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?
Focused more on networking: 46%
Held Off launch plans: 38%
Bootstrapped instead: 32%
Delayed marketing: 32%
Held off making hires: 27%
Had to let staff go: 20%
Relied on business loan: 19%
Pulled back from R&D: 12%
What could the Government do to help?
Make tax relief more generous to boost angel investment: 57%
Make R&D tax relief more generous: 32%
Lower corporation tax: 22%
Offer more clarity on COVID restrictions: 14%
Make it easier to provide VISAs for recruiting the right talent: 13%
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.
At Angel Investment Network, we strive to partner with pioneering organisations that support startups in ecosystems around the world, Silicon Roundabout have a mission to help get more young people into work at exciting startups, whilst helping unblocking some of the challenges in hiring that startups incur.
Franceso Perticariari, Managing Partner of Silicon Partner Ventures explains more in the guest blog post below:
At Silicon Roundabout we are working with the UK Government to help youngsters from all backgrounds and who are eager to break into the startup industry to get their feet off the ground and venture into their dream career.
As part of the programme, we help companies by offering a diverse pool of junior staff, aged 16-24, at no cost for 6 months, whilst helping these candidates gain work experience, so they can get their foot in the door in the tech world.
Our mission is to help increase diversity in tech by being the pathway for young people from all walks of life and varying backgrounds to find work with cool tech startups and develop the skills needed to build a career in today’s digital market.
We would all like to see an exciting, diverse tech industry! 🙌
Here are the jobs we currently train for:
– Junior Marketing Executive
– Junior Business Developer
– Office Executive
– Junior Graphic Design and Video Editing
– Junior Programmer
– Junior Bookkeeper
– Junior Project Manager
– Junior Data Analyst
Business qualifying will be able to apply for and hire candidates through our new, easy to use, platform and receive 6 months worth of wages for them! This includes NI & minimum employer contributions.
What happens at the end of the 6 month placement? Businesses have the opportunity (but not the obligation) to offer the junior employee a job at their company.
We already have 300+ employers on board and have successfully delivered the scheme to help 100+ youngsters with little to no experience and from all backgrounds, gender, and beliefs get training and join these employers. In fact, we’ve recently hired four junior members of staff ourselves who went through this very same process and training, which we designed as startup founders ourselves for startup founders. So far everyone is enthusiastic about the results and we really think this can have a profound impact for both companies and people.
Startups can sign up to Silicon Roundabout’s here .
Companies will need to pay these junior employees through their own payroll. We will then refund them using the Government funding after only 4-6 weeks from each payroll paid. No claiming needed. As long as the candidates are paid via the company’s payroll, We will automatically receive funds from the Government and transfer them over to them.
During the first month of our 6 month programme, candidates will be trained through our top digital bootcamps, which are also funded through the scheme.
Nicholas Phair shares why he thinks online voice messaging is the future in this month’s #SixtySecondStartUp.
What does your company do?
Online voice messaging. We help businesses build trust with their audiences using the most powerful tool they have… their voices. Our online voice recorders can be added to websites, workflows, social media and more, and used in online and offline campaigns to hear from customers, followers and fans and engage in two way asynchronous voice conversations.
Why did you set up this company?
To go back to basics. Voice has always communicated far more than typed text alone – emotion, emphasis, connection – and we saw an opportunity to bring the same ease and utility of voice messaging found in consumer apps such as WhatsApp and FB Messenger to help businesses better engage with their own customers.
How did you get your first customer?
By asking them to pay! It seems like an obvious point but it’s a lot harder than you think. Believing in your product means putting a price tag on it, and asking people to pay. Thankfully our first customer, a prominent podcaster in the US, saw the value immediately.
We knew we were onto something when?
… we received this early testimonial: “I’m just massively impressed with this entire thing. I’m kind of shocked that it doesn’t really exist to this level, and we can see this being extraordinarily helpful for us.”
Reading these words, after months of hard slogging in product and planning was golden. When our next 10 customers signed up organically and mirrored the above, we knew that if we kept going we’d succeed.
Our business model:
Freemium self-serve SaaS with consultative sales to the enterprise. In short: people sign up free on www.telbee.io to experience what voice messaging can do for them and their businesses. We limit the amount of voice messages that can be sent and received to 60 minutes per month and the service remains free (forever) until you decide you need more features, or want unlimited messaging minutes. And for larger businesses and enterprises we offer custom white labelled solutions and integrations specific to their needs.
Our most effective marketing channel has been:
Hands down it’s been word of mouth – which shouldn’t be a surprise since we’re all about speaking and listening!
What we look for when recruiting:
We ask why they want to work with us, and listen keenly to the answer. When the whys are strong enough the hows take care of themselves – or so the famous saying goes. We look for people that want to build something truly unique and grow personally and professionally with the business.
The biggest mistake that I’ve made is:
Putting the cart before the horse, and investing in sales and marketing capabilities before breaching that elusive threshold of comfort in finding product/market fit – and while that threshold keeps shifting, mistakes keep coming, but ultimately they are there to make us grow!
We think that there’s growth in this sector because:
Our voice is what makes us human – and in recent times the rise of automation, artificial intelligence, and lockdown-inducing pathogens, have highlighted the importance of building and cultivating real human relationships. We’ve seen an explosion in voice applications across the board, from podcasts, to voice assistance to new types of short and long form voice-based social media. Whilst we are still in the exploratory stage of this nascent sector, what is certain is that businesses everywhere are beginning to see the trust-building benefits of asynchronous voice communication for sales, support and retention. This is only the beginning – and there is so much to be excited about.
We worked with AIN because:
We worked with AIN because they gave us access to investors globally. As a UK company but with a product relevant worldwide, we knew that part of what we wanted from investors was to extend our market reach beyond our existing network. AIN allowed us to speak with investors from the US and Asia as well as the UK.
Keen to hear more?
If you would like to see what other companies are up to on Angel Investment Network, or are interested in raising funding yourself, you can find your local network here.
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.
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.
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.
In this guest blog, James Taylor, Director at Dragon Argent, shares his top tips of how start ups can claim R&D tax credits, a useful relief or rebate from HMRC. Here are the key things that you need to know:
Many new businesses spend the first season of their existence researching and developing a concept or a prototype. They then prove their product market fit, secure their first customers and start generating revenue. What some founders don’t realise however, is that any project which advances the fields of science or technology are eligible for tax relief, through its annual corporation tax return.
This extra relief could be as much as 25% of the cost of the project. For a loss-making company, a cash rebate of up to 33.5% is available in lieu of tax relief, which is often paid within 4 weeks or a successful claim being made.
This relief or rebate could make a huge difference to a bootstrapping startup and as HMRC believe that 75% of business who could be claiming R&D tax relief do not, it is too often a missed opportunity.
Does Your Business Qualify?
You can claim R&D relief up to two years after the end of the accounting period of the expenditure. The following criteria are flags that you could be eligible:
You are innovating, improving, or inventing processes or technologies which are not currently available on the market.
To your knowledge, at the start of the project you have no clear answer of how the project will conclude. This uncertainty proves the first point that the development is producing new knowledge.
You can document evidence of your research and development, and the expenditure relating to these activities
If your company meet the criteria laid out above, you should endeavour to maintain detailed records of every cost associated with the project, including:
Staff costs associated with the project. Some staff may work entirely on the project. In these instances, it is straightforward. Other staff may work a proportion of their time on this project, or on things associated with the project such as recruiting someone to work on the project. Using timesheets or similar, a log should be kept of this proportion as that might be eligible. For example, a staff member who works 30% of their time on the project while on a salary of £30,000 can be deemed a cost of £9,000 on which extra tax relief is available.
Subcontracted staff. On the same basis as above, the costs associated with subcontractors rather than employees is eligible.
Software associated with the project. If software was bought or licensed entirely or in part to service the project, these costs are eligible too.
Consumables. Any utilities or materials used in the project are eligible for tax relief.
Ineligible costs. These include the costs of distributing the goods produced, capital expenditure, rent or rates, and the cost of patents.
R&D Tax Credit Cap
As part of the Finance Bill 2021, introduced in April, HMRC have announced a cap on the amount that a loss-making SME can receive in R&D tax credits to stop abuse of the scheme.
Currently, loss-making companies can reduce the cost of their R&D by up to 33%. However this amount will be capped at a maximum of £20,000 plus 3 times the total PAYE and NI paid by the company in the year.
HMRC have maintained that the aim of this legislation is to target those who are seeking to abuse the system, rather than genuine claimants. However, SMEs with very few staff, or with directors taking low salaries, may also be affected by this.
If an SME is loss-making, normally claims around £25,000 in R&D credit but whose only employees are directors being paid a non-tax attracting director’s salary will now only be able to claim £20,000, a loss of £5,000 on their previous expectation.
This means that it may become tax-efficient for the company to increase their director’s salary so that it attracts National Insurance so that 3 times that amount can then be reclaimed through R&D. There will be other implications of doing this so it should always be considered in conjunction with these other factors.
HMRC have also included an exemption for any entity who meets the following two tests:
The company’s employees are creating ‘relevant intellectual property’.
Expenditure spent on work subcontracted to a related party makes up under 15% of the total R&D expenditure
The tax relief an R&D claim results in can often make a big difference to startups and SMEs at a critical stage in their development. Its sensible to seek professional advice to make the process of claiming as efficient and fruitful as possible and also to ensure the business as a whole is tax efficient in respect to the new R&D Cap.
If there is one positive from the pandemic, it has been the sheer volume of innovation and exciting businesses that are forming and growing as a result, as markets shift and new trends emerge.
Each month we’ll select a few start-ups that we see as particularly exciting and worth a further look. Here are some of the current highlights:
Zero Carbon Farms
Farming needs to evolve. Urbanization, population growth and climate change demand it.
Food supply challenges are well documented – Covid-19 has seen empty supermarket shelves and highlighted the need for secure supply chains, awareness of the damage of pesticides and GMO crops is growing, and extreme weather events are making food production more unreliable.
Enter Zero Carbon Food (ZCF), a cutting edge AgTech company that builds and operates controlled environment farms, providing a future-proof and sustainable solution for growing. This innovative method allows them to use less water, less space and run on 100% renewable energy. Their first farm? It’s 13 storeys below London in a WW2 air raid shelter.
ZCF supplies brands nationwide including M&S, Tesco Whole Foods and is discussing an international licensing agreement.
Anatome is an innovative healthcare brand, founded by an exited entrepreneur. Built on the founder’s passion for apothecaries of old and combining it with cutting edge science. It’s already on track to turnover £1.3 million and is playing in the global wellness market,with a total size of $7.2 trillion.
It’s a digital first platform focused on online sales, but also leveraging real world stores to activate customers in premium locations, including Marylebone, Chelsea and Islington.
On top of this it’s FDA approved, has margins in excess of 70% and has developed partnerships with the Hug group and Space NK.
ClearWaste is the first platform of it’s kind offering a price comparison site for household waste – it’s effectively Money Supermarket for household waste.
Founded by a former EY Entrepreneur of the year, the business has gained traction by helping citizens report where rubbish has been illegally left, and councils link it back to the culprit. Each month ClearWaste submits thousands of reports to local communities.
ClearWaste has over 500 certified waste removal companies on it’s platform, has hit the top 10 on the Apple app store and is projecting £729k revenue this year.
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.
“COVID has pulled the transition to digital learning forward by at least 5 years.” These were the words of David Sherwood, CEO and co-founder of EdTech startup BibliU, commenting on the remarkable development of the sector. With a series of lockdowns over the past year, there has been huge demand for technology to solve the challenge of learning shifting from the classroom to the home setting. AIN’s Sam Louis takes a closer look at the EdTech sector and why it is getting top marks from investors.
Size of Ed Tech market: The global education technology market size is anticipated to reach USD 285.2 billion by 2027 (Source: Grand View Research, Inc. Technology)
Number of companies: 3,250 companies globally according to Crunchbase
On the platform: Education and Training is the 17th most popular category for angel investors
Description EdTech (a combination of “education” and “technology”) refers to hardware and software designed to enhance teacher-led learning in classrooms and improve students’ education outcomes. It also incorporates the wider sphere of adult education and learning.
WHAT ARE THE REASONS FOR ITS RISE TO PROMINENCE IN THE PAST YEAR?
Necessity There’s been no shortage of great EdTech companies over the years, but lockdowns and social distancing have changed the game. It’s forced the hand of consumers because the usual in-person learning option was no longer available. Necessity is often the mother of change as well as invention.
The reason it’s taken a global pandemic to speed up adoption is that most consumers weren’t prepared to go through the hassle and the teething problems of full implementation. This is especially true of academic institutions and businesses and they aren’t unfounded concerns. It takes real time, energy and capital to bring step changes in how you deliver or receive education, and getting it wrong can have a very real cost. Until the potential benefits significantly outperform the current system (and it does have to be significantly for most consumers), the change is a genuine risk.
A new climate for innovation What this period has done is moved the market five years into the future in a matter of months. In time, EdTech offerings would have improved to the point that they did provide significant improvements for consumers and major adoption would have occurred. Instead the existing system has been hamstrung to the extent that the tipping point was reached early. I think this will be to the benefit of the education system long term. When in-person education returns, the best educators will be able to take the most valuable parts of the old and blend it with the new, and hopefully retain a more open view on future innovations to improve further.
WHAT CHALLENGES HAs EDTECH NEEDED TO HAVE OVERCOME?
For Individual learners The challenge with individual learners is user experience, course completion and efficacy. People either struggle to engage with the tool, they struggle to stay motivated, or they don’t see the results they want. In all cases, they drop off. People are very used to traditional learning so it’s been a big point to overcome.
For B2B products For B2B products there needs to be a strong enough case for change that the business commits to the risk. Beyond that, all of the points about individuals also apply.
For Academic institutions Lastly you have academic institutions. These have all of the hurdles of the other two, and then the added complication of being influenced by broader regulation or controls, such as the school board or government. Many EdTech ventures manage to capture a large number of individual teachers but never get the official adoption at school or national curriculum level. This is where budget allocation and curriculum is dictated and without that it is hard to secure wider market share. Not dissimilarly to the medical space, this is both a blessing and a curse. It makes the education sector a tough one to crack, but for those who do and are given the green light, the growth curve from there is very exciting.
Investors have been aware of all of these issues and that’s led to less investment. You can have the best concept in the world but the influence of top down decision making across the market creates a variable that’s very hard to predict or control for. As a result, despite many EdTech businesses more than holding their own in idea, innovation, team and execution, the investment has been far more restrained than other sectors.
The pandemic has arguably been a Black Swan event in that regard. Institutions have realised the need to adapt and change which has forced educators to engage with these new opportunities. This change in consumer sentiment has been recognised by the investors, which in turn has given them the confidence that startups can find a significant and willing market.
What types of companies are we seeing developing solutions in the EdTech sector?
a) Those digitally enabling existing learning This has probably been where we’ve seen the biggest change to demand – companies providing technology to enable learning that was already taking place. This has understandably been pandemic-driven growth, with the market responding to a particular crisis, but it’s also one of the areas with the least need to stimulate new consumer behaviours. This gives it a strong chance of adoption and investors know that, shown by the capital deployed this year. For example, BibilU, who digitise print text books and provide them seamlessly across all your devices, had to do an extension to their funding round due to the incredible demand for their product. People were already at universities, the courses and textbooks were already set, you are just changing one component. They’re enabling an action people are already doing in an easier, cheaper and more effective way. You can see why the pitch resonates.
b) Adult education
There has also been an on-going rise to prominence in digital solutions for adult learning. The pace of change in the world and evolution of job roles has created a need for lifelong learning. Time pressed adult learners are now able to get the same learning, sometimes even better learning, than available to them in traditional face to face institutions. This ranges from post-graduate degrees to language learning to brain training, with a new generation of smart apps able to offer them a tailored pathway.
People like DuoLingo have shown the heights possible with self motivated learners, while Coursera has done the same in the B2B market. Student motivation is still a concern, with course completion rates often low, but in comparison to younger learners, many adults actively engage with the digital structure and find that it opens up a world of opportunity.
c) Tech to boost efficiency With increased reporting and accountability, many educators are struggling with the added workload that comes on top of teaching time.There is a lot of work being done on technology to enable teachers to streamline their tasks and work more efficiently, giving them back the time to really focus on the important part, the students. Pango for example is a tool for planning lessons, sharing resources and managing curriculum. Whole schools can share and collaborate on lesson plans, keeping consistency while allowing teachers to design and plan lessons in a fraction of the time.
The past year has highlighted the difficulties and stress teachers come under and this area is likely to grow strongly. As institutions and governing bodies welcome more digitisation, we will likely see the strongest supporting tools gain significant market share as the industry encourages consistency across teachers.
d) AI and personalised learning systems: The most exciting and arguably the most controversial is AI and personalised learning. Companies like Atom Learning have developed high-quality, teacher-made content with sophisticated AI driven technology to keep students on individual, optimal learning paths. This can have a transformative impact on pupils’ progression and can arguably help to reduce educational inequalities.
New methods of learning enabled by AI and machine learning have come up against some entrenched thinking in the education system, as it requires teachers to learn new systems. Another challenge in encouraging take up is that some of the gains can be incremental. This has meant it has been difficult to get wholesale buy in, particularly given the initial disruption and new learning required. However attitudes are changing, driven by a new generation of tech native teachers
what are investors saying about this category?
A lot more than they were before, and a lot of it is positive.EdTech has a strong altruistic component for passion-driven angel investors. Investors see it as a worthy place to be investing money. They are improving peoples’ ability to learn and better themselves, which has always held currency but more so now than ever.
A lot of proponents are enjoying that this is a sector being given the opportunity to show what it can do. Many investors hadn’t considered education seriously before but it has come onto their radar due to the increased receptivity from the market. Many institutional investors now have EdTech proudly on their masthead of sectors they invest in, which was previously rare outside of very focused, and often government supported, funds. In this regard EdTech has arguably joined FinTech in capturing its own zeitgeist.
The speed of change in attitudes and investment sentiment shows the extent to which EdTech has been pent up by a challenging growth environment. The innovation has continually evolved as with other sectors but the hurdles in place, and investors’ awareness of them, has held the industry back. Now that the consumer market’s attitudes are changing, there’s no shortage of innovative ventures ready to take on both the investment, and the opportunity.
Hopefully this combination of attention, investment and market willingness will create a positive cycle of attracting the strongest talent to the sector and in turn drive yet more progress.
What are the fundamentals you look for in an ed tech business?
Traction – Unlike nascent markets, EdTech firms can build significant traction and product-market fit at an early stage, even when bootstrapped. We like to see strong uptake and engagement, that they’ve really tested the product or service with consumers and that the feedback has been encouraging. Not just they like the product, but that it delivers real value.
We’ve seen so many fantastic ideas but this shows when someone has really found something that has an impact for educators.
Core or ancillary – An important consideration is are they doing something core or ancillary? Is it enabling the student’s core interaction with either a teacher or the subject material. The demand is still very much ‘core’. As the market evolves though, we expect the supporting technology, efficiency products for example, to really start to gain momentum and attention.
Passion of the founding team – The passion, insight and drive of the founding team are key factors determining success in this industry. Despite new consumer willingness, there are still entrenched hurdles to overcome on the growth path within the sector. In B2B enterprise software, just having the best product might be enough to win a significant share of the market, but in education there is a trickier path to navigate and the leadership team is often the determining factor here.
WHAT IS THE UNICORN POTENTIAL VERSUS OTHER SECTORS?
CB Insights expects 2 of the next 50 unicorns to be in the EdTech sector. To build a unicorn you need a large, willing market that’s growing fast, and this is certainly the environment evolving where education meets technology.
With vast numbers of people in education of one form or another, there’s the potential to become a unicorn while staying within just one country’s market. This isn’t the case for every sector and so when you then consider the global opportunity, things get really exciting. Many of these technologies have both real scalability and the market opportunity for significant size, so we may see EdTech start to make up more than just 4% of the new unicorns as time goes on.
BibliU is a digital education platform that provides students with digital access to their textbooks and libraries across all their devices.
Founded in 2014, the company now has over 100 university customers including Oxford, Imperial, University of Phoenix and Coventry University. The company has digitised content from more than 2,000 publishers including: Pearson, McGraw-Hill, Oxford University Press. The content is licensed directly to universities, who can then provide access to students and include the costs in their existing tuition fees. BibliU raised £600,000 on the AIN platform last year, this was an addition to its £6.5m Series A. The company saw a surge in demand due to COVID 19. Completed in eight weeks, the funds will be used for new technical hires to support demand from Universities. The startup is scaling rapidly with 60+ new pilots across the globe.
CoGrammar is an edtech startup that is dedicated to closing the global tech skills gap. The company achieves this by integrating human mentorship and code review into the world’s leading tech education brands. The company integrates quality and affordable review of developers and aspiring coders using the top 0.6% of African tech talent. It has been backed by Facebook, Google, Python and the University of Cambridge.
PSYT Technologies are specialists in wellbeing and technology. The startup turns the advice of the world’s leading self-development authors into digital, action-based summaries to help individuals create real change. They work with leading academics at the forefront of research, providing innovative technology that allows them to use state-of-the-art research designs to capture data. The team is backed by advisors from Headspace, Masterclass and Audible.
We spoke to aisle 3 co-founder and CEO Thomas J. Vosper about his business revolutionising the online shopping experience. He talks to us about bouncing back from redundancy, what he learnt from pitching to investors and his passion for ensuring we have #nomoretabs.
Tell us about aisle 3? Like most people I find it super easy to find a car insurance provider, book a hotel in seconds or find availability on a flight based on what matters to me. So why is it so hard to find out all of my buying options for a set of wireless headphones? I am not alone in having to open endless tabs across multiple retailers and marketplaces when I shop online.
At aisle 3 we are building a brand and destination site so that shoppers can see all of the relevant product information, price and availability all on one screen. We are obsessed with a #nomoretabs experience that works for both shoppers and retailers.
Right now on aisle-3.co, shoppers can discover colour and size variations on one page for our launch products – trainers. We are actively looking for new commercial and investment partners to increase our offer.
What is your background? I’ve been fascinated by ecommerce and both the shopper experience and the retailer relationship since I started as part of a small team in Amazon’s nascent UK marketplace in 2007. It’s crazy to remember that there was about a dozen of us occupying half of the 5th floor of a Slough office block! I was lucky to launch thousands of merchants across the full range of categories and products over 6 years.
After learning a very different corporate experience at Tesco for a couple of years I joined a price comparison start up and grew its retailers from 6 to 45,000 in three years before it unfortunately went into administration.
I’ve spent the last 14 years trying to understand and support both sides of the purchase journey. I’m obsessed with learning more about how I can support shoppers whilst delivering value and growth to help retailers in the face of ever increasing commercial challenges.
How did the idea for the business come about? My ecommerce baptism at Amazon fanned the flames of my shopper obsession but having worked with thousands of retailers and brands I’ve become increasingly aware that there is a struggle on the other side of the purchase journey.
Showing shoppers all of their buying options needs to work in parallel with supporting retailers and brands.
Finding myself unexpectedly redundant a couple of weeks before lockdown was the forceful kick that (thankfully with some amazing co-founders support) was needed to look at how we could tackle a fragmented online shopping experience.
We looked at the current price comparison incumbents as well as Amazon and Google and were staggered that no-one was able to aggregate information that means we would see all of our buying options on one tab. Given the resource and scale of some of these businesses we wanted to stretch ourselves to see if we could take on the technical challenge of #nomoretabs that no-one else has solved.*
*12 days after our pre-seed round we deployed our own three algorithms that means you can now see all the sizes and colours of a particular trainer.
How have you overcome challenges during COVID? Our entire business has been built throughout lockdown which has meant we have had to work hard to hire and adopt a new company culture without ever meeting each other.
The shift to remote working has made it much easier for us to find talent to join the team from across the world, however this has impacted us in other ways that we didn’t consider in the midst of our own personal bubble of a global pandemic.
Outside of the disruption of Covid our team has been affected by Floods (India), Government disruption (Belarus), political tension (Armenia), Black Lives Matter riots (USA) which highlights the challenges of a diverse international team.
We’ve tackled a lot of this by working very transparently, putting trust in each other to hit clearly defined goals whilst making sure that we have a growth mindset that encourages constant feedback loops and support. We shot through the free tier of Slack in just a few weeks!
What would you say to others who have faced redundancy during this difficult time? We’re all in this together. It is very easy to reach out to friends, family, professional networks across calls, WhatsApp, LinkedIn, etc. and my experience is that people are actively looking to support anyone in a difficult position financially or emotionally.
I’m also personally very wary of perceived success on social media. I’ve been very proud of the grit the team and I have shown and our achievements this year but I’m not satisfied that I’ve made anything yet. Personally and with aisle 3, we are still at the very start of a journey that started in challenging times amongst an incredibly specific set of circumstances.
For every story of someone building a business on a credit card there are 99 that fail. What really motivated me was the outreach of support when I was openly discussing my personal challenge (no job) and the ambition I had to create a company that could impact every Shopper on the planet (aisle 3).
I’d encourage anyone who has been made redundant to reach out to their network and ask for support. It might just be that someone suggests something that you hadn’t considered and from difficult circumstances comes your next big personal development.
Why did you decide to raise investment? In March I was made redundant and wondered how I was going to settle the credit card bill for my hotel in a month that I wasn’t going to be paid!
My personal financial circumstances were not prepared for a new business, even if I knew that my career and personal development had been leading up to this moment.
I took out a £25k Virgin Start Up loan to get aisle 3 started but we knew that bringing in smart investors from a diverse background would elevate the business and we could relentlessly focus on growing a world-class consumer offering in a massive market.
I’m a big believer that we are better working together and knew, however capable the team was, that we couldn’t take on such a technical growth challenge alone. Our investors help us make the right commercial decisions whilst providing the financial support to build a shopper obsessed product that no-one else has mastered.
What are your top tips for anyone raising investment for the first time? Even if you feel very clear on your mission and execution I’d recommend drawing up a list of ideal investors and then flip the order so you are saving the most relevant till later. You have to practice your pitch so that it evolves naturally. I remember the pride we felt with the version of our deck but cringe now at some of those early conversations as we found our feet.
Make sure that you can explain enough of your business to friends and family so they can get a general snapshot of your business and what you need the cash for. If you can’t do that you might find you struggle with the elevator pitch to potential investors.
The questions that caught me out, certainly at the start of my journey, were the simple ones that I expected an investor to know and made me doubt my own answer. I sometimes found that the savvy investors would often ask quite a direct and/or simple question to see how you react and answer rather than to hear the details.
If you don’t know the answer don’t try and talk around it. One of my proudest achievements in our business is that we have been able to surround ourselves with colleagues, advisors and investors that complete our knowledge gaps. Investing is a two-way partnership and perhaps the answer to a question from an investor is ‘what would you do and how can you support?’.
What attracted investors to your company? Investors understood the problems aisle 3 is trying to solve and they related to their own shopper journey – especially when I was able to walk them through the competitive landscape and how we had already exceeded the current incumbents. I think, as shoppers, we are too accepting of the status quo and the need to open multiple tabs on your browser even though hotels, car insurance or flights are easy to compare.
Whatever the type of product and size of purchases the investors I spoke with all shared their personal stories of difficult online shopping experiences – from struggling to find the best deals on Google, to an uninspiring functional Amazon experience or broken comparison-shopping sites that they’d stumbled across.
It increased our conviction knowing just how much our mission can change the landscape of online shopping both for shoppers and for the retailers that struggle to convert to sales on the other side of this broken experience.
I already knew we were fixing a big problem but when investors tell me that we could be creating a unicorn business here in the UK, during a global pandemic, I feel incredibly inspired to push the business even harder and solve problems.
My biggest fundraising mistake was… I’ve made lots of mistakes! The hardest questions are often the simplest and I cringe a little thinking about an early conversation with a VC that asked quite directly what my role in the business was. That was probably one of the easiest questions to answer and I could have picked any five of the spinning plates that I manage and have delivered results in but I turned into a waffling mess! I’d spent so long prepping the intricate details of the technical challenge that I was ready to answer any question other than then ones I had assumed the investor would know.
The lesson for me, was that you can prepare all of the details, but don’t forget your value, what motivates you and how you drive the business forward. It’s not about trying to learn everything to fill the gaps in your expertise or responsibility – that’s what I have an expert team for and the sum is greater than the individual parts.
I have also learnt to better read the signs after spending far too long entertaining conversations that I see now were never going to bring investment. I found it very difficult to push hard for a ‘no’ and walk away at the right time when all the signs were there that we weren’t a good fit for each other. Thankfully, we have ended up with a cohort of smart investors who care about our mission and have been incredibly helpful in assisting the team and I.
Why did you choose to use Angel Investment Network? Whilst we had a great pool of industry experts from over the years, we knew that reaching out to external investors would help validate our business ambition and the capability of the team without the personal validation.
We’d looked at a number of different options and thought that AIN was a platform that would help us clearly demonstrate our ambitious, unlock conversations to new, smart investors and would also provide a good central location for investors to point to when sharing our details.
We decided to launch with the homepage feature on Tuesday, by Sunday had issued docs to the interested investors and closed the round the following Friday on target.