Today I spent the afternoon and evening at the Second Chance Tuesday event in London. In the afternoon there was an "Early Stage Funding Workshop" for an audience of about 100 companies, which consisted of a panel discussion with entrepreneurs and investors talking about what setting up and investing in a business is really like.
- Richard Moross, founder and CEO of moo.com, gave a very personal view of his own journey from the insight and idea, including all the stumbles and mistakes, to where he is today, with a company that sells to customers in over 140 countries. Like many successful entrepreneurs, his story is one of a great focus on the vision, lots of energy and persistence, and readiness to adapt to the circumstances and keep looking for a formula that works. A couple of other key points were around having clarity in your business model and building the network or relationships of people who can help you be successful.
- Mattias Ljungman, partner in Atomico Investments, spoke about the idea behind Atomico, which was set up by the founders Skype. They feel that having entrepreneurs investing in entrepreneurs brings ideas and insights into the process which you may not get from traditional investors. He talked about how trust and the "feel" of the business is important, and the opportunities and challenges that face today's web businesses that often sell to a global market from day one. His advice: it's essential to learn from and admit your mistakes, but your focus should always be forward-looking.
- Sean Seaton-Rogers, associate partner in Balderton Capital, one of the leading European Tech VCs with $1.5bn under management. Sean explained the overall VC investment process, from Seed through Series A, B, C, etc, to Pre-IPO or Buy-Out. He also talked about things the VC investment could be spent on, such as partnerships, hiring staff, international expansion, building infrastructure, and how the VC could help with this. One important point he made was when not to raise VC funding, e.g. if what you've got is a feature not a product, if the market you're addressing is too small, and if you are not financially motivated. If you do go to a VC for funding, then you lose the opportunity for a smaller exit that could still be personally lucrative (a £10m sale may be a long way short of what the VC is looking for but could still make you enough monye to retire to the beach), you have a co-owner who will have a say in how you run the business, you can't run it as a lifestyle business anymore, and you're committed to 3+ years with the VC. He also spoke about the importance to find the right investor, who is working in your space but without directly competitive companies on the portfolio, with a good track record. He then went into the details of the process, which will typically take a minimum of three months.
- Simon Murdoch, founder and CEO of FriendsAbroad.com, previously VP Europe for amazon.com and also a VC and angel investor. Having set up Bookpages, an on-line bookstore in 1996 and selling to Amazon in 1998. As an early-stage VC he has invested in nine companies, three of which failed, three didn't take off, two were modest successes, and one, Betfair, has been a big success. A 20% success rate would be fairly typical for a tech VC, but the idea is of course that the successes are so big that they more than compensate for the failures. He also invested in Shazam, which is now doing well, but the four founders no longer work for the company and three of them only have small stakes, and the lesson from this is that once you cede ownership of the business you need to be a good entrepreneur to maintain a role in the company - your status of Founder doesn't protect you if the business needs to change. It can also be hard for an entrepreneur to know how well you're doing when you're trying to get a VC on board, because you're typically speaking to an individual VC partner who then needs to sell the proposition to all the of the other partners, and until you've had an opportunity to pitch to and convince all of them, you really can't be sure you have a deal. VC funding is not for everyone, and most companies would do well by starting to build sales with a minimal amount of personal or angel investment and only go to VC when you really need a bigger investment.
After a networking break the evening event started, where the auditorium at the Royal College of Physicians was filled to the brim with over 300 people; entrepreneurs, investors, and media. We were treated to a rare public appearance of Niklas Zennström, founder of KaZaA, Skype, Joost and Atomico Investments in a "fireside" chat with BBC Technology Correspondent Rory Cellan-Jones.
Niklas went through the ups and downs of his serial entrepreneurship career, from being sued out of existence with KaZaA, working for a year with no funding when starting Skype, to re-visiting his old friends in the media world from the KaZaA days with his new venture, Joost.
Rory kept Niklas on his toes with some good questions, both for Niklas (Q: "So you've done three 'successful' start-ups but none of them making any profit?", A: "Actually, Skype is profitable, with number of users, revenue and profit all growing."), and for the audience (Q: "Who here has tried Joost?", A: a large majority of the audience. Q: "Who here is using Joost regularly?" A: not one hand raised that I could see) - in his defence Niklas pointed out that the premium on-line TV/Film market that Joost is addressing is still at a very early stage.
Overall it was a very entertaining session, and gave a few insights into the thinking and processes behind companies that have achieved a critical mass of users in a short time. This involves things like focus on solving problems that people care about (in this case sharing files, making cheaper/free international calls) in a way that is "friction-free" (easy to acquire and install), easy to use, and so compelling that you get the viral effect of users introducing their friends to the service.
I think Niklas perhaps underplayed the level of technical sophistication that is also necessary to be successful. At the root of each of these ventures is some very nifty networking and peer-to-peer algorithms that required some serious technical innovation. Building a business around a core piece of intellectual property is more important than it sometimes appears in the Web 2.0 world, and the current generation of web entrepreneurs should think carefully about this.
From a Microsoft perspective, this event was important because we used it to announce the next five companies to join the Microsoft Startup Accelerator programme. They are:
- Rugged Logic – provides Financial Directors with a structured financial planning solution combining historical data and business drivers with the ability to add their own business understanding and environmental factors to create a financial picture of their business in to the future. It’s delivered through Microsoft technology such as Microsoft Excel & Excel Services, Microsoft SharePoint Services and Microsoft Performance Point Services. Rugged Logic is the only accredited Financial forecasting Solution by the Institute of Chartered Accountants (England & Wales).
- Silobreaker – Silobreaker is a search service for news and current events that that delivers meaning and relevance beyond traditional search and aggregation engines. With content from some 10,000 news, blog, research and multimedia sources, Silobreaker’s innovative analysis and graphical search results enable users to quickly and easily get more from the stories of the day
- Psytechnics – based in Ipswich, Psytechnics is an exciting new approach to Voice over IP which fills a gap in the market for monitoring and managing voice and video quality. It provides a software solution for assessing and managing Quality of Experience (QoE) for real-time voice and video. Psytechnics is used by service providers and Enterprises to monitor, manage and improve IP Telephony, video and unified Communications solutions in both fixed and mobile environments.
- SportsDo.net – SportsDo.net targets sports enthusiast such as marathon runners, cyclists, mountain bikers, and skiers who have an interest in mapping their circuit or training runs. The service uses GPS to provide a breakdown of where the user has been, key statistics such as time, speed and distance can provide a 3D online image of the route taken. This information can even be shared in real-time with friends and families during sporting events.
- T5M.com – launched in December 2007 and founded by Charlie Muirhead, T5M.com positions itself as the fifth medium after TV, radio, print and online. It collates exclusive interviews from notable figures from all walks of life including Hollywood and politics.
Although these companies operate in some very different spaces, they all have some great capabilities, and we're looking forward to working with them towards building successful businesses. We will of course be writing more about all of our Accelerator partners here in the future.