Is Billion £ VC raise really that big in Europe?

TLDR: No. It’s less than even the quarterly VC investment rate in Europe.

There was a bit of chatter in the London startup investor community recently about the welcome increase in amount of funds being raised.

I remember Jon Bradford specifically mentioning close to a £1 Billion raised in a few months by 9 funds. There was a bit of a flutter around the group when JD mentioned the figure at #fplive – people wondering if all the money could even be deployed in the relatively nascent European / London tech startup ecosystem. Someone may even have mentioned valuation bubble, or some such gobbledygook.

Take a quick look at this chart from Dow Jones (source):

VC spend europe 3q14
Click to view full image.

Last quarter VCs invested €2.4 B (~£1.8B) in European companies. At an investment run-rate of £1.8 B a quarter, and increasing, that £1 B raise in a quarter doesn’t look that big anymore.

There will be some additional liquidity from investment exits[1] – IPOs and acquisitions. But given the relatively young ecosystem in Europe – most maturing, successful European startups move(d) to the US for better valuation & operating environments – there can’t be too many exits providing the rest of liquidity.

Makes me wonder the other side now: If this £1 B raise is such a big deal, where has the VC funding been coming in from so far? We’ve been above a quarterly £1 B quarterly investing rate for over 6 quarters now. US VCs investing in Europe without direct presence?[2]

Either way, that £1 Billion figure doesn’t look as big as it sounded first up. And we really do need more of them, more frequently.

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Equity Funding – Additive, not Dilutive

Matt Robinson GoCardless - Raising Money Additive Not Dilutive
Matt Robinson, from GoCardless, at Google Campus’ fund raising #campusedu event


Dilutive = money out (previous stakeholders cashing out)
Additive = money in (to company’s coffers)

Continue reading Equity Funding – Additive, not Dilutive

Startup fundraising facilitators – Hazard to Help

Today, at #CampusEdu on Startup Fund Raising, wasn’t the first time I’ve heard investors warn about being swindled by people who act like investors up front, but in reality are connectors who help you polish your offering and connect you to the real investors.

It’s valuable advice.

Founders are under pressure when raising funding, and a friendly, supportive facilitator can be a welcome presence. Specially, when he’s misrepresenting himself as an investor. The misrepresentation hurts more when either the promised funding gets delayed, or disappears, but even more when the facilitator takes a hefty cut before passing the funds on the startup, disrupting runway and plans.

On the other hand, the ‘connectors’ are not entirely to blame. Two factors, described below, actually create a valid market for them to cater to:

  1. A disproportionately large proportion of capital available for investing in startups is in the West – primarily US & Western Europe. This presents a handicap for startups in developing world – South Asia, East Africa, Latin America, and SE Asia – limiting most of them to a small clique of domestic investors, at least for the early stage raises.
  2. Must investment funds prefer funding startups that they get introduced to from existing contacts – founders, investors, LPs, etc. If a startup founder isn’t already connected to these networks, getting good and proper introductions can be a high hurdle. A great product, with outstanding metrics, and/or team does still get funded, but for many good-enough startups this may just be another glass ceiling to crack heads against / hustle around.

This mix of geographical and social barriers creates an opportunity for a kind of individual to facilitate fundraising for startups. And nothing good comes for free.

The problem here, it seems to me, is not that there are facilitators in the market, but that they are misrepresenting themselves as investors to gain credibility.

The solution, in my opinion, seems to be to legitimise them.
If the investors accept that there’ll always be segments of the market that could have really promising startups who may be struggling to each them for one of the reasons above, or others, there’s a way forward:

  1. Publish a list of accredited facilitators that the investment fund works with.
    Just the way companies work with accredited recruiters or advertising agencies. Except, make the list public, so potential investees can see it and reassure themselves that they’re not being taken for a ride by the facilitator.
  2. Lay down a set of rules, partly public, about facilitator codes of conduct – %age fees, confidentiality, misrepresentation, etc.
    Even better if the industry can agree on a set of rules, and make them a standard.
  3. Do not work with, or accept meetings from, facilitators outside your (or industry’s) accredited set.

This helps bring the facilitator networks out in the open, makes their terms of engagement clear, and gives founders the confidence to engage them without them having to misrepresent themselves.

It’s an idea.

Continue reading Startup fundraising facilitators – Hazard to Help

Crowd funding across (continental) borders

Equity Crowd Funding

The talk by Ricardo about Seedrs at CampusEdu event today, and this tweet by Sidin yesterday got me thinking –

Why aren’t there equity crowdfunding platforms for raising capital here in the West, by startups in India (and other developing countries)?

The flurry of crowd funding activity here, both equity and product/support based, demonstrates there is capital available to invest.

India, SE Asia, and parts of East Africa are home to some great talent building, or wanting to build, great companies. There is already a nascent investing community in these regions, but I’m sure they could do with more investments. Specially the community driven ones that also bring along benefits of a wider exposure, and validation on a wider scale.

There’ll be some hurdles – regulatory and cultural, the most obvious ones. But there’s also the opportunity of tapping in to the widespread, and relatively well-off, diaspora spread across the West. The diaspora loves to invest in social, and socio-political ventures, back home. And given the amount of diaspora money in Indian stock and real estate markets, they do love the investment returns too.

Wonder if there’s an opportunity here, and if anyone outside my conscious knowledge working on it.

Anyone got views? Share here, or tweet to me.

Continue reading Crowd funding across (continental) borders