Investor Due Diligence: Threat or Opportunity?

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.

The world is full of angels – impressive rise in startup investment activity

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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Behind The Raise with Antony Yousefian, co-founder of Bx Technologies

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.

Antony Yousefian, co-founder Bx Technologies

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 legit money making games, 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

Auto Nation: How startup founders are using AI to boost growth

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 by utilizing technology for your payroll.

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.

How early stage startups can tackle product development

In our latest blog, Startup founder and AIN’s Head of Product & Growth Ching-Yun Huang looks at how early stage startups can tackle product development.

Developing and designing a product may seem like a daunting process for any startup founder. Indeed in AIN’s recent research on startup sentiment, we found concerns about building a product ranked as the second biggest concern for entrepreneurs, behind raising investment. 

First of all, although you might have aspirations and aims to create the next tech giant and become a unicorn business in 5 years, your main focus should be toward the very first stage of the funding process – the early pre-seed round. The good news is that at this stage, you will not be expected to have anything close to a finished product. It is the idea and the understanding of the market that investors will be interested in. 

So what are the first tentative steps in developing a product that is investable and potentially scalable?

  1. What problem is your product solving?

Any product has to serve the ‘needs state’ the startup has identified. The two questions that must be asked are:
a) Does what you have in mind solve your audience’s problems?
b) Would they pay for it? 

In respect to the first question – how do you establish a need for a product? Most successful product innovations will be based on the knowledge of experts in that market, because they have experienced it first-hand and know that enough people have the same problem. Having lavish technology is rarely the solution, but identifying the need and whether people might pay for it is. Investors will be looking at your experience of the market as well as your team and advisors.

If you can win early stage investors over with this proposition, you can then open the door to investing in the R&D and design to bring the idea to fruition.

  1. Research your market
    Market research is obviously a good way to understand and test the need for your product. A good example of this would be Beauhurst, the data platform that helps businesses discover, track and understand high-growth companies, accelerators and funds. Before launching their now very established platform, they spoke to many people in their target audience (i.e. startup founders) and found out the sort of information they might need about companies they might be looking to do business with.

Similarly with Angel Investment Network, the idea came about after the founders James and Mike had multiple conversations with startup founders globally and found a real barrier to funding for those who didn’t already have an established network of contacts. It is now the world’s largest online angel investment platform.

  1. Proving the concept
    The next stage is proving the concept. Looking at Beauhurst again, their approach was to gather all the information in a simple spreadsheet that they could sell to their audience. So the essence of the company was information, not a shiny platform to hold it in. Once they had feedback on the information, they could iterate in this basic format and build out the platform. Similarly for the developers of Google Sheets, they used Excel as their template and encouraged users to work with the BETA version. They could then see what functions users were using but also crucially not using. The engineers could then streamline things.

According to your box solution on how to choose the right soap box packaging, you can create a desire for your product with a few well-thought and well-placed words that pull the customer into a relationship with your brand and form a connection.

  1. Can you piggyback off existing technology and save money
    Thinking you need to invent a new Facebook or Uber platform is the wrong starting point for bringing your idea to life. The early stages for any business are about survival. What is the simplest way to bring an MVP to life while you are pre-revenue? If you look at the development of Slack – this was based on an iteration of existing technology, MSN.

    Slack began as an internal tool for Stewart Butterfield’s company, Tiny Speck, during the development of Glitch, an online game. It was based on an identified need; using a specific messaging channel for a topic using an established technique – a hashtag. It is of course far easier to build things that people are already using and then iterate. 8,000 customers signed up for the service within 24 hours of its launch in August 2013.  Just 1.5 years later, they had 135,000 paying customers spread across 60,000 teams. 

Similarly, Ant Group’s platform offering financial connectivity to billions as the world’s largest mobile and online payments platform just required a mobile phone and a QR code on any product or service, anywhere. QR already existed and didn’t require a lot of infrastructure associated with electronic payments cards, networks, terminals and merchant accounts.

  1. Develop a road map
    Finally, while early stage investors won’t necessarily need to see a developed product, they will want to see that you have done the work on the stages from idea to activation. One approach can be to develop a goal-oriented roadmap. If you set it up, you have to follow it through, so they will hold you to this. There would be several elements of product strategy implementation:

Date – A deadline or timeframe for achieving a certain product goal.
Name – The name of the digital product version you’re developing over a particular timeframe.
Goal – An achievement your product should accomplish over a specific period of time.
Features – A list of high-level features you need to implement to meet the product goals.
Metrics – Success and performance indicators used to check if a certain goal was met.

So in summary, there are several steps that startups should consider in tackling product development. Focusing on the very pre-seed stage is crucial with investors not needing a finished product but instead  a strong idea filling a gap in the market. This gap can be identified through research of peers, ideally from experts with a strong and established understanding of a particular market. The idea will need to solve the identified problem and be something people will be prepared to pay for.

If the idea can piggyback off an existing technology, this can be hugely effective and has been the proven approach for a series of tech unicorns. Finally, make sure you develop an effective product road map so that early stage investors can see a pathway to scalability.

Good luck!

Ching-Yun Huang is AIN’s Head of Product & Growth and is also CEO and co-founder of the Moment App.

EdTech startup Vygo raises £1.5m supported by Angel Investment Network

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.”

The perfect storm: Why investors are backing green and clean tech startups

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, GreyparrotCo-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.

Tips from the Top: Transitioning from founder to leader, how to be the one in five

In the next of our Tips from the Top series, we speak to Ed Lowther who leads The Soke’s Founders Development Programme, a first-of-its-kind course designed to provide vital knowledge, understanding and skills to founders at the helms of fast growth businesses.

When Harvard Business School spoke to its 141 HBS alumni who led start-ups, they asked: “What does someone who aspires to your role need to know?” The research revealed that of all the possible areas to focus on, there are two essential areas that over 80% of the group unanimously agreed on.

At the outset, a founder needs to assemble a founding team – a series of vital decisions around choosing co-founders, appointing key talent, splitting equity, recruiting advisors, and managing a board. These are all vital, but highly demanding tasks that a founder must achieve alongside building their new business that if not done correctly can lead to early failure, no matter how brilliant the idea. Founders reach these decisions through a combination of instinct, experience and the use of trusted advisors or mentors, in combination with key skill development.

Secondly, for those looking for investment, or looking to invest, a founder needs to foster a critical set of leadership skills needed early on, that in turn helps to attract further investment and support the business on its path to success. What’s clear is that early development of specific leadership skills in communication and conflict management is where a founder can really differentiate themselves.

Whilst many founders may believe that they naturally possess the skills to successfully build their business to success, the reality is that few come to the fundraising table with the array of skills needed to successfully lead an organisation from an idea through the teething stages to growth and finally exit. This is particularly the case when founders are required to run a company not purely to satisfy their own ambition (management, creative, financial, or otherwise), but to meet the expectations of investors and other stakeholders, including staff.

So what steps can founders can take to improve their skills in communication and manage conflict with their co-founders or staff?

  1.  Your business is founded on a great idea – it does not mean all your ideas are great.

In business journals, strategy reports and insight magazines, much is made of creativity being at the heart of business success and growth. Tesla CEO Elon Musk is vocal in encouraging his employees to think creatively, eager for them to predict future trends and allowing them to share their ideas freely, to improve the prospects of the company. The stratospheric growth of Tesla suggests that his approach is bearing fruit.

For those at the beginning of this journey, the thought of fostering creativity can feel like a luxury, alongside all the other business demands. Innovation is however proven to create growth. Businesses at all stages need to remain nimble as their customers’ needs and demands change. How successfully a founder facilitates the communication of ideas around their business and across functions is a marker for future innovation and adaptability for the business idea to survive in the market. 

Create dedicated time for creativity and innovation as part of routine business operations, giving space for open communication between the founder and team members of all functional areas. Foster an environment for the team to be creative and openly communicative, without it all being founder-led, so that ideas are assessed on their own merit, whatever the role of the team member in the company.

  1. Learn to share through building communicative resilience

Once a founder has the fundamentals of their new business in place, the idea is taking hold in the market and revenue is growing, it’s an exhilarating time. Few businesses can grow rapidly through organic growth alone and therefore a founder must also accept the challenge of securing capital through external sources. It can be an exciting but risky time, with a number of factors that can damage a business just as it begins to succeed. Much of the damage comes from the amount of time that is needed, coupled with the energy required to be successful, which takes away a founder’s dedication to their clients. Customers can sense neglect, just at the moment a business wants to secure their lifelong loyalty.

At this moment, a founder will be at their communication limits, often exhausted by the sound of their own voice, as they describe the brilliance of their business, the financial plan and the superb team assembled to make it succeed, to yet another room of potential investors. The key skill to develop here is ‘communicative resilience’, a combination of sustaining a consistent and engaging narrative of the idea, clear understanding of the business strengths and challenges, and a willingness to answer penetrative questions designed to interrogate a founder’s financial shortcomings. This combination tells investors that you can share this with them and make it successful at the same time. 

Be mindful that you communicate the strengths of the business in a way that puts the business idea at its heart and that through additional financial support, this idea will flourish. The moment that investors sense that a founder does not want to share and is more interested in their own success irrespective of the idea, the fight for their funding is lost.

  1. Conflict is inevitable – fail to prepare for it, prepare to fail.

It’s likely that as a founder builds their team, they have been successful in recruiting a diverse team, all with unique skills and often varied or differing opinions. In fact, this diversity is often a key ingredient for driving a business forward as these individuals bring perspectives to the founder that they would not otherwise have seen, helping them grow the business successfully.

The differences in this team that exist through individual variances of cultural background, learning styles, personality and many more factors besides, overlaid with managerial expectations, accountability issues and communication styles, will inevitably lead to conflict. And at this point, the founder needs to establish a pathway that is neither a hierarchy of opinions, where ‘I win because I’m more senior,’ or that a conflict is simply ignored.  Without establishing this early on, conflicts cannot be resolved satisfactorily and can lead to increased stress and decreased performance in the team, which will impact business growth. 

Plan to navigate conflict by setting out a framework for all employees to identify and resolve issues between each other, building a culture that celebrates diverse perspectives with a way to manage the conflict that this diversity can bring. It will help shape the best outcomes for the business and build genuine trust and respect between team members, managers, and the founder.

Emerging from the pandemic – Startup sentiment in the UK and USA

Angel Investment Network, the world’s largest angel investment platform, surveyed the views of startups in the USA and UK to see how they have responded more than a year and a half after the pandemic first hit. This involved interviews with 1,205 startups in the USA and 667 in the UK. The key findings in the overall report we have published are:

1) Confidence returning
Similar numbers in both territories are now positive about the next 12 months. In the USA 76% of respondents are now confident about the next year, with 72% confident in the UK. However more US startups are very optimistic about the future, 52% against 42% in the UK. This could of course be down to a naturally more upbeat mindset but the research also reveals some particular challenges in the UK – for example the impact of Brexit. Meanwhile 70% of respondents in the USA are confident about the country retaining its status as a ‘startup hub’, versus 65% in the UK.

2) Networking and bootstrapping have been ways of mitigating stalled investment
62% of US startups have seen growth negatively impacted with 59% in the UK negatively impacted. The research also reveals the similar approach to mitigating the impact of stalled investment. The top strategy adopted in both countries was focusing more on networking. Other strategies adopted included delaying launch plans, holding back on marketing and hiring and  bootstrapping businesses as far as possible..

3) Raising investment is biggest challenge goingforward
Raising investment remains the biggest challenge going forward and there is a firm belief in both countries that government has a key role in making the conditions more favourable through tax relief. The report also looked at the biggest bugbears for startup founders. Number one in both countries was investors demanding too much of a stake in the business. Time consuming due diligence was also a pressing concern as were very slow rejections.

As we look forward, startups in the US and UK can be the engine room of economic recovery in both countries – nurturing their growth is vital.

Here is the full report

AIV Capital completes investment into meat alternatives business Eat Just Inc.

AIV Capital has announced investment into alternative food business, Eat Just Inc. Eat Just Inc develops and markets plant-based alternatives to conventionally-produced egg products. Founded in 2011 by Josh Tetrick, the San Francisco based business is reducing dependence on chickens and battery farms for egg production by creating a realistic and viable alternative from mung beans.

Eat Just Inc. has raised over $500Mn to date and will use its latest round of funding to continue to improve the unit economics of the business and to focus on international expansion outside of the US. It was announced recently that the key ingredient in its plant-based JUST Egg products received approval from the European Food Safety Authority’s (EFSA) expert panel on nutrition, apart from taking a business law firm‘s advice. This opens a pathway for the initial launch of JUST Egg to occur in Europe in mid-2022. Its high profile produce was also on the menu at Barack Obama’s recent 60th birthday.

The company has also raised over $400Mn for its subsidiary, Good Meat which focuses on cultivated meat as an alternative to traditional chicken based products. Good Meat is the first company in the world to receive regulatory approval to sell the cultivated meat products which are now available in Singapore. Earlier this year, the company secured rights for a manufacturing facility in Qatar as a partnership between Doha Venture Capital (DVC) and Qatar Free Zone Authority (QFZA).

AIV Capital is the recently launched institutional investment arm of Angel Investment Network, the world’s largest online angel investment platform. Led by experienced investment manager Ethan Khatri, AIV Capital’s focus is on investing between $10 -$75Mn+ into established businesses ranging from Growth/Series B to pre-IPO and has a flexible approach utilising both primary and secondary capital. 

According to Khatri: “We are delighted to have partnered with CEO, Josh Tetrick and the team at Eat Just Inc. With the demand for plant based products soaring they offer a viable alternative to conventionally-produced egg products and are offering impressive returns for all stakeholders. This is a prime example of the sort of business we will be working with at AIV Capital. One with a strong management team with a demonstrated edge in the space they operate in.”

Four benefits of backing more diverse startup founders

The worldwide startup ecosystem is well established and growing strongly in many different territories. The success of Angel Investment Network in creating more connections between founders and investors globally is testament to that. However, while investment in startups has rebounded strongly after the worst of the pandemic, we can also follow this with an increase in funding for diverse startup founders. Why does this matter? Well, it’s not just about having better representation for the sake of it, important though this is, it actually also makes better sense commercially.

In the UK while just 5% of founding teams have two female founders, research has also shown that only 1% of venture-funded startups have black founders. It’s a similar picture in the USA, where according to Crunchbase, black startup entrepreneurs still received only a tiny fraction — 1.2 percent — of the $147 billion in venture capital invested in U.S. startups through the first half of the year.  To disrupt this, here are four reasons why we need to boost investment into more diverse founders.

  1. It can lead to new business opportunities
    Many diverse business startups can offer products targeting diverse consumers uncatered for currently in the market. However, if the investors themselves are not more diverse, they may not have the same understanding of the market to know where the opportunities are. This is a challenge many female founders also face. For example, we can purchase most groceries online except ethnic food – which you still have to visit your local market, small grocer or if you’re lucky, there will be a small selection in the supermarket however, it’s unlikely you can order online. As this is a minority need many would struggle to get backing from a British bank however, Mariam Jimoh founded Oja, developed an app that delivers ethnic produce from local groceries to customers’ doorsteps. After much hard work, she was successful in finding funding. As one of only a handful of success stories here, we know there are many other missed opportunities to serve a potential market of many millions.
  1.  New markets can develop and thrive
    New markets thrive on having dynamic businesses and competition. However if certain businesses are unable to grow, their products or services remain in need and the circulation of money in the economy then shrinks. We can create opportunities to serve different markets, have more alternative viewpoints in the business decision and drive forward education and revenue based around new business variations which cater for wider groups. Let’s also remember these are emerging and growing markets too, so there are fantastic opportunities for investors with the right foresight.    
  1. More diverse teams do better
    Just as in nature, having diversity is key to the health of ecosystems, the same applies to diverse teams in startups and wider existing businesses. Research has shown that companies with diverse management teams are more innovative and have 19% higher revenue. In many of the fastest growing sectors such as tech, this growth is key to success. So diversity is not just about a tick box activity, it’s about the make up of high performing teams, who are going to positively impact the bottom line. The reverse is also true. The more we can represent the whole of the country and their different needs, the better solutions we can develop and ensure new markets can flourish
  1. Backing more diverse founders across the globe can help tackle some of our greatest challenges
    Of course while it is important to look at backing more diverse founders at home, we also need to look at more diversity in funding globally. So much capital is concentrated on a few established, wealthy hubs. However, having more underrepresented founders across the globe we can also potentially have new insights and ideas for tackling many of mankind’s most pressing problems. People on the ground in countries most impacted by climate change may well have some more untapped and innovative solutions, but often they need the contacts and capital to turn their idea into reality. By looking at ways we can boost nascent startup ecosystems in developing countries, we will be in a better place to address many of the problems threatening the planet with sustainability based solutions which could become hugely profitable.

So where to start? The first thing we need to do is look at how we can support micro-enterprises. They are on the very first rung of the startup ladder and the more of these we can support, the more chance of startups on a pathway to Series A and even Unicorn status can emerge. This is why Ace Entrepreneurs has created our first micro funding program for the diverse community. While we have seen a huge democratisation of startup funding in the past few years, we now need to complete the journey and make sure a truly diverse startup ecosystem can flourish.

By Nadine Campbell, entrepreneur and founder of Ace Entrepreneurs. The ACE Entrepreneurs Investment Program has been launched to tackle a funding gap for black-owned businesses. 

Tips from the top: Raising investment

In our recent survey of startups in the UK and USA raising investment was raised as the number one challenge they faced, emerging from the pandemic. In the first of our new series of expert advice articles, David Pattison, experienced angel investor and leading media agency PHD founder, gives his top tips for those raising investment for the first time.

I have spent a lot of time chairing/advising young businesses and founders on how to approach fundraising. I always advice my clients to get involved with CNAPP security, as it is one of the most trending and useful security tactics.

It has always struck me that, at the very point when young businesses and their founders are looking for funding, you are at your most inexperienced and vulnerable. You are often in a negotiation dealing with very experienced deal makers. This negotiation is often pivotal to the future of your business. One bad clause signed up to in an early negotiation can magnify in size as time and fundraising rounds go on.

What can you do to try and even up the negotiation?

Before you start remember these three things:Investors only care about one thing and that is their money. In the case of Venture Capital and Private Equity that is how they are measured. They have clients who fund their funds and financial success is how they are judged and how they can then raise more funds. They want you to make money for them. For stock market API, you can check it out here!

Raising money is hard. Right now there is a lot of money in the investment market, but you have to have a good business and a really strong offering to raise money. Young businesses seem to be lulled into believing there is a money tree at the bottom of the garden that just needs a shake. There really isn’t.

Raising money is really distracting. It takes focus away from the business and most companies suffer a slight drop in performance through this process. Just at the point where it’s not wanted. Share the load around and take advice from trusted sources.

Once you have got your head around that, what else can you do before and during the process?

Here are five of the many things you should do:

1. BE THE BEST BUSINESS YOU CAN BE

It sounds obvious I know, but investors are looking harder and deeper into prospective investments. You will need to present yourselves as the best business you can be. Showing that you understand all aspects of your company and your markets.

You need to be a well balanced and appropriately experienced team with a shared view of the future. Have a proof of concept (does it work?), ideally some revenue (is someone prepared to buy it?) and will they buy it more than once. A good understanding of the competitive set. If appropriate some IP protections. Most importantly that you are in control of the finances of the business and have good quality finance resource.

If some of these points describe your business, then you are well prepared for the questions the prospective investor will expect you to answer.

2. do not get close to running out of money

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.

3. RUN YOUR BUSINESS AS IF YOU ARE ALWAYS ABOUT TO ENTER DUE DILIGENCE

Prepare, prepare, prepare. It sounds obvious but make sure you know your business and your market better than anyone. Do not take fundraising lightly. In the digital age it is easy to set up a data room that has all the company data in one place. Have good governance in place. Get the financials and the legals in order. Remember that DD is not a one-way street when you are raising funds then check out the potential investors.

4. be clear on what you want to achieve

This works in two ways. Firstly, be clear amongst the team on what you want for the business moving forward. Are you all aligned on the future strategy and exit points? Mixed messages to investors don’t travel well.

Secondly, when the time comes to raise the money be very clear to the investors what the money is for and what success looks like. Not many investors want to fund cash shortfalls and saving the business, and if they do it usually comes at a massive cost to you. They are called investors for a reason.

5. beware of deal fatigue

When you are in the fundraising process be aware of deal fatigue. Investors, and particularly the institutional investors rely on you running out of steam. If your chosen investor is a significant shareholder, they will be a big part of your business life. You don’t have to love them but make sure you respect them and their motives.

Very often management get to a stage in the process where they just want it done. They agree to a deal without looking at every last detail. This is where investors can add the hidden clauses that bite you in the future. Stay attentive and on the way through make sure you share out the workload amongst the team.

One final piece of advice. Everyone I speak to who is involved in fundraising says the same thing, ‘get the best lawyer you can afford’. Don’t be afraid to upgrade as you go through the investment stages. A good lawyer should be seen as an investment and not a cost. They will also do a lot of the legwork on the legal documents for you and keep you focussed and avoid a lot of the pitfalls.

As I said right at the start of this, fundraising is not easy, and you should take all the constructive help you can find. I have been involved in a lot of fundraising.

If this blog has been of any help, then you might be interested in reading my 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. Whatever route you take to raise funds I wish you good luck and success.

David Pattison has had a long and illustrious career in the advertising industry and as an angel investor. He co-founded PHD in 1990 and more recently he has been involved in a number of startups in a range of industries including, marketing, publishing, construction, motorsport, AdTech, MarTech, FinTech, production and broadcasting. He was recently announced chairman of Conversational media platform Octaive.

Angel investment Network announces launch of Institutional investment arm, AIV Capital

Ethan Khatri

London-based Angel Investment Network, the world’s largest online angel investment platform, has announced the launch of its Private Equity and Venture Capital division, AIV Capital.

Led by experienced investment manager Ethan Khatri, AIV Capital will invest between $10 -$75Mn+ into established businesses ranging from Growth/Series B to pre-IPO and has a flexible approach utilising both primary and secondary capital. Its sector agnostic focus will be on strong management teams with a demonstrated edge in the space they operate in. 

AIV Capital Managing Director, Ethan Khatri brings 16 years of investment experience across the European and Asian venture markets. Over the course of his career, he has successfully completed 27 transactions achieving 13 exits, covering technology, enterprise software, pharmaceuticals, healthcare and consumer. He will be combining his experience with AIN’s early stage market coverage and portfolio of businesses they’ve historically funded. 16 year old AIN has a global network of more than a million entrepreneurs and more than 280,000 investors, winning investment for a host of powerful businesses including What3Words, Simba Sleep and SuperAwesome. 

According to Mike Lebus, founder of Angel Investment Network: “AIV Capital is the natural next stage of AIN’s evolution. AIN has been a game changer in democratising access to angel investment and powering the dreams of so many startup founders on the first stage of their fundraising journey. With the right experience and team in place, led by Ethan, we are now able to support businesses right through the fundraising cycle, from the idea in a bedroom to seed funding right through to pre-IPO.” 

According to Ethan Khatri: “AIV Capital is a powerful new force in private equity and venture capital. Building on the evergreen network of AIN, our experienced team has access to an extraordinary talent pool of growth to late stage businesses which we can match with the right funding structure to ensure they deliver absolute return opportunities. Our watchword is flexibility. We invest across the capital structure and this is the method by which we maximize returns for all stakeholders.” 

Ends

Majority of US startups very optimistic about the next 12 months

A majority of US startups (52%) are now ‘very optimistic’ about the next 12 months, despite 62% seeing business growth negatively impacted by the pandemic. This was a key finding of a new study of US startup sentiment 18 months after the start of the pandemic, by Angel Investment Network (AIN). The study of 1,205 US based startups found 76% expressed optimism overall with 19% quite optimistic and 52% very optimistic, versus just 24% who were pessimistic. It followed on from a similar survey we conducted of UK startup sentiment last month.

The results show the extent to which confidence has returned to early stage businesses Stateside, who are emerging strongly from the downturn. Of the 62% of respondents who revealed they had been negatively impacted by COVID, 37% had been ‘very negatively impacted’. Meanwhile 63% of those who had been planning to raise funds said they had delayed a raise as a result of COVID.

Top strategies to mitigate the impact of stalled fundraising were: Focusing more on networking, favoured by 46% of respondents, holding off launch plans (38%) and bootstrapping instead (32%), with a similar number delaying marketing.

Entrepreneurs were also asked what their biggest challenges were going forward. The top result given was raising investment (84%), hiring/recruiting the right talent (22%) and product development (22%). Ongoing COVID issues were a problem for 13% of those polled. 

US startups also believe more Government action is needed to encourage investment and help startups flourish. 57% favour making tax relief more generous to boost angel investment, 32% making R&D tax relief more generous and 22% lowering corporation tax. 70% of respondents are confident the US will retain its place as a startup hub.

AIN has seen surging growth on its platform with connections between entrepreneurs and investors up by 23% since the start of the year. Meanwhile revenues have increased by 40% to a new record, indicating the huge pent up demand from startups now seeking funding. 

According to Mike Lebus, founder of AIN: “It is encouraging to see how US startups have shown their mettle to ride out this really difficult period and emerge battle tested and with high levels of confidence. Many have been negatively impacted but have used their time wisely to build up their pipeline of contacts and bootstrap their businesses as far as they can go. RaIsing investment remains the biggest challenge going forward and as the world’s largest angel investment platform, we have been encouraged by seeing a record number of connections between investors and startups.” 

How did you respond to the pandemic?

  1. Focused more on networking: 46%
  2. Held Off launch plans: 38%
  3. Bootstrapped instead: 32%
  4. Delayed marketing: 32%
  5. Held off making hires: 27%
  6. Had to let staff go: 20%
  7. Relied on business loan: 19%
  8. Pulled back from R&D: 12%

What could the Government do to help?

  1. Make tax relief more generous to boost angel investment: 57%
  2. Make R&D tax relief more generous: 32%
  3. Lower corporation tax: 22%
  4. Offer more clarity on COVID restrictions: 14%
  5. Make it easier to provide VISAs for recruiting the right talent: 13%

What are your biggest challenges going forward?

  1. Raising investment: 84%
  2. Hiring/recruiting the right talent: 22%
  3. Product development: 22%
  4. Ongoing COVID issues: 13%
  5. Consumer sentiment: 12%

Behind the Raise with eleXsys Energy

Richard Romanowski is co-founder and Executive Director of eleXsys Energy. eleXsys has developed a unique, international award-winning, enabling technology that will drive the transition of global energy grids to a clean energy future.

Tell us about eleXsys and how you came up with the idea?
My co-founder, Dr. Bevan Holcombe, was a senior engineer at an Australian distribution utility with 30 years’ experience and was working on how to decarbonise the local suburban grid.  I was a cleantech angel investor, looking for fabulous ideas.

The biggest issue to local decarbonisation is that the grid was designed as a one way grid. Bevan was trying to find a way to solve this problem, that is, the very limited grid hosting capacity of renewables due to the one-way grid design. He could not find a solution anywhere so in 2012 we decided to team up and started a company now called eleXsys Energy to solve this problem.

eleXsys in simple terms turns the one-way grid into a two-way grid in a cost effective manner enabling a huge increase in local renewables that the grid can host or accommodate in each suburb.

When we started eleXsys, Bevan and I had a vision that discovering a way to turn the one way grid into a two-way grid would be our contribution to saving the Great Barrier Reef by speeding up global distribution grid decarbonisation.

Over the last 9 years eleXsys developed a unique, international award-winning, enabling technology that will drive the transition of global energy grids to a clean energy future.

Why did you decide to raise investment?
The co-founders, Bevan and Richard, are the initial high net worth investors.  We invested over $7.5 M USD of our own money.  Then some friends and close associates also invested almost another $4.0 M USD.  We had developed an MVP (Minimal Viable Product) and a few field demonstrations and planned a slow organic and affordable commercialisation, starting in Australia. Then slowly going global as we knew Australia was a few years ahead of the rest of the world in terms of grid hosting capacity problems due to so much rooftop solar we have Down Under.

Then we won the World Energy Council (WEC) global start up award in 2019. When we won the award, the WEC Secretary General at the time (Christoph Frei), challenged us as follows, he said:

“This technology is game changing; you need to think 100 time bigger” …. that is, we need you to help speed up global decarbonisation and fast!

Since 2019 that is what we set out to do, and in that vein, we needed much more investment to speed up commercialisation and go global faster.

What is your top tip for anyone raising investment for the first time?
It’s never easy, the 1st time or the 10th time. Be prepared to spend a large amount of time raising funds and listen and learn from every pitch. If they say no, ask why. Always be raising and expect to pitch to 50 or more before you hit any jackpot.

What attracted investors to your company?
The IKEA flagship project in Australia which helped investors realise how eleXsys can radically speed up global decarbonisation in the local suburbs.  The IKEA project represents a microgrid at up to 10 times bigger than what current Smart Invert technology and grid constraints would allow.  So up to 10 x greater energy savings for the tenant, up to 10 x more rooftop rent for the landlord, plus up to a 10 x larger $ project for the asset owner (e.g. solar and battery power plant) to earn a secure, uncurtailed ROI over 20 years.

My biggest fundraising mistake was…
Not listening at first to potential investors.

Why did you choose to use Angel Investment Network?
A very supportive, understanding, and innovative group with a focus on ESG (Environmental – Social – Governance) investing. We are now raising our Pre IPO round.

What has the funding enabled?
The main focus was fine tuning our global expansion plans through our planned licensing model. Licensing allows us to scale global quickly as opposed to originating, developing, and building microgrid projects ourselves, which would be a very slow and cumbersome process.

Through licensing our vision is that eleXsys becomes the “Intel Inside” of the global local renewables supply chain.  That is, almost everyone is using eleXsys in their local suburban renewables projects to speed up global decarbonisation.

Did you know that filling every roof with solar could generate > 120% of Australia’s total electrical needs? Same should apply across the global sunbelt ≈ 75% of world’s population.

Cannot be done – local distribution grids will not integrate this much distributed energy due to grid physics limitations (curtailment) due to one-way grid design

Grid curtailment of DER (Distributed Energy Resources) begins to occur when the utility hits ≈ 15% of customers with DER, making projects non bankable .eleXsys cost effectively solves this fundamental problem one-way grid problem.

So far, we have one Master Licensee MOU signed and are negotiating with four more. Plus, established a few Alliance Partners licensees within Australia to be the sales channel and EPC of projects.  Some of the Alliance Partners are global multinational using Australia as a test bed eleXsys licensee, with the intention to then become a global licensee.

Plus the funds are being used to enhance our manducating capability along with recruiting more staff to support the faster growth.

Cleantech energy company eleXsys Energy raises £640,000 through AIN

eleXsysEnergy has raised £640,000 through Angel Investment Network, the world’s largest online angel investment platform. eleXsys Energy has developed a unique, international award-winning, enabling technology that will drive the transition of global energy grids to a clean energy future. The eleXsys® technology enables large commercial and industrial rooftops to become grid-connected, solar power plants. eleXsys® is the critical enabling technology being installed to build the IKEA eleXsys Microgrid at IKEA Adelaide, which will become 100% powered by renewable generation by 2025.

The raise took four months and was part of a larger £5m funding raise, including a Series A round of  £3.55m, with the funds allowing the business to continue its investment as it rapidly grows its global reach. eleXsys Energy’s innovative technology unlocks the full potential of electricity networks to host multiple times more clean, distributed energy without expensive network infrastructure upgrades. By providing services that enable a two-way flow of electricity on grids, the platform supports the most efficient, low-cost means of delivering clean distributed solar or wind energy.

The company originated in Australia but has now reorganised and is headquartered in London. This is eleXsys Energy’s first raise overseas and marks a significant step for the company.  The company has over 270 customers including 11 industrial rooftops across schools and government, agricultural and commercial buildings. The raise will allow the business to continue to invest in its technology as it rapidly grows its global reach.

According to Richard Romanowski, co-founder and Executive Director, of eleXsys: “We are delighted to have completed a successful round of fundraising with Angel Investment Network. Our technology is critical for the transition to clean energy – one of the world’s most pressing challenges. Funding from investors across the world confirms the transglobal appetite for investment opportunities in new cleantech solutions, aiming to tackle global carbon reduction targets. We are a rapidly growing business and with the capital raised, we will be able to further drive our strategic plans for expansion and deliver on our goals for our new and existing investors.”

According to Sam Louis, Head of Consultancy at Angel Investment Network: “We are excited to be working with eleXsys Energy in this period of significant growth for the company. This raise ensured that eleXsys secured the backing of strategic and experienced investors as they expand their global reach and make their mark on international markets. Our passion-driven investors want to support businesses that solve real problems and there’s arguably few greater problems to solve than how to dramatically scale the move to clean energy.”

News of the raise has been covered in the media both in the UK and internationally including: UKTN, TechLoop Europe , UK Tech Investment News, Growth Business, Eminetra and 24htech Asia

FOCUS ON SUSTAINABILITY

The US Government recently made a headline-grabbing commitment to a 50% reduction in carbon emissions, while the UK committed to an even steeper 78% carbon reduction by 2035. So the question on everyones’ lips is how to achieve this while ensuring economic growth continues? The solution to marrying a low carbon future with answering our continuing energy needs lies in innovation and the ideas of many brilliant startups now seeking funding.

For our latest in depth focus article, Olivia Sibony, CEO of SeedTribe takes a look at sustainability and the development of startups that have the power to help save the planet. Olivia has recently been recruited by the Government to advise on the impact-focused startups we should be encouraging to set up in the UK.  

THE NUMBERS

Size of market
The global Green Technology and Sustainability market size is anticipated to grow from USD 11.2 billion in 2020 to USD 36.6 billion by 2025, at a Compound Annual Growth Rate (CAGR) of 26.6% according to Report Linker 

On the platform
– Renewables became the 11th most popular keyword for searches in the past year, a rise of 37 places compared to 2018. 
– This trend is being replicated by other popular keywords being used at the moment. During the pandemic Greentech became the 13th most popular keyword, up from 47th two years ago.

What is the reason for the soaring interest in sustainable focused startups during the past year?

I think the change really started snowballing in 2019. The mood music had changed on the back of consumer activism and changes to government policy. From Greta Thunburg to the Extinction Rebellion there was a concerted effort to ensure climate change became top of the agenda. It worked. Governments and businesses suddenly started making dramatic commitments to cutting carbon. While it might have been expected that investors would be retreating from these categories in favour of safer investment opportunities during the pandemic, the exciting news was these businesses are actually generating more interest from investors. 

Concerted government policy worldwide is certainly helping, along with increasing grants from the UK Government to stimulate innovation in this space. In order to hit these ambitious targets, innovation will be critical. Investors know this and so are backing the early stage startups with the vision to help governments and business in general hit these ambitious targets. We are also seeing something of a shift in the investor profiles, with some younger millennial investors coming to the fore who have purpose very much as their watchword. For many investors, rather than a ‘nice to have’ having purpose baked into their business plan is becoming a prerequisite for receiving backing.

What are investors saying about sustainability?

Investors are starting to see ESG measurements and reporting being embedded into listed companies and realising that the more they invest in companies that do this from the outset, the better chance they have of succeeding as they scale. It’s important to note that a lot of investors are interested in this segment but struggling to understand it, as there’s a sliding scale of shades of grey in what the “impact” and investment spaces, ranging from profit-first to impact-first. 

Our belief is that there shouldn’t need to be a compromise, so that profit and purpose are perfectly aligned and inextricably intertwined. The key difference is that it’s important to take a long-term view as some of the growth may be slower, but in the long term it’s more sustainable so has a better horizon for long-term profit. So investors are interested in this space but need help understanding the change in growth curve. When investors understand that growing consumer demand (culture), coupled with an increase in regulation (policy, systemic change) are driving this growth, it’s a clear path for investment for anyone looking beyond a three year horizon for their investments.

What innovations are most needed to power sustainability?

The three key areas of focus should be circular economy, carbon-capturing technology and renewable energy. We need a big focus on the entire food and agriculture chain where farming needs to capture carbon, food should be produced as close to home as possible, vertical farming practices are further developed, food surplus becomes minimal and a resource to turn into energy. Where water from agriculture is clean and no longer contaminates our waterbeds. We need to focus on trapping heat emissions from carbon and methane in order to slow down the melting ice caps. The quicker the ice caps melt, the more gases and unknown bacteria and viruses will be released and the harder it will be to reverse. We’ve already seen the impacts of one single lone virus and this should be a good incentive for us to not release unknown ones that have been trapped in our ice caps for millennia and have potential to cause incalculable damage. 

CASE STUDIES

Zoï environmental network uses its technology to treat and monitor wastewater systems, especially cleaning fats from public drains and pipes. Their core product is an environmentally-friendly system which doses special bacteria to the wastewater system and degrades the fat molecules in the system. The system prevents the development of fatbergs in the sewer & wastewater systems, allowing cleaner water to flow through our systems. Check out this Video of them.

Bionat Solutions is a Certified organic solution applied in the waxing process of fruits, with the aim of providing a longer shelf life without using fungicides or artificial products. The novelty is in the circular alternative made from the same agroindustry residues to increase the useful life of fruits.

Biohm is a multi-award-winning research and development led, bio-manufacturing company. The company enables the use of healthy, environmentally friendly, circular materials like food waste and transforms it into building solutions which can apply across the design and construction industries. This eliminates the concept of waste, demonstrating how business can equitably and ethically work in collaboration with the natural world, industry, academia, government and community.


Zero Carbon Farms has developed a data-driven system 70x more productive than traditional farmland. It uses 100% renewable energy, 70% less water and reduces food miles/food waste. Not only is the produce consistent quality, highly nutritious and herbicide-free, it is also hyper-local and year-round, specialising in subterranean farming.

Join Olivia Sibony on Thursday June 3rd in the next AIN ClubHouse ‘Business as a force for good’ session where she will be discussing how startups can pave the way to a zero carbon future for food production.

Five takeouts from our first sessions on ClubHouse

As a communications professional it is imperative to keep abreast of new trends and platforms. ClubHouse is the newest kid on the block, delivering something quite different in today’s social media landscape. Part networking platform/ part radio show/ part events business/part members’ club it has an intriguing proposition. It offers something quite different to other social networking platforms. Namely the ability to have a really informed discussion on topics of interest where your ‘real’ self is exposed, rather than curated.

In a world of anonymous trolls spewing bile from behind keyboards being able to talk with real people on a platform also represents a refreshing change. It is focused on the ‘voice’ and offers an ability to network and debate that we used to have from live events. Remember them? For me personally it has also been a nice change from having to see your own face on a screen during a stilted Zoom conversation. Particularly with hairdressers being closed for so long! The discussions I’ve seen and taken part in so far have been wide ranging: Mental health, building resilience, social media techniques, how to win investment, even the Burning Man festival. 

As an online network connecting hundreds of thousands of people from across the world it also offers a perfect opportunity for us at AIN to bridge distances. Our own channel startup.fm has featured some fascinating discussions so far and I wanted to pick out five great revelations from our guests so far.

  1. True grit separates those who succeed with those who don’t
    In our first conversation we heard from Thomas Vosper, founder of ecommerce startup aisle 3 on how he bounced back from redundancy 13 months ago. He has since led two successful funding rounds with a rapidly growing ecommerce businesses employing 15 staff across several continents. In winning funding and growing his business in the teeth of the pandemic,  he epitomises the character and determination startup founders need. A great revelation we heard that epitomises this was setting his alarm at 3 in the morning to respond to investors in Australia in real time. He is an expert in his field but this sheer level of focus and determination is what sets successful startup founders apart. It’s a tough business and it simply isn’t for the majority of people. Investors know this and character counts.

  2. Being prepared to pivot
    There can simply be no time for rigid thinking in the BETA world of the startup. Accepting things are in transition is a brilliant starting point for throwing off attachments and being ruthless in decision-making. This revelation came from Rav Robert from PharmaSentinel, the healthcare startup leveraging AI to provide personalised medicines data intelligence. He revealed the story of presenting his initial wireframes for his app to a board advisor with relevant experience. The blunt feedback was to ditch the initial idea and return to the drawing board. Rav realised quickly he needed to take this advice on board and adapt. Indeed this was why he had recruited this particular advisor. The result? Having launched its consumer app ‘medsii’ (Medicines information for Me) in October 2020 on the App Store & Playstore. It already has over 15,000 app downloads in 150 countries. The lesson was not be emotionally attached to any one idea and trust the advice of the experts you have brought on board. 

  3.  Don’t be too distracted by investors
    This might seem anathematic for those involved in a fundraise, but this was the loud and clear message from Saalim Chowdhury, former partner at 500 Startups and an angel investor. His strong contention was not to be distracted by the thought of investment rounds. Instead entrepreneurs should have a laser-like focus on winning customers and sales in the early stages and should bootstrap as far as possible. Paradoxically, the best way to impress investors was not being over focused on them. As he succinctly put it ‘Taking investment is as time consuming as setting up a business.’ Dan Simmons, founder of launch accelerator Propelia also thought it was vital to really focus on milestones early on and work with the right investors to help guide this process. His view was that there was a lot of inefficiency in the early stages of fundraising and it was really important for startup founders to be matched with the right investors as ‘co-pilots’. 
  1. Engage your community in your journey 
    This came through so loud and clear from several speakers. Saalim emphasised the benefit of crowdfunding –  not so much for gaining investors but building a community and gaining customers. For Ruari Fairbairns from One Year, No Beer, building a strong tribe and community was vital for the development of his app of alcohol-free evangelists and the direction of travel for the business. It is also easy to forget that investors can also be customers. Indeed he he was able to raise £1.6m of investment from his community. This included many corporate leaders who had taken on his booze-free challenge and seen the benefit in their life and productivity. A brilliant way of building advocacy.
  1. Opposites attract when it comes to co-founders
    Another great misconception is that cash is the reason startups fail. Several guest shared the view that it is the people dynamic that it most critical. While solo founders can succeed a succession of speakers and participants extolled the virtues of having co-founders with complementary skill sets, such as Kathryn Tyler and Nikki Cochrane from Digital Mums who joined us in week one. This was something Thomas also said was the ‘secret sauce’ in his working relationship with his business partner, James Valbuena. For solo-founders the advice was recruiting advisors and mentors who can offer skills you may not have. The message in effect was to acknowledge your weaknesses and rather than try to correct them, find someone who excels in those tasks. 

    We look forward to more great insights and revelations in future weeks of ClubHouse. Please join Adah Parris, Chair of MHFA UK, Olivia Sibony, CEO of SeedTribe and Michael Solomon, Director at Responsible 100, on Clubhouse tomorrow Thursday, 28th April as we discuss, can business be a force for good?https://www.joinclubhouse.com/event/mWreGdga

Toby Hicks, Head of PR, Angel Investment Network

Coffee on Purpose with Liv Sibony

Liv Sibony, CEO of SeedTribe and Head of Impact at Angel Investment, recently spoke on the Coffees on Purpose podcast about how start-ups can marry profit with purpose, what we need to do to support the next generation of start-ups to address the UN’s Sustainable Development Goals (SDGs), and why female entrepreneurs are still underrepresented in this area.

From sharing with us some of the most exciting start-ups in the space, like Pinpoint, who are using big data and hundreds of thousands of blood samples to help detect early signs of cancer, to deconstructing some of the structural imbalances in the current investment space, Liv gives a comprehensive overview of the impact space, and what’s on the horizon. 

Watch the podcast here.

Breaking the cycle – how female-led startups can succeed in 2021

Bumble’s recent IPO generated stellar headlines for making Whitney Wolfe Herd the world’s youngest self-made female billionaire. However it was the exceptionalism of the story that made it so significant. Women make up about half of the global population but account for less than 5% of the world’s 500 biggest fortunes, according to the Bloomberg Billionaires Index. 

In order to have more women at the top of the list there needs to be more investment and encouragement going into early stage startups. The UK has one of the most developed startup ecosystems in the world. Yet it falls down when considering the huge gender imbalance in the startups winning investment. Indeed research from the British Bank shows that for every £1 of Venture Capital investment, all-female founding teams get just 1p.

This matters from both a moral, fairness perspective but also from the end consumer perspective. According to research from Catalyst.Org, 67% of all UK Household consumption is controlled or influenced by women. However their needs are often unmet in a world where so many products and services are brought to market without the input of 50% of the UK. Across the country there are so many entrepreneurial women with brilliant ideas for gaps in the market to improve our lives, but these are likely to remain unfulfilled. The lack of funding opportunities and visible role models makes the ideas more likely to remain in heads. Not least because you can’t be what you can’t see. 

As a result of Covid, the situation has become even more precarious. Firstly investors are more likely to stick with more established businesses, more likely to be male-led. Secondly the bulk of domestic responsibilities (including childcare) tend to fall on women, simply meaning there has been less time and ability for many to focus on the all consuming life of launching a business. Home schooling has been a clear example. In order to shake things up and start to rebalance the situation we should focus on practical measures women can take.

Develop a wide network

Start-up investment has traditionally been a very closed world. Much of it stemmed and often still does from old school ties which tend to be stronger with men. This is then often reinforced throughout our lives. Platforms like Angel Investment Network, SeedTribe and crowdfunding platforms have undoubtedly helped to shake things up by democratising the world of early stage investing but it remains crucial for women to focus on building their own networks. Encouragingly there are a host of forums for women to network and create their own forums. This includes investment groups such as Angel Academe, which trains and empowers women to invest in female-owned start-ups and Ada Ventures which invests in under-represented founders; the Female Founders Forum, set up jointly by Barclays and The Entrepreneur Network (TEN), or more specialised groups such as Hatch’s incubator for first-time female founders and the Mayor of London’s Women in Cleantech group. Once you know groups are out there, you can then focus on the one or ones that are right for you. 

Being bolder in pitches and asks

Some research from Barclays revealed Britain’s female entrepreneurs are less likely than men to ask for business funding to scale up operations. We are also likely to be more timid in pitches. We need to be direct and ask for what we need to get a business the launchpad it needs. In my personal experience investors will buy into the vision and ambition. Remember investors are expecting to be asked for money. Tell them in no uncertain terms the amount you require, what you will do with it and of course, the share they can expect. You will be surprised by how positively your request will land.

Doing your homework on the investor

Switching perspectives so we can understand the right argument to make is one of the best and most simple steps we can do to boost our chances of investment. When I launched my start-up GrubClub I realised the importance and power of understanding different perspectives. I would then adapt my pitch according to the investor I was speaking to. Key to this was really researching each investor, including their background and interests.  This helped me understand the different reasons they might invest. It’s also helpful to ask the investor directly about their prior investments. This isn’t rude. It is a two way street. The investor will conduct Due Diligence on your company and you, and you should also feel comfortable to Due Diligence on them as an investor. However at the same time, it’s important to be flexible and open to other approaches, but never to the detriment of what is fundamental to your company.

Backing other women

In instigating change, we need to be the change we want to see. It’s up to women to support other women in the industry. This is the only way to disrupt an entrenched system. Having launched and sold my own business, I dedicate my time to supporting impactful entrepreneurs to grow in more sustainable ways. My strong conclusion is we need successful women to become investors themselves to shake up the system. If we can encourage more women investors, we will start to see the level of funding increase for female-led startups. This will in turn create a virtuous circle of successful female entrepreneurs who are likely to become female-backing investors themselves.

 However, support doesn’t just include fundraising. It is also about opportunities for offering mentoring or other support. The individual power we all have is far greater than we realise. Let’s be the catalysts for the change we need to transform the prospects for female entrepreneurs.

Olivia Sibony is CEO of SeedTribe and Head of Impact for Angel Investment Network