Author: Toby Hicks

In our latest blog post Graham Davies founder and CEO of Addition gives us the low down on R&D tax credits and what the recent changes in the budget mean for startups.

Innovation is at the heart of entrepreneurship – whether it’s finding a new solution to an age-old problem, or creating something no one else has thought of yet. Research and Development plays a vital role in economic growth – which is why the UK government has committed to investing 2.4% of GDP in R&D by 2027.

What are R&D Tax Credits

Research and Development Tax Credits are a UK tax incentive designed to encourage companies to invest in R&D. Companies can reduce their tax bill and recover up to 1/3 of their R&D expenditure.

To get R&D relief, your project must have:

• Looked for an advance in science and technology
• Had to overcome uncertainty
• Tried to overcome this uncertainty
• Could not be easily worked out by a professional in the field
• The project may research or develop a new process, product or service – or improve on an existing one.

Since 2020, the uptake in R&D tax credit claims from start-ups and SMEs has rocketed. Gov.uk reports a 16% rise in the number of SME R&D claims, with 76,225 small businesses benefiting from the scheme as of the government’s last report in 2020.

SMEs have been making the most of R&D tax credits, but what’s the uptake in your sector? Many start-ups – especially those at grassroots levels – have yet to understand the role that R&D plays in their business offering.

SMEs have been making the most of R&D tax credits, but what’s the uptake in your sector? Many start-ups – especially those at grassroots levels – have yet to understand the role that R&D plays in their business offering.

Figures from the last Government report (2020) show that certain start-up industries have yet to take full advantage of the scheme. Thanks to new reforms announced in March 2022, however, we might begin to see a change.  

What Changes Were Announced to R&D Tax Credits in 2022?

In his Spring Budget, Rishi Sunak laid out new reforms to the existing R&D system, with the aim of expanding qualifying expenditure while tackling false claims. The reforms, which come into effect April 2023, mean the following costs will qualify for R&D tax relief:

1.   Data and cloud computing costs associated with R&D (including storage)

2.   Expenditure on overseas R&D activities where there are:

a) material factors required for the research (for example, geographical factors such as weather conditions that are not present in the UK)

b) Regulatory or legal requirements which mean the R&D project must take place outside of the UK

What do the R&D reforms mean for start-ups?

Understanding how these changes relate to your business can help you spot opportunities for future claims and projects. It’s also important to be aware of any challenges these new reforms could present for start-ups.

First, let’s take a look at the good news:

A Triumph For Tech

Anthony Lalsing is Innovation and R&D tax expert at Menzies LLP. He acknowledges that data and cloud computing are necessary services for most start-ups – and often incur significant costs.

‘The cost of cloud computing, data and storage associated with R&D – as well as activities and expenditure which relate to mathematics – will all now qualify under the new proposals. These reforms will be appreciated by tech start-ups,’ Says Anthony, ‘and will support emerging sectors such as artificial intelligence, quantum computing, robotics, as well as strong sectors such as manufacturing.’

Bigger Wins for Small Businesses

So far, start-ups have only been able to claim under the SME R&D scheme. However, the government is now considering increasing rates on the RDEC (Research and Development Expenditure Credit) scheme. This is only reserved for larger companies, but Anthony suggests that start-ups should consider cashing in.

‘Most start-ups will claim under the more generous SME R&D scheme. However, the large (RDEC) scheme can still be relevant where work has been subcontracted to an SME company from a large company.’ He states, ‘Even if the intellectual property/R&D rests with a larger entity, if part of this has been subcontracted to an SME company, a claim can be made under the RDEC scheme.’

The inclusion of data and cloud computing costs is a massive win for start-ups – not to mention expanding possibilities for claims on other schemes. But other aspects of the R&D scheme reforms could negatively impact start-ups – so it’s important to be aware of them as early as possible.

A Loss for Longhaul Labour

For most start-ups, hiring or outsourcing tasks abroad is more cost-effective than paying UK wages. Salaries for overseas labour relating to innovation were previously covered under the R&D scheme. However, the new specifications mean the playing field is narrowing once more.

John Miller is COO at Addition. He says grassroots start-ups risk being disproportionately impacted by the change in April 2023. ‘ The purpose of the scheme is focusing R&D spend on UK talent and innovation.’ States John, ‘For potential claimants, all contractors and developers used must be UK-based, rather than foreign nationals (unless the project meets the new requirements). This means weighing up the cost/benefit of cheaper non-UK labour, versus a higher R&D claim.’

John adds that start-ups can best inform their choice by consulting an R&D expert (like Addition).

PAYE To Play

While this isn’t a recent announcement, many start-ups continue to be caught unawares by the April 2021 reform – which limits claims with low employee numbers and high connected sub-contractors costs.

‘The SME cap on R&D tax credits was introduced for accounting periods beginning on or after 1 April 2021.’ Says Anthony, ‘This limits the repayable R&D tax credits to £20,000 plus 3 x PAYE/NICE, albeit with exemptions available. Many start-ups do not have significant payroll costs (often using subcontractors) and may therefore find their R&D tax credit repayment unexpectedly restricted.’

How can start-ups access R&D tax credits in 2022?

R&D tax credits are claimed through your Company Tax Return (CT600). This is based on the numbers from your Statutory Company Accounts and is submitted annually.

Due to the complicated nature of the R&D claim process, many founders choose to outsource their application to a professional. And with the government set to clamp down on false or exaggerated claims, getting expert help is more important than ever.

 ‘It’s true we are seeing increased scrutiny from HMRC,’ Says Anthony, ‘including a new cross-cutting team focused on tackling the abuse of these reliefs. However, R&D tax incentives remain incredibly valuable, offering up to 43.7% tax relief on expenditure for profitable companies and 33.35% for loss-making companies in the form of cash back.

So what’s the most effective way for start-ups to access R&D tax credits, without risking the notorious wrath of HMRC?

‘It’s important that businesses engage with specialists.’ Anthony concurs, ‘This will ensure claims are properly considered and justified, with all relevant qualifying costs captured.’

TOP TIP: The gov.uk website has information about eligibility requirements. If you’d like more tailored details and support, why not use Addition’s R&D Tax Calculator to figure out how much you could claim?

In Conclusion

R&D Tax Credits are an excellent means of rewarding yourself for innovation. The March 2022 announcement brings new opportunities – and challenges – for UK start-ups. But with HMRC zooming in on claims, having professional support is more important than ever.

At Addition, we help start-ups like yours identify qualifying expenditure, and handle every aspect of your claim. We understand integrity matters, which is why we’ll only take on your claim if we’re confident you’ll be successful.

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A strong quality that marks out successful startup founders is a ‘fail fast mentality’. Integral to the fail fast philosophy is cutting losses when testing reveals something isn’t working and trying something else.

However in fundraising this can be a very costly process, with raising investment being carried out in parallel with running a nascent business. Making mistakes with potential investors or going down rabbit holes with time wasters can take you further away from your other job of building a game-changing startup. That’s why we wanted to bring to bear some of the accumulated wisdom of startups who have successfully raised via AIN over the past two years.

They have the self awareness to acknowledge the mistakes they have made so others don’t have to. Here are the top pitfalls.

1) Underestimating the time and effort required

This came through loudly and clearly from several startups we spoke to and was the most commonly reported fundraising mistake, based on our interviews. 

According to Benjamin Carew, Co-Founder of affordable workspace solution Othership: “It took me some time to realise that I needed to run it like any other business activity, as a structured process. I spent months pitching at intermittent events and meetings waiting for my angel to land in lap not realising what I was doing was practising. I was at the wrong events, with no real investors; and worse meetings with the wrong people who were more interested in introductions than investing. Once I sat down, opened the round in SeedLegals, got all my deliverables in place, built a sales funnel and set a firm date to close the round then I was well on the way.” 

This sentiment was echoed by Nino Judge, CEO of low cost airline Flypop:
“Building a company always takes longer and costs more. We ended up incurring unexpected costs including paying consultants to perfect the business plan. Good people cost money. Third party validation reports, marketing campaigns & events to raise funds, Legal & IT costs.”

He continued: “It always takes longer as the holiday seasons get in the way. With Easter, Summer, Ramadan, Christmas and New Year, nearly 4 months out of 12 are go slow or closed months. Let’s not forget our unexpected Covid -19 virus!”

BorrowMyDoggy founder Rikke Rosenlund agrees that everything takes longer than expected: “You need to be prepared that it may be longer, especially when it is the first time. For example with angel groups, they don’t necessarily meet that often. Even with a crowdfunding platform there is a lot of work to get a pitch ready and then the closing off of the investment round.”

2) Pitching to the wrong type of investor

A key part of the preparation stage should be on finding compatible investors. However much you hone your elevator pitch and deck, if you are targeting the wrong type of investor the investment of effort simply won’t be worth it. You can also get it wrong by pitching to the right investor but at the wrong time.

According to the co-founder of DIY wealth-building app WealthyHood, Alexandros Christodoulakis:   “We began by approaching early-stage VC funds, instead of angel investors. This was wrong; it cost us time and money, but we soon realised it and switched our focus to angels, who were a much better fit for our stage and needs! However, it helped us challenge our value proposition, improve our deck and positioning and make it more robust.” 

According to Ben Hallett, CEO and co-founder of EdTech business Vygo: “My biggest fundraising mistake has been limiting myself to close proximating investors, I wasted a lot of time with pools of investors that expected global standards of traction but only wanted to give us “local market standard” terms. We all now have access to global capital so in the same way that investors will have global benchmarks for your traction, startups should have global benchmark expectations for investment terms.”

3) Not doing your homework on investors

Once you have identified investors who could be a good fit for your business, you need to appropriately tailor your pitch. Getting this wrong can be costly.

Gary Piazzon who founded Porter, a digital travel companion said: “I initially failed to adapt pitches and conversations for my audience. I quickly learnt that different types of investors were looking for different information from our discussions, with a big difference between angels who were much more interested in the vision and team, versus VCs who were much more focused on the quantitative side of things.” 

Olivia Sibony, exited Founder of GrubClub and AIN Head of Impact and International Partnerships says: “Learning to switch perspective to put the most pertinent argument forward is one of the simple steps we can do to increase our chances of investment if fundraising for a start-up. Failing to do this can create a barrier. My experience of launching my old start-up GrubClub was critical in helping me understand how important it is to think of different angles, adapting my pitch according to the investor I was speaking to, so I would research each investor carefully and highlight a different reason for them to invest, based on their background and interests.”

4) Being impatient, understanding no’s are an inevitable part of the process

It is crucial to understand that rejection is an inevitable part of the fundraising process. You may have been raising for some time and not had much success but it could just take that one great conversation to get you back on track.

 According to Katie McCourt, founder of sustainable underwear brand Pantee:  It’s really easy to get bogged down by the no’s which you will get a lot of, in most cases more than the yes’. Don’t let it slow you down – we were given some great advice by a fellow startup founder who advised us to ‘learn to enjoy the rejection’ – once you stop taking it personally it allows you to learn from it – in a productive sense!”

According to Mike Lebus, AIN co-founder: “There is so much emotional investment that has gone into launching a startup it is easy to feel disheartened by rejection. All the most successful startups have to go through this, including many who have first raised on our platform who have gone on to successful exits. Being patient and having a realistic timeframe to find the perfect match is the best approach.”

He continued: “Remember it’s not a no until the investor says so. A lot of entrepreneurs say “I messaged the investor and didn’t hear back, so they’re obviously not interested”. Investors are busy people, so they often need to be nudged to jump into action. Think of sales people – they don’t just send you one email, they then send several follow-up emails to try and get a response. It may be mildly irritating, but it is clearly effective, and this tactic also shows investors that you’re persistent and won’t give up.”

5) Failing to drill into the terms on offer 

Of course once you have landed interest from an investor this is the time to exercise maximum caution. You may have great chemistry but their interest is gaining the maximum value they can from any partnership. 

According to Rich Wooley, CEO and founder of item-swapping marketplace app Paperclip: “Probably the biggest fundraising mistake I made was not pushing back on some of the investment agreement terms in our first VC raise. There are a bunch of reporting, corporate governance and approval processes that I have to go through. For example, I need to gain approval for spending over £5,000 on something, or hiring someone with a salary of over £35,000. These terms ultimately do benefit and protect our shareholders, so they’re not all bad – but for the stage we’re at, they can be slightly onerous; they  can slow things down at times or take me valuable time to report.”

Timing can also be crucial here in determining the terms, according to David Pattison, angel investor and founder of advertising agency PHD: “Never leave it too late to raise funds. Investors will sense if you are running out of money and will try and delay the completion so that they can ‘chip’ the deal just before closure. Leave yourself plenty of time. Never underestimate how long it takes to raise money, allow 6-9 months if you are looking for serious money. Try to give yourselves options. Taking money from the least worst option is never good.”

The fundraising process is time-consuming, can be draining and there will be many dead-ends. But it is a vital part of the process providing the investment that can fuel your startup’s future growth. All of the founders interviewed above have raised successfully and we thank them for their honesty. The more prepared you can be going into the process, the better the chances of success. We wish you the best of luck!

If you’re looking for an angel investor to help fund your business, then the Angel Investment Network can help. Sign up to pitch your business to investors all over the world

Ben Hallett is the CEO and co-founder of fast growing EdTech company Vygo, built to ensure no student is left behind. In the latest Behind The Raise interview he talks to AIN about creating equality in education, scaling fast and pivoting, the reasons for rising investor interest in EdTech and how to avoid wasting time when fundraising.

Tell us about Vygo and how you came up with the idea?
While studying at university, myself and my co-founder witnessed too many of our peers struggling, falling through the cracks and ultimately falling short of their potential. With further research we discovered that the problem was global with 30-50% of students dropping out of higher education and most students struggling with severe or debilitating stress. We discovered that one of the core challenges is helping students connect with the support they need when they need it and we couldn’t see anyone else meaningfully solving this. This set us out on a mission to ensure that every learner has equal access to the support they need, when they need it, so that they can reach their full potential.

What is the problem you are looking to solve?
Equality in education.

How did you get the business off the ground?
At first we built a minimum viable solution (MVP) which enabled students to academically support each other. We saw a overwhelming student response to and universities started asking us to lease the platform. We ran the impact and revenue numbers and after that decided to adapt the platform to be B2B SaaS. It’s accelerated since then. 

What traction have you seen?
We’re now working with universities across APAC, EMEA and North America, consistently doubling or tripling growth every year and have raised over $3m in investment.

Why has there been such increased investor interest in EdTech?
Better education is at the root of almost every challenge the world is facing. The pandemic exposed a lot of the weaknesses in the education system and further catalysed everyone interest in EdTech, including investors.

What initially attracted investors to your company?
Our first round of angels mostly invested in Vygo because they believed in the founders’ conviction around the mission and our horsepower to bring it into reality.

What is your top tip for anyone raising investment for the first time?
Nail your authentic story telling. If you feel like you don’t have an authentic story, dig deeper, you have one, find it and obsess over it. 

My biggest fundraising mistake has been…
Limiting myself to close proximating investors, I wasted a lot of time with pools of investors that expected global standards of traction but only wanted to give us “local market standard” terms. We all now have access to global capital so in the same way that investors will have global benchmarks for your traction, startups should have global benchmark expectations for investment terms.

If you had a magic wand and could wave it, what would you wish for to improve the fundraising process for startups?
I would wave that wand to create much more transparency from investors and startups about each other, the deals the are doing and the journey ahead. I’m a big believer that honesty and integrity leads to better deals. I’d wave my wand for something similar to the ingredients list and health ratings on food packaging. I’d love everyone to post the specifics of their deals ($, valuation, special terms, traction, TAM/SAM/SOM, etc.). This would save startups so much money and time spent in negotiation and lawyers. Of course this would create another suite of issues to be solved BUT it’s my magic wand.

In our latest guest post David Pattison, experienced angel investor, business leader and author, considers the thorny question of investor due diligence. Is it a threat or or an opportunity? Or a bit of both?

If you are trying to raise money, there will be a requirement for the company (and often the management) to go through a Due Diligence (DD) process. This is where the prospective investors will take a deeper look you and your business.

If the investors are individuals or angels then the DD can be quite light touch, usually involving an interrogation of the business plan, some conversations with the team and maybe some customers or current investors. If they are funds or institutions, then they will take an almost forensic look and ask you to provide a mountain of information.

This can cover Finance, Legal, Commercial, Tech, Management, Sales and Marketing, Security. IP etc. They are looking for weaknesses, threats to the business, problems and anything that could be vaguely called illegal. Almost all of this will be done by sector experts often employed externally.

It’s a tough and distracting process. My personal experiences and most businesses I have spoken to about this process show it to be exhausting and emotionally difficult.

So is DD a threat or an opportunity, or a bit of both? The answer is that it depends. It is largely driven by the type of investor. It can be a threat if they are obsessed with just protecting their money, then it can feel negative and can erode the future relationship. It can be an opportunity if they are looking to help to build the business and see the future health of the business as the key to their investment paying off. As they will use the DD to come up with recommendations on how to improve practices and processes.

Whatever type of investor you have, DD will be part of the investment process. Here are some things you can do to help yourself:

1. Be well prepared.
   A founder of a company I worked with always said ‘run your business as if you are always about to enter DD.’ Make sure you always know where all the documents are and be prepared to share everything. You will be asked to set up a data room with all the company information in it. Why not set this up from the start of your business? It’s a good discipline and shows good business practice.
   
2. Spread the load.
   The CEO should not be the only source for DD. Spread it around the team. It shows confidence in the team and exposes the team to the investors. Have a DD data lead and if possible don’t make it the CEO. If they are a good team, then show them off.
   
3. DD is distracting.
   Do not underestimate the amount of time it takes to get through the DD process. Often it can be three months or more. Almost every business I know suffers a drop in performance during this period, always because the team is distracted. Try to minimise the effect by being well prepared in advance.
   
4. Don’t be afraid to say no.
   Investors can be lazy and will just ask for everything you have. If you think the information is not justified, then push back.
   
5. Set a time limit.
   At the start of the process set a date for when no more information will be provided, and no more questions will be answered. Doing this will ensure that the deal keeps moving forward and the advisers/specialists employed by the investors will not be tempted to over justify their fees by dragging it on.
   
6. Do not lie or cover up in DD.
   This is a forensic process and whatever you are trying to hide will be found. Good businesses with good practices should not be afraid of DD. Bad businesses should.
   
7. Just answer the questions.
   Sometimes you don’t know the answer to a question, don’t try and tap dance your way through it. Just say you don’t know and then find out the answer. Sometimes a finding will surprise you. Be surprised and then find out why you are.
   
8. Do not get emotional.
   This is the easiest thing to say and the hardest thing to do. You and your company will effectively be accused of all sorts of things. It can sound like you are a ‘fraudulent liar’ running an illegal money laundering crime syndicate (I am exaggerating a bit!). Unless you are then let it wash over you and try to explain why none of this is appropriate and here are the reasons why. Remember they are looking for weaknesses and that’s what they focus on.
   
9. If it’s not mentioned, you are probably doing it well.
   It’s very rare in DD that you get congratulated for doing something well and if you are it is usually in passing and buried in the small print. Don’t look for a lot of ‘pats on the back’. If the investment happens that is usually the sign that you have a good business.
   
10. Investors become partners.
    Try not to burn bridges with the people doing the investment. You will work with them after the investment is made, and friction early in the relationship rarely diminishes.

Two final things to remember about DD:

• Firstly, it is, in effect, an extended interview. Part of that interview will be the ‘quick cup of coffee’ or ‘meet for a drink’. Everything you say will be noted. It’s important that you and your team are aligned and have the same answers to the same questions.
• Secondly, DD is a two-way process. Ask the investor about their performance, who they work with. Talk to some of the companies they have invested in. Do your own DD and do not stop asking questions of them.

DD is hard and even if you are well prepared it is distracting and emotionally demanding. But it can make you a better business in the long run. Is DD a threat or an opportunity? A lot of it is up to you.

This is one of the many topics David covers in his book The Money Train: 10 Things young businesses need to know about investors. It’s a guide to preparing for the investment process from seed capital to Series A, with lots of real-world examples.

There has been a significant rise in the numbers of angel investors looking to back startups across the globe. Technology is the most popular sector and food and beverage seeing the fastest year on year growth. These are some of the key findings from Angel Investment Network’s annual analysis of the global state of angel investment funding based on data from their platform. 

AIN has 40 networks extending to over 90 different countries; and now with more than 1.75 million users it is the largest angel investment community in the world. The results are a real barometer of global startup investment activity in 2022.

The data reveals there has been a significant rise in interest from investors looking to back businesses solving problems in a range of industries. There was a 6% increase in searches from angel investors looking for potential startup investments. Over the same period, the number of pitches fell by 7.5%, which highlights an increasingly positive ratio of investors to startups.

Technology remains the most popular sector for investors, with searches up 23% year-on-year. Software remains second, up 7%. Food and beverage is third with the fastest growth of all sectors, up 35% with a range of innovative ideas coming to market.

The finance sector becomes the fourth most popular sector, up 24% YoY, with huge interest in the FinTech space. However, there is a mismatch with it being only the 11th most popular sector for startup ideas. Meanwhile, interest in property has soared since the start of the pandemic, up more than 100%.

AgTech businesses remain in high demand and since the start of the pandemic have been one of the fastest risers. 

Top 10 sectors for startups
1. Food and beverage
2. Property
3. Technology
4. Entertainment and leisure
5. Fashion & Beauty
6. Retail
7. Software
8. Agriculture
9. Manufacturing & Engineering
10. Hospitality, Restaurants & Bars

Top 10 sectors for investors
1. Technology
2. Software
3. Food & Beverage
4. Finance
5. Agriculture
6. Property
7. Medical & Sciences
8. Entertainment & Leisure
9. Energy & Natural Resources
10. Retail 

According to Mike Lebus, founder of Angel Investment Network: “The results show the global startup ecosystem in good health. We are seeing a lot of pent-up demand from angel investors, who have held back during the pandemic and have accrued more capital that they are now looking to invest. Meanwhile entrepreneurs are now working harder at ensuring the proposals they are bringing forward are more fleshed out so we are seeing more quality over quantity in terms of nascent startup proposals. During a challenging period many have taken the sensible decision to bootstrap their businesses further and go for funding at a slightly later stage.”

If you’re looking for an angel investor to help fund your business, then the Angel Investment Network can help. Sign-up to pitch your business to investors located all over the world.

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Antony Yousefian is the co-founder of innovative agtech businesses Bx Technologies. In the latest Behind The Raise interview he talks to AIN about transforming farming, his lightbulb moment courtesy of cannabis growers, a near death epiphany, and a clever approach for refining your pitch for investors.

Tell us about Bx Technologies and how you came up with the idea?

Bx Technologies helps farmers switch to climate friendly practices by measuring the climate-impact of produce, and putting that information on food. We do this via our software technology that quantifies farmers’ positive impact on improving their soil. We then sell that as a service. This enables farmers to differentiate their crops from others.

My co-founder Ben Bardsley is a 5th generation farmer and my background is in asset management where I was involved in the initial waves of cleantech. So we really understood the challenges in this space. Both on the ground and the economics behind it. 

What is the problem you are looking to solve?
Food production systems are the main driver for 70% biodiversity loss and over 30% of greenhouse emissions globally. With the pressure to feed the growing world, this is creating a negative feedback loop, we are incentivising farmers to produce food as cheap as possible, at the expense of the planet. 

Our soils are our biggest carbon sink. They can hold three times the amount of carbon versus air. However through the use of damaging chemical inputs and pursuit of cheap yields, we are turning our biggest source of carbon capture into an emitter. 

There is now a clear realisation this needs to change, but helping farmers to transition is critical. Many farmers are also in the red, with many farms only covering costs with the farming subsidy. I have to give a shout out to Jeremy Clarkson for bringing this to life in his series on Prime. Supermarket and food brands are under pressure to reduce their emissions – with the majority coming from farms. So what if we could use technology to quantify farmers who improve the soil, share that knowledge and incentivise more of it?

What was your lightbulb moment?
My personal “ah ha” moment was when I was working with medicinal cannabis growers in North America with a Dutch agtech company 30MHz. They seemed to be optimising the crop by improving the soil health. The byproduct or result of this was putting more carbon back into the soil. 

They did this because they were incentivised by their buyers (pharmaceutical companies) who paid more for higher nutrients or therapeutic effects from the crop. When I quizzed these growers and said, “Why don’t you do this for food? Their response was, “Yes we should” and I asked them “why don’t you do it then?”. Their response was “There is no money, there is no incentive”.

This was where my two worlds collided together. I had left the finance industry where more than 30% of assets had an ESG mandate and looking to invest in impact. Here is one of the most important industries in the world, which can grow in a way which repairs and improves the soil and our planet.

No amount of agtech or robotic automation was going to solve this. We had to either pay growers more for what they did or help them earn new revenue streams. For example repairing nature or putting carbon back into soil. Where it belongs by the way! It is how nature has been designing it for 3.8 bn years.

How did you get the business off the ground?
Thanks to my co-founder Ben. He had been on a remarkable journey, coming back into his family farming business in 2013, after being a leader in the British army, who was shot on the front line in Afghanistan. He had a realisation in the moment of being shot that if he did survive, he needed to focus on something that would truly make a difference. He realised the farm would have to change if it was going to survive. He made the brave decision to stop investing in new trees for his farm, and agreed to set-up and incubate Bx within his farm business.

My role was to build out the capability to measure the positive impact in the soil (more carbon), quantify it and find a way to sell it.  We had the perfect incubator and the envy of many Agtechs, where we had 800ha of playground to test and iterate. We were able to go fast, test and iterate with a market leader in the industry at scale. 

It worked. Bardsley England became verified as Carbon Negative. Bx supported the farming business to win a multi-year contract with a supermarket. There we saw a brand or retailer willing to pay more for planet positive produce. We had proved the model.

What traction have you seen?
Food Brands are under pressure and also have made commitments to remove emissions. The majority of their emissions are occurring on farms. For example for Nestle 90% of their total emissions come from scope 3 (ingredients, farming). Working with brands directly, we have found they are willing to pay more for carbon removal. In some cases 10x more than carbon credits farmers are selling for today (£15/t Co2e). Consumers want this to happen and brands can capture market share and premium. We have seen fantastic traction with leading food brands in the UK, and have our first international customers in the US and NZ.

Why are you raising investment now?
We are raising to push out our series A raise (Early 2023), deliver the MVP for these first customers, including discussions with a major UK supermarket. We can double down resources on data-science, build on our machine learning capability and automate data-collection on the farm. This will give us the foundations, readying us to scale up with a supermarket and larger global brands in 2023.

What initially attracted investors to your company?
We are told it is our story and the experience of the team. We understand farming and the food chain deeply, the problems that exist including in agtech development. Bringing together data-science and experience from sectors including gaming, media and finance.

Our business model has been attractive to investors which is centred around incentivising a transformation in the food system. We are able to quantify impact and reward it explicitly. One of our first investors was Counteract, a carbon removal VC. They understand this space well and the potential for soil to remove carbon at scale.

How important are startups in helping to solve climate change? And how can their ideas be best facilitated to tackle the existential threat to our planet?
This is probably where us and Counteract see eye to eye. We believe it is going to take big bold bets NOW, not later to prevent a disaster. We need entrepreneurs with clear vision and backed by passionate impact investors who want to make a difference. Waiting for validation of business models is going to be too late. We have less than 8 years in the current carbon budget (1.5c warming-) and we need to start creating disruptive changes to industries. As Larry Fink (Blackrock CEO) said recently, the next 1,000 unicorns will be climatetech. 

What is your top tip for anyone raising investment for the first time?
Take time to do your homework on the investors you want to approach. Obviously capital/cash is one of the main drivers but investors can add a lot of value. For us now, patience, impact, food, ag. capital is best for us. 

For Bx right now, Angel Investment Network is perfect for us. Though in 12 months time, we are looking for investors who understand how to build an AI business. The expectations and go to market are different versus say an enterprise SaaS solution.

Another tip, once you have done the above, make a tier list and go to the tier 3 first and then end of tier 1. You will have refined the pitch, the deck and your data room.

My biggest fundraising mistake has been…
From a previous life, not doing the homework on the investors and bringing in the wrong type of investor. They wanted acceleration of commercialisation vs product development. This took us down a wrong path and stalled our growth. 

If you had a magic wand and could wave it what would you wish for to improve the fundraising process for startups?
Reduce the time needed. It would be great, if investors were able to look into a business remotely and it didn’t require any significant time from the founders of the business. It’s catch 22 though, you need to educate investors about your business but some of the most valuable people driving the business forward are out of the business for months on end.

Bx Technologies are currently raising. Please contact Sam Louis for more information – sam@angelinvestmentnetwork.co.uk

In this article, founder and CEO of Addition Finance Graham Davies explains how automation can help small businesses create scalable processes and promote growth.

The average startup is working with extremely limited resources and manpower in its early days. As cash is king, it’s easy to focus all your time and effort on delivering your product. This is natural and understandable. However, it’s also why founders are hitting burnout at record levels as they try to stay afloat while under pressure from wearing multiple hats. Attempting to manage everything, alone and all at once, isn’t only dangerous – it’s also ineffective.

“Well who else is going to do it?”. I hear you. It’s tough being an entrepreneur – especially when you’re just starting out. Maybe you’d love to outsource the bulk of the grunt work, or expand your team, but money’s tight and you’re not quite there yet. If this is you (and even if it’s not), automation is your friend.

Whether it’s B2B or B2C, automation trends are on the rise. According to 2022 Gartner research, AI software revenue will hit approximately $62.5 billion this year – with a 21% increase over last year.

Five ways automation can help you level up

Automation can help streamline workflows and reduce manual tasks – giving you (or your team) more time to focus on the human elements of growing a business, such as sales or customer service.

When wielded with precision, an AI toolkit is the perfect ally for startups – wherever you’re at on your business journey.

Let’s break this down.

1.   Processing Power

The power of streamlined processes can’t be understated. Regardless of how big your team grows, you want your product or service to be delivered in a consistent way. This builds trust, brand loyalty and credibility.

Workflow automation leader Zapier sums up its purpose very clearly in its Quick Start Guide: ‘The heart of any automation boils down to a simple command: WHEN and DO. “When this happens, do that.” Even the most complex automation can be broken down into this simple command.’

For example: when you get a lead from your ‘Get in Touch’ website form, the ‘do’ would be to have an automatic message sent to your sales team. This is a very basic workflow process, but it ensures that no leads are slipping through the cracks.

It may sound obvious, but always have your team test the trial version before committing. Different tools serve different workflow styles. We love Zapier and Make (formerly Integromat) at Addition. These are highly effective tools, but they do require training to use. Consider either hiring an automation specialist or investing in a training course for one of your team.

TOP TIP: Ask a sales rep to walk you through a demo on a call and answer any questions. This will help you determine whether the tool is really the best for your business. There’s sometimes wiggle room for price negotiation as well (if you don’t ask, you don’t get).

2.   Less hard, more smart

It’s not how many hours you work, or even how hard you work – it’s how smart you work. Diligently scraping data together into an Excel sheet, or manually emailing cold leads is a noble effort, but it isn’t going to help you scale. In fact, quite the opposite – it will slow you down and hinder growth.

Using automated software for process-heavy tasks is like using a dishwasher or tumble dryer. You could do without them – but the rate of progress isn’t even comparable.

TOP TIP: Lead generation, nurturing and conversion is one of the most common areas for automation. Tools like Hubspot and Mailchimp are giants in this space and for good reason. Hubspot has a wealth of free guides, ebooks and certified courses on all kinds of automated marketing processes. If you haven’t checked them out yet, it’s definitely worth the effort.

3.   Right on the money

Money, money, money. Businesses spend it, earn it and invest it. Keeping track of ingoings and outgoings is a lot easier with automation. There’s a wealth of bookkeeping and accounting software to choose from. Just picture it – a platform where you can raise and pay invoices, balance the books and manage your taxes, all in one place. Major leg-up for your company, right?

TOP TIP: Speaking from experience, Xero is the number one tool to beat. Why? Its open API syncs with over 1000 other apps (Stripe, Paypal etc). Also, optional add-ons like Payroll or Xero Tax make it a limber tool that can grow with your business. We love it at Addition.

4.   Track and trace

Ah the ‘key performance indicator’. We all know why they work – but figuring out how to get started is often just as difficult as keeping track. Automation can help you collate data to work with, like unique website visitors, conversion rates and domain rankings. When you already have a clear picture of where you’ve been and how you got there, it’s much easier to chart a path to where you want to go. And getting that information gets a lot easier with automation.

TOP TIP: If you’re already automating things like your lead generation, the tool you’re working with probably has options to report back on KPIs. But if not, or if you’re looking for software that is KPI-tracking specific, here’s a list of some KPI Dashboard tools.

5.   Checks and balances

AI is by no means flawless. You’ll often find the ‘computer says no’ scenarios crop up where the situation isn’t cut and dry. This is where the human touch comes in – and it’s important to keep the right balance between program and person.

Focus your AI use on process-heavy tasks (like generating templates and reports, extracting and importing data scraped from multiple sources, or auto-filling forms). You can then channel that extra time and manpower into stellar customer service. Never underestimate the power of a sincere note or phone call when your clients hit a snag. And always double check your AI’s final product – just in case the computer said no when it should’ve said “let’s talk”.

TOP TIP: While the pandemic has given remote working and automated processes a huge boost, the need for human connection is also at an all-time high. If you don’t have the budget for a permanent physical office, look into shared professional spaces (like WeWork) where you can offer clients face-to-face meetings to build trust and relationships (and host company socials!).

In Conclusion:

It may take a bit of fine-tuning and digging, but the right tools to take your business further, faster are definitely out there.

However, automation can be much more than a tool to save money and scale quickly. Setting up efficient workflows through automation requires you to think about every process on a granular level and will give you a unique understanding of your business.

Addition offer outsourced financial services for startups in the UK and US.

Funding will help accelerate global borderless education support in higher education

Fast growing EdTech startup Vygo has raised £1.5m in a pre-seed funding round supported by Angel Investment Network, the world’s largest online angel investment platform. Vygo is a Saas platform reinventing the conventional social support ecosystem in higher education.

Offering personalised support services beyond the physical campus, the business already works with a third of Australian Universities and is rapidly growing in the UK. The raise will help it expand in the UK and Europe and fuel its ambition to build borderless social education for every student.

The round was led by EdTech VC Sparkmind and supported by Angel Investment Network. Other participants include EdTech accelerator Supercharger Ventures and the Australian Catholic University. The funds will be used for platform development and expansion of its UK and European presence. 

The demand for Vygo has soared in the past few years as a result of the increased demand for HE institutions to extend their support services digitally. A recent JISC study estimates that up to 96% of university students require additional access to support during their undergraduate degree. This demonstrates the need for support services to be more accessible than ever to ensure that students are getting the best educational experience possible.

Ben Hallett, Vygo CEO & Co-Founder, comments: “At Vygo, we believe that every human deserves a world-class education and that social experience is at the core of impactful learning. The Vygo platform gives every learner a social education community filled with their peers, mentors, tutors, advisors and other supporters. With Vygo, education institutions are able to reinvent their social support ecosystem online and ultimately improve their student outcomes whilst scaling their impact. We were delighted to work with AIN to find amazing investors and individuals through a well-streamlined process.”

According to Sam Louis, Director, Angel Investment Network: “We’ve worked with some fantastic EdTech startups in recent years – Ben and the Vygo team are right up there with the best of them. Their focus on the social and pastoral side of education resonated with us right away and, combined with significant international traction, investors within our network from right across the globe felt the same. The need for this platform has only accelerated in the past few years with so much learning being done remotely and we’re delighted to have helped Vygo on their journey.”

Olivia Sibony, AIN’s Head of Impact, looks at the rise in interest in green and clean tech startups and why we have seen a ‘perfect storm’ of conditions for their growth.

Over the past few years we have seen the perfect storm of conditions that have rocketed investor interest in green and clean tech startups. Looking at the patterns of investor keyword searches on the AIN global platform we have seen impressive growth for green business terms, including ‘renewables’, ‘greentech’  and ‘environmental’.

In the last three years these business ideas have gone from niche to mainstream with investors hungry for standout solutions for our manifold environmental challenges. The COP 26 conference further committed Governments to carbon reduction targets. As was acknowledged in Glasgow, it is private enterprise and nascent businesses that will provide many of the solutions. 

Factors such as the recent surge in gas prices have made us more aware of the need to find alternative and renewable energy sources, alongside smart ways to reduce energy consumption. 

Reasons behind rising interest

There are several reasons for the rising interest among investors. 

1. Firstly, the increased global natural disasters with floods and wildfires closer to home have really brought this home to everyone. Including consumers, business leaders and governments.
   
2. We then saw COP 26 turning up the volume on the dialogue. This included recognition of the need for the ingenuity of businesses to come up with the solutions to the challenges we all face. 
   
3. A third factor at play has been covid reframing people’s values on what really matters and the increasing interconnectedness of the planet. 

Companies have realised they need to nurture their customers and the younger generation who have the most to lose are the most vocal in advocating for change. So they’ve shifted their focus which has opened up the supply chain market for a lot of B2B Climate Tech opportunities.

A further spur to action comes from companies also realising their employees increasingly care about the environmental impact of the companies they work with, so has also stimulated growth in this space.

Case study examples

This means more entrepreneurs are stimulated to build companies in this space as more investors see great commercial opportunities. As well as the obvious motivation for passion driven angel investors in investing in something that will provide a better future for them and their children. Over the past year through AIN, we have seen some impressive cleantech businesses being backed by our experienced angel investors.

Exciting businesses who have raised including cleantech business, eleXsys Energy who successfully raised £5m last year. They have developed a unique, enabling technology that will drive the transition of global energy grids to a clean energy future. Investors bought into their vision for their technology which enables commercial and industrial rooftops to become grid-connected, solar power plants.

Another business that has seen a great deal of investor interest is Zero Carbon Farms. They are a cutting edge AgTech company that builds and operates Controlled Environment Farms, providing a future-proof and sustainable solution for growing. They solve the problem of carbon generation in farms by providing up to 90% less water and a fraction of the space compared to conventional farming.

While Zero Carbon are dealing with sustainable production, Greyparrot – Co-founded by CEO Mikela Druckman, are applying cutting-edge deep-learning AI computer vision technology to the formidable problem of waste recycling. Their solution analyses waste on moving conveyor belts to allow monitoring, audit and sorting of waste at scale. Greyparrot have trials ongoing at 12 facilities with leading waste management companies, and are now raising a £10m Series A to scale their commercial product and become the category leader in waste analytics.

Seeing the success of these businesses can inspire the next generation of entrepreneurs to come up with their own solutions, offering the chance to marry profit with purpose. In turn many will go on to become investors themselves creating a virtuous cycle to help power the circular economy that must become the future of the planet if we are to avoid the worst ravages of climate change.