"I wanted to get closer to the companies themselves and have more involvement with the actual operating businesses" – an interview with Simon Jackson

I recently caught up with Simon Jackson, Director, in order to learn a bit more about his RIG story.

When and why did you join RIG?

I joined RIG in June 2009 by osmosis. I first started working on one client, and within 2-3 months I was fully engaged working on 3 clients. I’d known Shields for a long time and always thought that what he did and the way he talked about it was very interesting.

I’m a technophile and my career has kind of gone in the opposite direction of flow to some people in some ways. I started off as a fund manager so I was very far away from the things that I was investing in and so I had no influence over those things. Then I was in M&A for technology related companies. In M&A, there’s a lot of excitement in doing the deal and then the real work starts once the merger or acquisition is completed. So I wanted to get closer to the companies themselves and have more involvement with the actual operating businesses.

So essentially your background was as a…?

Frustrated scientist meets techno wannabe.

How would you define your role at RIG?

I wear a couple of hats. So, one is as a regular member of the RIG team which is all about winning and delivering high quality client work.

Then, as a director of the firm, it’s about shaping the direction of the firm. We have been thinking a lot recently about how to grow the firm in a non-incremental fashion. I also act as an ambassador for the firm; seeking to engage with people and build on that which will hopefully bring high value opportunities to RIG. Not just clients, but also high value transactions, potential investors – leveraging X for the benefit of RIG.

With the finance hat on, I do financial planning for the firm: how to grow value for the firm; how to find good ways of compensating individuals; how to create incentivisation plans that reward individuals for being engaged. That’s the finance side of trying to make RIG an exciting place to work, grow, and be rewarded. Along with Shields, I think about team development and team growth.

I also want to help embed in the firm a culture of equity ownership, which is about us owning the investment in other companies and the culture in RIG needed to facilitate it. Part of that is to extend RIG’s skill set in a financial direction because, over time, we are building out the things that we can do with companies.

Catch the second half of our interview with Simon in the near future.

"I want clients that have the potential to exit at $100m": An interview with Sameer Pal

Sameer Pal has been with RIG almost since its inception. Previously he was with Mercer Management Consultants. Sameer is a RIG partner. A citizen of the world, he was educated in India, Botswana, and the United States. Not a convert (yet) to the religion of blogging, he was interviewed by RIG Principal, Shields Russell.

Sam, why did you join RIG?

I did the big consulting practice. I wanted stay in consulting but to do something entrepreneurial. RIG is an entrepreneurial project in its own right and we work with entrepreneurs. I like seeing the fruits of my labour becoming something real and tangible. The beauty of young companies is that you are starting with a fairly blank slate.

How would you describe what you do?

Well, to be blunt, we help companies (our clients) figure stuff out and get stuff done and we do it better than anyone else. Our value lies in strategy and intelligent execution. We are not afraid to get stuck in and I have no hesitation in saying we are good because we are really smart and we have a strong bias for execution.

Tell us about the most successful client in your current portfolio

Let’s start with revenues won because ultimately that’s what matters. In two years, they have gone from being a single customer vendor to a company with more than 25 major customers. This year (2012) we have closed nearly $6m. That’s what matters. I, and the RIG team, have worked with the CEO to close deals in 5 continents, 17 countries, working in several time zones. And we have done deals in multiple languages including Spanish, French, Chinese, and Portuguese. All our consultants speak more than one language fluently. All, of course, except you Shields.

Describe your ideal client?

First thing, they must have global ambitions and that means they must be targeting a big market.

Second, the product doesn’t eat anyone else’s lunch and can compete in the market based on its technology rather than any business model or accompanying service.

Third, there must be a very capable, professional CEO who has deep expertise and understands their own and the company’s limitations. Someone who is willing to engage with us in a continuous feedback loop. That really matters to me. Someone who is not a micro-manager but trusts us to get the job done in the company’s best interests. And they must not be cheap. By which I mean that they are willing to pay us well because they recognise that when we do our job well we are adding significant equity and cash value.

Accountability is the last point I would make. It has to operate both ways.

Since you aren’t going to be working for them, describe a client you absolutely won’t work with?

The serious nightmare is a company that has a recipe that in my view adds up to nothing but a hard slog and low growth prospects: a company working in commoditised marketplaces where the competitive differentiation is on the margins and value based pricing is near impossible to extract. And it is all made worse when you have a CEO in these circumstances who believes they have a breakthrough product. What you have there is the delusional entrepreneur with misplaced expectations. I am also uninterested in working with companies that have a narrow geographic focus.

What’s it like working at RIG?

We are all different. We are all smart but in markedly different ways. We are a small boutique firm really. Very flat. Producers matter. Can’t produce means you will leave. In that sense, we are an up-or-out company. We are a pretty outspoken bunch. We have a lot of freedom as long as we look after our clients and each other. Teaming really matters for us, both with clients and colleagues. It is a negotiated workplace and that is a good thing. That is the basis of our culture. We don’t always get it right but we know whom to look at when we get it wrong.

What sort of people are you looking to add to your team?

I am not demanding. I just want sharp people with the ability to develop a quicksilver commercial nous. I want people with a genuinely global outlook who aren’t of the nine to six variety. I don’t mean people who taught English in the jungle on their gap year.

What are your ambitions in the next two years?

I want to create an ass-kicking team focused on IP-rich companies with a global market and a product that is truly differentiated and a team of bright ambitious people who are seriously focused on building equity value. And I want clients that have the potential to exit at $100m. That’s fun. That’s a trip. I haven’t manage this yet but I wouldn’t bet against achieving that goal in the next 24 months.

And lastly, why don’t you blog?

My portfolio clients come through reference. I don’t need to blog and I don’t have the time to blog.

 

 

USEUM – A case study in funding

Boosted by winning Athens Startup Weekend 2012, USEUM is described as “The social network for art, offering two key features; firstly an art archive i.e. the ‘Wikipedia’ of art that is built collectively, and then a podium for everyone to express their opinion and to publicly ‘Like’ and ‘Dislike’ aspects of art, as in all other subject-specific social networks.”  We spoke with founder Foteini Valeonti about her experiences in finding funding for her startup.

 

As part of winning ASW, you won the chance to pitch at HackFWD in the Pitch in Berlin V2 event.  Did you get funding for USEUM there?

“Although it was a great opportunity, pitching in Berlin was very tough and we didn’t get funding.  The other startups had already been through previous funding rounds and had been in existence for at least 6 months.  USEUM was still under construction at this stage so a completely different proposition.  That said, I think had I done a live demo of our mobile app I would have increased our chances of funding greatly as the live demo at ASW was what really counted in our win.”

So after that, what sources of funding did you pursue?

“Well, we felt the best route at this stage was to bootstrap our company and create a minimum viable product using the least possible funds.  Starting out with this model worked well, but we couldn’t take it very far due to some legal expenses.  I decided I didn’t want to get a loan for the business or go to friends and family for funding, so instead set about looking for angel investors.”

“I successfully found 3 investors who were willing to back USEUM.  What I learned from this process, was that to find the best angel investors, you just have to find the people who share the same interests as you, and who can really click with your idea.  In USEUM’s case it was people who are into art and Greek entrepreneurship, so a perfect match.”

Would you use a similar method to get funding again at future rounds?

“Obviously we will give priority to our original investors, as they are the ones who believed in the team and the idea in the first place.  If still further capital is needed we might seek similar angels, although our strategy is to assess all options so we would also talk to some VC’s.  We are lucky enough to have a revenue model from our USEUM Gift Shop though, so as long as we are covered by that we will delay fundraisers and build our value.”

Interview by John Sherwin

The Investment Game: how to choose your investors wisely

Tony O’Shaughnessy, founder of ABS, gave us some key points to consider when looking for investors for your company:

“I think the very first thing you need to understand is why you are looking for investment in the first place. It sounds really obvious but you would be amazed by the number of people who think ‘if only we had investment we could do x, y and z.’ Thinking about money problems alone is a very naïve viewpoint. You should really make sure you know exactly why you want the money, what you’re going to do with it, and that what you are going to do with it fits with your strategic direction. This is absolutely key.

You also have to think about what the role you want these investors to play:

  • Do you want them to be equity holders?
  • Do you want them to be proactive?
  • Do you want them to have valuable employment in the business?

The minute that you have investors it will affect the culture of your business and your employees directly. You need to know that it is a great idea because it allows you to build a new product, etc., but also what it means in terms of the way you operate.”

 

“The only guidepoint is reality” – Interview with Andy Hutt of triOpsis

Andy Hutt is founder and CEO of triOpsis, a real-time visual intelligence company designed to provide technology that allows enterprises to use mobile devices to track the status of products and services on the ground.

I can’t promise any words of wisdom at all, but I can promise words.

1) Why did you decide to become an entrepreneur rather than go down a more traditional career path?

Lots of answers to that. As with most things in the world, life is a bit more complex than, I woke up one day and said, “Fantastic! I’m going to do this.” Life evolves to a point and you make some decisions. For me, one of the most important ones, and it is only one of many, is when I looked at a traditional career path, I just saw boredom. My background is in finance; I’m a qualified accountant. Way back when I worked for PwC, I worked in Private Equity Transaction Services at Deloitte, I worked in corporate finance, blah, blah, blah. And the problem was whenever you looked at the career path of any of those, it was frankly just boring. And for me, I didn’t want to spend 30-40 years of my life doing that. At all. So it’s about how to make a change. And any change is very difficult to make.

For me, the obvious one with the skillset I had was to go and set up a business. It was possibly a bit of a random choice in terms of where we went, but you have to use what you have around you. I had no background in software prior to this, I had no background in retail, no background in utilities, never set up a business, all those kinds of things. But you have to make a decision that says, I need to change something. I need a more interesting path in my life, I need to do something which I find more satisfying, more enjoyable, and I have more control of.

2) What new skills and specialisms did you have to develop as you got triOpsis going? How did you develop new skillsets?

One of the skills a potential entrepreneur has to have is risk taking. Risk taking possibly equates to stupidity or arrogance, because if you knew all the risks, you probably wouldn’t do it because you’d assess you’d fail; or you understand the risks, and you’re so arrogant that you think you can succeed anyway.

A lot of people are very risk-averse when it comes to trying different things. I’ve never set up a business before. Ok, fine, how do you do that? You just go and talk to some people, get a bit of guidance, and do it. And a lot of it comes down to just doing it. I’ve never run a technical team before, in terms of coding, never run a PR campaign before, I’ve never been a salesman, I’m going back to when I started the business, and it’s about risk taking, just dive in and do it. And if you work out you haven’t got the skills, learn. So, can I be a salesman? Yes. If you can’t afford a salesperson at first, that’s what you have to do. You can’t say, “I don’t have those skills!” You have to dive in, do it. The key thing is, if you’re prepared to take that initial risk—which is basically whether you’re prepared to show yourself up, whether you’re prepared to effectively fail—you need to learn quickly. Dive in, learn quickly, chuck it at the real world and off you go.

In terms of acquiring new skills, it’s partly about risk taking, it’s partly about confidence, and it’s the ability to learn quickly. A large chunk of my view of the world, when it comes to learning and entrepreneurship, is about surviving enough failures to succeed.

Most of the time, until you’ve made your business, you’re assembling a collection of small failures. If I go back to the first sales pitches I did four years ago, I cringe. I’m like, “My God, did I ever actually pitch something as stupid and vague as that?” But you have a go and you just learn, and that was a failure. You’ve got to collect these failures. And in terms of how you fund the business, ideally with entrepreneurship, you need to get enough funding to survive enough failures to have learned enough to succeed.

People view failure as though there’s only one way to fail, which is, you know, like the Eurozone at the moment: BIG! And actually, entrepreneurship is lots of little failures. “I tried that, it didn’t work. Put that to one side. I’m going to try that, ooh that didn’t work, ooh that does, let’s do more of that.” Ideally it’s not catastrophic. I got a good piece of advice early on, which is, “Never bet the ranch early on any particular given path.” Some people say, “You’ve got to do it the whole hog, just go for it!” And if you did that, put all your money in one strategy, one path, one thing, and it fails where do you go? I’d rather spread the failures, and then try and learn where I passed. “That bit did succeed, I’ll put some more money over there.” With failures you learn. Success doesn’t actually teach you anything, it’s just like, Oh, I got lucky. More of the same.

3) How do you balance breadth across industries and depth within an industry?

It’s a really good question because for me, success only comes if you focus. But it’s actually the point I was making a second ago about failures, because you don’t actually know which market, which product is going to be a success. So what you have to do, and what we did, is we started off in brands and we tried retail, and we’ve ended up in utilities; we ended up in water, and we’re now in gas and electricity. It’s a case of the same learning curve, but the ultimate goal has to be a focus. As a small company, you don’t have the resources to do lots of stuff. Provided you understand that to start with then you may succeed. If people don’t understand that to begin with, if they think they can have a go at everything, they will fail. You can’t. Unless they’ve got a really big bank balance, in which case, good luck to them! So, what you have to say is, ultimately I do have to focus to succeed, but I don’t know where to focus, so it comes back to how do I learn? How do I fail, etc.? And what you try and do is get into a niche where you think, yeah I’ve got something real. And that particular point to me in terms of business is what I was talking about earlier: you have to get that in the real world. You can’t sit in an office and think, right, it’s going to be this. That’s the way for me. You have to take the risk and then actually go and talk to that particular client. And they’ll probably go, “Oh that’s rubbish.” So you go back, you have a think, you listen and then you go back and you try that again. And ultimately it comes down to, sadly, what will this generate in revenue for somebody or will it save them money? You need to understand that as an end point.

The only guide point is reality, and that’s the bit when I was talking about risk taking earlier. A lot of people aren’t prepared to take a risk. And a risk is standing up in front of people and actually potentially looking a bit stupid. And for a lot of people, they’re not prepared to do that. The ultimate arbiter of everything is reality. You can’t sit in an office and make a profit. You have to actually physically go into the real world, get your product into the real world, and get real world feedback. Think of anyone who sits in an office and says, “Yeah, this is the best thing since sliced bread!” For our products, we could say, “Yeah insurance market, hey! We can do all of this stuff!” But actually if you spoke to someone in insurance they may turn around and go, “Err, you can’t do it for these reasons.”

4) What is the lifestyle of an entrepreneur like?

The lifestyle of an entrepreneur? It varies. In the world of big corporates, hard work is when you have lots of work on. For a small business, when you’re an entrepreneur, that’s easy. I’ve got work. The hardest part is when there’s nothing. You know, there aren’t any projects. You haven’t got a team of people, you have to sit and you have to go, I need to do something, I just need to create something from scratch. That’s hard work.

 

Growing a business during a rough patch in the market

You do not need to look far to notice that the Eurozone recession is dooming on us. During the last global recession, entrepreneurs were some of the worst hit across all businesses.

So we got in touch with one of few entrepreneurs who managed to continue hiring and growing his business during the recession, Tony O’Shaughnessy, to describe how he managed to build Fourth Hospitality to a point where it was strong enough to break the storm and plough through by hiring 5 to 10 people a week, and to give us and other entrepreneurs advice on how to survive rough patches…

“The key point here is business planning. I’ve written and seen so many business plans that have unachievable financial targets. This is because entrepreneurs are stereotypically very opportunistic, and there is nothing wrong with that as long as you consider the worst-case scenario. You need to consider how you can ride the storm in the middle of the Atlantic, i.e. how can I operate my business with limited resources and demand.

Additionally, you must always think of the basics: what is it that your product does and how is it unique. A lot of people promote products/services that are ‘good to have’, but not many people sell ‘essentials’. If your product is an essential in the market with no better substitutes, the effects of external pressures will be minimal. Once you have identified why the market demands this product, you must drive this through with consistency.

We offered complete back office solutions, which met market requirements that would aid them to overcome the effects of recession. Very importantly, our offering was affordable. Major industry players felt the pressure of the recession and wanted to become more organised to succeed. Consequently, they recognised us as a way in helping them through the recession and coming out on top. In particular, the idea of visibility and sales analysis became very important to them in understanding how they can outperform. Our ability to provide this solution became a great asset for them to control performance of outlets.”

Key challenges in sales and marketing for entrepreneurs and growth-stage firms

Permasense corrosion monitoring systems provide engineers, inspectors, planners, and plant managers insight into condition and capability of critical oil and gas assets. Potentially it is a technology with wide appeal. Given this, what are the key challenges in the sales and marketing process? What are the key steps and challenges entrepreneurs face in taking a product like Permasense successfully to market and what would you advise they do to overcome them? We asked the CEO of Permasense, Peter Collins…

Identify the product champion

Identifying the individuals in a company that are ‘own’ the problem your product or service is addressing is the place to start in finding the individual to champion it in your target customer.

For example, in Permasense’s case, this person my be an asset integrity, engineering, corrosion or inspection manager.

Identify all that have to sign off on adoption

If you are selling a system solution, impacting on a number of functions or business processes, you must also win the buy-in of these gatekeepers. For example in Permasense’s case this includes IT, safety, plant operations and frequently others.

Identify the economic buyer

It’s as old as sales itself – no sale without a budget, and it’s so easy to believe you’re close to a sale, when the person who has to sign the cheque hasn’t even been brought into the sales process, let alone convinced.

Whether you or your champion, or both of you together, convince the economic buyer will vary – but you will need to be clear with your champion how that final step to sale is going to happen…

Realistic time plan

Entrepreneurs and their financiers should not underestimate the length of the sales cycle, and thus how long to positive cash flow. For business-to-business sales like Permasense’s, this cycle can easily be 6-12 months. And that following achievement of reference sales. So make sure to plan your cash management accordingly.

Know your product

Know your product, believe in it, communciate that passion – but don’t oversell it! Having the appropriate background – in Permasense’s case, an engineering background – is, I believe, so important.

Customer (and Patient) Control – An Interview with Dr. Mohammad Al-Ubaydli

Dr. Mohammad Al-Ubaydli is founder and CEO of Patients Know Best, a personal health record system designed to put the patient first. By giving patients control of their own health records, the system allows more efficient and effective relationships between doctors and patients, as well as between doctors and specialists comprising teams of care providers. Patients Know Best is based in Cambridge, UK.

1)   Before Patients Know Best, had you ever thought of doing something entrepreneurial, or did the drive really start with the problem and solution you discovered?

I started with something entrepreneurial in a sense because I knew I was going to start my own company. I was setting myself my own syllabus, so I went through medical school having learned how to program; I was just teaching myself how to write medical software and the intention was that I’d basically solve problems for physicians. And that’s what I did during medical school. I also grew up in Cambridge, and in Cambridge… I was told in school that when you’re in Cambridge, you start your own company, so I believed them. I knew I would do that one day. The final piece for me was learning business, so I worked for a management consultancy in the States, in Washington D.C. While there, I saw the problem that I thought, “OK, this is really important I could commit to, I can see myself dedicating the rest of my life to solving this because it’s really important.”

Beyond that, there’s also a business model behind solving this problem, and I guess I just wanted to solve this for myself. I was facing the problem as a patient, trying to organise my care, trying to manage my health. I spent a year sulking that no one was doing it, and 2008 came along and I said, “You know what, I’ve literally written the book, so I have to do it. Let’s just go and do it.”

2)   How much has the service evolved since you started as a result of patient and physician input? What developments do you foresee with regard to the service in the near future?

We started with an embarrassingly minimum viable product. We took all the classic startup advice, start with the minimum market product: we launched with only one feature. I came back to the UK and I began asking for interviews from my friends who were doctors and then asked them to recommend other doctors to speak to. They weren’t saying, “My problem is I don’t have a PHR.” They said, “My clinics are overrun with patients and I’m always late in helping my patients. There are budget cuts, I can’t get enough staff…” All these very clinical, very operational problems. So I just began building up clinical problems, and I thought, if you use the patient as an asset rather than a liability, we can help. What’s the minimum feature they would need, that they would pay tomorrow, to use? And the one thing they said was, “We want to send messages to patients across institutional lines, if the hospital wants to send a message to the patient and cc the GP, or GP send a message and cc the social worker, for example.” And that was the only thing we launched with.

To give you some contrast, the UK government spent tens of millions on Healthspace, which is their sort of attempt at a patient portal. And only after they went through that sort of tens of millions did they get the feedback of, “I don’t really need any of these features, but I really need to send messages.” So then they began trying to do messages, but by then they’d spent so much money, no one was going to give more money to develop the software any more. So, we started from that feature and every single other thing you see in the software is because a doctor, a nurse, a patient sat down and said, I need this, or I’m stuck on this.

The whole thing top to bottom has been built by the user saying what they need; we respond every two weeks by putting out new features. From our perspective, it’s great because we’re only building stuff that people care about, but also our users are huge evangelists. Every commissioning customer who uses us can point at a part of the screen and say, “That was mine.” And then they go and tell all their friends, “Go and use this software because that was mine. And also, whatever you tell these guys, they’ll do it in two weeks. They really respond really quickly and I’ve never had a software company do that with me.”

3)   In one of your customer videos, Gary Hotine describes looking for something that would be like “Facebook for Patients.” I’m curious to know how apt a description you feel that is for Patients Know Best.

A lot of our users describe us as the Facebook of healthcare. When we trained patients in the beginning, the docs were kind of worried that the patients wouldn’t understand how to use the software. When we sat down with them, most of the trepidation was that they did not believe the docs had actually handed over the records and given them control. But as soon as they get there, they’re like, “Oh, I see, that’s like Facebook. I’m good.”

From that point onwards they just go ahead and use it. It’s like Facebook in the sense that it’s a very easy method of communication, pulling data from everywhere and it can send lots of places. It’s not like Facebook in the sense that we’re not selling your data and we change the terms of use every week: we are not confusing our financial benefit with your privacy desires.

4)   When you started, I’m guessing it was pretty much just you. How did you then go and assemble a team? What qualities did you look for?

It started with just me having the idea and doing some of the research in the States and then deciding I needed to go back to the UK to start it. Cambridge was the place to do so, both as my home and because I’d heard that Cambridge receives 7% of all VC funding in all of Europe. It’s just a crazy number. So I came back to Cambridge and just did a bunch of things to start building the team. I emailed the CEO of Cambridge Network and said, “I’m coming back to the UK, I’ve trained as a programmer and I’m starting this company; I have no team, no product, and no customers. Who do you think I should talk to?” “Let’s have coffee.”

I think he took pity on me, but he said, “You know you should talk to Ian, he’s a CFO of VC backed companies and I think he’ll talk to you.” It turned out we shared the same pub, and we kind of just spent 2 hours the first time talking about the company and he thought it was really interesting. Over the next four months, the poor guy, Ian, taught me accounting. And then eventually he became a member of our board of directors and CFO of our company. So he was the first really heavyweight executive to commit his time to the company.

Then from the development side, I started by just getting some contract developers to build the proto-type and then some other ones to build the final software. We now have developers from the UK (obviously), but also the States, from France, from India, just a real international team. And they tended to have some experience with healthcare in the past that meant that they were as frustrated with healthcare as I was. And so they’re quite evangelical.

In parallel with that, I got a meeting with Dr. Richard Smith, who was the former editor of the British Medical Journal. It took me six months to get a meeting with him—because everyone’s trying to get a meeting with him—but I knew when I was reading his editorials as a medical student, he was always on the patient’s side, often to the anger of his colleagues and medical professionals. But he’d always be on the patient’s side. I knew that if I could just get a meeting, he’d get it. And sure enough, he got it and he agreed to new meetings. And then one day, he agreed to be chairman of our board of directors.

As you build that core team of world class people, it’s just easy to get people. Everyone then wants to join up.

The balance between capturing new clients and retaining existing clients

Anybody who has ever tried to secure new clients for their business will know that this is a crucial process of growing businesses. It is also commonly known that it is just as important to retain existing customers as securing new ones. In fact, in some cases, it can be more valuable. We asked Tony O’Shaughnessy, a renowned entrepreneur, whether he has any tricks of the trade that he can pass on to entrepreneurs on how to secure new clients, retain existing customers and balance the interest of all concerned parties whilst meeting your own company goals…

Securing new clients

“Firstly, I would suggest that you should take a step back, put a clear-cut structure and plan in place, and work consistently to that.

Secondly, you need to understand exactly what it is that you do that makes people buy from you. Then create a simple message at marketing level that puts exactly that point across to prospective clients.

Thirdly, you must identify the people you should be marketing and selling to. You should really take time to understand that. There is a big difference between people who are ‘interested’ in your product/service and then there are people who would ‘buy’ your product. You must distinguish between the two.

Finally, you must be transparent and honest to your clients. If you are having problems, tell them that you are and what you are doing to fix it.  Be realistic to your clients about what you can achieve.

What made Rapid Innovation Group stand out from the crowd was the fact that you had the answer to: ‘What can you do for me and why nobody else can do it for me?’”

Retaining existing clients

“I believe keeping good relationships with your existing clients should be intrinsic, not only a strategy. Honesty and transparency are not only key for gaining new clients, but are also crucial for retaining existing clients. Essentially, they want to trust you, and these are the ways to attain that. You should not look to blame somebody for any mistakes made, rather you should find a way to fix it. You must be loyal to the relationship between yourself and your clients.

For example, ninety-five per cent of the companies give bigger promises than they can keep. You must position yourself in the remaining five per cent. Do not offer something that you cannot materialise, because that will not be honest.”

Interview with Ascendant: the current trends in UK tech investment

Stuart McKnight is the Managing Director of Ascendant, a technology and media focussed Corporate Finance house that specialises in growth stage companies. Ascendant also has experience in fundraising for buying and selling businesses and technology licensing deals. RIG’s Managing Director, Shields Russell sits on Ascendant’s Advisory Board.

Ascendant has tracked all growth-stage investments in technology companies in the UK and Ireland since 1996. Their definition of technology is broad – covering software, telecoms, Cleantech, semiconductors, and internet/wireless services – but excluding life sciences and most medical devices, as well as Management Buy-Outs and Private Equity deals.

What are the growth-stage investment trends that you look to cover?

“We keep track of five key questions in the growth-stage technology sector in the UK and Ireland: how much money is being invested; who’s writing the cheques; what they’re investing in; the stage of the companies; and whom they’re co-investing with – that’s very important as well.

“2011 was a very interesting year – we saw good growth in the total amount of investment (£786m up from £620m in 2010) and the capital was more concentrated – there were 193 deals greater than £0.5m in 2011 compared to 213 in 2010.

“228 different investors participated in those deals last year. That number 228 is important because if you speak to the many of the London-based VCs and ask them how many different people are investing they typically say 20-25 – or a maximum of about 40 – but nobody imagines that it’s closer to 250.

“There is a geographical locus in terms of where VCs are based but not in terms of what they invest in. Most of the most active VCs in the UK and Ireland are based in London but many look at companies throughout the UK and at deals in Europe too.

“There are also a large number of trade investors looking to invest. In 2011, there were 34 deals in which trade investors participated. So financial VCs are not the only solution.”

How do companies perceive VCs in the UK compared to overseas?

“If I had a pound for every person who came to me saying that they were looking for a US investor, I’d be a very rich man.

“Companies can spend a lot of time looking for a US investors as there is a perception that they are better at Tech investing than the Brits. For a company that’s grown well in the UK the obvious next stop is the US and so picking up a US VC whilst you are there seems like a good idea. Add the belief that there is a big pot of gold waiting for them over there and you get an army of UK companies getting on planes to head for the US.

“Initially many find that there is a lot of interest. It’s easy to get meetings in the US – anyone can line up two weeks of investor meetings of 45 minutes to an hour each. However many US investors see these as a ‘fishing trip’ to see what’s going on in the European market. But it’s much more difficult to get serious, hour-and-a-half meetings where investors are really thinking about you as an investing opportunity.

“Companies and their shareholders have to be really sure that the US is right for them They need to be realistic about the chances of getting US money – only 11 UK tech companies received money from the States last year.

“Europe’s actually been a much more fertile ground, and it’s much more enthusiastic on mobile/internet companies. The VCs in Munich, Paris, and Brussels have been active in the UK, and the Nordic funds have recovered a bit but they’re still not back to the position they were in about a decade ago.”

Which sectors are getting the most interest at the moment?

“There’s been a strong sector bias – the three primary areas of investment were Internet/Wireless services, Cleantech, and Software. We find that in many cases investors tend to hunt in the same packs: they follow the same trends and look for the same ideas. There’s a cohesion about what investors look for at a certain time.

“Cleantech is interesting because it’s still strong but we’re beginning to see it wane. I could go to a Cleantech conference every day of the week but in truth there was a dramatic drop in Cleantech deals last year, even taking a broad definition of Cleantech that includes solar, fuel cells, electric motors, and so on.

“In Q1 last year there were hardly any Cleantech deals – perhaps 2 or 3; Q2 was very busy then Q3 and Q4 were very low. There were only 31 Cleantech deals in total compared to 45 in 2010, which compares to typically 60-70 deals per year in Internet/Wireless services and 45-50 in Software.

“Investors in Cleantech are making bigger gambles on later-stage companies than they were when Cleantech started to become popular and we started tracking it in around 2004/5.

“A lot of these businesses are still effectively early-stage because they are struggling to get meaningful orders from customers or even just getting a customer even though they’ve been going for many years. For most LLP backed VCs, when an investment holding period extends beyond 5 years, the IRR on the investment starts to get difficult. Many funds are starting to realise that in some cases Cleantech can be like semiconductors in needing lots of capital and long holding periods. Hence the rapid reduction in the number of active investors in the sector.

“Cleantech companies are starting to look for other options like funding through the balance sheet investors or ‘green funds,’ and we’ve seen a larger participation from non-standard VC funds like trade funds or family funds that can take a longer-term position.”

The majority of deals last year had more than one investor. Why do firms co-invest?

“Co-investment can be a bit of a magic trick for investors and for companies. Not all investors get the same deal flow – some get a lot of high-quality deals; some get a lot of average deals; and some struggle to find the right opportunities.

“Well-established firms like Index, Balderton, and Accel see a high-quality deal flow, whereas for the others a bit further down the league table it can be a rational business development strategy to build up relationships with other investors and look to co-invest with them.

“It’s in the investors’ interest to network. The relationships between VCs are partly personal and partly corporate. The relationships are primarily personal but there is such a thing as corporate memory – people will remember joint successes and they’ll remember joint failures.

“In the UK around 60% of deals have more than one investor. This is one indicator that the market is in ‘good health.’ Just before the ‘internet bubble’ burst in 2000-1 less than 40% deals were done jointly – reflecting the misplaced sense of confidence VCs had at that time – they were so sure that they had the best deals that they did not want to share and wanted everything for themselves. Fortunately many of those folks are no longer with us.”

What advice would you give to growth-stage companies looking for funding at the moment?

“Before a company speaks to investors, they need to have a significant opportunity, a clear differentiated plan to exploit it, a good team, and realistic expectations in value and the amounts they want to raise.

“For Ascendant to take on a deal, we would need to comfortable on all these points and be certain that we could identify 30-40 potential investors who would actively consider the opportunity. We are happy to give some guidance to companies looking at funding options – it is a tricky market out there. ”

For more information on Ascendant contact Stuart McKnight at smcknight@ascendant.co.uk