A conversation with RIG’s founder

RIG Engagement Manager, Ffion Rolph, sat down and interviewed Founder and Managing Partner, Shields Russell, over a series of face-to-face meetings. Here, Shields shares his thoughts on RIG’s history, its evolution, and its future.

 

FR: Is it fair to say that RIG’s market focus has evolved significantly in the last few years?

SR: I think that ‘evolved’ is the key word. We have certainly increased our focus on energy, natural resources, and major industry. This was deliberate and we now have some portfolio companies with terrific technologies in this area.

 

FR: But you didn’t just stumble into these areas?

SR: No. In part, it has been a decade long evolutionary process of reflecting on where we have had most success and greatest impact.

 

FR: I assume that the emphasis around IP rich technologies emerged out of this process?

SR: Very much so. There are several sources of competitive advantage that are defensible to varying degrees: brand, business momentum and market dominance, business model, and intellectual property (IP). We strongly bias IP for the simple reason that proprietary technology is the most defensible advantage a company can possess. It reduces, if not eliminates, the threat of replication. Unburdened by the threat of commoditisation, it less susceptible to pricing pressure. In a B2B context, it is an asset that can be exploited exclusively by the ‘creating company’ or through that company granting rights to other organisations.

I would say that while we are attracted to IP rich technologies for these reasons, I am conscious that the technology must be decisively better than what it replaces. It must do a much better job. You can make money though delivering marginal improvement but you can make a whole lot more if your product is in a different class.

 

FR: What other factors have informed the current focus?

SR: In my case at least, getting older has also played its part. It’s the big, global, long run challenges that most engage me. These challenges have really important social and environmental dimensions. They really matter. And, of course, addressing massive challenges can offer huge economic opportunity.

I am never oblivious to the mission and political aspects of these challenges. My second job was as a teacher in Botswana. I earned about the same in a month as I had in a half a day in my first business in New York but the mission was more important. More meaningful. For me, commercialising a technology that directly contributes to sustainability is simply more motivating than building a sales operation for a B2B SaaS application that delivers greater efficiencies. Mission driven challenges have a great ‘why’ and I love that.

 

FR: The largest group of companies in RIG’s portfolio is focused on energy challenges. What has driven that particular angle?

SR: Energy is such a critical space as it lies at the heart of the climate change challenge. I cannot see any other way of tackling the acute energy challenges the world faces other than through adopting new, more efficient technologies. You cannot dispute the need but that is not the same as saying that new energy technologies can just turn up and the world will be their oyster. I think that is where a lot of the first wave of cleantech companies were wrong-footed. There was a lot of vision and a lot of big numbers but finding that market that could give the company traction often proved a bridge too far.

 

FR: So market discovery is a critical element of the process?

SR: That is the essence of the challenge and perhaps no less challenging than creating the technology in the first place. Finding high momentum applications and engineering adoption is a huge, often quite complex, challenge and that is where we can play a pathfinding or scouting role. In terms of building a market, innovators need to think small to get big. They need to identify and then offer a superior solution to a specific energy challenge. That is very much what we do. It is where we fit.

 

FR: Is it accurate to say that RIG’s more focused approach also reflects a broader trend in the venture space?

SR: Yes, that is a good observation. When I was first involved in what you might call the ‘start-up’ scene, entrepreneurial ventures where generally lumped together. Many start-up events reflected this. Now, of course, you have events for different tribes – those involved in FinTech, EdTech, or CleanTech for example. Many VC firms used to have partners focusing on investments in a several fields and, of course, many still do. But now you see much more focus which makes a lot of sense. I imagine that several VCs all with a focus on a single area, let’s say consumer internet, makes for a much better conversation and investment decision than a group of VCs each with a different specialisms. I think it is a reasonable assumption to say that the most successful Series A investors are the ones with the most focus and the most evolved investment theses. So in our way we are very much aligned to this trend.

That said, as a firm focused on innovative technologies, I think we must remain open to possibilities that lie outside our declared areas of focus. Those areas of interest we call our ‘column’. That ‘column’ is permeable with purposely ill-defined parameters. It is in many ways a tool that drives our internal discussion. What’s in? What’s out?  What’s happening out there? What’s emerging? What are the grand challenge that engage us? We have to remain alive to the non-linear developments and the emergence of new challenges that cannot be addressed simply by improving on the thinking and technology that can rise to them in the first place.

For example, we are working on a fascinating and important cyber-security project. It does not lie within ‘our column’ but we are totally committed. It ticks the interest box of one of our partners and that is always an important factor for me. You get the best from an individual when their ‘desire’ coincides with ‘opportunity’. So our focus will always in a sense be negotiated. We are that type of firm. We attract people to come and work for because of what we do and the areas we work in. Equally, we are influenced by how their interests develop. What interests people drives their development and when we work on things that interest us that gives us passion. There is nothing harder than doing a job that commands zero interest. It is like the class you hated at school.

 

FR: Does a more focused RIG mean the firm is becoming more specialised?

SR: We have made some choices that undoubtedly makes us not only a more focused outfit but also a more specialist one. Our future is very much centred on building out market practices where we can combine specialist knowledge and relationship capital with our more generalist ‘how-to’ knowledge. That combination packs a powerful punch. It is an approach that enables to us to codify our knowledge and utilise our contact network much more effectively. In terms of how we allocate our time, engineering licensing deals, building out networks of distribution partners, finding solution partners, or executing high value – and by value I don’t just mean revenue here – direct sales, consumes most of our time. Over the last ten years we have done a lot of business building. We will do a lot less of this type of work going forward.

 

FR: Why put the brakes on what is a valuable activity?

SR: We have accumulated a great deal of business building expertise over the last decade. This widened the scope of our operations to the extent that we had specific experience vested in individuals rather in a shared company-based capability. But the big question for me now is where we best apply this expertise. Helping a company find some product-market fit and achieve some early traction is without question valuable. It is the first staging post on the way to building a valuable business. Building organisational capabilities to take advantage of this is also undoubtedly valuable. There are lots of managers that are well qualified to grow an organisation. The know-how and experience required to build a revenue-generative organisational capability from its early evangelist stage to something that is more repeatable and scalable is fairly hard-to-come-by competence. As it often the case, companies with the beginnings of organisational capability believe that hiring a manager from a larger company in their space will help them navigate this stage. They are nearly always wrong. They have hired that individual too early. Building something from scratch is not what they do.

But for us the problem with this type of work has been one of value perception. Clients place a different order of value on securing first revenues and consequently we have the opportunity to make a healthy return on our efforts here. The same cannot be said for business building work which is time consuming and less glamourous. It is ‘airline’ work – it takes a lot of planning and organisation, creates a lot of value but is rarely profitable. But while we will do less of this type for clients, we shall look to apply this expertise in building more of our own ventures.

 

FR: Where does starting new ventures fit into the picture?

SR: I am agnostic as to whether we are working for companies that are client partners in the traditional sense or companies that we co-founded and part own. What is certain is that in the next five years we will increase the number of companies in our portfolio that we have co-founded and are significant shareholders in. To date, we have been opportunistic. Going forward, we will be much more systematic and objective driven about it. We have learnt from the ventures that we have started not least from our failures. Where we can make things happen is on the commercial side, in mitigating market risk, in introducing the customer into the product development process, and in establishing distribution channels as early as possible in the commercialisation process. In contrast, our natural co-founders are the product-centric CEO or technologist with a prototype operating in our areas of interest.

 

FR: What has prevented RIG from starting more ventures?

SR: The lazy answer would be time. I think we have huge potential as an entrepreneurial platform but in truth we have been reactive rather than working out a more systematic and proactive approach to identifying opportunity. One key element of this is resolving the funding challenge. If you are starting from scratch with each venture, then securing seed funding can be a drawn out process and take an ordinate amount of time. One of our goals in the next 12 months is to develop ‘a bench of investors’ that can fund not only new ventures but can take advantage of opportunities within our client base. I am interested in creating a tight knit group that become intimate with and confident in the work we do, that share our approach and values, and are interested in markets and technologies we are engaged with. We have started talking to some HNWIs and we shall also look to some family offices. I am most interested in investors that will place value on social and environmental benefits alongside financial return.

 

FR: What is RIG offering this investor group??

SR: What we will offer our investor bench has a few dimensions. If we take opportunities within our client portfolio then I think we can offer fantastic dealflow with our involvement acting as a form of due diligence. We know our best clients inside-out and we know the size and nature of their market opportunity. There are two scenarios we will bring opportunities to the table. The first is essentially ‘follow-on’ investment opportunities where the investment is made on the back of substantial market traction and the where the business model has been defined. The second scenario is less straightforward and is best characterised as addressing a short term funding need. Even those companies that are well established and firmly on the path to success are not immune from a variety of problems that can result in funding challenges. Few if any emerging companies can get all their ducks in a row. But if the core product and market fundamentals are in place then there is a great opportunity. The critical thing is to be able to move quickly, to ensure a problem does not become a serious distraction, and to preserve or re-establish goodwill.

With regard to new ventures these may attract a different type of investor. What we want to here is to establish a very structured, gated approach whereby we chunk the commercialisation process in a fairly granular and transparent way and then align funding to each specific stage. I believe that by engaging with the market early, by co-developing solutions to high value problems with industry partners, and by confirming, prioritising and sequencing demand, we can accelerate the time to revenue while reducing both business risk and a new venture’s early funding requirement.

 

FR: What still surprises you after running RIG for more than 10 years?

SR: I suppose I thought that as I got older my curiosity might wane but it hasn’t. I thought I might become more conservative with age but if anything I feel more adventurous. We play in such interesting spaces. There is so much to learn and engage with. I spent a little bit of time on my summer vacation doing a deep dive on the ‘circular economy. It is so relevant a concept that it must become part of our internal discussions as to which companies and technologies we work with.

 

FR: Are you ahead or behind where you might have imagined you would be when you started?

SR: Definitely behind. I am impatient person who has had to learn patience. What I have learnt is that developing talent takes time, sometimes much longer than first imagined. But I have stuck with people. I made the decision early on to hire young people and to try and give them the type of challenges that could drive their development. I think you have to commit to talent and be prepared to wait. It probably takes six years or so to get really good at what we do.

 

FR: Last question: Why are all RIG’s partners male?

SR: It is a fair question and it is something that I would like to see change. I started with four male graduates; one is now the CTO of a crowdfunding platform, another left to join Roland Berger, and the other two are senior partners at RIG. So we started off with an imbalance which was compounded by an early failure to attract a sufficient number of female candidates. Foolishly on our part, and mistakenly on theirs, we were viewed as being overtly ‘techie’ which is a mile from the truth. But we are well past that now and so the situation should rectify itself over time. I think that will have a very positive impact on our culture.

‘I always encourage my clients to think global.’

I always encourage my clients to ‘think global’.

Obviously.

Bland blog statement?

Possibly.

Here’s why it isn’t:

In my experience, most businesses do not truly ‘think’ global.  They might ‘describe’ global – which always helps with those TAMs and SOMs – but they do not have an international attitude.

Thinking global is not the same as planning for global, nor engaging globally.  It is, however, related.

The best businesses are those that can disrupt markets globally; those which establish fresh paradigms.  Some entrepreneurs start businesses because they feel passionate about something; many entrepreneurs start businesses because they want to make a lot of money.

Making a lot of money.  There’s two ways to do that: pay yourself a lot (so you need a vehicle that generates a lot of cash), or sell a vision to someone else that they are willing to pay handsomely for.  The best vision to sell is one of paradigm shifts, long term customer lock in, and huge competitive moats.  And global markets.

To sell that story effectively, the entrepreneur needs to be convincing – the statement ‘and international markets’ is not convincing to the cynic.  The cynic wants to see one of two things: ideally evidence, or at least understanding.

Hey Mr Trade Buyer, I may not have a global customer set – but I’ve been focussed on this, this, and this, and I know that we can replicate / adapt what we do with very little effort to spank the competition here, here and here, because this is the market dynamic and these are the competition’s short comings.  And it was similar in this market we entered last year.

This is all achieved through an attitude towards one’s business.  Okay, we are going UK and Ireland today – but I am thinking about how we can apply what we do outside of those markets.  I work with a company involved in legal information – the company started in the British Isles, which anyone familiar with law will tell you is based on common law.  But we know there are many legal systems in the world – there’s civil law, there’s religious law, there’s customary law, and of course there are plenty of hybrids.  In order for the company to address a global set, the approach to information could not be based on structuring data to be perfect to the common law system, and nor (importantly) could it assume publicly available legal documentation to support its service.

The CEO there thinks global: he builds a business knowing that things are different in different parts of the world – and makes his technology, and more importantly his information structures, flexible enough to cope.  In his market I have spoken to a number of competitors who started on the wrong foot, and cannot recover without rework that would most likely end their company profitability for several years. And what’s worse, it’d be hard!

So my advice:

  • Don’t be channelled by what you see in front of you
  • Seek to understand the rest of the world’s approaches and problems early
  • Seek to remain flexible with every decision you take

Has water become priceless?

Drought to undermine hydro power in favour of wind and solar and also lead to a revolution in organic waste treatment.

Rain, rain, go away and come again on Mammy’s washing… A favourite childhood rhyme of mine that I hummed on many a teeming wet day in Dublin. Little did I know back then just how precious a resource that rainwater was nor how in many places it was not as abundant as in soaking Ireland.

A number of recent events and meetings have focused my thinking as to how our planet’s changing climate will impact existing business models within the economy (both green and brown) if our need for fresh water and the use of fresh water become unsustainable in relation to fresh water availability. This scenario is not as far away as you may think according to a recent UN report “By 2030, the world is projected to face a 40% global water deficit under the business-as usual (BAU) scenario (2030 WRG, 2009)”

 

Drought drives energy generation rethink

I recently met with an energy expert from Brazil who shared with me the impact that two years of drought have had on the country’s hydro power resources resulting in power cuts and a return to natural gas generated energy resulting in energy price increases of 30%1. As a result, many in Brazil are now questioning whether the country can continue to rely on Hydro power which currently accounts for ~70%1 of the country’s energy production. According to the expert, there has subsequently been an increased search for and focus on alternative green energies that can reduce the dependence on Hydro power.

But thinking about this more broadly, will other countries such as China and the USA who have invested heavily in hydro power (or those who generate a large percentage of their energy needs from hydro) and have experienced drought, need to completely overhaul their energy strategies?  What will this mean for solar and wind – will this open up new opportunities to replace hydro? Will those considering investing in hydro power in the future need to reconsider, or at the very least re-evaluate the assumptions underpinning their investment models?

 

California drought leads to irrigation reduction

I then read this article in the Guardian covering the voluntary decision by farmers in California to voluntarily cut their water usage by up to 25% to avoid mandatory restrictions following 4 years of drought.  With agriculture consuming ~80% of the state’s water the deal was considered historic.  But who would have thought (clearly many scientist and environmentalists may have) 20 years ago that climate change would lead to such drastic measures in the largest state in the supposed home of the free world?

With this article reinforcing how scarce water is in regions such as California, it reinforced the potential for the technology of a company that I recently met which turns organic waste into energy and grey water which can be used for fertilizer.

The question I now have is, will it actually be the need for water that will be the tipping point for such technologies, as opposed to the need for either clean energy or an economic waste treatment solution. Has water now become priceless?

1: http://oilprice.com/Energy/Natural-Gas/Drought-Forcing-Brazil-To-Turn-To-Gas.html

 

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.

"As a CEO, you never stop pitching."

Rory O’Connor is the CEO of Scurri, a cloud-based delivery management platform that gives merchants the tools to gain control and operational efficiency. Scurri was recently chosen from thousands of businesses to represent Ireland at the European Business Awards. We caught up with Rory to hear about his journey with Scurri so far.

First things first, how are you on this rather warm day?

Great, I love the sun. I just biked in which I love doing. Days like today always put a smile on your face.

Congratulations on being chosen to represent Ireland at the European Business Awards. How does it feel?

It’s great. We’ve actually won a number of competitions over the last year or so. It’s good as it gives the team validation that what we’re doing is worthwhile. It also provides you with exposure and opens up funding opportunities that you wouldn’t otherwise get. Sometimes it can be hard to see the amount of progress you’re making, but getting recognition from your peers in business is always motivating.

So tell us a bit about Scurri; how would you sum it up in three sentences?

Basically, it’s a piece of software which makes managing e-commerce deliveries easy for online merchants. What that actually means to a layperson is that we use our software to connect e-commerce companies’ software stack to courier companies like DHL. This allows merchants to print shipping labels and allows them to pull delivery data back into their systems. It improves operational efficiency, provides access to delivery data, and improves customer service.

How did the idea come about?

It happened like most startups I suppose. We started with a slightly different idea but the vision was the same; to make delivery simple through technology. We started out targeting small sellers, like those on Ebay selling excess delivery inventory from the couriers.

We then continued our development by speaking to customers, and kept iterating the product. We thought that there was more value in the e-commerce sector, so now we’re operating in a very focused segment but it’s a very big market with lots of opportunity and growth.

You’ve recently completed a funding round; was that challenging? What have been the other significant challenges that you’ve faced since starting Scurri?

For a startup business, finance and cash is always a big challenge. We had a seed round for angel investors and I learnt a lot as I’d never done fundraising before. Whilst it was very taxing, I actually enjoyed the experience. One of the main things I learnt was the importance of timing; it’s very important to find the right investor at the right time. Maintaining momentum during the funding round is also key.

As a CEO, you never stop pitching. You’re always thinking about the next round; it doesn’t stop. Someone once said to me that the role of the CEO is to appease stakeholders and to get funding. I spend a lot of time working on many things, but it really comes down to those two responsibilities.

As the CEO of a company which is enjoying some success, what would be your advice to other startups?

We made a lot of mistakes. For someone to leave the corporate world to run a startup is difficult. It’s not just like a smaller company; you’re trying to build something. When you’re trying to create a new product or disrupt something, the rules aren’t there. You can’t just take the big company rules and scale them down; you have to make the rules.

When we were building the software, I really started to follow lean and agile philosophies. The whole ‘build it and they will come’ approach can be damaging. It’s better to prototype, to get out there and talk to people, even if you don’t have a fully formed product. I’d advise everyone to read Eric Ries’ book The Lean Startup, and Steve Blank’s The Startup Owner’s Manual.

How do you enjoy working at Tech Hub? Is it a good environment for startups?

I love Tech Hub. My team is in Ireland so I spend four days a week here. To be in a place where your team isn’t around you but there are lots of people facing the same challenges, with the same dreams and aspirations, is great. The staff here are also very good and they look out for you. If they can help in any way, they do.

Finally, what is your favourite TV show at the moment?

I watch a programme in Ireland called Love/Hate. It’s a drama about gangland in Dublin. It’s very good and has recently been shown in the UK and had record numbers of viewers tune in on the first night, which is unprecedented for an Irish TV show. I never miss it.

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

Interview with MoveMeOn co-founder Nick Patterson

MoveMeOn was founded in 2011 to fill a gap in the recruitment market for providing select job opportunities to high quality candidates. We spoke to co-founder Nick Patterson, a former McKinsey consultant, about his iterative process of founding and growing a company.

Your website talks of your ‘first attempt’ to change graduate recruitment at Cambridge, what was your vision for that?

I set up a recruitment agency to place students in internships. When I was at university I did an internship at a small consulting firm, and I think the experience I gained from that was more valuable than what I might have gained from a larger firm. At that age you’re still ‘green’ and so rarely get the opportunity to pick up tasks with much responsibility in the larger firms, whereas at small firms the various different types of work have to be done by everyone, so you often get more opportunity to take on more challenging work. Equally the bigger firms are flooded with applications for a small number of places, leaving many students with no internship at all. I didn’t pursue it for very long but it taught me a lot about the recruitment industry.

What was the ultimate catalyst for starting your own venture?

I really wanted to start a company when I left McKinsey, but I didn’t initially have an idea. I ended up stumbling across it because of my own experiences. All of my peers in the city, particularly those in consulting, were being bombarded with calls from headhunters about potential job opportunities. The headhunters had very little idea of what I had done or what I wanted to do; they called with any opportunity that they thought was relevant to me based solely upon having worked at McKinsey. These phone calls were almost weekly and frustrated me and many of my peers. MoveMeOn came out of this – we thought the whole process could be improved. All it really needed was more transparency in the market; the top companies needed to know where they should be looking for the top tier employees.

I also really enjoy the energy you get from working at your own venture. One thing I’ve learned is that if I can see the immediate value in something I’m much more likely to throw myself into it, which is definitely the case with MoveMeOn. Projects in the past where the immediate value is harder to see or non-existent I found very frustrating.

How long did it take you to get it up and running?

From the initial idea to the website getting up and running took around three or four months. This was longer than we had originally planned, and the delays were mostly due to our not understanding the difficulties involved in building a website – a process which we outsourced and learned a lot from.

We had something of a classic startup story in that we made a fairly large pivot and changed the focus of our business further down the line. We had identified three main channels to use when trying to find a job:

  1. Your personal network
  2. Good headhunters
  3. Jobs boards

We started out by effectively being a middleman between good headhunters and job seekers – this wasn’t the most efficient method, but it was necessary to build a strong network of candidates and develop some credibility in the market. Keeping our definition of MoveMeOn fluid was vital at this stage; it allowed us to evolve into the third channel – jobs boards. This proved to be a huge turning point for us and now is by volume and revenue the most valuable part of our business. It’s one of those industries that hasn’t caught up with what can be done online, creating a gap which we were able to fill very well. Often the problem with jobs boards is that there are too many listings, which makes finding the right job a time-consuming process. It’s followed a common internet trend. The past five years have been all about getting volume and choice onto the web. This has been so effective that people are now overwhelmed with “choice” and don’t know where to look. We envisage the next five years being all about filtering for quality. As such, we go for more of a hand-picked jobs approach, only posting the jobs that really excite us and we can see our fairly specific demographic of members working at and enjoying.

If you have sought funding for your venture, what funding options did you pursue?

We needed some capital expenditure early on but it’s not a capitally intensive company. We were lucky to be able to self-fund and were cash flow positive within a very short period of time (in the region of four to five months). We have been approached by institutional investors, so we’ve thought about getting more funding on a few occasions. Sometimes you do need an extra injection of pace and cash to burn through, but we decided that if we didn’t have a very good idea of what we would spend the money on, we weren’t ready for it.

Interview by John Sherwin

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

"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

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.”