Opportunity Knocks, Edinburgh 29 May 2014
I had expected to spend 29 May attending another “event”, hearing platitudes mouthed by some familiar faces and trying to extract some value from the networking scrum during the breaks. Instead, Opportunity Knocks turned out to be the most passionate, thought provoking and inspiring business conference in my memory.
I could write a long and not at all boring post expounding all the great ideas I heard and picking out the funny, frank and fantastic bits from the day’s presenters. But let me just concentrate on the handful of things that made this standout so much from the run of the mill.
Support and help was the ultimate message of the day. It is working together that allows us to rise above our individual limitations and achieve great things. I left with lots of ideas for mentoring and collaborating with startups running around my head. Please use the comment box below to share your own best ideas about how we can help each other and leverage the passion and commitment of the whole community.
By Kenny Fraser
Startup Investor Manifesto aims to set the agenda
A group of Tech Entrepreneurs launched the Startup Investors Manifesto at the EBAN Conference in Dublin this week - you can find it here.... In the week of the Euro elections it is a pertinent reminder of the importance of entrepreneurship to all our futures.
The Manifesto is designed as a lobbying document and aimed solely and squarely at the various EU authorities. It follows on from the Startup Manifesto published a couple of years ago and like that document it is very much about startups in the tech sector. Initially it felt slightly odd reading it through. I am a startup investor and these people are lobbying on my behalf without me realising I was part of such a group. On the other hand, why shouldn’t the views of a vital and dynamic sector of the economy be strongly represented to Government and regulators?
One answer to this question might be that Government interference in highly competitive markets is not the best solution. I totally sympathise with this sentiment but it is not actually how free market economics operates. If you want to see a totally unregulated free market, go to Mogadishu ( which by the way is not quite as scary as you would think…) Free markets depend on an open but reliable and predictable regulatory framework to exist and grow. For example, the stock market changed utterly when joint stock companies became an authorised vehicle for business in the middle of the 19th century. It is therefore very important that Governments create the right platform for startups to thrive and for investors in those companies to deploy their capital. An important proviso. The market framework should keep distortion to an absolute minimum.
Does this manifesto propose measures which would help achieve that objective? Perhaps predictably it is a bit of a mixed bag. Some ideas are excellent, some are questionable and a couple of the proposals sound quite dangerous.
Overall, the main recommendations make sense but there are a couple of things in the detail that are major concerns. Firstly, the manifesto recommends a standard common definition of a business angel. Indeed in section 5.2 it actually says that this should be imposed. The whole point of angel investing is to encourage people with from every walk of life with the widest possible range of interests and agendas not to create a new defined (and no doubt regulated) class of investor. Secondly the detail goes quite a bit further than the broad agenda and starts to feel like quite a heavy hand and an element of protectionism ( the proposed transatlantic trade treaty is seen as a threat for example). Ultimately, if things go too far they risk strangling the very dynamism they are trying to encourage.
Enough of the negative. Broadly I would support this initiative. I would like to build on it and in the spirit of the entrepreneurial movement to see recommendations which encourage broader horizons in three main ways:
I wish the promoters of the Startup Investors Manifesto well in their attempt and I hope they can find a way to include the ideas and the support of the whole community.
Measurement helps with investment, management and exit
I realised when I first started to write this blog that I have a bit of an obsession with measurement. About 500 words in, I still had not reach my first point and it was clear that I had at least six articles rattling around in my head. I have decided to spare readers for now and focus on just one thing, the importance of measuring when looking at the investment potential of a startup.
Generally speaking, startup valuations lack any discernible frame of reference. Potential investors naturally fall back on financial projections because this is where they are comfortable or rely more on a gut feel about the product, the market and the people. There is no panacea which can make the future predictable for a new business but I believe non financial measurement should have a place in any startup evaluation.
The basis for this view is simple. The digital revolution has not changed the principles of business but it has transformed a couple of things. Measuring is one of those things. For businesses selling online or in the software and mobile apps world, it is already possible to measure and track just about everything. Without spending any money! Much of what you need and what a business owner could only dream about a few years ago is available in a couple of clicks through a bunch of fee tools, most prominent of which is Google Analytics. If you have a website of any kind go check this out. Number of customers, source of clicks, usage rate, page dwell time, sales rate and much more is just sitting waiting to be analysed.
Over time, as the tools become even better, as the mobile Internet adds location and other context data and as the Internet of Things starts to take a grip, the range of businesses for everything can be measured will grow and grow.
Great but what does this mean for the potential investor? Three main things:
Startups will never be a perfect environment. Even online measures will be based on a small user base and a limited timeframe. Like any measure they will also reflect the past and in the digital world, the future will most certainly be different. However, measurement is a tool that every investor and every leader in a Startup should be using and it can make a big difference to the chances of success.
What did I learn from EIE14?
EIE 14 took place in Edinburgh this week. Organised by Informatics Ventures it has quickly become the premier event for Startups and potential investors in Scotland and one of the most important in the UK. This was my first time attending and I must admit I was blown away by the scale and breadth of the whole event.
EIE stands for Engage, Invest, Exploit and despite the slightly creepy connotations of the last word, the concept works. The conference is focused in the Engage phase and is an opportunity for angels, VCS and other investors to meet with and hear from as many Startups as possible.
The whole day is centred around the Startups and this year they were organised into three main groups, Technology, Biosciences and Energy. Most of the main sessions were devoted to pitches from Startups with a separate room for each group so attendees could focus on the sector of most interest. Pitches in turn were split between one minute "pop up pitches" and longer 6 minute pitches which had a panel asking questions at the end. I would be interested to hear the feedback on these sessions. For me, the one minute version was great, gave me just enough to decide whether I wanted to go and seek out the company pitching and find out more. The longer versions were a bit staged and less helpful. This may just be me. Sitting listening to people talk from a stage has never been one of my strongpoints.
Luckily there was also plenty of opportunity to talk directly to the Startups. Companies from all three groups were gathered in one exhibition hall. There is no favouritism so everyone has a stand the same size and a huge throng of people just work their way round the room. I knew quite a few of the companies exhibiting and every time I went up to chat to someone I knew, they were engaged by at least one stranger trying to find out more. It was clearly working.
It is well worth checking out some of the pitches and other material on the website eie14.com. However, I always find with these events that it is the buzz and messaging around the room that sticks in the memory. So what did I learn from EIE14?
Look out for some serious marketing
Everything feels very optimistic and energetic. Although I focused on the Tech startups, there was an equal sense of urgency about the bioscience and energy stuff. On limited evidence, it would seem that this is indicative of the UK generally not just Edinburgh or Scotland. Just to reinforce this, the latest Tech Monitor from KPMG shows strong growth and especially the highest level of hiring in the sector for three years. The first part of the influx of funds is clearly being felt already.
I will be very interested to see the impact of the other part of the investment promise. One of my observations about the UK and especially Scottish startup sector has been lack of visibility in the wider public domain. My guess is that there will be a bunch of exciting and attention grabbing marketing from tech startups in the next 12-18 months. Hopefully, this will mark a big step forward for the startup ecosystem as a whole.
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.