Top Ten insights from the UKBAA Summit 2015
1. Technology is not disruptive, business models are…
“We always said to our investors not to get dragged into the technology because that can be replicated,” said key note speaker, Ambarish Mitra, CEO and co-founder of the fast-growing augmented reality company Blippar ,which has grown from ground breaking idea to an industry leader, with over £250 employees, raised over $50m,13 offices around the world and over 50m users. “Disruption is often misunderstood. Technology is not disruptive, business models are disruptive. We massively focus on the business model.”
2. The Internet of Things is both a gold mine and a Wild West
The UK is right at the forefront of many IoT technologies, said Will Pryke, Drector of Operations at BT Breakthrough Innovation. “There’s never been a better time to be investing in British IoT startups; a lot of the technology is there and it works.”
The trouble for angel investors: it’s not clear where the money lies. “There are many opportunities for small companies to devise solutions for problems of security, or authentication, or data analytics, and many other areas. But it is a bit of a wild west because the value chains and partnerships have not yet been formed,” said Chris Bruce, director of BT Global Services.
Health Care, Smart Cities, transport and construction all offer opportunities for investors to gain competitive advantage where IOT has the potential to disrupt the market, concluded the BT experts. Adrian Karl demonstrated with his drone how Sky Futures has used IOT technology to disrupt the oil and gas facilities inspection market . “Angel investors recognised the early potential of this technology”.
3. Angels want to invest in people with ambition to be the next Unicorn
Michael Blakey, newly crowned Angel of the Year 2015-16, was clear: “I want to know the problem that an entrepreneur is solving. I want to know about the scale of their ambition and their capabilities. The key strength of many entrepreneurs that we back is their ability to build a team around their vision.
“When I am investing, one of my biggest bugbears is the word ‘conservative’,” he said. “Why the hell would I want to invest in anyone offering me something conservative? I want the entrepreneur to tell me that they are going to dominate the world and be a global business. A conservative business will never become a £1bn business.”
“You need to look at the whole market and market share when deciding which entrepreneurs offer the opportunity for exponential growth, said Simon Menashy Investment Director at MMC Ventures, we look to take along term view and identify whether the business can effective deploy £10m investment over time and can achieve a £10m plus growth”
“There are challenges for investors and entrepreneurs between the need for exit and liquidity and the need to enable the business to exploit its full growth potential , said Simon Calver, ex CEO of Love Film, chair of Moo.com and new Chair of UKBAA. “ If you have worked for years in a business and have sacrificed a lot, take something off the table- this recognises the achievements of the entrepreneurs to date and gives them the impetus to carry on. “
4. If there’s one country in Europe that gets Tech it’s the UK
“Don’t forget how advanced the UK market is”, said Gerard Grech, CEO of Tech City UK. “If there is one country in Europe that gets tech, it’s the UK. The UK was first to market with equity crowdfunding, which goes to show the foresight of the previous government about the digital economy.
“With 1.4m people employed in tech across the UK, whilst we think of Tech City as the centre of tech enrepreneurship, we need to recognize that the greatest volume of digital companies are base around the UK regions such as Bristol and Bath, Greater Manchester, Reading , Leeds and Brighton”.
“But there remains a challenges in finding the Angels with the expertise and experience to invest in these great businesses – there is a lack of visibility in many regions” said Gerard.
5. Equity crowdfunding faces the risk of success rather than failure…
“We will see a very different profile of equity crowdfunding in 12 months’ time,” said Julia Groves, chair of the UK Crowdfunding Association. “There are lots of new entrants coming in.”
“There is much more evidence of VCs engaging with crowdfunding as co-investors “ said Ayan Mitra of CrowdBnk.“This is showing a changing attitude among the rest of the investment market”.
“There remain two sorts of Angels said Peter Cowley, Cambridge Angels, founder of Martlet Corporate Angel and Angel of the 2014 “It is difficult to see that investors putting in £10 are business angels. These should not be regarded in the same light as a business angel investor who get to know the business before they invest and really add value post deal”
“We are seeing some very significant players through corporates and experienced business people investing through our platform with the capacity to be lead investors” said Jeff Lynn, Founder and CEO of Seedrs
“A very significant level of funding is being pulled together through experienced angels taking the lead to mobilise other angels on line” said Andy Chung of AngelList . “These syndicates have the capability to pull together significant levels of funding and expertise .”
“The great risk is when a crowdfunded company does take off, achieves a massive exit, and the early crowd fund investors don’t get the same return as later investors,” said Peter Cowley.
“I agree” said Jeff Lynn, “The real challenge for crowdfunding will not be a failure, but a success”.
6. More women tech entrepreneurs will emerge – but the narrative needs to change
“In order for more women tech entrepreneurs to come through, said Sarah Wood, co-founder and COO of Unruly ,which has grown from 2006 to be a £46m turnover business with 5 offices around the world. “We need to look at education. There is an urgent need for more young women to study STEM subjects. We have to fill the top of the funnel.”
UnLtd’s Director of Ventures, Julie Devonshire, referred to the recent WAYRA survey “ London entrepreneurs were more likely to be female than in Silicon Valley”. “Something is happening and that is good.”
“It is going in the right direction,” agreed entrepreneur and angel investor Wendy Tan White who co-founded Moonfruit in 1999 with seed capital, did two VC deals and exited two years ago through a trade sale.
“The narrative around tech needs to change- we need to stop talking about women in tech as a problem,” said Sarah Turner, co-founder of Angel Academe.
“Change the narrative, you will see shift in ambition,” agreed Claire Braithwaite, CEO of Tech North, the Tech City UK initiative to support digital entrepreneurship in the north of England.
7. Women lack role models of successful female investors
“Women are intrigued by angel investing”, said Sarah Turner of Angel Academe, the 100-strong angel group that has women as the majority of its members. “But we start from low awareness levels. As a syndicate, we have to educate and build confidence. It’s a long learning curve.”
“For successful female entrepreneurs who want to become angels, there are few role models” said Wendy Tan White “My experience of growing a business and exiting provided me with the experience, finance and desire to be an angel”.
“But I have started to work in circles where I have to prove I am an investor – and there are very few women in those circles,” she said. “The more female angel investors we have, the more opportunities there will be for women entrepreneurs.”
“There is a lack of tech angel investors in the north, observed Tech North’s Claire Braithwaite. “I have yet to meet a woman among the investors I have engaged with.”
8. Angels are investing globally
“Eight years ago, almost all of the US angels wanted to invest about two hours away,” said Marianne Hudson, Executive Director of the Angel Capital Association, “US investors will be increasingly investing cross-border and internationally in the future, and much of that will be driven by developments in online platforms.”
The extensive number of successful Indian entrepreneurs across the world who are angel investing is the focus of the Indian Angel network which has now set up a Hub in London. “Of the investments we have made so far in UK entrepreneurs, 75 per cent of the money has come from outside the UK.” said IAN president and co-founder Padmaja Ruparel.
“The growing wealth in South East Asia and the rise in the number of smart entrepreneurs seeking investment has been a strong impetus for Singapore to seek to attract investors into the market” said Zach Tan of INfoComm, “ There are great investment opportunities for UK investors in Singapore as well as support for market exploitation for their portfolio companies”.
“By mobilising Business Angels across our continent, Africa can move away from aid and encourage fellow Africans and the wider investor community to invest in growing our many great African entrepreneurs”. Harry Tomi Davies, President of the newly formed African Business Angels Network, explained . “We also see the opportunity to work with UKBAA to mobilise the diaspora of the African business community here in the UK to invest in our entrepreneurs”.
“Business Angels Europe supports the creation of a single market for angel investing across Europe and make deal flow cross-border more accessible to angel investors” said Luigi Amati, CEO of META Group and Vice President of BAE. “Member States need to set up compatible tax relief systems for angel investors as well co-investments funds.”
9. Connectivity is the key to Building the Angel market
“Angel Investing is an exciting space to be in right now, but we can’t do what we do if we work alone.” said Simon Calver, new Chair of UKBAA . “We need to connect and simplify the eco system so that all key players can work effectively together. UKBAA has a key role as the trade body in ensuring connectivity”
“A major focus of the year ahead will be to work with all key players to ensure that we can build a strong and connected angel ecosystem across all the regions including supporting development of the new Northern Power House” said Jenny Tooth CEO of UKBAA
“UKBAA’s new online marketplace will reinforce these connections where members can share, build and close deals together”.
And Finally…The UK Economy is in Good Shape, but we must address our Productivity
“The UK Economy is in good shape, said Trevor Williams, Chief Economist at Lloyds Bank, but its Services that continue to lead the growth. Our growth is consumption led -We are still not making enough”.
“Growth remains focused on London and South East. We must address the longterm challenge of the North”.
“Our biggest problem is weak productivity,” said Trevor. “We have been growing employment faster than GDP, so our productivity is abysmal. We are less productive than France – it takes us five days to produce what they do in four. The reason the UK has done well is because we work longer hours.”