Evidence and Vision. Two assets often overlooked, or not seen as working in tandem. But today’s entrepreneurs must focus on both if they are to stand out from the crowd in London’s buzzing tech scene.
This year, London Technology Week did a great job of showcasing the hotbed of talent, innovation and entrepreneurship in the capital. Shining the spotlight on technology in the city throughout the week, you started to get a feel for why many commentators see London as a fast-growing global tech powerhouse.
This commentary is all well and good, but what’s the word on the street when speaking with these young businesses about what it’s like starting, running and growing a successful business in the city? From our own experience at Intent HQ, we know that funding plays a vital role in enabling a business to develop and grow – especially when there is new technology at the heart of the business, which will almost certainly need to pull in resource from the brightest minds to develop a proposition that is truly pioneering.
Thankfully, we have been very successful as a company in achieving funding. Yet, it can be difficult, especially in London, despite its reputation as a great place for start-ups. Investors and VCs can only support a small percentage of companies analysed for funding, so unfortunately they have to say ‘no’ most of the time – it’s the nature of their job.
So what would I recommend? In a universe of 500 investors, say, only three may both want to – and be able to – invest in a new opportunity. The key here is to identify these three – but practice on the others until you have honed your pitch. The real issue is attracting funding from the right investors for your business. To me this is more important than getting the funding in the first place.
Finding this match comes down to trust. This is why connections are so important. In general, people tend to trust their colleagues, friends and other contacts. If a VC or other investor is alerted to a good opportunity by a contact, they’ll listen because they trust them. This doesn’t mean investors will turn down a good prospect when they see it – but it can be that start-ups will find it difficult to get in front of them in the first place.
Although it’s natural to focus on the seed round, in many ways this is the easiest part. After that, you can no longer raise funds on an idea, and tangible results become essential. It also becomes difficult if you don’t meet any of the typical round definitions of an investor’s expectations. For example, if your proposition demands heavy investment in IP early into the business model and is consequently slow in generating revenue. In this case, be prepared to provide additional burdens of proof and validate both the IP and the potential to scale without the evidence of revenue.
This is why it is important to have the right investor. Once again trust is key. Investors are buying the fact that you understand your market space, your cognitive abilities and because you are able to demonstrate the attributes of your proposition. The world is increasingly data-driven, so investors are looking beyond whether they like you or not. You need a combination of evidence and vision to tip the balance.
Gaining the right funding can be especially hard in London compared to the US. The main difficulty here is the length of time decisions can take. What would take six weeks in New York, could take six months here. Also, in the US the level of in-depth tech knowledge is significantly greater and this translates into a willingness to commit early and more deeply to a funded company. However, there is also a difference in the intrinsic eco-system. There is similar raw talent, but levels of support, experience and real knowledge around building a business are still lacking in many entrepreneurs. It can come down to philosophy, habit – but also deal flow.
It’s easy to forget that investors want the company they’ve funded to deliver the best. Their returns are entwined with your returns – and your success. It’s only when there’s a divergence of strategy or approach that problems can begin.
And then it goes back to establishing an understanding of approach and being able to communicate what really matters to your industry and markets.
Jonathan Lakin, CEO of Intent HQ