well when raising capital.We’re also not advocating that a tub-thumping entrepreneur is necessarily more effective than a more reserved, follow-my-example type. This is not the primary assessment that VCs are making when looking for energy and conviction from the entrepreneur. But they do want to sense – and see — that the ambition is there to build a massive company, as stated goals can quickly become the targets towards which people end up aspiring. VCs also want to see that a founder will have the self-belief required to weather the inevitable challeng[...]



Kano - A computer anyone can make

2013-11-20T18:54:20.121+00:00

Introducing Kano ............ frameborder="0" height="360" scrolling="no" src="http://www.kickstarter.com/projects/alexklein/kano-a-computer-anyone-can-make/widget/video.html" width="480"> Back it now on Kickstarter and get yours...... Related articlesKano Kickstarts A Pi-Based, DIY Kit Computer Designed To Make Learning To Code Child's PlayKano launches a Kickstarter campaign for its $99 DIY, Raspberry Pi-powered PC building kitThe Kano Kit - Building a Raspberry Pi ComputerKano launches a Kickstarter campaign for its $99 DIY, Raspberry Pi-powered PC building kitKano: A computer anyone can makeKano launches Kickstarter for a PC kit that anyone can assemble into a computerDon't Give Your MacBook To A MonkeyKano computer kit by MAP [...]



Entrepreneurs .... you may have Maggie to thank!

2013-04-09T13:46:58.996+01:00

Former British Prime Minister Margaret Thatcher (Photo credit: Wikipedia)The passing of Margaret Thatcher has caused me to pause and think back on just what a determined leader can accomplish.Reams have and will be written about her achievements and the changes she brought about. This post is a personal one and not intended as a general tribute.I never actually voted for Mrs Thatcher - nor for the Tory party who seemed to me to stand for privilege - in any of the 8 elections for which I have been fortunate enough to qualify. I guess at the time I didn't fully appreciate that her rather uncomfortable, uncompromising approach was exactly what was necessary to change a declining, deeply troubled Britain.We came to the UK from South Africa at the end of  1976...immigrants like many others. Attracted by the relative freedom and open democracy  but fearful of my ability to thrive as an entrepreneur.The liberalism of Britain was like a breath of fresh air but the country was in a dreadful state. Morale was rock bottom. People could not understand why one would choose to come to a country where nothing worked.British Steel, British Leyland, British Rail, British Airways were a national laughing stock, labour strikes were crippling. The great in Great Britain was entirely absent.The winter of 78/79, named the Winter of Discontent brought the country to a standstill.There seemed to be a complete absence of enterprise, the major industries and institutions were run by the great and the good who went to the right schools and belonged to the right clubs (the aristocracy). They were clueless as to how to deal with industrial relations. In my view, one of Thatcher's greatest and lasting achievements was the ruthless reduction of the power of the aristocracy - from within the Tory party - through deregulation, privatisation and the unleashing of a meritocracy.The transformation of Britain was not comfortable nor easy - especially for those with a liberal social conscience. A lot of  what Mrs Thatcher did was done in an arrogant and heavy handed way and her demise, 11 years later in 1990 was at least partly due to her stubbornness and divisive style.Interesting how many of her fundamental economic policies were adopted by Tony Blair and new Labour, enabling him to win 3 terms as PM.Although the grocers daughter would never have allowed Govt spending to get so out of hand as did in the new century. 'Living within ones means' and 'good housekeeping' were among her favourite mantras.How different is the UK of today. Today, I believe the UK is the best place in Europe to start and build a business. The nation has its pride back and is, by and large, at peace with itself - in it's multi- cultural and cosmopolitan skin.The challenges that remain are immense and one does have to wonder whether we have the global leaders today with the clarity of purpose and determination to overcome them.I guess we have a lot to thank Mrs T for.Related articlesFormer British Prime Minister Margaret Thatcher Dies After StrokeMargaret Thatcher dies: Former British prime minister stands tall in the history booksObituary: Margaret Hilda Thatcher, Britain's first and only female Prime MinisterBritain's 'iron lady' Margaret Thatcher diesBritain's first woman prime minister prevailed almost unchallenged for more than a decade [...]



$1bn has 'gone' in 4 years

2013-02-03T13:00:40.094+00:00

Diagram of the typical financing cycle for a startup company. (Photo credit: Wikipedia)Should tech angels stop investing in startups?The current debate raging in relation to the so-called Series A crunch has highlighted for me the importance of startups and more specifically, angel investors, working more closely with VCs.The Series A crunch is absolutely nothing new. Sometimes called the ‘valley of death’ for a startup business, the period between raising the initial friends and family or seed round and the first institutional money is a very difficult one and requires very careful navigation.Sarah Lacy at Pandodaily has called this situation absolutely correctly and referenced a good piece of research from CB Insights who clearly state:"1000+ STARTUPS WILL BE ORPHANED; $1 BILLION+ LOST" For me , the question is what should startup companies do to mitigate and how can angel investors minimize the ‘death rate’ of their investments? At TAG we know a thing or two about the valley of death and the Series A crunch having invested in more than 60 tech startups.Understandably, startups are obsessed with getting their seed round closed so that they can get on and make their first hires and building their products and markets. A bit more work and thought needs to go into where to get their seed funding and just how much cash is necessary.A lot has been written about the so-called ‘signaling effect’ of taking seed funding from a top tier VC. The phenomenon and the concern is easy to understand. An investment from a top VC at Seed who then does not follow-on (for any number of reasons) provokes suspicions in prospective Series A investors.The research by CB Insights proves the fallacy of this widely held theory.“On average, 39.4% of seeded companies go onto raise follow-on financing. Interestingly and contrary to what the punditry have often said, seed deals in which VCs participate have a historically higher rate of getting follow-on financing as compared to seed deals in which VCs are not participating.”This result makes perfect sense to me. VCs are better at predicting what VCs are likely to want to invest in at Series A.This truism has been at the cornerstone of the TAG Seed philosophy from the very start and is largely the reasons why more than 70% of our seed investments have gone on to raise Series A.Raising a Series A is, of course, no guarantee of building a decent business. Many companies need further rounds of capital to get to the point where they are generating cash. Getting a VC to back your series A is just the beginning. Sustaining and building on the relationship by delivering results is what will cement the partnership.No fewer than 4 of the current TAG portfolio are generating profits in excess of £1m per MONTH and another 7 of them have reached profitability while growing strongly.[No prizes for guessing the names, list excludes profitable 'sold' companies].The majority of these companies are less than 6 years old.These companies have had the financial and other support to get them there – as well as the necessary talent and hard work – but their focus on being capital efficient and on profitable revenue marks them out. Raising funds for startups is generally much more difficult in Europe than it is in the US – particularly in the valley. As a result, the companies that do get funded tend to be more conservatively managed and focus on getting to breakeven quicker and on revenue and profitability at the expense of growth in users/customers.During tough fund raising cycles, this approach has its advantages – but also leads to better habits and company culture – in my experience.In addition to the usual criteria for investing in great entrepreneurs addressing large markets etc, angel investors really ne[...]



European Tech companies are ready to show their mettle

2012-10-21T22:09:25.509+01:00

...and why Institutional Investors need not be wary of Venture-Backed Tech CompaniesThe ‘campaign’ to kickstart the London tech IPO market has kicked off. The blog posts that Neil Rimer and I both published have attracted a lot of press attention. The engagement we’ve had with No10 and the LSE should result in some small but important regulatory changes that should be seen as important steps towards making London a major hub for tech IPOs.As we have consistently said, however, regulation is not the primary barrier to a robust IPO market. A number of other parts of the ecosystem need to evolve simultaneously. Over the past month, I've heard a number of concerns that Europe’s public markets are not ready for international tech companies. What rot!Below I list a number of the specific concerns and, where relevant, address them. The main takeaway, to my mind, is that institutional investors should not be wary of venture-backed tech companies—indeed, they should seize on the opportunity to learn more about and invest in this space, a rare ray of light in an otherwise gloomy economy.1.  How good are the governance structures and procedures?Companies that are backed by venture capital firms have strong governance built in from their first investment, which is typically a Series A funding round. Formal board meetings are held, usually monthly. Compensation and Audit committees are commonly set up and meet at least annually. Key decisions will normally need Investor Director approval or shareholder approval. The governance rules are set out in the companies articles and shareholders agreement. By the time the typical fast growth technology company is ready to come to the market, governance would have been refined and tightened. Good governance is in the DNA.2.  Are there dominant shareholders, directors or founders who run the company?Tech companies seeking IPO will typically not have any controlling shareholder. All preference shares would be converted to common stock. The founders will generally own less than 50% and there will be at least 2 VCs, often 4 or more. The company will typically have little or no debt. Venture backed companies are, by nature,  equity funded. The distinction between this and the typical PE backed company could not be clearer?3.  How difficult will it be for founders to adapt to life running a public company? Clearly this is a challenge for founders who have never been in that position before. But these challenges will not be those of being accountable to a board or shareholders. Founder/CEOs and CFOs will have raised multiple rounds of finance, involving many detailed presentations to investment committees and will have been required to take investors through detailed accounts, budgets and 3 - 5 year plans. Missing quarterly targets cause real consternation and are frequently damaging to valuations achieved at funding rounds - so managing expectations and getting forecasts right are very important.4.  Won’t share prices be volatile if market capitalisation is low and only 10% of a company is floated?This is undoubtedly true and will probably eliminate many investors from the share register – at least at floatation. Since a number of the early shareholders (Seed, Series A, Employees) will want to exit at some time in the subsequent year or 2, the float will inevitably rise and opportunities to build stakes will present themselves.The initial low float should not be a reason for a company not to be listed.5.  Is the floatation designed to allow founders and other shareholders a quick exit?The main reason for our pushing for the minimum float rule to be reduced from 25% to 10% is to align founders’ longer[...]



Wonga: a successful British tech company worthy of UK Government support

2012-09-16T13:46:43.383+01:00

Errol Damelin, CEO of Wonga,How often do we hear the refrain “why doesn’t the UK produce the $bn companies that are churned out in Silicon Valley?”Reams have been written about this issue and many hours have been spent in think-tanks – in and out of Government – figuring out how we can get the universities to commercialise their innovations, how we can pump more money into start-ups, how we should be training more engineers, more entrepreneurs, or how we can create effective clusters etc.Successive governments have created enterprise schemes including NESTA, The Technology Strategy Board and, more recently, Tech City. Countless millions have been spent too – some of it to good effect, but much of it wasted. This Government has adopted a supportive and pro-active approach and some of the initiatives are having a very positive effect [see my post:  http://the-accelerator.blogspot.co.uk/2011/03/i-think-uk-government-is-listening-to.html ].It is widely acknowledged that one the major factors encouraging innovation and entrepreneurial activity is the celebration of success and the making of ‘celebrity’ entrepreneurs. We need the Zuckerbergs, the Bezos’, the Elon Musks. And we do have Richard Branson, James Dyson and Stelios – all great business innovators – but where are the new tech heroes (who have not sold their businesses) whom young entrepreneurs can aspire to emulate?Based here in London, Wonga is one of the fastest growing companies Europe has yet seen. It may well rank in the top five growth businesses of all time by these measures. After less than five years, it is employing more than 300 people and is still growing at an enormous pace. What’s more, it is continuing to innovate and develop new products spending millions a year on its NPD (new product development) and R&D activities. Its results for the year ended 31st December 2011, just announced ... just serve to emphasise how strongly the company is growing and just how many customers it is now serving.Revenue growth, up 225% to £184.7mNet income up 225% to £45.8mNumber of loans provided  up 296% to 2.46mIt employs engineers, mathematicians and statisticians (more than 20 in its risk team alone, including several PhDs). It is a truly international business employing people from more than 40 nationalities. And in its founder and CEO, Errol Damelin, there is a charismatic, thoughtful and hard-working leader and entrepreneur - in many ways just the role model the UK Government should want to embrace and promote - or at the very least endorse.In addition, Wonga is exactly the type of company that we love to hail – disruptive of a failing, oligopolistic industry and doing so using really smart technology to make its processes super-efficient and its service designed around its many customers. Independent research shows they generally love using it as a result and its Net Promoter Score consistently exceeds 70. UK Banking average is Zero.It is either helping to solve a problem which has existed and been ignored for many years – or is facilitating and empowering hundreds of thousands of consumers. Probably both.Yet there is a problem. Regulation of the financial services industry is complex and difficult, lags behind product innovation and is highly political. It was not designed for entirely new products such as very short term loans offered on the web in ‘real-time’ and with interest applied daily. The entirely inappropriate Representative APR measure, which is required to be prominently displayed, despite the average duration of these loans being little more than a couple of weeks (16 days), has been more of a focus than the innovation or customer feedback.It is difficu[...]



Techs and the City

2012-07-30T13:49:54.660+01:00

The post below first appeared on the Index Ventures blog and formed the basis for articles in the Telegraph and City AMAt Index and TAG we feel strongly that a healthy IPO market is an important element of maintaining the strong tech startup momentum that has been building in Europe over the past 5 years.Together we can get the Tech IPO market going in LondonFrom our vantage point at Index, the centrality of the Tech sector to economic growth -- particularly during the economic slowdown of the last few years -- is all too clear.A recent piece in the FT reiterated this point. Ed Hammond, the paper's property correspondent reviewed the shifting make-up of the City and the steady transformation of the tenant mix in the Square Mile.Examples Ed quotes of recent office moves help to illustrate the point:Bloomberg: 500,000sq ft on Walbrook SquareSkype: 88,000 sq ft on Waterhouse SquareExpedia: 81,000 sq ft on St John StThose of us working in the tech world or, more accurately, the tech-enabled sectors, have known for some time that the Old Economy is being slowly replaced by the New Economy. Retail is being replaced by eCommerce, Old Media by New Media, enterprise software by SaaS. While industries like law and finance have experienced sluggish growth over the past 5 years, companies in the tech sector are seeing revenue growth of at least 30%/annum, and frequently upwards of 100%/annum. Both start-ups and larger companies like Moshi Monsters and King.com are beneficiaries of this explosive growth. In fact, one of our portfolio companies, Moo.com, has moved or expanded office space seven times in as many years to accommodate its rapid and continuous expansion.Yet a disconnect remains between the economic vigor in the tech world and the dynamism of the City. My partner, Neil Rimer, wrote an interesting and challenging post recently decrying the fact that the door to London’s IPO market is shut tight for tech companies. Little wonder, then, that despite London’s place as a global financial centre, so many European tech companies like Yandex and Qlik Technologies ended up listing in New York.What makes this trend even more remarkable, and even more regrettable, is the fact that the UK’s internet economy is one of the most vibrant in the world. Online retail accounts for 13.5% of total UK retail sales, a higher percentage than in any other G-20 country, according to a recent BCG report. The UK is also dominant in online advertising, which accounts for 28.9% of total advertising spend in the country. By comparison, in the G-20 country with the next most developed online advertising market, Japan, only 21.6% of the advertising market has gone digital.It just does not seem right to me that the City of London, with all its smart investors, would allow the largest seismic shift in the economy to take place without their active participation. Particularly when evidence of this shift can now be found in the buildings outside their back door.Our sense at Index is that a collective effort needs to be made to kick-start the IPO season for tech companies. And so, in an attempt to invigorate companies, policymakers and the City alike, we’ve put together some recommendations. All it will take is a three-pronged attack from policy-makers, entrepreneurs, and the City alike to make this happen, but it will only work if all the pieces come together.For the companies capable of listing:An approach to an IPO needs to be one which recognises that the listing is a fund raising and liquidity event on the way to building a large and great company. It is NOT an exit.It is important to be IPO ready. This means having the [...]



A National Grid for Banking - radical thinking by Errol Damelin

2012-07-18T11:57:00.803+01:00

The article below is an extract from an opinion piece published in the Times of London from Errol Damelin, founder, CEO of Wonga. It appeared on Monday July 16th. The complete article is here: http://thetim.es/NcY9EeImage by Wonga.com via CrunchBaseWhat Errol proposes here would require a radical shake up of the way in which banking works in the UK - or anywhere else for that matter.Radical does not, however, mean it is impossible to achieve. The idea, is in essence, the reverse of privatisation and suggests that the infrastructure, the backbone, the networks of the banking system be placed in public ownership (or at least independent ownership from incumbent FS companies) thus creating a level playing field for businesses to build services on top this infrastructure. A little like the National Grid - for bits, bytes and packets rather than  for electricity and Gas.Wonga as a business has begun by shaking up and transforming the murky world of unsecured consumer lending and I would not bet against Errol and the team at Wonga doing similar to other financial services.Errol writes (in part) as follows:"It would help to think of high street banking services in the same way as basic utilities such as water or electricity.Just as millions of us depend on the water companies to keep the water flowing and our lives working, so we rely on the banks in the same way. Indeed, when a bank's computer system fails and customers cannot get hold of their money, we feel it as keenly as a burst water pipe.And just as water that flows from our tap comes from a sprawling network of tunnels and pipes, so our ability to withdraw cash at an ATM depends on vast interconnected information networks There is a strong case, given the convergence of these computerised systems, to create one single super-bank to look after our basic banking needs. Just as we have one interconnected network for water and energy, or standardised systems for road, rail and air transport, or uniform protocols for the internet and phone systems, so we could have a single, transparent and easy-to-access platform for basic banking services.This super-bank could be founded and overseen by the Treasury. It would only provide bread and butter services such as a safe place to deposit your money.You could think of this super-bank in the same way as iOS, the operating system for Apple's iPhones. It is always there, running smoothly in the background, and most people don't even know about its existence.Similarly, this super-bank would flawlessly send and receive data, facilitating everyday banking needs.Of course, customers also have more specialised needs — they want mortgages, pensions, loans and ISAs. As individuals we need a wide array of services to suit all kinds of situations. That's why we would need a second layer of services, developed by private companies, on top of the super-bank's superstructure. These companies would compete with each other to offer products at different rates.Just as the smartphone platform has unleashed apps for everything from telling you when the next bus will arrive to ordering groceries, so the super-bank platform would stimulate cost-efficient solutions to everyday needs on a vast scale. For Wonga, linking our technology systems to a super-bank would let us make consumer and business loan decisions even faster and allow us to bring ideas for new products to market in a fraction of the time.Our expectations have rocketed since the advent of the internet. We expect to have 24/7 access, to easily be able to make comparisons, to crowd source, order or apply online, pay electronically and receive goods at our home the next day. Although online banking[...]



Getting your foot in a VC's door

2012-07-01T13:58:13.763+01:00

This post first appeared in the Financial Times on Saturday 2nd June and was written specifically for the FT. A lot of start-ups ask me how to get a meeting with a venture capitalist. The first question I would ask them is why they would want a meeting with a VC firm.The obvious answer is to raise capital for their venture. However, the more important question might be whether a VC is the best, most appropriate partner and source of funds at this stage – or at all.Assuming their analysis of this point results in the conviction that venture capital is the way for them to go and they have figured out approximately how much they wish to raise (yet another subject) then here is how I suggest they proceed.Firstly, take a highly targeted approach. A scatter gun will not only not yield the desired meeting but if by chance it does, then it is very unlikely to result on an investment from a suitable partner. What you want is a well aimed rifleshot.Secondly, review the landscape of funding available. VC firms come in many different shapes and sizes. However, they can broadly be categorised along three dimensions: size of typical investment, geographical focus and sector or theme within sector.Having narrowed the candidate VC firms down by these rough parameters, look very carefully at their most recent investments. How many have they made? What types of companies did they invest in? If possible estimate the size of their investment.How many partners are there in the firm? Do they tend to specialise?Next, read what the firm says about such things as their investment philosophy, approach and sector focus, and see how closely this matches with their most recent investment.Remember that not all VC firms invest at early stage or do seed investment. The majority of what are called VC firms should probably be better described as private equity investors because they prefer providing growth capital to established companies.Once you have identified the three or four candidate VC firms, you now really need to dig in to the data and start your networking research. Note that no approach should yet be made. An unsolicited approach will invariably fail. It is not rudeness for even the most well crafted email, letter or other communication to be ignored. If my inbox is anything to go by, it is simply impossible to reply to all – many look like they’ve been sent to multiple investors and being unqualified in any way have to be filtered out. A polite, but canned response is of no value to the recipient.The best way to approach a VC firm is to identify the partner, principle or associate most likely to be a match to your requirements. Find out all you can about this person. Read their blog, follow their tweets, check out their LinkedIn profile and find anyone you know who may know them, been funded by them, know someone who knows them. Try also to get hold of another  founder who has been funded by them.The next step is the key that unlocks the door. Get an introduction from a trusted third party. Someone who has recent and better still frequent contact with your target and whose judgement they are likely to respect.If yours is a technology startup, there is an enormous amount of data available today and resources like Google, LinkedIn, Techcrunch(Crunchbase),  Seedcamp, Angelist, to name but a few, are invaluable.All of this desk research and networking is time consuming but will save an awful lot of wasted hours cold calling, mailing and meeting one potential investor after another.If all this sounds difficult or impossible, remember it is easy compared with building a great business, which is what you want to do, is i[...]



Trust Me .....

2012-02-21T13:36:16.113+00:00

This is a Guest Post from Martin Lee, Partner, Acacia Avenue, a leading Market Research company with a different approach to discovering how brands interact with their customers.Martin Lee and Wendy Gordon (co-founder) are very experienced researchers whose clients include Barclays, eBay and PayPal, BP, EDF Energy and many others. I'm particularly interested in their work on 'trust'. As regular readers will know, I believe strongly that putting customers/users at the centre of product development and service delivery is a powerful approach to building strong brands.The question of trust has always been at the heart of commerce on the web. Will the goods I'm ordering live up to the great photography? Will they delivered on time? or at all? Are my credit card details safe?Funny how one thinks less about these things when ordering from John Lewis, Amazon, ASOS - these brands have earned the trust.“Trust me.”  The two least trustworthy words you can hear somebody say.  But why?Nearly all our clients have become absorbed with the issue of brand trust recently, to the point where it’s often become a dedicated project brief in its own right.  It’s not surprising.  Look at what’s happening: the banking crisis; MPs’ expenses and Catholic Church sex scandals.  All erode trust in public institutions.As we listen to the public talk about trust, we’re hearing emphatic messages, and it turns out that how trust operates with brands is very similar to how it operates with people.  The most important thing to emerge is the distinction between trust and trustworthiness.  A person (or brand) can come across as trustworthy, based on what you see of them from remote observation or hearsay.  But trust itself only happens when you get to know that person or brand.  And crucially, trust is only conferred upon you or your brand by the person who chooses to trust.  This is why “trust me” is such a bad thing to say.  We all recoil from this, and effectively say, “I’ll be the judge of that.”I’ve highlighted the word ‘chooses’ deliberately.  The other vital thing we’ve learnt about trust from consumers is that trust operates in environments where people have a choice.  I’ll maybe trust BA more than Virgin, or Barclays more than RBS, for my own reasons.  But the choice to trust involves risk.  In choosing your brand, I’m turning away from alternatives.  And here is the nub of it.  What if the trust turns out to be misplaced (e.g. over charging or poor service)?  The loss of trust that follows is not just about that experience, but makes me feel bad about myself as well – I could have made a better choice.  This is why it’s so important not to betray customers’ trust and why lost trust is so hard to win back.  You’re not just letting them down; you’ve made them let themselves down.  And that’s a lot harder to recover from.Related articlesTrust Barometer and its implications for social media (edelman.com.au)Ten ways to build up your personal brand (theglobeandmail.com)When Trust is Down, the Trustworthy Get Going (forbes.com)Barclay's Pingit: Safe mobile banking depends on you (charlotteclark.wordpress.com)You take care in developing your offline brand so why not your online brand? (londoncalling.co) [...]



The cult of the founder

2012-01-04T10:59:55.466+00:00

In the world of technology,  the founder is rightfully 'top dog'. Founders are put up on pedestals, its a badge of honour, the most admired of roles.Settling for co-founder is certainly a better moniker than even CEO.Founders take the risk, make the leap, make the sacrifices.And we need the heroic and iconic founders - the Steve Jobs, Jeff Bezos, Marc Andreessen, Nikolas Zennstrom et al to inspire future ones. Their tales are the stuff of legends.We all know, however, that it is far more complicated than that.Seldom has a founder been able to realise a dream (or even formulate that dream) without the commitment, blood, sweat and tears of at least a few others. Think Steve Wozniak, Paul Allen, Kevin Colleran (who??) and bunch of others, Janus Friis, Craig Silverstein.Founders often get disproportionate rewards - both financial and in terms of recognition.Most recently, I have been consulted - along with many others - by the UK Government asking for ideas as to how to stimulate further the growth of entrepreneurialism in the tech sector.The Government has been listening and have implemented some important tax and visa changes which are most helpful in this regard. Two of the policies illustrate just how founder focused they have been - and where there is room for further important enhancement.Firstly,  UK capital gains tax - the tax on the first £10m for entrepreneurs is now only 10%.However, if you did not have founder shares, but joined after the founding of the company and have an option package, then providing its an approved scheme - eg EMI - then you'll be taxed at 28% - or if unapproved then possibly at 50%. Doesn't seem right, does it?Often senior execs in a startup have taken considerable risk, leaving highly paid jobs, accepting far lower salaries in the expectation of making a significant capital gain.We need to attract more of this type of talent to our startup companies and a change to the CGT rules will help significantly.Secondly, the Entrepreneurs Visa. A big step forward enabling non EU entrepreneurs, with recognised backing to enter the UK. This does not yet apply to talented people - non founders.So, lets hear it for the unsung backup teams - its tough to build a great company but doing it on your own is simply impossible. [...]



Breakfast at No10 Downing Street

2011-11-11T15:27:48.374+00:00

This is a guest post from Rob Keve, Founder, CEO of Fizzback Group Ltd, a company backed by TAG and others."Last week I was invited to present to some MPs over breakfast in Parliament, about UK start-ups. In the first few minutes, their full English fry-up was clearly winning the battle for their attention. The only serious question on all MPs lips is how to stimulate economic growth and they didn’t see the relevance of a venture capital backed start ups on economic growth. I told them that we were only a five year old business having raised modest amounts of funding but had created over 100 jobs in the UK alone – they stopped sipping their tea from the exquisite House of Commons porcelain teacups. Next I explained we had generated more in direct tax income for the economy than the amount we raised in the first place and had just injected a further $80M indirectly into the economy by way of sale pro-ceeds from an overseas buyer – they put down their forks and put away the HP sauce. Finally, I explained that a small group of brethren calling themselves Fizzback had won some of the world’s largest brands as clients, was improving these brand’s competitiveness all whilst putting British technology on the global map – they looked up to see who was talking. Tonight, when they go home, I hope that as they are pulling up the draw-bridge they will ‘get it’. Economic growth comes from innovation and self-initiative. It comes from a just a few dozen individuals in a few square feet of space designing a unique solution, garnering deep in-sight, selling & servicing to the top brands in the world. That creates growth. That is economic leverage. The answer isn’t to be found in public sector spending, in UK policy board rooms or in banking regulation. The answer is to be found at Fizzback and the other ground breaking start-ups like us. We create economic activity, jobs and wealth."Rob Keve [...]



Fizzback does a NICE deal

2011-09-19T11:05:25.998+01:00

Readers of this blog may have noticed that Fizzback, an investment we made in 2005, gets lots of coverage – here in and in tweets @robinklein. Aside from the fact that I’m passionate about customer service being a fundamental competitive advantage and one of the pillars of a great brand, I have a strong personal connection with the company.Today we are announcing that a sale of Fizzback to Nice Systems (NASDAQ: NICE) for approximately $80m has been agreed. The transaction is scheduled to close in a few weeks.In many ways this is a great result for the team and the investors to be celebrated. Nice is a very good home for Fizzback and Fizzback is going to add considerably to Nice (see product/market details below)On the other hand, its a disappointment that a company which had begun to make a global impact in the world of Customer Experience Management, had captured some of the largest corporate clients worldwide, is not going solo ‘all the way’.The TAG philosophy has always been to support founders and to recognize that entrepreneurs’ own motivation must ultimately be the deciding factor in these types of decisions.Some history of this super company is relevant and I think interesting.Our relationship with Rob Keve, Fizzback's founder, goes back about 15 years and we invested in IMI (Instant Market Intelligence – its former iteration) in 2005 - as part of the company's small seed round. I well remember the 4 hours Rob and I spent driving to and from the Cotswolds every month during 2003 for the Cotswold Company's board meetings. Rob was thinking about starting IMI.Like many successful companies, the vision for Fizzback made a few pivots along the way. Its initial vision was to address demand for rapid market research and new forms of customer insight- kind of vox pop via SMS. Selling a product to the market research community didn’t seem to me to be a place where we’d find good sized budgets. Rob had another much more appealing idea which he was running in parallel. A service to retailers and service providers which enabled consumers to provide feedback at the point of experience – in store, on the train etc – via their mobile phones – via SMS. IMI would interpret the message (using NLP appropriate to SMS ‘speak’), categorise and direct the message to the appropriate department for action.This latter idea got me excited. I agreed to invest and join the board as Chairman. Rob and I pulled together a small group of angels – including Jonathan McKay – and what a great decision that was! Jonathan, who is a real enterprise software/services guru, took over the Chair in 2008 and helped Rob build the stellar sales team and been an invaluable guide to the business.Step one back in 2005 was hire a small team. Tech head was Herx Fisherman who conceived and built the original Fizzback Enterprise platform. Operations head was Jonathan Morris (my son-in-law) – still the Operations Director of the group, often holding things together …. another reason for the soft spot for this company.Step two was creating a brand which would define a category. With the help of Phil Ley of Branded, Fizzback emerged. This was not about market intelligence, it was about actionable feedback.The learnings gleaned from early clients like Butlins, National Express and others helped the evolution of the product.The 2 relatively modest funding rounds – first from Advent £2.5m in October 2006 and later, at the end of 2009 £1.6m from Advent, Nauta and TAG helped focus the company on bravely targeting giant accounts[...]



TAG commits another 250K Euros to extend runway for Seedcamp companies

2011-09-12T14:33:43.475+01:00

Seedcamp is obviously in our bones at TAG, but for a little colour,  I remember: brainstorming the concept while it was a twinkle in Saul and Reshma’s eye being on the first Board with Mattias, Sara, Paul, Sumon and Jasonpitching to new investors and writing the first cheques to Seedcamp I and IIfunding Zemanta, MyBuilder and Kublax in 2007; Toksta in 2008; Erply in 2009 and Editd in 2010going to Mini Seedcamps in Ljublianga, New York, Tel Aviv, Paris, Copenhagen working closely on Seedsummit and the latest Term Sheet program So we love Seedcamp - that's a given.But having just spent the week at Seedcamp in London, its clear that the Seedcamp platform and network has moved to a new level and finally there is also serious capital available. But most importantly the latest group of Seedcamp companies are totally inspiring by: the progress they have made, the scale of their ambition the amount they have achieved with little to no money.Seedcamp has never shied away from the fact that to build something great takes time - and to building an ecocystem takes decades. We still have a long way to go in the markets we operate, TAG is not ready to buy a tracker (and also we are fundamentally "stock pickers").We’ve had our successes and failures at TAG, that’s part of investing and its especially so at the earliest stages. However, we are inspired by the progress we’re seeing - especially from Eastern Europe - and want to make sure that at least some of this year's 20 teams will have at least double their run-way and be able to take some more time to develop the right product, find the right customers and discover which investors share their vision and values.So we are offering €50k as a convertible loan to 5 teams from this week’s Seedcamp in order to help extend their runways further and look forward to contributing in a small way to the continuation of their journey from seed to start-up to superstar.As frequently happens, Techcrunch got a sniff and published this offer here:http://eu.techcrunch.com/2011/09/12/seedcamp-week-2011-meet-the-finalists-the-winners-and-one-good-samaritan/We would of course invite any other investors - European or otherwise to join us in this funding - this is a promising group and they deserve our support Here are some edited highlights of Seedcamp Week.Daily Video Highlights: Day 1 Founders - (Yandex) - http://www.youtube.com/watch?v=PnRBUCCWTE4Day 2 Product - (Mozilla, Soundcloud etc) - http://www.youtube.com/watch?v=A1TJ_TZ7pK8&feature=relatedDay 3 Growth - (FON, McClure) - http://www.youtube.com/watch?v=9ygYMB58FO8&feature=relatedDay 4 Demo Day - http://www.youtube.com/watch?v=xffj0TcXUf0&feature=relatedSome of the news coverage:Techcrunch: http://techcrunch.com/2011/09/08/seedcamp-expands-adds-e2-million-to-its-coffers-partners-with-500-startups-angellist/Forbes: http://www.forbes.com/sites/parmyolson/2011/09/08/tech-startups-get-tough-love-at-bootcamp/ and http://www.forbes.com/sites/parmyolson/2011/09/09/y-combinator-challenged-by-growing-rival-seedcamp/WSJ: http://blogs.wsj.com/tech-europe/2011/09/08/seedcamp-strengthens-its-core/?mod=google_news_blogWired: http://www.wired.co.uk/news/archive/2011-09/08/seedcamp-announcementsGigaOm: http://gigaom.com/2011/09/08/can-seedcamp-join-the-ivy-league-of-startup-schools/NextWeb: http://thenextweb.com/eu/2011/09/08/seedcamp-partners-with-500-startups-and-angellist-aims-for-the-startup-program-ivy-league/[...]



Do we need more engineers in government?

2011-08-30T20:23:26.815+01:00

Its very interesting that the number of students applying for Engineering and Science courses at University has - at last - started to rise. In the UK anyway.Have you ever thought about why it is that there are so few engineers and scientists in UK and US government. The UK’s cabinet has six PPE (Politics, Philosophy and Economics) degrees, five history degrees, three law degrees, and plenty of other arts and humanities graduates.The fact that most come from a couple of universities concerns me less than the fact that the 'gene pool' in terms of education, experience, ways of thinking and problem solving seems very narrow indeed.Politicians in the UK are often heard decrying the fact that we don't have enough engineers - they presumably don't mean in Government. They mean in industry. Countries like China on the other hand have its politburo full of scientists and engineers. Hu Jintao, the country’s president, graduated with a degree in water conservancy engineering, while the rest of the group consists of chemical, electrical and radio engineers and the the odd geologist.I'd like to advance a theory as to why this very obvious disparity between some western democracies and China in the people we get to lead us and take the profound decisions which affect our and our children's lives.In the UK and the US, to get elected you need to be an orator, have the 'gift of the gab', be charismatic, media friendly, articulate, persuasive. Not necessarily the strengths of the average engineer or scientist  - or anyone else with left-brain hemi-spherical dominance.Does our democratic process unfairly disadvantage the engineers and the scientists?In China, those that get top marks in the Sciences, its seems, get to the top. [...]



Stick or Twist. Sell or swing for the fences.

2011-08-11T16:46:24.635+01:00

A number of the companies in the TAG portfolio are at very tricky junctions in their lives. Its the point where they are now faced with multiple options. I'm guessing there are many companies at this particular point.
None of these options is bad - but deciding on which to take is not at all easy.
Many startups of the 2006-2008 vintage are reaching the point where they are real businesses, generating cash and growing well.
So what is the problem?
Simply put - where to next?
The options broadly fall into these 4 categories:
1. Sell
2. Continue building with cash internally generated
3. Raise more cash at a good valuation and go for growth
4. A combination of 1 and 3 - ie take some cash off the table, raise more funds for the company and really go for it. [This can be done by an IPO or raising VC/Private Equity funds - but that's another issue]

Many entrepreneurs  - mostly those outside of the US - are criticised for selling too early. I'm pretty sympathetic to a first time entrepreneur who having sweated for 5 years or more is sorely tempted to convert his/her shares into cash.
The amounts of cash a founder will receive for a good business are literally life changing - in a good way.

Investors often see the situation very differently. Especially if the company is still growing rapidly and is addressing a large market. There is frequently great frustration at the lost opportunity to build something really big - something fund returning.

Increasingly, enlightened investors are working closely with founders to enable option 4 - ie allow founders to sell ordinary shares - at nominal (or no) discount to the price paid for new preferred shares.

This would seem to be a good way forward for a founder who still has 'fire in the belly', wants to continue to build a huge company but also has the need to get their personal finances on a sound footing.

The lesson in all this for startups is that choosing investors who can help navigate through this rather tricky phase is pretty important.





A Bubble? - Chinese Style.

2011-05-02T19:52:10.620+01:00

You think we are experiencing a bubble? Sure we are - but in China, everything is bigger – much bigger.I've just returned from China and made a couple of illuminating visits.First to Innovation Works. The brain-child of Kai-Fu Lee, Innovation Works is an incubator, Beijing style.Lee, having been with Apple and Silicon Graphics in the US,  Microsoft China and then Google China, Kai-Fu knows a thing or two about identifying, attracting and nurturing talent.He tells me that they have 120,000 graduates on their database on which to call to help staff the dozens of companies being incubated in his Beijing offices, a few blocks from Beijing University.Innovation Works houses 400 young people working away at building a wide range of companies. About 30 of these are directly employed by Innovation Works and are called the ‘platform team’. These folks (average age I guess about 27/28) are business, finance and marketing graduates whose job it is to attend to the formation, funding, administrating, recruiting for the start-up companies and helping them with their ‘go to market’ plans.In fact, they do everything other than build the product itself.This was how incubators were meant to work during the ‘first bubble’ of the late 90’s and 2000.The difference – as we all know -  is that now the cost of building a product and getting it market tested is a fraction of what it once was AND in China it is a fraction of what it costs in the US or Europe.Not only is working space extraordinarily cheap but engineers and graduates generally earn 1/5th of their US/Euro counterparts – AND are apparently of high quality and in plentiful supply.The effect of this is that the $200,000 which Innovation Works invests in these start-ups takes them a very long way indeed. So far that a typical Series A, Kai-Fu tells me, commands a $50m post money Series A.Yes, that's $50m! I checked twice. Not $15m but $50m.Given the number of $1bn+ funds which have been raised recently in China [Sequoia etc etc], it is not surprising that VCs aren’t much interested in placing a couple of million in a number of start-ups.During my visit, Chris Evdemon, who runs the incubator, was just finalizing the judging for next crop of start-ups to join the line – following what I understood was a Seedcamp type application and review process.It was difficult to get a good picture of what all these start-ups were working on and how their evolution may impact on world markets but my impression was that the vast majority (approx 90%) were aimed at the Chinese market – in ecommerce, mobile apps, social, Android development platforms and games.The latter category being the most likely to be reaching global markets any time soon.I expect that retaining star talent and building large, meaningful companies will become challenging as it becomes ever easier for talent to get their own backing and the skills required to build serious global businesses go beyond engineering and towards marketing, finance and management.My second visit was to a relative veteran of the Chinese ecommerce world – Diane Wang, founder and CEO of DH Gate.DH Gate is a B2B marketplace matching (with a number of important added value elements) SME buyers worldwide to Manufacturers in China.DHgate.com was founded in early 2004. Before founding DHgate, Diane was one of the founders of Joyo.com, where she successfully led the co[...]



Where are all the Euro talent acquirers?

2011-04-03T07:13:45.929+01:00

Facebook, Google, Microsoft et al routinely make 'talent acquisitions'.In the last 10 years, Google has made 93 acquisitions - the majority of these have been to get their hands on the talented founders and teams who have built some technology or have demonstrated such a capability. 75 of these acquisitions have been in North America and most of these in the San Francisco Bay Area.Microsoft have made 140 acquisitions in the last 20 years - again the vast majority in the US.Yahoo made 62 acquisitions in 15 years - only 10 outside the US.Even the new kid on the block, Facebook, has made 14 buys - 10 in the US.The possible answers to why the predominance of targets are US based are these:1. They have better engineers in the US. [this I very much doubt - though no doubt I'll be corrected]2. Tech companies in the US are building stuff targeted to be bought by one of the big boys.3. If you're going to buy a company for their talent - you want to keep that talent and integrate it with your own operations or development teams.4. The eco-system is such that the corporate development teams know the startups and vice versa. Not just know them but meet regularly at the many events and in the coffee bars on University Avenue and elsewhere.5. Buying a talented team elsewhere (ie outside the US) is risky - there is the cultural gap, the legal hurdles, the distance, the time shift etcThese transactions - 250 of them between just the 3 mentioned - power the whole ecosystem. The funds generated for the founders, the VCs, the LPs are considerable and get recycled in a sometimes perfect virtuous circle.So, where are all the Euro based talent acquirers? Related articlesFacebook about to buy big? (simplyzesty.com)Yahoo Exec Predicts Acquisition Spree (webpronews.com)Silicon Alley Insider: Google Will Continue Its Acquisition Binge This Year (GOOG) (businessinsider.com)FaceBook Said to Hire Google Exec for M&A (dealbook.nytimes.com)Google searches for acquisitions (theinformativereport.com)Microsoft Needs Tech, Not Torts, To Beat Google (informationweek.com) [...]