technologyIt’s funny but in the startup world we use the word exponential a lot. We talk about the exponential growth of startups and the power of exponential technologies. However, I would argue that apart from Silicon Valley the eco-systems themselves just don’t hack it. Why are we not seeing exponential growth of the eco-systems? Even the shining stars such as London and New York see only moderate progress from a low base. Tech investment is still an extremely small asset class and VCs are almost a cottage industry within the broader financial services industry. So what is required to change?

It is well worth looking at London as a case study because it has been successful by many measures. The Government has been highly supportive through tax breaks and other incentives and has been effective in promoting the city as a technology startup cluster. However, this has still only created modest growth from a slow start rather the exponential growth we should expect from such efforts. I don’t believe that we can rely on Government to make this happen. Much of what has been achieved in technology innovation over the centuries has been the result of individual human endeavour rather than Government intervention.

If we look to Silicon Valley we see that growth comes from within the eco-system. It’s all about the drive of key individuals and leveraging the power of paying forward. In my view, it is the established founders that have the means to drive exponential growth from the eco-system. They can do this by continuing to engage with the startup eco-system after their first successes. This can be achieved by starting their next venture or by supporting others to create theirs.

We have had massive support for our programme from established founders such as William Reeves, Tom Allason, David Buttress, Nic Cary and others. However, we need to change the mindset and start to expect exponential growth of our eco-system. This will require far greater support for emerging entrepreneurs from people who have been there and done it before. It requires a step-change in ambition. We should look to emulate the likes of Elon Musk and unleash the full potential of innovators.

So some concrete suggestions;

  • Join the dots between the key players; established entrepreneurs, emerging founders, universities, investors, corporates etc.
  • Engage successful founders more proactively as investor mentors. We need our own Paypal Mafia
  • Educate investors in tech investment as an asset class to increase liquidity in the sector
  • Raise the ambition level by promoting a vision for technology in schools, universities and society in general

As always the answer lies in the power of the network and the ability to make connections. The Silicon Valley model works. We just need to take the best elements and adapt them for other markets. We have created a database of the key influencers in the London Technology scene and are reaching out to involve them in projects involving the best startups on our platform. If you feel you have something to contribute to our mission please reach out to us.

Blog by Paul Dowling — Co-Founder of Dreamstake the world’s first tech startup platform to match over 16,000 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 create profiles on the platform and get curated introductions to investors. We are constantly looking to support great early stage tech startups. Investors please contact [email protected]

Me

You have identified a large and growing market, built an MVP and acquired a few customers. You believe that you will have a business that will be attractive to VCs in 12–18 months but you need £250K to hit the metrics that they demand. Everyone is telling you that you need to find an angel investor or more likely a group of angels. However, finding them is easier said than done.

I was chatting to a Russian investor yesterday. He has made investments in London, Silicon Valley and Tel Aviv and put forward the view that early stage investment was often controlled by a small group of insiders. In the Valley, for example, the best startup investment opportunities are never put out to the broader investor community. He is sometimes asked whether he would like to ‘join’ an investment opportunity as if it is a special privilege.

It got me thinking about the London investor scene and whether something similar exists here. I believe it does, but it is much smaller and therefore even more difficult to penetrate.

Some of you will be familiar with those lists of investors that have circulated on groups like London Startups on Facebook. Well, surprise, surprise, these are not reliable. The VCs are usually accurate because they are easy to identify simply through their websites. However, the angels are either already invested out, were never investors at all, are in the wrong territory etc.

I started to think how best to build the ‘real’ list and realised how important it is to identify the movers and shakers. These are the guys who have been there and done it before. The founders of startups such as Just Eat, Transferwise, Shutl, Songkick, Love Film and the likes. In addition to these there are small numbers of potential tech investors embedded in the main angel networks plus a group of newbies who have the money but not experience. These are good to build a round behind the lead investors.

I have ended up with a list of 100 influencers. These are people that I believe can make a round happen by bringing a combination of expertise and capital. I am meeting as many as possible and inviting them to review the startups on our platform. I have learned that building a round is very strategic. Founders need to be well prepared and pitching at the right level. They don’t get many bites of the cherry, exactly because it is a small community of investors.

Blog by Paul Dowling — Co-Founder of Dreamstake the world’s first tech startup platform to match over 16,000 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 create profiles on the platform and get curated introductions to investors. We are constantly looking for great early stage tech startups. Investors please contact [email protected]

Me

The whole concept of democratising capital is very compelling but does it really work?  The UK has led the way in equity based crowdfunding, with firms such as Crowdcube and Seedrs in the forefront of the trend. Now other nations are set to follow, but does it really work?  What are the alternatives?

I am a great believer in the idea that platforms change the world.  We see this with the likes of Uber and Airbnb.  Platforms are great for aggregating the market and reducing the cost to serve. They are very efficient and can grow rapidly through network effect. AngelList has achieved great things in the US as a professional funding platform but has failed to achieve such strong traction in the UK.

I have often observed that VCs don’t exactly eat their own dog food when it comes to building scaleable businesses for themselves. Platforms can change all this and make it possible for investors to engage directly with founders.

However, I would argue that equity crowdfunding has severe limitations.  There are simply not enough high quality startups to sustain the existing players. This will lead to compromising acceptance criteria and higher risk for investors. Investors have reduced control in the crowdfunding model and are less likely to have the skills to carry out the same level of due diligence.

Crowdfunding also relies very highly on market hype.  The man in the street will only invest in high risk tech if he believes that he is investing in a future unicorn. Once the heat goes out of the market, the stimulus to participate disappears.

Angel Investment is highly technical and only sophisticated investors fully understand the the need to diversify their investment across a broad portfolio limiting overall investment to a small percentage of their overall capital.  Investing in one or two startups on a crowdfunding platform will almost certainly result in losing the original capital investment.

Founders love crowdfunding because they believe that they will get a better valuation and access to a broader base of investors.  They also get the opportunity to build user base during the fundraising process. However, most platforms recommend that founders bring their own investors before launch.  Sophisticated Investors will increasingly refuse to play ball because the process is against their interests. We have seen a couple of high profile founders pull their crowdfunding campaigns due to lack interest from investors. This can be a disaster because it signals failure to the whole market.

So what’s the choice?

Professional funding platforms such as Dreamstake provide certain advantages to investors and founders;

  • We work with the founders over many months to get to know them, providing support through Dreamstake Academy and other activities. This allows us to conduct proper due diligence.
  • We have built a database of qualified investors and a high understanding of their investment preferences
  • We provide tools such as a dealroom to help investors build the round
  • We match deal flow through to the most appropriate investors and therefore increase the chances of success
  • We allow lead investors to set the term-sheet and negotiate the valuation

Professional funding platforms offer many of the same advantages of crowdfunding platforms. They aggregate both investor and startup databases and matchmake to increase the probability of closing the round.  They deploy the experience of sophisticated investors  to carry out due diligence and ensure that terms are balanced. Only time will tell whether crowdfunding becomes the norm. Angel and VC represent a tiny percentage of the overall investment market. This is largely determined by the number of investment opportunities. I would rather see innovative ways for institutions to deploy capital into venture than open up investment to investors who are going to get burnt.

Blog by Paul Dowling — Co-Founder of Dreamstake the world’s first tech startup platform to match over 16,000 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 create profiles on the platform and get curated introductions to investors. We are constantly looking for great early stage tech startups. Investors please contact [email protected]

 

At first glance, investing in technology startups looks highly attractive. The best ones grow into billion dollar companies in amazingly short timeframes and fortunes are made by those that spot the winners. Even without betting on individual unicorns David Rose of New York Angels estimates an annualised IRR of 25% for angel investors. Not bad by any standards.

So where is the dilemma? The problem is that when you look to make your first investment all technology startups look high risk and of course they are. There is at least a 50% chance that the startup you are reviewing will fail and only 10% that it will be that billion dollar unicorn. It is only when you diversify the risk over at least half a dozen startups that things start to look more rosy.

I recommend that the first decision to make is whether to be an active or passive investor. You can choose either approach but your tactics will vary depending on which strategy you follow. To passively invest, you will need to follow others. Pick investors who you trust, investing in sectors that they understand. These are often HNW’s who have made their money from successfully selling or IPOing a company. Let them do the due diligence and set the term-sheet and invest alongside them.

If you choose to be an active investor, you should do a lot more research up-front. This kind of investment has to be fun and is often best driven by a passion. The tech startup sector is very diverse and it is rarely possible to pick a sector that has more potential that the next because everything moves so fast. If you are based in a city such as London, you can predict the sectors which will get the most support from Government and corporates. In the case of London it might be FinTech and FashTech. You might alternatively choose to bet on the future and take a look at sectors such as EdTech or HealthTech. You can also take a technology focused approach, looking to back emerging technologies such as Virtual Reality, Artificial Intelligence, Robotics or Big Data. Whatever choice you make, base it on research.

Active investors sometimes choose to invest in smaller portfolios. The reason for this is that it’s difficult to manage more than a few startups at once.

Finally, there is nothing wrong with taking a hybrid approach. This would involve investing in a small number of startups as the active lead and then build the rest of your portfolio by following other more active investors.

So the main tips to angel investors are;

  • Always diversify your investment across multiple investments
  • Only actively invest in what you understand
  • Follow other angels when you don’t fully understand a sector or technology

Blog by Paul Dowling — Co-Founder of Dreamstake the world’s first tech startup platform to match over 16,000 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 create profiles on the platform and get curated 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

Everyone knows the innovators dilemma.  As companies grow they lose the ability to innovate. The odds are stacked against them as shareholders tell the management team to stick to the knitting. All desire to take risk evaporates and suddenly they find they have been disrupted by a nimble startup. Just look at what Airbnb has done to transform the travel sector, or Uber in transport.

More and more big corporations are beginning to recognise how important it is to get involved with early stage tech startups. Big names such as Telefonica and Barclays have started to build collaborations between themselves and startups with the very clear strategy of exploring new technologies and innovative business models.

MassChallenge produced an interesting report that shows a shift in the dynamics in the behaviour of corporates towards embracing startup culture in the U.S. The same trends are perceptible in Europe and in particular the UK and we have clearly identified a number of corporate strategies happening here :

The ‘GodFather’ approach: Google operates a whole building to nurture startups – Campus London has 5 floors of event space, free and not so free co-working places, plus offices for a couple of London accelerator funds. A sort of micro silicon valley ecosystem on the edge of the City of London.

The ‘ Getting them early’ approach’: Early stage accelerators are quite a popular model for big corporates. They increasingly focus on niche market segments rather than generic technology and only take the startups that have a direct value to the corporates. They usually partner with large strategic players and they take equity in exchange for subsidence capital. A recent example is the last fashion tech accelerator by Asos , who is partnering with Wayra.

The ‘Lets see what happens’ approach is an interesting model that is taken mainly by financial institutions or players with deep pockets, sometimes resulting in non-equity accelerators.  These nurture startups, usually from a specific niche, such as Fintech.  The main goal is to keep an eye on what’s happening and potential make an investment in the future. They try to build goodwill by giving a lot of value in the form of free office, mentoring and PR. A good example is Winton Capital, that have recently put through their first cohort of ‘big data startups’.

Most corporate accelerators are roughly based on the Y-Combinator model. This involves picking limited size cohorts and providing light mentoring for a set period of time. The goal is usually to introduce the startups to investors at a ‘demo day’ at the end of the programme. Common problems in running accelerators include; poor picking of startups,  bad mentoring and lack of investor interest at the end of the programme.

Dreamstake is able to draw on a community of over 2,000 startups reaching across Europe through a virtual ecosystem. We also bring 10 years of startups experience which we are willing to share with corporate clients looking to harness the potential of early stage technology.

MeWe would like to wish all our investor friends a great summer holiday period. It is a good time to reflect on the Brexit decision and make an assessment of the implications before the next HoxTech Angels event at the end of September.

London has an extremely strong tech scene which will continue to boom over the next few years.  Tech Angel investing delivers extremely high annualised IRR in relation to most other asset classes so long as investors act responsibly and diversify risk across portfolios of quality startups. Our mission at Hoxtech Angels is to identify the best tech startups from over 1,500 on the Dreamstake platform and curate them into selected angel investors.

I would suggest that the startup investment scene was already changing before Brexit.  European tech investors had been responding to fluffiness in Silicon Valley valuations by focusing on more tangible propositions, addressing real problems and with more proof points. The Brexit decision has simply reinforced this.  Expect to see less angel investment in social and consumer apps and more going into sectors like Fintech, Healthtech and Edtech.  As far as technologies are concerned, we are on the cusp of a revolution, with the UK in a great position to exploit leadership in areas such as Artificial Intelligence, Machine Learning, Virtual and Augmented Reality.  We can also expect to see demands from investors to see high levels of traction and lower valuations. However, to repeat a common cliché, great startups will always attract the capital they need to grow.

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 month.

FoodTech or Internet of Food is one of the fastest growing startup categories, changing the way we find, prepare, order, ship, and consume food and beverages. Here are just a few examples of the most common trends and tech startups doing innovative things and trying to disrupt the food ecosystem.

Food Delivery

We all know the big players like Deliveroo or JustEat , who deliver us delicious dishes from local restaurants, but is there anyone helping us with grocery shopping? Here are a couple of our startups, who are trying different approaches:

Grocemania is a startup that is connecting stores to local couriers. They are highlighting the groceries on their own e-commerce platform. You can buy online and get all of it delivered by your local courier.

Caper are focusing their proposition on your current locations and quality of the shops. You can order the best groceries and get them delivered from your favourite local stores under 60 minutes.

Big data

There are also some interesting big data players in the food sector trying to collect and analyse food data:

Fuuduru is a real time, location based discovery site where users’ can discover what’s happening in food right now, from the latest food trend to what chefs, restaurants, foodies & businesses are saying. It is a great way for customers to socialise and keep up to date with new dishes, local places, but also a great data source of analytics for food businesses.

Foodi  is a tech company that aims at connecting customers and restaurateurs using mobile Apps and cloud services. Their platform allows customers to order and pay using mobile phones, and gives businesses powerful analytics and a dedicated advertising channel through which they can drive more sales.

Alternative Food Marketplaces

Imagine, that you could shop your food directly from the farmers. MarketSnapp seems to have an interesting approach for that. You can now shop from your local market online, from the comfort of your sofa. It’s an online retail platform for market & street sellers with the added benefit of Click & Collect. They offer a free platform, that helps to raise awareness for local farmers and retailers disrupting the eco system of the food trade.

Food Cooking

Cooking is a great hobby to have and was always a big movement within food tech startups. There are a few startups that are making cooking easier, healthier and faster than ever before! Imagine that you could find recipes you love in seconds and get those ingredients delivered to your door immediately. Foodzube  and Whisk are doing exactly that, which its effectively the innovative and disruptive way of cooking and a whole new way of grocery shopping!

This blog post is writen by Marina Atarova, the co-founder of Dreamstake. I mentor our startups through bootcamps and events. I also help to get them funded through our Hoxtech Angel Club. I have organised the FoodTech Funding Forum on 28.07, where I will have foodtech superstar investors and entrepreneurs debating on subjects around investment for early stage startups. Please sign up here.

UNiIn his recent book, The Third Wave, Steve Case talks about the way the next generation of technology startups will focus on solving the really big issues facing society. He points to the fact that the first wave was all about setting up the basic building blocks of the internet by big players such as Cisco, Microsoft and AOL. The second wave saw the rise of the stand alone app startups such as Uber and Airbnb and a whole host of less significant players. The third wave will use this platform to transform sectors such as health and education

The education system in many developed nations has changed little in past 300 years. It was designed at the height of the British dominance as a way of equipping diplomats with the skills they needed to run a huge sprawling empire. This system is arguably no longer fit for purpose for a modern technology enabled society where students need new and quickly changing skillsets.

Technology offers huge potential to radically improve the learning experience and equip students with the skills they will need in the next decade.

Trends to watch include flipped learning, where students learn from video at home and attend school to do their homework with the help of educators, adaptive and personalised learning and student generated content. This transformation will be driven by the interaction of a number of exponential technologies that will come together to deliver an entirely different learning experience. Big Data and Machine learning will help educators to predict learning requirements and tailor content for specific student needs. The huge increase in video bandwidth will enable Virtual Reality experiences that are more engaging and will improve the learning experience. Coding schools are already creating a generation that is more familiar with software and will set high expectations about the rest of the curiculum which is rarely aligned to the needs of employers in the digital age.

The biggest challenges will not be technology based. Edtech founders currently face long sales cycles and a system that is reluctant to take risks. Steve case believes the third wave will be all about partnering. Founders will have to become effective at building relationships with Government agencies, educational establishments and other stakeholders. However, I am confident that we are entering a period of rapid transformation where a quality education can be delivered to a broader cross-section of society.

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 month.

The obvious answer to one of our FAQ  ’where to find the investors’ is networking, but how to network with the relevant people , who will connect, introduce and put you in front of your future investor? One can argue that events are not as effective for it as they could be. I agree, but only if you network ineffectively.
To get the best contacts and exposure, you have to show yourself as a real leader at the event. Here are a few ideas how to do it:
1. Be a speaker
There are plenty of options for this out there from pitching at the investment events to telling your startup story to the students in your local university. To be a good presenter is sometimes not easy, but if you manage, you will move fast. This is the best way to show yourself as a real leader and the better you are at speaking the better speaking offers you will get.
 2. Get a stand.
This is such a great way of networking and exposure, because people actually come to you to network with you directly. I usually organise mini startup exhibitions during our events to give an option to our entrepreneurs to showcase. This is a free option, but you will have to qualify with a minimum criteria.
3. Create your own network
There are plenty of ways for creating your business network: Facebook groups, Google groups, Twitter followers etc. Make sure you give a lot of value to your members and think of the purpose of your network: is it for the young entrepreneurs learning and getting tips from each other or for the professionals from your industry?
4. Organise events/meetups
This sounds scary, but you can start small with just a weekly meet up dinner or drinks with relevant startup people. It pays off to be selective and go quality vs. quantity.
 5. Become a sponsor/partner:
yes, I know you will say that the poor startups have no money for it, but you will be surprised how little money you might need to cover a beer’ or a snack’ bill.  I f you have a strong network of contacts that are relevant for the event, you could act as a media partner by co-promoting each other.
This blog post is writen by Marina Atarova, the co-founder of Dreamstake. I organise events and workshops since several years and its enormously helpful for the early stage entrepreneurs. It can be challenging to find the best and the most relevant contacts, but at Dreamstake we provide you with the effective platform – online and offline.

 

 

great-gatsby-party

 

I read the recent blog by Bryce Roberts of O’Reilly AlphaTech Ventures, ‘Are we reaching the Limits of Silicon Valley’s Venture Model?’, in which he questioned the validity of the model.  As a Londoner with little connection to The Valley,  I realised that it was only one of many hundred recent blogs I have read from Silicon Valley VCs that recognised that the model might be broken.  It was refreshing to hear a VC actually take some responsibility for the current situation.

As an outsider, I would be a bit more blunt in my observation.  I guess Mattermark could confirm that over the past 20 years, Silicon Valley has consumed by far the highest ever level of resource in human history.  This has involved deploying trillions of dollars of capital in addition to concentrating some of the best minds from across the globe.  And the result?  A taxi app and a bed and breakfast app!  Before you shout that I don’t understand.  I do realize that Uber could be the basis for driverless cars and that VCs have been clever enough to spot this and pump in capital.  However, it is still only a taxi app. and it is quite possible that Tesla or someone new will get there first.  In the context of the trillions of capital and concentration of resource, is this really a great result and shouldn’t VCs take full responsibility for failing to invest in more significant opportunities?  It’s your bubble guys. No-one else is to blame.

Silicon Valley VCs are hypocritical in their approach to investment.  They dictate rules that they don’t observe themselves.  They insist that businesses are scaleable but have done nothing to ensure their own businesses are. They still invest in companies an hours drive from the office and employ little in the way of automation. It’s an old story. Turkeys don’t vote for Christmas and VCs don’t wish to put themselves out of a job.  They therefore insist that somehow VC is different from other professional services and can’t be automated by platforms or machine learning.  They have been guilty of extreme groupthink which has lead to a bubble.  Yes, sorry guys, it is a bubble. Just in case you haven’t noticed.

The bubble has been caused because of this groupthink.  It’s always the same. It goes back to the tulip bubble and has caused every bubble since. This time around it has been caused by an inability to take true risk on innovation, instead chucking capital into ‘me-too’ marketplaces and ‘safer’ business models. This groupthink happens because of a lack of diversity and the exclusion of wide ranging opinions. There is life outside The Valley in case no-one has noticed.

The rest of the world has some justification in being unsympathetic to The Valley and in particular Sand Hill Road.  You have sucked our resources for a few decades and risk spoiling our party too. You have given us the basis of our own startup revolution but any bubble threatens to take us down as well.

The solution?  Silicon Valley VCs need to admit that they are myopic in their approach. They can no longer kid themselves that somehow a bunch of bright people can change the world through concentrating capital based on their decisions.  The close-knit cluster has had its day. The internet will open it up, as it has the industries VCs invest in.  We should strive to reach the point where a founder building a startup in Nairobi will have equal access to resource as the college kid from Stanford. As VCs themselves say, ‘platforms change the world’.  This much is true.

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 month.