Why we should be positive about the outlook for the UK Tech scene

UK Tech Scene - London Calling

I wanted to share some thoughts I read in a post on VentureBeat by Gerard Grech, the CEO of Tech City UK, a UK-based non-profit focused on accelerating the growth of the UK’s digital economy.

The post is titled, as blog posts tend to be, “9 things you didn’t know about the UK’s tech scene“, but really delivers an incisive analysis of why investors specifically (but by extension entrepreneurs) have reason to be sanguine about the tech sector in the UK (even post-Brexit).

You can read the full article (15min read) by following the link in the title above or by clicking here

If you haven’t got 15 minutes or so, I’ve listed three of the key points here:

1. The UK is the second biggest destination in the world for VC money, on a per capita basis ($3.6 billion was invested last year, up by 70 percent from the year before!)

2. The UK is second in the world for tech startup exits, after the US. There were 135 mergers and acquisitions in the most recent quarter of 2016.

3. The UK government helps tech companies from cradle to exit with the world’s most generous tax breaks and capital gains exemptions for investors as well as visa schemes for digital innovation experts and grants for entrepreneurs.

The cause is strong!

The Lean Startup Revisited – Does it really work?

The so-called ‘Lean Startup’ methodology, coined by Silicon Valley entrepreneur Eric Ries, has come into vogue in recent years and aims to address the problem of heavy cash outlay during the early stages of your business. In other words, it advocates proving your concept as far as possible without building the finished product. It aims to take the financial risk out of building a startup (as far as that is possible!).

The Lean Startup for Entrepreneurs - Does it really work?

The lean startup methodology is all about experimentation, feedback and iteration. Or to use the vernacular of a school science teacher: hypothesis, evidence, synthesis and improvement. The idea is that rather than spending hours and hours writing a ‘perfect’ business plan, keeping your ideas hush-hush and finally launching a fully developed product in the hope that investors and consumers will be won over, you test hypotheses by collating customer feedback from your MVP (Minimum Viable Product).

The Lean Startup Experimentation Loop

For example, you could throw up a landing page selling a product/service that, as yet, does not exist, and measure the popularity and interest in it. By this means, you can calculate whether the idea is worth pursuing and how it can be optimised; or whether you should ‘pivot’ or iterate, or change the concept entirely. For more information on what lean startup means, you can visit www.theleanstartup.com/.

But in this post I want to address the question of how far this lean startup method has proven itself as viable. Ted Ladd is a professor and entrepreneur who has conducted research on this question and recently published his findings in an article for the Harvard Business Review. Click here to read the full article.

In a nutshell, he concludes that while the experimentation and customer feedback produced by following the method does impress investors and presentation panel judges, it does not necessarily indicate subsequent success. He states a number of possible reasons for this:

– Too much feedback erodes entrepreneur confidence
– Method may produce ‘false negatives’ when there is no clear rule in place to stop testing and start scaling. In other words, entrepreneurs are experimenting so much that they always end up with negative results.

This leads him to say that while the lean startup method has considerable benefits for entrepreneurs, it is important that the testing and experimentation on a micro-level is combined with a broader strategy. That way, only the priority areas are tested; and time and confidence are not wasted testing every aspect.

He ends his article with the following:

“The popularity of the lean startup method is well deserved. But, as is true of any business process, the method must be tailored and employed with reflection and constraints, not blind allegiance. Just like the new ventures it creates, it will improve as researchers and practitioners propose, test, and incorporate refinements.”

Food for thought…

Angel Investment vs Venture Capital – Which would you choose?

VC's vs Angels
This morning I read a great post by Venture Spring. Venture Spring is a hugely well respected ‘venture development’ company which “helps Fortune 500 companies innovate like startups” according to their company mantra. The article is about the differences between venture capital funding and funding from angel investors.

Startups are often all too eager to take one option over the other based on their own preconceptions. It’s important to realise that one may be more suited to one type of startup over another (and vice versa. So, understanding the points of difference could be crucial to the way in which you approach your fundraise; and how your company ends up being run down the line. So it’ll be worth your while familiarising yourself with the key points…

You can read the full article on their site here. (It’s a 5-10 min read).

Or, I’ve summarised the key differences for you here and (added in a few that they missed!):

Angel Investors:
– are private individuals investing their own money
– can make quick decisions regarding investment
– can be flexible in the amount they invest
– can provide expertise, contacts and support as well as capital
– can feel personally attached to your business
– can be as hands-off or hands-on as you require
– can qualify for tax breaks like SEIS and EIS
– do not have to be given board positions

Venture Capital Firms:
– are whole companies that invest in startups
– are run by professional investors investing money from corporations, individuals, funds and foundations
– take board positions and have a strong say in how the company is managed and grown going forward
– invest much larger amounts than angel investors
– do not usually invest at seed stage
– generally invest not less than £1million
– take a longer time to make investment decisions and broker deals

What’s your take on the issue? Do you have any experiences you’d like to share? Comment below or hit me up on Twitter