Archives for the month of: March, 2015

gerkinThere have been plenty of articles about why London is a great place to set up a FinTech startup but I thought it would be fun to look at it from a different angle. I believe that the whole London startup eco-system can benefit from a strong Fintech sector. The City has the potential to seed a thriving tech scene in much the way that Silicon Valley was seeded by Stanford university, Hewlett Packard and other hardware firms in the middle of last century.

Injection of capital - FinTech startups are more likely to attract capital than any other sector in London. There is a lot of individual wealth in The City as well as institutional investors. This capital is far more likely to be invested in a sector that is easily understood and in startups that solve problems that can be related too.  This represents a quick way into the startup scene for City guys who want a piece of the startup action. This new source of capital will gradually spread across other startup sectors as the investors become more confident and want to diversify their risk more broadly.

The redeployment of talent - The City attracts the best talent from across the globe. A small percentage redeployment of these human resources into the startup community will have a huge impact. FinTech is the sector that is most likely to precipitate this effect because it is smaller jump than other types of tech startup. We find that ex City people can make excellent startup founders. They are often extremely well educated and have the necessary drive to build a successful venture. A shift of resources from corporate tech to tech startups will improve the general gene-pool and lead to a greater number of startup success stories.

Fertile source of ideas - FinTech represents a great way for the startup world to add real value. The financial sector is long overdue an overhaul and is dominated by slow moving monolithic players. The banks have a terrible reputation for customer service and can be challenged by disruptive startups that offer a better experience. Startups such as TransferWise, Iwoca, and Nutmeg are already having an impact and there are many more to follow.

In summary, we all know that startups generally thrive in clusters. These clusters need access to resources such as human talent, capital and physical infra-structure. The City of London is ideally placed to provide all of these to a vibrant tech scene that has grown-up right on the doorstep of the financial sector. This should be encouraged and can only lead to continued success.

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. Investors please contact [email protected]

We have also recently launched an exclusive tech angel investment club in partnership with The Hoxton. HoxTech Angels will run invitation only angel investment evenings every last Monday of the month.

 

Nearly all of today’s high growth startups go through multiple funding rounds. It’s almost a badge of honor, for startup founders to close larger and larger rounds, and a sign that they have reached the potential to scale up into global businesses.  Sometimes the accompanying legalities can seem like a hassle and most founders would prefer not to spend too long on them. However, having a startup friendly lawyer on board can be a definite asset and will speed up the process at all stages;

Investment readiness – Investors hate uncertainty and it can kill the deal in a flash if they lose trust in you. Consult a lawyer early on to make sure that you have not set any traps that will catch you as the deal progresses. Make sure that you can clearly demonstrate ownership of any Intellectual Property through copyright, trademarks or patents. It is essential that all contracts with subcontractors or employees stimulate that the IP resides with the company.

Tax structuring – It can be worth consulting a lawyer to ensure that a company is structured to be eligible for investor related tax breaks. In the UK, schemes such as the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) are highly attractive to investors. However, there are traps to avoid, that can make companies ineligible for these incentives and therefore less attractive to investors.

Shareholder agreements – Investors also want to see a clear unambiguous ownership structure. This is normally catered for by a simple shareholder agreement that your lawyer can draw up for you. All other documents relating to company ownership and structuring should be agreed before entering negotiations with investors.

Funding negotiations – Most investors will bring in their own lawyers to check contracts and to assist them in negotiation. It is essential for founders to do the same. The main negotiations will take place around the term sheet. This will specify the amount being committed and the valuation, as well as, details such as pre-emption rights.  It is vital to pay attention to these details that can seriously undermine your future interest in the company.  In general it is not not wise to accept non-dilution rights from early stage investors as to do so would only weaken your own shareholding.

To summarise, there is a clear link between the funding process and the legal structure of a startup. The more effort that has been put in to keep the legals clear and unambiguous from the beginning, the easier it is to avoid pitfalls later on. A good startup lawyer will be sensitive to the fact that founders don’t have money to burn until they close their first major funding round and will advise on the minimum essentials to avoid problems.

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. Investors please contact [email protected]

We have also recently launched an exclusive tech angel investment club in partnership with The Hoxton. HoxTech Angels will run invitation only angel investment evenings every last Monday of the month.

Angel investment is the biggest source of early stage capital for early stage tech startups.  Angels are generally high net worth individuals who want to put a proportion of their wealth into funding entrepreneurial businesses. They have a number of motivations including financial, intellectual stimulus and entertainment. It is crucial to understand how to interact with this important group. Following these tips will improve your chance of receiving the investment you seek and closing your funding round as rapidly as possible;

Make sure you are investment ready – It is now rarely possible to obtain investment for idea. Investors have a choice. They would rather reduce their risk by investing in a strong team than simply a good concept. Make sure that you can prove product/market fit before approaching angels.

Have a great investor pack – The central document is the pitch deck. This needs to clearly convey the proposition. Investors receive large number of pitch decks every week. Only the very best will stand out and get their attention. Make sure that the key points are covered in the most concise way possible. Dave McClure of 500 Startups has produced a good template deck to use as a guide. You will also need a one or two page executive summary. This can be sent in an email to stimulate initial interest.

Be realistic about valuation – Angels will see it as a sign of naivety if you seriously over-value your startup. The valuation of startups prior to revenue generation is tricky but you can look at how other companies are valued at a similar stage and use this as a guide. You should be able to back up your valuation with data.

Research your potential angels – You can find a lot of information online on platforms such as linkedin. The objective is to determine whether you are dealing with a genuine angel or a consultant. Once you are sure you have a real angel you will need to check that they are currently active, what they invest in and how much they generally invest. It is often a good idea to ask these questions directly. Most genuine angels will be happy to answer with relatively detailed answers.

Let everyone know that you are fundraising – Get the word out that you are fundraising. Word of mouth is very powerful. Although it is important to let people know that you looking for funding, don’t bombard everyone with pitch decks or exec summaries. Save these for the angels that you know will be interested in your specific proposition.

Understand how angels work – Most angels invest in groups and put relatively small amounts of investment into a large number of opportunities. Although you might be lucky and get a single angel to invest the full amount, this is extremely rare. It is therefore important to tap into existing networks of angels who will trust each others judgement in backing your startup.

Find a lead angel – It is very important to find an angel who will lead your funding round. This angel will help set the term-sheet and will take some of the burden of dealing with multiple investors. Pick someone who brings credibility with their reputation in your sector. They will also often bring an established network of contacts, including co-investors and potential clients

Use multiple channels - Explore all the obvious channels. These can include angel networks, funding platforms and successful entrepreneurs who have sold businesses in your sector.

Get referred – It is often easier to approach a potential angel through a trusted third party than directly. Angels are often sitting on a large pile of business plans and look to third parties to filter the best deals for them.

Ask for advice - It is a truism that; ‘ask for investment and you will get advice and if you ask for advice you will get investment’. The indirect approach is often more engaging and will usually deliver better results. Follow this approach with potential investors who you have met at networking events or with cold emails.

Remember that angels are just normal people. They come in all shapes and sizes and from a very wide range of backgrounds. Try to find out what really excites them. Many are ex-entrepreneurs who what to stay connected with the latest innovations and enjoy the thrill of investing with friends and colleagues. You will greatly increase your chance of getting investment by understanding their drivers and adjusting your approach accordingly.

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. Investors please contact [email protected]

We have also recently launched an exclusive tech angel investment club in partnership with The Hoxton. HoxTech Angels will run invitation only angel investment evenings every last Monday of the month.

 

 

 

 

We are on our way to 4YFNbarcelona images a major startup event being held in Barcelona from 2nd-5th March and devoted to innovation in the mobile and digital Eco-system as part of the Mobile World Congress. We will be doing our bit for the UK economy by presenting a workshop; London Calling – Why Move Your Startup to the UK. 

As well as delivering this workshop we have a couple of other objectives for the week;

Startup talent Scouting – We are always on the lookout for the very best early stage tech startups in Europe. London is currently a great place to launch and we would love to tell you more about the advantages.  If you are interested in making the move to the UK we can provide support through our regular Dreamstake Academy at Google Campus. Once your startup is ready for investment we will connect you to angels or venture capital firms through our matching platform. We are on the search for all types of high growth potential internet startups, especially those with a mobile UX.  If you are a founder with a strong, technically oriented team and a highly scalable business model, please connect with us.

Meeting early stage tech investors – We have built a database of over 1,000 European tech startups.  The UK Government has provided great incentives by introducing significant tax breaks. These help investors to greatly reduce risk, whilst building portfolios in some of Europe’s rising stars. We are looking for either experienced tech investors who want to lead funding rounds or less experienced investor who would like to engage in this exciting sector.

So if you are visiting Barcelona this week, as either a startup founder or an investor, please reach out. It would be amazing to meet and discuss ways in which we can work together.

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. Investors please contact [email protected]

We have also recently launched an exclusive tech angel investment club in partnership with The Hoxton. HoxTech Angels will run invitation only angel investment evenings every last Monday of the month.