Entrepreneurship, UAVs and Star Wars: A conversation with Daniel Sola, CEO of Archangel Aerospace

We caught up with Daniel Sola, CEO and founder of Archangel Aerospace, an aerospace consultancy specialising in High Altitude UAVs (aka HAPS or High Altitude Pseudo Satellites) and space.

 

This is my first interview with an entrepreneur for Rapid Innovation Group’s “entrepreneur’s viewpoint” page. I am excited to see where our conversation takes us.

Well I will try and give you an “entrepreneur’s viewpoint.” I find that if I describe myself as an entrepreneur I suffer massive imposter syndrome [laughs].  Maybe that’s because I’ve spent a decent amount of time rubbing shoulders with extremely successful founders in Silicon Valley or maybe it is the curse of British self-deprecation.  Who knows.

 

Considering it’s the dream of imaginative children to get as close to space as possible, I’m interested in how you got into this line of work?

Well, I studied engineering at University even though I’m not an engineer by instinct. I almost studied History or Classics. In all honesty I was a terrible engineering student for most of my degree and I even attended PPE lectures instead.  We did a solar-electric high altitude drone project in my third year, I got enthusiastic about it and suddenly I was an engineering scholar and doing pretty well.  I am most interested in outcomes of projects that can have a big impact so even if I did choose an arts degree, I think I would have got to a similar destination in my career by a different route.

I always intended to work for myself, but after University I looked at my debts and options and felt the tug of The City.  As many graduates do, I felt there was a painful choice to either earn lots now to build something special later or do good work now, utilising my engineering skills. That is one of the things I enjoy about Silicon Valley. They have shown this is a totally false dichotomy and doing valuable things pays.

I decided to spend a few months in The City whilst my security clearances were coming through. I had planned to just earn some cash whilst waiting for clearances but it was something I found difficult to leave. The people were bright and energetic, it was fun and I was looking at something like a 60% pay cut at the graduate level to go and do science or engineering.  The City often talks up competition for top talent to justify bonuses.  This really misses the point. London banks aren’t competing so much with New York or Paris for top talent; they are competing with productive British industries and startups for the pick of graduates.  I think we will see this trend reverse as technology continues to disrupt old industries and inefficiencies though, so I’m optimistic for a resurgence in UK technical talent getting on with doing productive things.

 

So after working as a trader did you set up Archangel Aerospace?

No I spent 5 years gaining skills and experience before that. I began working for QinetiQ on three main areas. Asteroid deflection, infantry modernisation and high altitude UAVS.

It was at QinetiQ I got involved with the development of Zephyr, a High Altitude UAV. The last we developed with QinetiQ was Zephyr 7 and Airbus are now working on the Zephyr 8. Archangel Aerospace was founded to support the World Record flights in 2010 and we’ve continued to be involved since.

 

Can you explain your involvement with Zephyr further?

The story behind Zephyr is an interesting one. At the end of the First World War, Royal Aircraft Establishment was banned from making airplanes, so the engineers there pooled their own funds to develop an aircraft which they called Zephyr.

Similarly, this project began as an internal start-up with employees at QinetiQ putting their own money and time in to get it off the ground. The first prototype was called Zephyr 2 in homage. The Zephyr programme is somewhat bigger today and has produced a High Altitude Pseudo Satellite powered by the Sun and is unique in its ability to stay in the air for weeks or months. It holds three world records for altitude and duration. It started as a hobby which many dismissed as “it will never work”. Soon enough there were people tapping watches and asking “where is it?”

 

Bringing things back down to earth briefly, given your involvement with solar and battery technology on Zephyr, what’s your view on these two technologies in meeting future energy needs?

I think with regard to solar, the efficiency of the cells and scalability of production will be key. New production methods for amorphous triple and quadruple junction solar cells are really interesting. Scale in supply is a significant gap which needs to be crossed in order to lower costs and lead to widespread adoption. A lot of energy tech faces the same catch-22: scale is the way to lower prices and lower prices are needed for scale.

What Tesla did with its home battery (Powerwall) was significant in pairing cars and homes to batteries. The more this technology can be scaled up the faster it can lead to mass adoption. The basic Tesla Powerwall is quite undersized but even if it was sold at zero profit it still makes sense for Tesla do it to drive up scale and drive down the costs for car batteries.  One of Musk’s other companies, Solar City, will install solar cells on your roof that make more financial sense with some home storage so it is an easy upsell.  Regardless of how effective this particular home battery is, it’s a smart business move and it certainly makes the market more credible for other suppliers.

We’ve been told that fuel cells will be important for a while now.  The date changes but the rest of the slide deck looks the same. For most cases, fuel cells don’t make sense to me as the round trip efficiency is too low. Unless you were immediately going to use a substantial amount of the energy stored for heat generation anyway, batteries are the answer for home storage.  For cars the rapid recharge was attractive but rapid charging batteries are coming and you still don’t want all that heat.  For some bigger solar electric aircraft, fuel cells may well make sense with specific designs.

 

What are the applications of HAPS? How do you see them as addressing significant global issues?

HAPS of course have a military use for surveillance and communications but the commercial applications are probably more valuable. HAPS are cheaper than orbital satellites and produce better quality imaging and communications with better spectrum reuse. In a commercial capacity Earth monitoring could be applied to pollution monitoring, agriculture, border controls and sustainable fishing to name a few. The potential to sample weather and atmospheric composition directly, something satellites can’t do, is great. That side is exciting but it can be difficult to find a customer with cash for global scientific missions.

 

 R+D in this area is often military funded. Given the commercial applications of HAPS, do you see investment diversifying?

It’s hard to see where funding in HAPS will go. We have already seen huge amounts of money being poured into it by Google and Facebook given HAPS applicability to enable internet connectivity throughout the developing world. I expect that just like satellites the first customers will be (and have been) governments followed swiftly by commercial communications, which will come to dominate.  The science missions will wait for the economies of scale to drive the cost right down.

 

Business is often about mitigating risk and shaping perception. What risks do you see in terms of perceptions of UAVs in getting HAPS funded and widely deployed?

Unfortunately, the word drone gets used a lot and often these refer to quadcopters used by amateur photographers and hobbyists. They can pose significant threats in civil aviation and when a bad enough incident occurs there will be a backlash against all Unmanned Aerial Vehicles.

Having said this, regulators have been very accommodating in the projects I have worked on, allowing special permissions to fly within busy airspace in Europe and the Middle East for example. The safe answer is always ‘no’ so I have been really impressed with some of the enthusiastic efforts by these regulators to help us get to a ‘yes’.

It has been significantly harder to agree arrangements for regular routine flights, which is likely to involve legislative change. Right now, a lot of regulators are inundated with requests for flying multi-rotors straight off eBay (and that’s the operators who request permission). That workload is only going to increase so I feel quite sympathetic towards them.

 

What’s next for Archangel Aerospace?

Well, we are moving offices to Oxford. We are going to set up shop in Harwell, a hub for innovative space technology. Using our expertise and knowledge we want to carve out our own niche in the emerging HAPS market, as well as working on some lower level UAV and payload products. We think we are onto something special and have a pretty clear vision for the future but the key for us is to rapidly get to a testpoint for each product as early as possible.

 

Lastly, what did you think of Star Wars (the latest film instalment, not Reagan’s Cold War defence initiative)?

I thought they played it safe to be honest. It’s the 4th time they’ve blown up the Death Star or something similar so some new ideas would be nice. It reminded me why I wanted a lightsabre as a kid growing up in the 80s. It’s hard to hate on a Star Wars film so long as there is no Jar Jar Binks so I think it’s a thumbs up.

 

An interview with the founder and CEO of Export Technologies, Daniel Loughlin

Daniel Loughlin founded Export Technologies, an eCommerce platform provider and consultancy, in 2005. To date, their eCommerce platform, the IRP, has transacted over £1 billion in retail eCommerce sales in over 180 countries. I caught up with Dan in order to delve deeper into the world of eCommerce and entrepreneurship.

How would you define an entrepreneur?

From my point of view, it is someone who can create a viable business out of an idea.

How did you come to be an entrepreneur?

I was initially a programmer and had a big interest in eCommerce and still do, and an opportunity arose. Because I was able to facilitate the eCommerce side of it, from there I really developed the business out of that. I didn’t set out thinking I wanted to develop the business but it happened because I knew how to do the eCommerce part of it so it was a very quick and natural thing to do. I’m sure a lot of people in the technology sphere materialise in a similar way – they start with an idea and the business comes afterwards.

If you could go back ten years, would you do it all again?

I’d possibly do it slightly differently. I think one of the bad things in many ways about technology is that it’s not quick. It takes a lot of detail and a lot of time. The length of time you have to sink into these projects makes you question doing it. Saying that, I still enjoy the area that I’m in and it remains very interesting. As you get to learn things, you do realise you could have made a few quicker decisions in the early stages.

How would you encourage someone to get involved in the world of eCommerce?

I am positive about eCommerce, but it has moved on from where it was 4-5 years ago when my answer would have been “get involved” and it was still possible to grow businesses very quickly. I would say now that people should get involved to maintain or expand the market share. To find areas of huge growth in a pure selling sense, you’d have to pick your market very carefully and have absolutely the right technology.

I think the best time to start a pure eCommerce company would have been between 2000 and 2004, after the end of the first boom.  There is a lot more money to be made on the technology side of things: efficiencies, solving problems et cetera. On the shop and selling side of things, it’s definitely getting more competitive.  For serious growth markets I think people should be thinking about selling internationally instead of selling here. Look for demand and think about selling some of the high quality products that we have here and carve out a niche.

You were partly responsible for growing Chain Reaction Cycles into the world’s largest bike store, achieving a turnover of £180m. How did working alongside CRC have an influence on shaping Export Technologies into the company that it is today?

I think it had a big role to play because it essentially allowed us to fund our R&D and was a very nice position to be in. So because of CRC, we became an R&D organisation instead of a selling organisation and remained there for a long time creating a great product.   It was also a great opportunity to learn a lot about the way that online markets work in depth.

You’ve previously mentioned that you got involved with CRC at a time when there were strong tailwinds in the cycling market. In which markets do you think we are currently seeing strong tailwinds?

In my view, you can make money in most markets. You need the right technology and the right choices – it will not just happen. Unusually, there isn’t enough focus on a pure sales angle. Probably because the world of online selling is a bit more opaque. But companies need to get real skills in that area in order to really get on top of the key metrics and they key channels. Unfortunately, these require a lot of detail in order to make them work properly. Not being able to physically see your customer is a challenging thing. Normally, you meet your customer. You can watch them, talk to them, and learn, and in the online world you’ve got to shift your thinking into a different way of doing that.

If I was to pick a niche, I would be thinking carefully about what the populations of the growth economies are consuming, and whether or not we can supply them from here. For much of the world’s history, China has been the largest economy. I’m not sure about the restrictions, but I’d look at Eastern markets e.g. do they consume something that we can supply from the UK?  If there are no export barriers then whiskey might be an example. There will definitely be growth areas like that. People need to look at poorly serviced markets where there’s a demand – companies like us are useful in trying to analyse these markets.

What are your main aspirations for Export Technologies over the next three years?

I would like to really strengthen our technology and simplify it so that it reduces the barrier to success – that is a key thing. Commercially, I’d like to see a wider adoption of the technology because I believe it’s very strong.  And also to grow the business in a structured way, based on a strong value proposition. I believe our IRP technology and our vision of “Commerce in a Connected World” can have an impact.

When you’re not doing all things eCommerce, what do you like to spend your time doing?

I spend time reading about the area I am in, business in general, and current affairs. I enjoy competitive sports; playing them rather than watching them and getting away from the computer screen in the outdoors.

Sometimes I think about the impact our work has, and the bigger impact of Information Technology; the area we are in. There are competing forces in our own area of Commerce – between ‘buy local’ and ‘buy global’ so it will be interesting to see how this shakes out. I think most of us are spending more time interfacing with technology, and less with other people which is a change for society. There are also issues of personal data and security brought about by the way communication has changed that society is yet to catch up on.

Introducing SprinkleBit: the DIY Investment Revolution

Alexander Wallin moved to the USA from Sweden in 2007 to pursue a Bachelor in Economics at the University of California, San Diego. Today, 6 years later, he is running the social online investment platform SprinkleBit and has secured seed round funding of $800,000. Fellow Swede and RIG summer intern 2013 Erik Lehmann caught up with Alexander between volleyball tournaments and equity research sessions to check in on SprinkleBit’s progress and Alexander’s view on raising capital.

First off, congratulations on winning the San Diego Business Journal’s Innovation Award for financial innovation.

Thank you very much. I was quite surprised to be honest but obviously very honoured, especially when looking at all the other very strong nominees that we were up against in the final.

So tell me about SprinkleBit. What are you doing and what are you trying to achieve?

What we have today is a stock simulator, where you can buy and sell virtual stocks using “SprinkleBucks”. We have “The SprinkleBit University” where you can educate yourself and learn more about the world of finance and then the social network where you can communicate with friends and experts. In the fall we will launch our brokerage service so you can trade real stocks with real money.

When I signed up for SprinkleBit about a year ago it was free. How are you going to make money?

It is free to sign up for SprinkleBit because the key to building a strong social network is to have an extensive user base. However, when the brokerage service rolls out we will, like the other brokers, charge a commission on the trades. Our marketing forecast predicts 3000-5000 new users per month and conversion rates of about 20%, meaning the 20% of people who sign up will actually start to invest.

Between 3000 and 5000 new users per month is quite impressive. What is the secret?

Well, apart from being good at using Google Ad Words and Facebook campaigns, a recent study we did showed that we have a viral coefficient of 4.57. That is, for every person that signs up at SprinkleBit, they get an average of 4.57 of their friends to sign up as well. That is a very efficient way of growing a user base.

What is your vision with SprinkleBit; how are you going to change the world?

If we consider 10 years from now, SprinkleBit will be the social investment platform. SprinkleBit will be where you will turn for everything finance related. Be it securities-investments, the financing of a new loan, or setting up a credit card. All of these services will be consolidated on our platform and at the same time you can communicate with your peers through our social network. You will discuss your social life on Facebook, jobs and careers on LinkedIn, and finance on SprinkleBit.

How much funding did you raise and what were the biggest challenges in doing this?

To this day we have raised approximately USD 800.000 as a seed round. The investors are mainly family, friends, and friends of friends. At SprinkleBit we are building quite a complex product which posed a challenge in that it makes it harder to receive VC funding as they want to see a minimum viable product. If your business idea is to sell shoes over the internet, it is pretty easy to show an investor “Here are the shoes and this is the guy who is going to build my website”. We have a very good ongoing conversation with a couple of VCs but it is too early for them to make any investments yet. They are willing to wait until we have more traction even if the price will be higher.

$800.000 is a lot of money. If I said it is easier to raise capital for start-ups in the US than in the UK, what would be your response?

I disagree. I think people generally base that opinion on all high profile VC investments they read about in the news. If you would actually look at the earlier stage deals involving angel investment rather than VC investment, I would agree that there is indeed more capital available in the US than in the UK, but that the large number of firms competing for it offsets any advantages for US start-ups.

So what do you think is the key to succeed in raising capital?

First of all, I think a lot of companies go wrong in that they do not know what exactly they are raising capital for. They start with a number instead of a purpose which is not going to get you anywhere. Secondly, I believe in maintaining a network of potential investors that you continually keep up to date with your progress. The important thing there is to not send out messages saying “by January 2014 we will have 40.000+ users” or next year we expect do to a, b and c. Instead, the focus should be on letting them know when you have done something interesting or are starting something new. That way you can maintain a positive dialogue without the risk of diluting your word based on complex predictions about the future. Finally, focus on investors that either know your team well or know your industry. That will save you loads of time and negative answers.

Thank you very much Alexander and good luck.

Thank you.

Post by Erik Lehmann, Summer 2013 intern

"The crowd as a whole is smarter than any single person"

Paul Higgins was a consultant with Rapid Innovation Group from 2005 to 2012, when he left RIG to co-found Crowd Valley. Crowd Valley provides the platform and back office services for crowd funding, peer to peer investing and alternative asset marketplaces for securities professionals. We caught up with Paul to find out more about Crowd Valley’s growth and his views on crowdfunding.

Why should a customer choose Crowd Valley as a platform?

Crowd Valley is a spin out (of Grow VC) which has been going since 2008. We have been involved in the sector since before it all began really.

Grow VC was the first global equity-based crowdfunding platform and it served as a real proof of the concept of crowdfunding in diverse countries across the world.

$3 million has been spent on the product over 5 or 6 years and we have conducted a lot of Beta testing with partners which means that the platform is stable enough to offer to customers. No one else is in the position of having so many years of trying and trying again as our group.

Technology is only a part of it; it’s a prerequisite. We’ve been involved in advising governments and regulators around the world and customers appreciate that. It means that we’re able to offer guidance as well as providing a tech platform.

How did Crowd Valley come about? Why did you see a need to spin it out of Grow VC?

Grow VC started in 2008 and we ran what is now Crowd Valley out of there for a few years. We had an interesting model based out of Hong Kong, with a few financial structures to make it work. The question was always: “how can you grow something into a world class company given the regulatory restrictions around the world?”

Could we license the software out? Could we have a company represent Grow VC? This is actually what happened in India and China and we licensed the product there for a while. Grow VC eventually pulled out because it became too complicated to maintain the technology as separate installations.

So we rethought things again and built the software again so that everything would run on the same central infrastructure, allowing people to operate their own platform.

The real impetus was the JOBS Act and we realised this area was going to be quite a big deal. Crowdfunding hadn’t received any US government approval before then and we didn’t know whether it would continue to be banned in the US or not. When we realised it was going to be big, we wanted to be ready so we created a separate holding company to deal with that.

Grow VC has continued to spin out different financial companies to deal with different areas.

Where do you see Crowd Valley in 3 years’ time?

If you include all the customers we took on last year during Beta testing, then we’re working with hundreds of companies around the world, spread over five continents. So we have a big presence already.

Over the next few years, we need to improve the usability of the product. We would like to see some of the most successful crowdfunding operators in the world using our platform.

We are also interested in connecting people in lesser known markets, as that type of thing is still important. We’re trying to build something which provides different methodologies for investment.

In 3 years’ time there will be a clearer set of regulations and more countries who will have come out with their own set of regulations.

Do you think equity-based crowdfunding is better than rewards-based crowdfunding?

There’s space for both as they’re not really competitors. They’re useful for different industries and scenarios.

Kickstarter has given crowdfunding such prominence in the media and it was able to get started much faster because it required no regulation and worked much like donation websites such as JustGiving.com in the charity sector. Rewards based crowdfunding appeals to the public because it has an endpoint; an output, and is generally used to fund arts and cultural projects.

One of the first things invested in via Grow VC was a green showerhead in Australia. They had their prototype but no distribution or distribution facilities. They needed $100,000 and the equity-based approach was their only option as they were operating in an area where the general public don’t really understand what you’re doing because it’s fairly hi-tech, and there’s nothing to give away as a reward.

The “democratic market” concept is fairly prominent on your website. Is it something that you came up with?

It’s a market where people decide “what’s good” and “what’s bad”. Financial markets usually have a middle man controlling the information and the access to buyers and sellers. You need a middle man otherwise there’s no way for buyers to engage with sellers; like banking.

10-15 years ago you weren’t able to check your balance or make a transfer without going into a branch and talking to someone face-to-face. This is essentially still how the investment world works, even though the rest of the banking sector has already moved on.

The crowd as a whole is smarter than any single person. The Crowd can evaluate as you go which provides more validation than any single person.

Crowdfunding seems to be providing new sources of investment for companies which might otherwise have struggled to secure funding. Mike’s Fancy Cheese recently managed to raise £80,000 from 100 different investors on Seedrs. So is crowdfunding here to stay?

Mike had apparently already collected a load of potential investors and Yorkshire’s leading cheese manufacturer had decided that his company was the future of cheese. Cheese is also something that people understand because it’s not hi-tech.

The crowdfunding platform still provides an opportunity to connect people who know about a niche market. It’s a much more efficient way of securing investment and is less likely to fall down. Much more financial systems are moving to models like this so I don’t see why anyone would go back once you are able to do this.

Roughly 45% of Americans don’t invest in a pension scheme. Do you think crowdfunding will provide more options for people considering their long term financial security?

It will give them another option I suppose. In a lot of the customer cases we’re seeing at the moment, people don’t see crowdfunding as an alternative to other forms of investment.

A pension scheme might use a crowdfunding platform like ours to maintain a better relationship with their customers. I don’t see it changing how people invest because if you invest $1,000 over 40 years, you might get one or two great companies, but it isn’t going to be transformative.

I suppose the whole process of investing has been made easier to understand. Whether it’s real estate or shares, people will start getting used to investing and used to doing it online so it will be interesting to see how that plays out.

The biggest change that the JOBS Act will bring is that you will be able to advertise the fact that you’re looking to raise money. Right now, if you tweet or advertise that you’re looking for investment then you can get into trouble with the SEC. Once that part of the legislation is finalised, we might see a situation where anyone will be able to write on Facebook, Twitter, advertise on the Metro etc. People might see that type of advertising and decide to invest. Whether or not that convinces people to start investing in different things, not just pensions, remains to be seen.

And finally, on a completely separate note, what is your favourite song and why?

I used to be a DJ once upon a time, when I was at Cambridge. I used to run these nights in Cambridge and arrange trips down to London. The music I always used to play was House; people like Masters at Work, during the early 2000s.

There was this movement called Africanism which tried to get African and American beats into House music and people like Bob Sinclar were instrumental in this. It was round about when David Guetta got really famous that I decided to check out.

So based on that, my favourite song is Madan by Martin Solveig.

 

"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.

 

 

Smart Connections – Networking with Shhmooze

Shhmooze is a smartphone app that makes networking at events and conferences fast, smart and effective. Michelle Gallen, founder and CEO at Shhmooze, explains how every event junkie out there can benefit from Shhmooze and why she admires founders.

Could you start by explaining what Shhmooze is about?

It comes from the fact that we felt that networking really sucks, it’s hard work, it’s painful, it’s time consuming, and most of us are actually pretty rubbish at it. However, networking is really important when you are in business and even more so when you are in the startup world. I have been in this space for quite some time now, and I felt that there has been a need for a service like Shhmooze.

Shhmooze is a smart phone app that allows you to make smart connections by helping you to check-in to events, both massive conferences like Le Web as well as smaller meet-ups like Tech Club.

When you check-in with Shhmooze, it will show you who is at the event. This is done by analysing a lot of publicly available social media and network data, and as a result we don’t only tell you who is at the event, but also who you already know there, and more importantly, we provide you with smart recommendations of who you should talk to. In conclusion, Shhmooze helps you make smart connections so that you can have fantastic conversations at any event you go to.

How did you come up with this idea? Was it because you went to so many events and got frustrated that you couldn’t connect with people in a better way?

I am definitely an events junkie but it’s a little bit more interesting than that. In my early 20’s I had a brain injury and I basically went from having a fantastic job, working on Regent St, being super happy and active – to being sent home to my parents in a wheelchair. I had to spend a lot of time learning how to do a lot of basic skills again, such as learning how to walk, and how to read and write. I spent a lot of time working with technology to support my learning process. I had memory problems and I needed to often look things up when I was out, so when the first smart phone came on to the market I jumped on it. This made me realise very early on that mobiles could help my brain.

I love to go to events and to meet new people. However, as a result of my brain injury I have prosopagnosia, which means that I really struggle to recognise names and faces. So when I was looking at my mobile one day, I thought about how my phone actually has information about where I have been, as well as information on where all these other people have been via Twitter etc. Therefore the phone can basically scan the room for me, and let me know who I know. It is something which can really help me on a personal level but actually, it also helps a lot of other people since many of us struggle with networking.

How long have you been working on this idea?

The company was formed in April 2010. The technology was built over two years in order to be really solid. We wanted to make it right, and not turn it into a service that is about shouting out that you are in a room and that there are 50 other people there too. We wanted it to be about creating an understanding to why someone would be at a particular event, understanding to what level they want to be connected and to understand what they might want to talk about. We want to make things happen in the real world.

What is the market like for an app like Shhmooze?

I am going to be generalist about this. I think maybe 95% of the competition consists of generic conference apps that are based around the conference organisers’ needs. Sometimes these apps only work at one event since the conference organiser pays for them. There is also another section of apps, which are more about discoverability and work to inform you that this friend of a friend is having pizza at the same restaurant as you are.

I think the difference is that when I go to a conference, I am switched on and I am there with a purpose, that’s when I want to know whom to talk to. I don’t think that there are a lot of apps in this space, and I don’t feel like a lot of people have done the same deep thinking as we have.

What is your strategy for monetisation?

We have a freemium service that anyone can use, but if you are a power networker, then you can purchase additional features. We also work with conference organisers. We offer to upload schedules and speaker profiles for free, but for a certain fee, give them to possibility to have their own brand on the app.

Considering the fact that you seem to be a very avid conference-goer it would be interesting to get your point of view on the startup community in London. Is there a community, especially in regards to Tech City, and if so does it provide any support?

I think it is kind of like the music scene, at first you have an underground scene and for a while, everyone thinks it is cool and then it goes mainstream. I think what Tech City has done is that they have identified a scene, and they are now trying to find a way to consolidate it.

To have the government behind you is very powerful, even if it’s not the only solution to sustain London’s tech community. I think we need a more solid support and slower voices – and you also need the renegades and the anarchists, the people that are out there pushing it. I think Tech City is just part of an interesting support system that is happening. The one thing that I am little bit concerned about when it comes to Tech City is that it seems to be such a focus on geography. I think it we would be great if we get over spatting over geographical boundaries and instead focused on the amount of amazing tech startups that we actually have here.

I know you have been involved in the entrepreneurial scene for quite some time now and I was just wondering what it is that you personally find to be the most appealing factor with this choice of career?

Well, my father warned me to never gamble, as we have had gamblers in the family that had bet their entire savings on a horse. So I didn’t go into gambling, I got involved in startups – which is obviously completely different…

I left a career at the BBC to do my own thing [TalkIrish.com] and after that I just kept on going. I think you have to be somewhat of a risk taker. Personally, I had no guarantees when I left my job, I just walked. You will need a great deal of confidence in the fact that everything will work out.

I think founders are different from people that join startups. I have a massive amount of respect for individuals that have actually founded companies, the people that grind away and do a lot of deep thinking. Founders are an incredible, interesting species.

Do you think you are born a founder or do you think it involves a certain set of skills that you can learn over time? Do you think anyone can become a founder?

I think anyone could do a startup but I think that you wouldn’t be really interested if you are not a certain type of person. I think founders are usually people who are risk-takers, and people who can see potential and not resist the opportunity to do something they believe is right or try something new because they believe they can make a positive difference. There are plenty of people out there doing startups because they know that what they build will generate money, and that’s great too, but for me it has always been about creating something which will make things better, and then I try to come up with a revenue model.

Interview by Philip Gasslander

"I realised how much more satisfying it is when you are able to pursue something you are truly passionate about."

Founded in London in 2011, Payumi is an online service that makes it easier and more efficient to collect money from friends or colleagues for a wide variety of social situations where people need to share the cost. Khurram Farooq, Founder & CEO of Payumi talks to us about the different challenges entrepreneurs face during the startup process and why he believes Payumi will change the way we manage our social financial relationships.

How did you come up with the idea behind Payumi?

Given my background in technology and digital media, I was pretty set on doing something in the consumer internet space, and I had a stack of ideas that I was considering. Payumi won over the others because it is a very simple proposition that addresses a real need. People immediately got what I was talking about and so it passed the elevator pitch test 100% of the time. Thinking back to my time as a student, I remember falling out quite dramatically with a good friend over a gas bill and it occurred to me that building a solution to prevent this problem was obvious and long overdue. (Alex, if you’re reading this, you still owe me £27.50!)

Everyone I spoke to about the idea immediately shared with me some of their own furstrationsfrustrations about the process of collecting money from a group and in particular how painful and awkward it can be often leading to stress and even arguments. Through this process of talking to potential customers, we developed the product so that it could work for a wide variety of potential social situations where friends need to share the cost. It was very quickly clear that our solution needed to be flexible enough that it could be applied to just about anything.

I definitely think that the need is there. If you have lived in this city long enough, you know that sharing bills and paying for things as a group is part of everyday life, but do you think this need is big enough to facilitate the behavioural change needed for Payumi to succeed?

As people are increasingly maintaining their social relationships online, it’s astonishing that we still continue to organise group finances by emailing round bank details or worse still collecting cash and cheques. Almost all social activities involve shared expenditure and so the piece that is missing from the equation is how money fits into people’s online social life and this is where Payumi comes in. People are always looking for new, easier and better ways to do things and so I think Payumi will solve a lot of problems for a lot of people.

What was the biggest challenge you faced in the process leading up to the launch of Payumi?

There were a number of different challenges. I think the first big challenge for me was to find a good technical lead as I am not a technical guy myself, a problem which a lot of founders that are not technical often encounter. The second challenge was of course to get some funding. As a result of my background in investment banking, I had a pretty good network of founders, investors and other people that I could speak to, many of whom I had enjoyed working with before or knew through other connections, so that is how we managed to secure our initial funding. The third challenge is building the right team and I think the idea helped a lot here as some really cool and talented people were as passionate about it as me and wanted to get involved.

How has the product been received by consumers so far?

Everyone loves it! Like any new consumer internet start up our biggest challenge is to just make people aware that it exists. Pretty much everyone coming on to the site ends up ‘liking’ us or saying good things about us, so the initial reaction is thankfully a good one.. We are still building new features in response to feedback and iterating the product rapidly so the product will get better with time and soon move onto mobile as well. We are launching to the public fully next week so these are exciting times for the team. We’re confident people will finally say goodbye to using email, bank transfers, text messaging, phone calls, spreadsheets or notes on the fridge to track and manage payments from friends.

How do you view the market for this type of service and have you identified any potential competitors?

I don’t think there is anybody in the UK market that is providing this kind of service in the same way that we are. There are a couple of companies in the US, such as WePay and Paydivvy who have tried to address the problem by becoming deposit account providers which let you create group bank accounts where one individual administers that account on behalf of the group rather than providing a direct money transfer service between friends. In fact, WePay is now much more focused it seems on pursuing smaller merchants and trying to win business off PayPal.

There are some other players in France (Leetchi) and Germany (Friendfund) but both of these work quite differently to Payumi so I think there is a real gap in the UK market where we can establish ourselves as the leading market player for direct, many-to-one peer to peer social payments. We have a unique model and while we are focused on the UK market for now, we will look to deploy it internationally in due course.

Being located at Hoxton Square, arguably the heart of Tech City, what is your experience of the east London start-up community? Do you feel like a start-up community exists here and if so, have you felt any support from it?

There is definitely a great community here, even though we didn’t locate to East London because of that reason, it was more a matter of convenience for us as we all live in the area and we were lucky to find some great office space nearby. Being part of the community is cool though as being a founder can sometimes be quite a lonely experience unless you have other founders around who you can talk to and who you know understand some of the challenges you face because they have experienced similar things themselves. Having said that, we probably haven’t leveraged the community as much as we should have because we have been very focused on building the product and the team and already had funding in place, but the community is great for keeping up to date on what’s going on in tech in Europe and for the opportunities to network, work with other start ups and share knowledge and experience.
How did you make the decision to leave your job and pursue a career as an entrepreneur?

As a corporate finance advisor focused on technology and media businesses, I used to advise entrepreneurs on strategy, raising finance and mergers and acqusitions so I was curious about doing something for myself – something which I really considered to be fun. I was always so inspired by the entrepreneurs I met who had started from scratch and turned their companies into really valuable businesses but also into great places to work, while having a lot of fun doing it. I felt that I also wanted to build something from the ground up.

So, finally I guess I just took the plunge – luck and serendipity played a part in that I was forced to take a career break to allow my wife to pursue her career in Psychiatry with a 6 month secondment in New Zealand. While I was there, I learned to fly a plane – something I had always wanted to do – and I realised just how much more satisfying it is when you are able to pursue something you are truly passionate about. When we returned to London, I was very focused on building a company and have never looked back.

Do you think there are any specific skills entrepreneurs need in order to be successful?

Persistence, passion and a belief in what you are doing. You also need to be a bit of an all rounder and be able to lead and motivate a diverse team to achieve success. No matter how stressful my day is or however complicated the situation I am dealing with, I still relish getting out of bed in the morning whereas in my corporate job I always felt a bit stifled and often wished I was doing something else.

As Steve Jobs once said in a letter to new Apple employees, There is work and then there is your life’s work – this feels like my life’s work and I am enjoying every minute of it.

Interview by Philip Gasslander

"Building a product that people want" – An Interview with Dragos Ilinca, CMO and Cofounder of UberVU

Dragos Ilinca is the CMO and cofounder of UberVU, a social media intelligence company with bases in London, Bucharest, and the USA. Dragos began our interview by describing the genesis of UberVU as it evolved out of a web-marketing consultancy into a social media posting platform, into a social media monitoring tool, into its current form as a social media dashboard with social media intelligence.

In your opinion, what is the most difficult part of getting a startup off the ground? Is it getting funding, working together as a team, is it actually developing the product, or something else? Or is it everything in combination?

I think it’s everything in combination. It all comes down to building a product that people want because I think everything falls into place from that. Of course in order to build that product, you need a team. We were lucky because we had known each other for a lot of years, we had started other businesses together, but I look around and a lot of people are looking for co-founders and I think that’s really, really hard, finding someone to start a business with. And once you do that, its about just building something that people want—even if it’s a minimal sort of version—because if you do that, raising money shouldn’t be difficult. If you manage to build that product, that kind of means you’ve got a team, and if you’ve got that team and product, raising money should come pretty easily. So in our case, I think it was definitely figuring out what product to build, but I see a lot of entrepreneurs who are starting with building a team, especially in places like London where developers have so many options to choose from. They could work for, you know, the finance industry, or an already-established startup, and if you’re just starting out it’s difficult to get talented people to join you.

Perhaps it’s too early to ask this question, but in terms of your experience working with social media, how do you adapt? How do you know when to stay your course with your vision for developing a product, and how do you know when to pivot? The social media world is constantly changing, so how do you adjust for that?

I don’t think there’s an easy answer to it, but it kind of comes down to traction. If nobody likes your product or buys it, you need to do something about it. If you have a few people who really, really love it, then you need to understand who those people are and why they love it, and if there’s an easy way to reach more of them, that’s your whole market. And if you’re happy with that that’s fine, but if you need a way larger market, you can potentially work with them and figure out what a dumbed-down version of that product is. I think the most difficult thing is actually making the decision. I think deep down you kind of know when things aren’t really going well, and you can stick around for three months, maybe another six months and see: make a plan, and just say we’ve got this deadline and if things don’t pick up we need to do something about it. But I think people deep down kind of know, but they’re just afraid to make a decision. You need to be able to say, “What we’ve done so far, yeah, it’s a lot of effort, but in the end, people aren’t really paying attention to us and aren’t buying the product, so tough luck. We need to start all over again.”

UberVU strikes me as a pretty advanced mechanism, integrating social media and media monitoring. Do you think the days of simplicity in application development are over? In other words, do you think the skill-level required to produce groundbreaking apps will only become higher as times goes on?

Probably. That’s probably true. Because we’re a business tool, so from that point of view, we need a lot of technology to do what we do. But look at something like Instagram, for example: there’s not a lot of technology in there. If you think of technology just in terms of code, you know, other people can build that kind of stuff in a weekend. If you think of technology as also the mechanism by which they’ve been able to build viral coefficients in it so that it spreads and that kind of stuff, then that’s very difficult to replicate by other people. So I think if you’re building consumer apps—if you know what you’re doing—you can still get away with not having a highly technical solution. But even so, if you look at Colour, they’ve got pretty hardcore technology in there, and it’s just a photo app, more or less. So even these things are becoming more and more complex, and I think the reason is that you can do so much more now with the technology and the stuff that would have been impossible to do in real time is now possible, so you can build a lot better experiences for the user; and the second thing is there are so many people looking at the tech space, that if you build something that can be replicated within a week, and you’ve got absolutely nothing else that can make you succeed, then it’s just not worth it, because other people will copy you ASAP. Just look at Groupon as an example. A lot of people think it’s the technology and they built that in a weekend and there are hundreds of clones; but actually the difficult part is the sales behind it, selling to small businesses and being able to scale and that kind of stuff. So if you think about that as sales, not really technology, but technique and strategy, then it’s very difficult to replicate it. In terms of actual code, some people can probably build that in a day. But it’s not that that makes it work.

Since you’re the CMO, I wanted to ask a marketing related question. Since uberVU and so many applications are so heavily grounded in the online world, how important is actual person-to-person interaction in marketing?

I think it’s still important to have the in-person interaction. Not all the time; we started selling online with credit card, so it wasn’t necessary to meet anyone at that point. You could, you know, make the product and the company look more human by having photos of the members of the team on the website, having a video where you present certain stuff, having a blog that’s very human, but now that we’re moving more into the enterprise space and we’re starting to get customers like NBC or the World Bank, for these sort of things it looks like it’s pretty important to meet face to face, and if you cannot do that, at least have a few phone calls. I think the higher price you charge for what you do, the more you need that sort of relationship. And it’s not just because of the person-to-person interaction; usually if you’re charging a lot of money, the solution that you’re selling, you need to really understand the customer’s use case and be able to show them how the product is really going to make an impact. And these solutions are usually pretty complex, so it’s not like a photo sharing app: you take a picture, you share it with your friends, pretty easy to understand. It can be pretty hard to articulate just from a website and understand exactly how that could be used in your organization, and understand how easy it is to use even though it’s got this breadth of features. It’s hard to make the jump from, ok I see this demo video, how could I use it for my specific use case? It’s very difficult to understand that. And people just don’t have the time and don’t want to take the effort, so instead of researching that tool for 30 minutes and not understanding, it’s sometimes more useful to say, ok let’s just have a 30 minute phone call, you’ll tell me about it and I can explain really easily how we can help or how we won’t be able to help and you’ll probably need some other tools.

 

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