Thursday, September 16, 2010

Daydreams and Night Journeys


The London Business Angels pitch went well last night, and it looks like we finally hit our message and are gaining some momentum.

Startup businesses fund their growth through a succession of investors.  Initial costs are covered by founders and grants, then incubated through angel investors, before becoming big and successful enough to attract VCs and institutions.  Angels are high net worth individuals who invest in groups (syndicates), each putting in around ₤50,000 in return for equity in the business, hoping to exit at 10x+ multiples within 3 years.  Securing their investment is important, not only because banks and governments aren’t supporting startups, but also because they bring experienced directors with good connections on-board.

Startups connect with angels through “Company Events” organized by angel groups.  London, Cambridge, Oxford all have investment associations that host periodic networking events.  Several (screened) companies are invited to present investment opportunities for the members; startups pay a small up-front fee and a percentage finder’s fee from money raised.  In return, they get coaching, a 12-minute slot to present their business, and access to several dozen interested and active investors. 

New tech, telecom, and medical startups generally ride this circuit for a six months, refining their pitch and assembling a syndicate of a half-dozen backers.  I find that there’s value in regular contact with these other startups, trading tips on which groups have value, swapping services, and sharing presentation ideas.  It becomes a road fraternity, something like actors and salesmen form out of repeated informal meetings.

We’ve done a half dozen of these events now, and get better with each one.  The pitch gets refined and nerves calmed, but most valuably, the repeated critiques shape the rough business idea to executable and investable form.  It is a merciless process, but it definitely refines the plan to potentially successful form.

My business professors talked about the importance of having “Strong positions, Weakly held”.  While I’m certain of what I’m proposing and why it has value, I still need to be prepared to adapt it when a better idea is offered. It’s a tricky balance, because I have conviction and passion about my ideas.  Sometimes it’s hard to take criticism constructively, hard not to be discouraged by repeated rejection. And there’s always the sense that limited time and money are draining away: the business will fail if it’s not funded, soon.

I believe that Europe is as fertile ground for starting a new tech business: there’s talent and money, markets and opportunity.  I bet (my career) that I could live here and make a go of things, getting my ideas funded and my product marketed.  Last night felt like a big step forward along an incremental pathway towards making that happen.

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