A note from the Director: Innovation – our interpretation
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On Wednesday 12th June, Engine Shed partnered with Silicon Valley Bank (SVB) on “Raising Your First Venture Round”, a professional panel event, providing expert advice for start-ups looking for investors.
Engine Shed’s Nick Sturge opened the event, hosted at Osborne Clark, before handing over to Alex McCracken, a SVB UK Managing Director, who gave an overview of venture capital activity in the UK. They have seen about £1.5 billion invested into UK tech start-ups, 15 of which are in Bristol at a total £89 million. Bristol is the third largest UK city outside of London for VC tech investments, after Dublin and Cambridge.
SVB typically start lending at a second round level, but Alex explained that it’s more and more common for corporate lenders, private equity fund and even hedge funds to start coming in at early stages now.
With 623 unique investment funds into UK tech, of which roughly half are Venture Capital funds, SVB are starting to see trends in investments, with more going to AI and deep tech, algorithm enterprise software solutions and B2B enterprise solutions. On the other hand, ‘Madtech’ has been overfunded recently, and there will likely be a drop in £100 million rounds.
The evening’s first panel comprised of Mike Dimelow, co-founder and head of investment at ADV, Paul McNabb, a partner at Episode 1 Ventures, and William Orde, an investment manager at Oxford Capital. They discussed issues including:
The panel agreed that the best way for an entrepreneur to break through the noise when approaching investors is to have strong contacts that can refer you to the investor.
Paul McNabb said: “A high quality business plan, resume, and track record is important. As is having a referral from someone we trust. Association with a strong partner, experience in an incubator or accelerator, or working somewhere like Engine Shed where someone might say to us, ‘Watch what these guys are doing,’ is also important.
“No matter how much market analysis we do, we’re investing in a person, and a problem we believe in.”
Discussing the do’s and don’ts of pitching, the panel agreed that knowing your figures, being transparent, and having conviction, are the three most important factors in winning over a investor.
Mike Dimelowe said: “It needs to come from within, the feeling that you need to go and do this thing, and you need people to come and do it with you.”
These days, investors are looking for disruptive companies to invest in. It’s a term that’s bandied about a lot. But what does it really mean? Having an insight into how markets are changing, and being able to pinpoint exactly why your idea is relevant right now, rather than at any other time, is key. Identify a space in the market that is enabled by your new technology, and you could be onto a winner as far as investors are concerned.
The second panel saw Rory Stirling, co-founder of BGF Ventures, Katy Turner, co-founder and managing partner of Multiple London, and Nigel Toon, co-founder and CEO of Graphcore, take up the mic. Topics they considered included:
A problem many entrepreneurs face is in scaling, and navigating the difference between building a product and building a team.
Katy Turner said: “Between series A and B investments, companies are still demonstrating their product market fit. In order to drive success, things beyond the product become very important: the people, company culture, and core purpose as a brand.
“These are skills learned, which a technically lead product team doesn’t always naturally have. Bringing the right people into the business to solve some of these challenges can be critical.”
In the venture capital industry, investors are looking at the market opportunities, and thinking about what everyone will own in the company at the end of the journey. As a founder, you don’t want to give away more than 20% of the capital.
Nigel explained, “I think the experience of the founder can have a big impact on the valuation. Founders looking for first-time investments shouldn’t be demoralised by that, valuations by mark up have never been healthier, and the investment community is much friendlier. Now, we’re thinking about the whole journey of the company, and are more likely to make smaller investments, shooting for large outcomes.”
The evening was a resounding success, and we hope to see SVB back in Bristol to plumb the depths of their knowledge again soon.