Archives for the month of: October, 2014

mind the gapInvestors and founders often talk about a Series A funding gap.  However, in the UK, this has shifted downwards and it is relatively easy to explain why. First of all how do we know what is happening?  Dreamstake have 1,000 tech startups on www.dreamstake.net. We put up to 15 per month through our Google Campus Demo Days and are introducing up to 20 per month to angels and investors at every level of funding, from £20K – £5M. We are getting a lot of data from the market.

So what’s happening? There has been a great deal of stimulus below the £150K level.  The Government SEIS (Seed Enterprise Investment Scheme) has moved angels to invest earlier and in smaller amounts to diversify risk over a broader portfolio. The legalization of equity based Crowdfunding through platforms such as crowdcube and Seedrs has brought new sources of capital at approximately the same funding level. Finally, the proliferation of accelerators also addresses the need for very early stage capital.

The VCs are always under pressure to invest to move their average ticket size upwards. This is because it is easier to manage a smaller number of portfolio companies than spread the fund over too many. There is a small amount of pressure for some of the larger VCs to look at earlier stage investments. This could be a response to crowdfunding which may cherry-pick some of the VCs deal-flow before they get at it. However, in general, even early stage VCs are only investing above £5ooK, often with a sweet-spot of approximately £1M.

So to the gap! The Government has effectively created a gap between £150K and £500K by encouraging angel investment at an earlier stage. The most promising funding solution for founders who find themselves in the gap territory is syndication. This can be fulfilled by either encouraging multiple angels to invest together or by a combination of micro-VCs and angels working together.

In summary, founders will currently find it difficult to get funding between £150K and £500K without a mechanism for bringing together multiple sources of investment. A platform is the ideal way to facilitate this.

Blog by Paul Dowling – Co-Founder of Dreamstake  the world’s first tech startup platform to match founders with the most appropriate investors using a unique startup rating system. This allows entrepreneurs and investors to monitor startup progress and inject capital and support when most needed. Startup founders can create profiles on the platform and get direct introductions to investors. We are constantly looking for great early stage tech startups. Join here Dreamstake.

Startup founders are often reluctant to invest in their startup until they have a reasonable possibility of success. During this boot-strapping phase it is tempting to ignore the details and focus purely on getting the product to market. We run Dreamstake Academy to give access to a basic level of knowledge from real experts on a pro bono basis. We are able to achieve this by running joint classes rather than providing one-to-one consultations.

We believe that it is vital that startup founders put a high value on their startup right from the beginning. After all, why put your life into launching your dream if you don’t believe in it enough to pay attention to the details. Our next two workshops will help you reduce risk and add value;

Intellectual Property – Protect your Idea - Doing all you can to protect your intellectual property shows real confidence in your idea. There are many ways in which to achieve this including, trade marks, copyright and patents. However, few people realise that creating IP also adds significant value to your startup, especially when securing funding. The UK government has also made it even more attractive to get a patent for your invention by introducing the Patent Box. This is a scheme that halves the corporation tax payable for the life of the patent.

Accounting and Finance – Understanding Startup Numbers - Many founders find that understanding the company financials is the most difficult part of planning an early stage business.  Investors expect you to be able to articulate the figures with confidence. You also need a good understanding of the accounts to run the business on a day to day basis. Avoiding problems such as lack of cash-flow will help avoid early failure.

So although it may be a temptation to ignore the details it is a good idea to take advantage of the free courses we offer at Dreamstake Academy and make sure you are up to speed on these vital topics.

Blog by Paul Dowling – Co-Founder of Dreamstake  the world’s first tech startup platform to match founders with the most appropriate investors using a unique startup rating system. This allows entrepreneurs and investors to monitor startup progress and inject capital and support when most needed. Startup founders can create profiles on the platform and get direct introductions to investors. We are constantly looking for great early stage tech startups. Join here Dreamstake.

The word startup not always has been associated with high growth potential, low capital intensive tech businesses, mainly internet based. The phenomenon started and took root in Silicon Valley which is still the centre. The Silicon Valley model brought together ideas, capital and human resources in a tight cluster that generated the high growth tech companies which we are now all familiar with. Is this about to change?

- Everyone can become an internet founder - The process is well documented by Eric Ries in The Lean Startup and the methodology is being taught across the globe. The cost of technology has come right down and the global market for apps is now well established.

- Other clusters are starting to boom - It’s taken quite a long time for the rest of the world to recognize the formula for creating successful startups but it is finally happening. New York, London, Berlin, Tel Aviv all have thriving tech scenes and there are many other developing clusters.

- Silicon Valley is losing its grip - It has become expensive to develop a startup in The Valley.  Engineers are scarce due to immigration policies and this makes them expensive to hire. Other clusters are doing more to encourage startups with generous tax breaks, access to lower cost resources and other benefits.

- Globalization beyond the cluster - The cluster is a short-term phenomenon needed to pump-prime the early stages of any technology. As the technology becomes more available activity spreads more evenly across the globe. This will be particularly true in the case of internet startups. The demand side is shifting rapidly to the developing world. We have recently seen the success of Ali Baba and products such as peer-to-peer lending on mobile phones are having a greater impact outside the US. This will see a boom in local startup activity closer to the consumer and utilising lower cost resources for development.

- The Internet is disrupting the startup world – Ironically, it is the internet itself that will ultimately reduce the influence of Silicon Valley. For all its innovation, The Valley eco-system has been based on personal and localized networking. The VCs have been particularly parochial in their viewpoint, often investing only in companies within driving distance. This has starved much of the startup world of capital. The internet is opening up new sources of capital through crowd-funding and platforms such as Dreamstake and Angellist. Such platforms are connecting entrepreneurs with the other resources they need to build their startup businesses.

In summary, the internet is becoming ubiquitous and the ability to create internet startups is spreading out from the traditional clusters.  There is now little reason why a founder in Nigeria, can’t develop an app serving consumers in Africa, using capital from Europe. This is the real start of the internet revolution.

Blog by Paul Dowling – Co-Founder of Dreamstake  the world’s first tech startup platform to match founders with the most appropriate investors using a unique startup rating system. This allows entrepreneurs and investors to monitor startup progress and inject capital and support when most needed. Startup founders can create profiles on the platform and get direct introductions to investors. We are constantly looking for great early stage tech startups. Join here Dreamstake.

geekI never thought I would hear myself say it, but we are on the search for single startup founders. The usual logic is that investors don’t invest in startups with single founders. However, at least one has turned this on it’s head and specifically wants to get in early and help the founder shape their business.

There should be big demand for this. By far the the most common question at networking events is, ‘how do I find a co-founder’, usually a CTO. This is a huge challenge unless the founder is prepared to pay big bucks. However, here are few suggestions that might help make the discussion easier;

- Get as far as you can – It’s not just about having a great idea. Do your research and make sure there is a market before engaging with a potential business partner. Create a business plan and even get a mock-up done. The more you do, the more credible you will be.

- Build relationships early – Get out there and meet potential partners early. This is the stage to go to networking events and get feedback on your idea. Don’t engage potential co-founders with, ‘I have a world changing idea and I need a co-founder’. Share the vision and see whether you get any pull.

- Have a clear plan – Remember that you are asking someone to give up a chunk of their life in pursuit of ‘your’ vision. They need to buy into you as a leader. Present them with a clear plan of how the startup will develop over time. Make sure that the milestones are credible and describe the part that they will play in meeting them.

- Be realistic about your own skills - Don’t exaggerate. It is important to be realistic about your own capability. After all the reason you need a co-founder is to plug the gaps in your own experience.

- Offer a fair share – Do not over-value the ‘idea’. Execution is the main thing and you can’t do this alone. Be prepared to offer a reasonable share in the business through a vesting agreement or similar arrangement.

In summary, if you are a single founder with a great idea and prepared to go about execution in the right way we would like to meet you. We can give you direction through Dreamstake Academy and introduce you to investors who will provide seed funding.

Blog by Paul Dowling – Co-Founder of Dreamstake  the world’s first tech startup platform to match founders with the most appropriate investors using a unique startup rating system. This allows entrepreneurs and investors to monitor startup progress and inject capital and support when most needed. Startup founders can create profiles on the platform and get direct introductions to investors. We are constantly looking for great early stage tech startups. Join here Dreamstake.

LondonEarly stage tech startups are often highly mobile. Just take a look at the way that small geek-teams are able to land on accelerator programs across the globe. I could name a few accelerator groupies that have been on more than 2 or 3!  This mobility means that they can often pick and chose where they settle down and London currently has a lot to offer;

- Europe’s startup cluster – It’s important for startups to hang out together, cross-fertilize ideas and share resources. London provides the best opportunity to do this in Europe. There are hundreds of networking events every month and many are specifically aimed at tech startups. There is a large and vibrant cluster of tech startups developing in East London.

- Sizable test market – The population of London (10 x SF) makes it a great test market for location based apps such as courier services, taxi apps etc. It is possible to achieve considerable scale in London before launching globally.

- Funding climate – There are more VC’s than anywhere else in Europe and the Government has introduced tax breaks such as the Seed Enterprise Investment Scheme SEIS to make it really attractive for angels to invest. London leads the world in equity crowd-funding and The Patent Box is an innovative tax break for developing IP.

- Startup education – There is a lot of free learning to be had.  Dreamstake Academy and Google EDU both teach founders lean methodologies as well as legal, accounting and other professional topics.

- Tech plus – London is probably the only city in the world where the tech sector sits alongside all the other major sectors. It’s a great place to build a Fintech, Fashtech or Adtech startup. London also has several of the world’s best universities.

However, we recognize that startups have a choice. It is now possible to join a platform, develop your startup elsewhere in Europe, launch in London and scale globally from the US. It can be very attractive to have a small founder team in London whilst maintaining your development team in a lower cost location.

We like to think that we can help startup founders wherever they chose to build their startup. This is the advantage of an online platform. Of course, we would like to meet you all personally in London but we recognize that housing costs or immigrate rules may make this impractical. We are therefore, currently linking startups from across Europe with investors here in London, If you are interested join the platform and take a look.

Blog by Paul Dowling – Co-Founder of Dreamstake  the world’s first tech startup platform to match founders with the most appropriate investors using a unique startup rating system. This allows entrepreneurs and investors to monitor startup progress and inject capital and support when most needed. Startup founders can create profiles on the platform and get direct introductions to investors. We are constantly looking for great early stage tech startups. Join here Dreamstake.