Each month our team selects some of the companies raising on Angel Investment Network that really stand out, as part of our #StartUpBuzz feature.
This month’s picks includes: Smart Container Co – real time tracking for beer kegs, Bx Technologies, a platform facilitating carbon offsetting by connecting corporates with farms, and ARQ, an investment platform for personalised wealth management using AI. Smart Container Co
Enabling Transparency and a net-zero draught beer supply chain.
Smart Container Co turns traditional kegs into ‘smart’ containers, so that breweries, distributors and pubs can monitor the state of the beer inside, by combining a small waterproof IOT device connected to each keg (a KEGTRACKER), with their BEVEREDGE software.
It means that relevant parties can track the location, volume, temperature and motion for the liquid inside, reducing the risk of wasted stock, helping obtain more accurate shipping information, and gaining granular information about which product is being consumed where and when.
– UK patent pending – Chairman with 30 years experience including SAB Miller – Piloting technology with Brewdog.
Sam Louis, Head of Consultancy, Angel Investment Network shared why he is most impressed by Smart Container Co:
“We’ve known the Smart Container team for a while now and have been incredibly impressed with their progress. What we like is that they have a product that integrates smoothly into an exceptionally large existing market, giving significant opportunity for fast scale.
Since we first spoke with them, they’ve built strong relationships with some of the largest brewers and keg owners in the world, all of which have approached them cold. The timing is also very good – the pandemic has meant pubs and bars have become increasingly open to technology, something that was previously a hurdle, and many breweries have seen strong profits from retail sales.
All in all, it sets the company in a very strong position going forward and we’re excited to see where they go next”.
Helping farms prove carbon emissions and offsetting – connecting farm to corporates.
Farmers are incentivised to maximise crop yields, but are rarely accountable for their carbon footprint. However, there is enormous interest in carbon offsetting from corporates to help them meet their ESG goals.
Bx Technologies is the first two sided marketplace that connects corporations with farms and agriculture, reversing climate change through carbon offsetting and economic service investment.
Bx Technologies use a farm management SAAS system with a trading platform powered by blockchain to create a carbon credit investing platform, allowing farmers to see both their carbon position and the profitability of their orchard. At the same time, Bx offers Ecosystem Service Investments for corporates, securing a long term supply of carbon offset tokens.
– 1st SAAS client signed – paying $200k per year. – Expected to hit profitability by March ‘22 – Pipeline of over 12k hectares established
In terms of what excites him about Bx, Sam Louis explains:
“We were drawn to Bx Technologies for a number of reasons, the first of which was the boldness of their mission – remove 500m tons of carbon from the atmosphere per year. They’re operating in an exceptionally important and exciting vertical, with the opportunity to make an incredible impact on the planet as well creating massive growth potential.
They’ve tied these lofty aims to a strong underlying business model, with profitability within sight, and they aren’t expecting any altruism to make their business work. They’ve aligned the incentives of all their stakeholders, making it genuinely robust model. All in all, it’s the type of business we love – exciting, impactful and pragmatic.”
A wealth management app using AI personalised insights and comparisons.
ARQ is an investment platform that creates a personalised wealth management experience using AI and deep science.
The intelligent tools rank your investments performance using huge quantities of data and gives insights that can be used to improve your portfolio. ARQ are making tools that are only available to the super rich to more mainstream investors.
– A team with over 100+ years experience in financial services
– ARQ are offering white label services for wealth managers
– In house tech team behind leading fintech apps.
Xavier Ballester, Director of Angel Investment Network’s Brokerage Division shares why he is particularly impressed with ARQ.
“What I love about Arq is that I have this very issue: an Excel sheet with my various investments that doesn’t really give much insight after I have made my initial decision to invest. The beauty of this platform is that I can see my net worth and how my money is working for me and I imagine it will be a huge hit with financial advisors too.”
Addition offer a suite of financial services, from bookkeeping to growth funding. Their CEO Graham Davies explains in the guest article below how start-ups can benefit from having a portfolio CFO working alongside them.
When it comes to multi-tasking, entrepreneurs take the crown. Wearing a plethora of hats is pretty much a given. Not all roles can be juggled, however. A jack of all trades is a master of none – which is why a growing number of startups are choosing to outsource certain company tasks.
The average self-employed person spends an average of 12 working days a year on tax compliance alone. Time is golddust to entrepreneurs, and 12 days worth of drumming up new leads (or spending time with loved ones) is a lot of time to spend on something you may not even fully understand.
It isn’t only about saving time. Strategic outsourcing is usually a money-saver, too. This is especially true when it comes to accounting and financial planning. According to Glassdoor, the average CFO wage in the UK is £121,443 per annum. Taking on a full-time Chief Finance Officer is far too costly for most startups. However, they still look for these insights and advice to help them plot a course for growth.
This is why portfolio CFOs have started to become increasingly attractive.
But let’s take a closer look at this on-trend dynamic.
What Is a Chief Financial Officer?
A chief financial officer (CFO) is a senior executive who manages the financial actions of a business. Their duties typically include:
– Tracking cash flow
– Financial planning
– Analysing and acting on financial strengths and weaknesses
Essentially, a CFO oversees every aspect of your company’s accounts, finances and compliance. Their job is to ensure informed decisions are made to support the financial wellbeing of the business.
What is a Portfolio CFO?
Many startups choose to outsource their financial management to a third-party CFO. These high-qualified individuals usually work with agencies or freelance, and will manage multiple company accounts – or portfolios – at once. They will typically have extensive experience in their field, and offer dedicated services at a much more affordable rate.
Why are Portfolio CFOs so popular?
Startups are becoming increasingly attracted to Portfolio CFOs. But what is the chief driver behind this surge in popularity?
John Miller, Chief Operations Officer at Addition, links this rise to one simple factor: cost. Having previously served as CFO in green tech startup Spring, John now manages Addition’s CFO services. “Startups don’t require a CFO on a full-time basis,” He reasons, “as the cost is arguably not worth it. At £80k – £150k+ for a full time CFO in a startup to a medium company, this expense is often hard to justify.”
Of course, hiring a portfolio CFO is still an expense. However, the investment is well worth the cost. “The aim for all back-office roles, like finance, is to pay for yourself.” Says John, “Therefore, having a CFO on a part-time basis makes this easier in a small business. At £3k per month, it’s almost a third of the cost, whereas I would argue the benefits will not be a third of the size.”
Are Portfolio CFOs similar to Accountants?
As your startup grows, you’ll likely be advised to hire an accountant. This is definitely sound advice. Accountants will help with your tax compliance, bookkeeping and reports. But once the ball gets rolling faster and you’re looking to drive growth, a CFO can work wonders.
In order to appreciate what each of these roles brings to the table, you need to understand exactly what it is they do. “An Accountant or bookkeeper is focussed on implementing the rules and guidelines set out in the accounting standards for companies.” John explains, “This includes ensuring your company meets its statutory and tax obligations, accounts filed, returns processed etc.”
A CFO, meanwhile, is a strategic position in a company with the aim of driving the business towards its goals. “CFOs need a particular set of skills to do their job that accountants generally don’t.” says John, “One of the main skills needed is agile thinking – the ability to understand the ramifications from proposed or imposed decisions very quickly. For example: should business A start offering their online english tutoring business to China? The Portfolio CFO needs to quickly think about the ramifications of selling in China and the tax implications. They need to consider legislation, marketing the service in a different language, hidden charges and how to monitor progress. The role of a CFO goes beyond following the letter of the law – it involves creating strategic opportunities for growth.”
Portfolio or not, the CFO supports the startup on its journey and drives it forward in the most effective way possible. “Ultimately, an accountant and CFO work hand in hand.” John acknowledges, “It’s a symbiotic relationship, which is why at Addition we have a team made up of portfolio CFOs and bookkeepers. This gives our clients access to both elements required and is more economical to use both roles where they are best suited. There is no point in paying a CFO day rate to complete bookkeeping tasks.”
What does a Portfolio CFO do?
They might not be a full-time employee, but make no mistake: portfolio CFOs are definitely on your team.
During their contracted hours, a portfolio CFO will work as strategically and diligently for you as any of their full-time colleagues. Here are five of their main areas of focus:
1. Financial Management and Strategic Planning
Your portfolio CFO will implement controls so funds can be spent easily, but with solid regulations. They’ll help you determine where the business wants to go, and what it needs to get there. Finally, they’ll turn this understanding into a financial strategic plan.
2. Forecasting and Budgeting
This involves breaking the overall strategic plan into nuts and bolts. Your CFO might ask questions like, “How much are we going to spend – and hopefully earn – on all elements?” They’ll help adjust your budget to reflect this,
3. KPI and Performance Tracking
KPIs are vital to financial growth. A portfolio CFO will implement automated ways to periodically track performance to plan. They’ll help answer questions like, “What do we need to do more of – or less of? Do we need to do something completely different?”
4. Cash Flow Management
Cash is king for all startups. Staying on top of what is coming in and what is going out is vital for survival as well as success. Your portfolio CFO will help you utilise your cash-flow efficiently.
What Can a Portfolio CFO do for my small business?
While anyone can make use of a portfolio CFO’s services, the best fit are small to medium startups- especially ones who are focussed on operational delivery direct to customers.
You may wonder what scale ‘small to medium’ is operating on. “Once a business gets to a certain size,” says John, “let’s say 50 full-time employees and £25m+ revenue, getting a full-time CFO would be more economical.”
For John, this is due to the complexity of the organisation. “Someone who is fully focussed in the CFO role would be able to add the most value to that entity. Therefore businesses who are smaller than that, I would argue, may not get the full benefits for the cost of a full-time CFO.”
Establishing when the time is right isn’t always straightforward. For some helpful context, here are some examples of startups who’ve hired portfolio CFOS:
Example 1: A restaurant group with several sites. They’ll obviously have experience when it comes to running the restaurant profitably. However, a portfolio CFO could help with raising money to open a new site.
Example 2: A startup which has seed investment (before PE where it gets serious – a PE firm may want a 100%-focussed CFO to guard their investment and drive growth their way). This business is still in its infancy. The experience of a part-time CFO to guide the founders ideas will be vital to success.
Example 3: A hairdresser who is looking to expand into another site. A part-time CFO could spend some time working out a business plan for the new site. This would be presented to a bank to help raise the funds. The CFO could then track the performance of the site to make sure it is delivering the plan (and if not, help with what to do next).
Example 4: An online tutoring startup which may offer English courses all over the world. The tax treatments need to be carefully managed.
Example 5: A gym or fitness centre looking to sell. A CFO can support with financial reporting to give to potential buyers, as well as projections to support the valuation.
All of the above examples are in need of good financial management and leadership. However, they aren’t large or complex enough to require a full-time CFO within the business. Their main focus is on operationally delivering for their clients. This means a bank-office role such as a CFO isn’t needed daily.
“The CFO doesn’t help these example startups to cut more hair, offer more classes, or clean more flats.” John analyses, “Therefore in order to maximise profits, why not take on a part-time CFO?”
What Makes a Good Portfolio CFO?
When it comes to key traits and talents, portfolio CFOs and in-house CFOs fall under the same umbrella. Demonstrable experience and qualifications are obviously important. However, with portfolio CFOs managing multiple clients at once, commitment and dedication to each customer is more important than ever.
A stand-out portfolio CFO should be:
“When it comes to numbers, the CFO’s analysis and guidance needs to be true and actionable for the client on the journey to achieving their goals.” Says John, “Due to the portfolio nature of the role, this is a challenge. Dipping in and out of several businesses means focus cannot be 100% 24-7 – unlike that of the client with their business. Therefore, it’s about building solid advice on the facts of the business.”
A catalogue of prior experience with startups and goals similar to yours is key, according to John. “I’ve found that providing experience of how events have played out in historical scenarios really helps clients understand ramifications.” He says, “Failing that, it’s about drawing on the diligence disposition of a CFO to research, investigate and provide insight, as well as drawing on the network of contacts.”
3. A team player
As mentioned before, you’re not paying a CFO day rate for them to replace your bookkeepers. That being said, they should be working closely alongside your bookkeeper.
“30% of my day is spent with bookkeepers to ensure that all base financial data is strong, solid and makes sense.” Says John, “No analysis works without good foundations, which is why our Portfolio CFO’s are supported by a team of bookkeepers.”
4. A visionary
Once they have the necessary information, a good CFOs should make the most of it. “I use informed insights about my client’s business to give them actions that, when put in place, help them achieve their goals.” John explains. “Your CFO should be modelling out the future for your business, and helping set a course for the future. This could be help with raising money; working out which hires to make; whether to add a new product line and many other strategic decisions for small business.”
5. Clued in
A good CFO (portfolio or not) should always be aware of the latest financial guidance pertaining to your business. “10% of my day is spent researching the latest guidance from the government.” John states, “This is to ensure that we can provide insight on the latest legislation, as well as which grants could be claimed for.”
Advising multiple clients calls for an extra set of scruples. This is especially true when it comes to any potential conflict of interest.
“We have one set of clients where there could be room for connection. In order to ensure ethical practices, we divide the work between myself and my business partner.” Says John, “Were either of us in a situation where we were working on our own, we would not take on the work if we believed there was a conflict of interest. Our integrity is worth more than the paycheck.”
A good CFO should also keep on top of their ethical and professional requirements – as part of their membership to the relevant accounting bodies.
We all know how frustrating it can be to wait on a response from someone – especially where money is concerned. Along with the cost-effective perks of a portfolio CFO comes the fact that they can’t be on call 24-7.
“A portfolio CFO cannot serve all clients at the same time and immediately.” Says John, “Some startups value this more than the cost of full-time versus part-time. The biggest challenge as a Portfolio CFO is staying on top of multiple clients and prioritising effectively. The way we get around this at Addition is by having two portfolio CFOs to share the load. We also have a team of highly qualified accountants and bookkeepers to ensure the financial information is clean, robust and clearly presented.”
AIN members can obtain the following offers in our Perks & Benefits section.
1. Annual Budgets & Forecasting
Addition helps you plan your business’ journey for the next 12 months and transform your vision into an actionable finance plan. £1,500 per scenario – Angel Investment Network members get 20% off.
2. Financial Modelling
Every business decision has a financial impact. Addition creates a dynamic model for your company, based on today’s needs and tomorrow’s goals. £500 per scenario – Angel Investment Network members get 20% off.
3. Financial Pitch Deck Review
Addition has helped startups from pre-seed to to Series A and beyond. They know what investors are looking for when it comes to financial reporting and projections in your pitch deck. £650 per review – Angel Investment Network members get 20% off.
Up next, Ziglu, a digital platform bridging the gap between cash and crypto; Yang Li, Chief Growth Office, shares his story behind the company’s £6.1 million seed round:
Tell us about Ziglu and how you came up with the idea
Ziglu was born out of the realisation that both traditional and challenger banks were preventing their customers from having access to cryptocurrencies. With the rise of cryptocurrencies we could be seeing the biggest ever transfer of funds into a new asset class, and decentralised finance (DeFi) is providing unprecedented opportunities to grow wealth.
Yet the majority of consumers are unaware of the opportunities of cryptocurrencies and DeFi, or are confused by them, or have no affordable way to participate in them. To solve this problem, Ziglu has been designed and built to combine modern challenger banking features for everyday spending with safe, simple, affordable and insured access to cryptocurrencies.
Why did you decide to raise investment?
We saw some remarkable early customer engagement and wanted to accelerate our customer acquisition, particularly to coincide with the amazing bull run we’ve been seeing in the crypto market. Giving ownership to customers also gives them a chance to benefit in our growth and success too and that’s at the heart of what we stand for.
Furthermore, our product and tech team had built an innovative but aggressive roadmap of features that they wanted to deliver. Fundraising has meant we can now deliver new features and improve customer experiences pretty much as fast as we can think of them.
What is your top tip for anyone raising investment for the first time?
Don’t overly focus on how your product compares to competitors. Be clear about how your product truly delights customers. No startup has failed due to competition alone.
What attracted investors to your company?
Ziglu has an experienced team with a proven track record of building amazing startups like Starling, Monzo, Wirex, Meituan, and a product that provides a significantly better crypto-investing experience for beginners and aficionados alike. This combination of a proven track record and a visionary product and proposition has proven to be very attractive to investors.
My biggest fundraising mistake was…
Worrying too much about the aesthetics of the pitch deck.
Why did you choose to use Angel Investment Network?
Angel Investment Network stood out to us because of its superb track record of assisting innovative startups to find strategic investors: investors that provide us with first hand advice about disrupting huge industries, broaden our network of partners and add significant value beyond cash.
What has the funding enabled?
The funding has allowed us to significantly ramp up our marketing, build new features faster and accelerate our plans for international expansion. The team is currently very focused on Ziglu’s international expansion, with our first overseas launch slated for the second half of 2021.
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 fundraising yourself, you can find your local network here.
You’ve Got This is a talent marketplace for startups. We bring together experienced professional talent with the UK’s fast growing startup ecosystem.
We’re making it quick and simple for hiring teams to find mission aligned team members with the sales, finance, product and sector knowledge they need now.
We enable you to get to know each other on a project basis and hire on an employment basis when the time is right.
Why did you set up this company?
Covid has accelerated job losses but it’s also given us the opportunity to weigh up our priorities and how we allocate our resources. Many of us want to be more efficient with our time and to work on things that connect with our values and sense of purpose.
At the same time more mission driven businesses are being created. Innovative startups and SMEs are looking for ways to bring on flexible diverse talent, and that is harder to find through traditional channels.
They look for highly skilled individuals that can get them through the early years and establish shared values and trust before they hire long term employees. That’s where we come in. I felt there was an opportunity to use technology to help us find meaningful flexible work with businesses and become their early team members if there’s a fit.
How did you get your first customer?
Our first customer came through our co-working space. They’re a startup in the renewables space. They had tried platforms like Upwork but couldn’t find what they needed; someone with specific qualifications, who could work part-time, come into the office a couple of days a week and become their first hire down the line.
We knew we were onto something when?
We had a first degree connection with the first 50 professionals that signed up to the platform. After that we started to get referrals from individuals who we’d matched for conversations with businesses.
Similarly one of our businesses who we matched with a part-time Finance Director came and asked if we could connect them with a Sales and Marketing expert.
Together with my CTO Stephen, we’ve built a platform based on customer insight and a roadmap that positions us well alongside platforms such as Upwork and People Per Hour.
We’re now producing content for our user base on joining and building high performance teams. Our content has been reshared by NatWest business builder and venture capital funds.
Our business model:
We’ve looked to modernise the traditional recruitment model of upfront commission on annual salaries. Many of our startups find this prohibitive in the early stages. It’s free to search and start connecting with available professionals.
We apply a service charge on the value of bookings made through the platform. We also provide the process for getting timesheets approved and payments made once work is complete. You can read more about our pricing on our website here.
Based upon our conversations with our business users, we’re planning to launch a pay monthly service with a discounted service fee and extra features for our regular users.
We think that there’s growth in this sector because:
The gig economy is growing rapidly, with 50% of the workforce are expected to be full-time or part-time self-employed by 2025.
Automation is replacing the jobs of people who have worked in one sector for many years, pushing people to make a career change later in life.
There are 1.3 million SMEs in the UK (1-49 staff), currently spending an average of £6,000 per year on recruitment. This market is worth £7.9 billion. We’re looking at entering new markets in the future.
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.
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.
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.
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’.
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.
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.
The focus of the book is the need for companies to revolutionise how they create value to remain relevant in today’s world. A distinguished business academic and business leader, Joachimsthaler believes we are witnessing the birth of a new type of company that he describes as an ‘interaction field’ company.
These are companies that thrive on the participation in value creation by many different groups: from customers, suppliers, partners, and other stakeholders, but even competitors, observers, independent researchers, and government agencies. Companies that achieve this are able to create an unstoppable momentum and growth called ‘velocity’.
Joachimsthaler considers the different types of value creation that have until now dominated. For decades, it was ‘value-chain companies.’ He describes them as ‘structured as a hierarchy they organized its key activities along the value chain from sourcing to design, manufacturing, marketing, and sales and were optimized on a pipeline.’
Over the past couple of decades we have seen the advent of ‘the platform economy’. from Facebook to Amazon to Netflix, these digitally driven, asset light, and quick to grow companies have disrupted the game. They have made founders very rich and inspired the hopes of startup founders everywhere to set up and monetise new platforms.
Joachimsthaler argues in many ways the value-chain company and the platform company are more similar than you might think. ‘They are both highly transactional. They are focused on a specific exchange, which is typically the provision of a product for money.’
His belief is we are moving on from the ‘platform’ economy and instead nascent firms should focus on building a new kind of company, an ‘interaction field’ company. These new companies which include Tesla and Alibaba, facilitate, and benefit from interactions and data exchanges among multiple people and groups–from customers and stakeholders.
But also from those you wouldn’t expect to be in the mix, like suppliers, software developers, regulators, and even competitors. Everyone in the field works together to solve big, industry-wide, or complex and unpredictable societal problems.
Furthermore by participating in these interconnected groups, interaction field companies can achieve a kind of unstoppable momentum and wild expansion ‘velocity’. He writes ‘It is a new form of multidimensional, constantly accelerating, explosive and smart growth that goes far beyond the traditional measures of sales increase, profit, or market capitalization.’
He also considers the four steps needed if a company is to become an interaction field company. These are:
1. Framing: It solves new problems and intractable challenges for multiple participants
Joachimsthaler argues that platforms and digital ecosystems typically focus on solving narrow or existing problems, challenges or pain points for customers. For example Uber and Lyft remove frictions of hiring a taxi or airbnb for having somewhere to stay without paying hotel prices.
Interaction field companies frame the challenges they are solving in a much more comprehensive way. These businesses solve complex challenges for customers, for an entire industry or even society. For example, Tesla solves for a lot more than just electric cars as a replacement of gasoline-powered cars. It solves for autonomous driving, lower CO2 emission, better utilization, lower cost of ownership of a car, traffic congestion, and so much more.
2. Designing: It creates shared value by designing for interactions, not just transactions
Platforms and digital ecosystems tend to be highly transactional business models. Ie. Airbnb between hosts and travelers, and Amazon between buyers and sellers. Because platforms or ecosystems are transactional, they typically benefit from the volume of transactions which generates learning and network effects. Interaction field companies however are not transactional, but rather interactional. Interactions are built on collaboration, engagement and participation. Interaction field companies focus on the quality and value of interactions as much as on the volume of interactions.
For example Alibaba is not in the business of disrupting small retailers. They are in the business of making them efficient, removing frictions and enabling them to sell more.
3. Building: It isbuilt to beopen and comprehensive by deeply integrating into the lives of participants
Interaction field companies are inclusive and compete in a world without walls. This is contrary to digital ecosystems and the current discussion around “ecosystem competition,” the notion that ecosystems compete against each other and you must decide which ecosystem to join if you can’t build your own. Companies should be wiser and reconsider the focus on extracting value through competition.
An interaction field company designs the interactions, architecture and governance in such a way that it solves problems and challenges of customers and many participants – including competitors who participate in other ecosystems.
4. Sharing:It is built to share out value with the participants in the interaction field
The goal of the interaction field company is to solve for problems and challenges in the nucleus, the ecosystem and in the overall market. The goal is not just to solve for the cheapest ride or the fastest grocery delivery, but rather to enable fair value distribution. As one leading platform academic, Marshall van Alstyne says, a situation where you create more value than you take.
Given the huge challenges created by the pandemic, this call for companies to focus on interconnectedness and solve deep rooted global problems has particular resonance. As he concludes: ‘Given the fragility of the planet and our global interdependence, interaction fields are the future, not only of business, but of the world.
In many ways there were two sides to 2020. On the one-side, there has been a monumental personal loss to so many families, we’ve all been taking the strain mentally due to our daily lives being uprooted, even if we have yet to admit it to ourselves, and many good businesses have been torn apart by COVID.
But though searching for positives might seem futile, there have been some, and they are noteworthy.
Change = business opportunity
When people have a problem that needs solving, that is often when there is an opportunity for a new business to emerge.
When life is stable, people incur major problems relatively infrequently; most people’s problems have been solved, and there are less opportunities for businesses to be created.
When COVID happened, simultaneously putting the population at risk, disrupting the supply chain and dampening demand for many products and services, suddenly there were a lot of problems that needed solving.
For prospective entrepreneurs this is actually a good thing – people needed to:
Keep safe whilst out and about during Covid
Communicate effectively with their team whilst WFH
Make childcare work when nurseries and schools were closed.
These new problems and others are creating opportunities for the businesses of tomorrow to emerge.
This might sounds counterintuitive, but in the good times it’s hard to create a great business. Why? A lot of the top talent gets sucked into corporates, and consumers are less inclined to change their behaviour, because, well, they don’t need to.
Economic shocks mix things up – Thomas Vosper was made redundant at the beginning of the COVID crisis, he’s recently completed an investment round for an innovative new retail concept that he since started – you can read about it in his recent blog.
And whilst COVID undoubtedly has caused huge disruptions, some companies in some industries were quickly able to shift into the ‘new normal’.
Working from home was something that was alway going to happen, probably in a decade or so. When COVID happened, almost everyone had to do it, straight away.
But this had a few benefits that weren’t necessarily foreseen, people by way of being forced to do it – actually became good at using video calls.
Meetings where people would have travelled across town and back, and set up 1 hour meeting to justify the time, suddenly became more efficient half hour Zoom calls. A huge time and efficiency saving.
When the pandemic first hit, there were signs that investors were being more cautious – some had taken hits on their portfolio and dropped back on the number of the investments that they made, and pushed harder on valuations.
However, investors have adjusted to the new normal, for each in person meeting they have given up, there are many more Zoom and virtual meeting that they are taking.
Lockdown enforced many people to become savers, as there were so few opportunities to go out and spend money. Investment activity has rapidly obtained new momentum.
The upshot is that we are fortunate to just had our record ever month at Angel Investment Network, and feel well placed and optimistic to enter 2021, despite the continued uncertainty. We’re mindful that it remains a challenging time for many.
Wishing you a happy festive season, even if it’s not what you hoped for, we hope that you at least get the quality downtime that you deserve.
This month we delve deeper into the world of agile fundraising and share some practical advice that can help you raise money for your business before the end of the year.
Making the most of the Christmas rush…
The run up to Christmas is always one of the busiest times of the year in terms of fundraising activity and investment. This can be a great time to look for investment, as many investors are looking to move quickly and close investments before heading off on their well earned break (even if this year that will be at home…).
With less than four weeks until Christmas, there’s not long left if you’re looking to raise investment this year. But all is not lost – agile fundraising enables you to raise investment quickly and flexibly in situations just like this.
What is agile fundraising?
Over the last couple of years at SeedLegals, we’ve observed that many early stage companies are moving away from go-big-or-go-bust funding rounds every 12 to 18 months in favour of agile fundraising where they raise small amounts frequently, taking investment opportunistically (e.g. when you meet someone who wants to invest) and as needed.
We now see the savviest founders use agile fundraising to grow their businesses faster, spend less time holding up the business while they look for investment, and give away less equity than founders relying solely on the traditional go-big-or-go-bust funding rounds.
The two main agile fundraising methods are SeedFAST (Advanced Subscription Agreement) and Instant Investment.
Advanced Subscription Agreement (ASA)
An Advanced Subscription Agreement is the UK equivalent of the SAFE (commonly used in the US) and is SEIS/EIS compatible – great news for you and investors.
An ASA allows investors to give you money now, in exchange for shares in your next funding round. Your ASA investors will receive their shares, generally at a discount compared to other investors in the round, because they invested early, when you close your next funding round.
Instant Investment allows founders to close an initial funding round like normal, and then top that up anytime, within limits agreed in the initial funding round.
This enables you to raise only what you need or are able to raise right now, and get back to growing your business. Then, as you find additional investors, you can quickly and easily add them, effectively topping up your last round. At SeedLegals, we regularly see founders close a funding round and continue raising using Instant Investment for 12-18 months before doing their next round.
You can read our comprehensive agile fundraising guide here
Is agile fundraising right for me?
There are a number of scenarios where you can use agile fundraising to your advantage, whether you are going out to investors for the first time or have raised multiple rounds of funding already.
Here are a few of the most common use cases we see at SeedLegals:
You’ve found your first investor…
First investor on board – now to find the rest, right? Yes and no…
While one option is to keep your round open as you search for other investors, a better way could be to use ASA to get that money in ASAP, rather than keeping those investors (and their investments!) on hold while you line up all the other investors for your round.
With an ASA you get investment there and then, which can be used to invest in growth or extend your runway, and the investor generally receives a discount on the upcoming round in return.
The fact that one investor has already committed and transferred funds will also typically be viewed positively by other investors you’re speaking to.
You can’t agree on / don’t want to commit to a valuation…
Is my valuation £500k? £1m? £3m? £5m? Agreeing a valuation for an early stage business can be a minefield. Luckily, we’ve written this article about how to think about valuing your startup…
Great! So you’re good to go… But there are still lots of cases where investors and founders simply can’t agree on a valuation or may strategically not want to agree a valuation at that time.
An ASA can help both parties here, giving you up to 6 months to finalise the valuation. As a founder, this not only gives you much needed cash, but also time to grow the valuation to a point where you and your investors are both happy.
You’ve got your key investor(s) on board…
When fundraising, founders will often have certain investors they really want to get on board. Perhaps they’re writing the biggest cheque, have a great network, or are able to provide unique advice and insights.
You’ve landed your dream investor(s) and have a decent chunk of your target raise committed – now what?
This is a great time to consider closing your round and continuing to raise using Instant Investment. Negotiations around valuation and key terms are likely to be finalised or close to finalised by now, meaning that other investors are likely to be signing up to the same terms.
This approach means you receive funds and can put them to work immediately, whilst continuing to fill and complete your round.
You’re just waiting on the last investor(s) to sign…
Everybody has signed, except one or two investors… One is going on holiday for two weeks and the other is dragging their feet. What do you do?
You could wait until they get back, but this just means more time thinking about fundraising vs. growing your business. Instead, you can let these investors know that you’re going to close the round without them, but (and very importantly) they will be able to invest at the same terms once they’re back, or ready to commit.
This approach can sometimes lead to investors suddenly being available to sign and transfer funds, meaning the round closes as initially planned. Either way the round closes sooner, without losing investors, a win/win.
If fundraising is dragging on, or you just want to move faster, agile fundraising could be just what you have been waiting for…
Questions about agile fundraising, or fundraising in general? You can book a call with one of the SeedLegals experts, who will be happy to help.
Jenny Collins brings her passion & experience for bringing together smart, impactful R&D teams, across Google – to optimize the European start-up eco-system, and in particular connect Xoogler (“ex-Googler”) entrepreneurs with angel & capital investment.
This is the annual opportunity for ex-Googlers who have founded their own start-up to connect with investors.
This year, we have 170+ investors lined up and we are selecting 15 of the most credible start-ups from around three times that many applications. We’ll help each of them to create a succinct & delicious elevator pitch, of 2 slides in 2 mins & 2 Q&As, to attract further discussion in the social element of the day.
I’ll be simply there to present the talent: we have keynote speakers, all the major capital & angel investors signed up and we are sponsored by Landscape, which seeks to reward great behaviours in the investment world and Remo.co as our platform.
But it’s not just about funding; it’s about creating an entrepreneurial community, in this locked-down world. It’s a space to connect like-minded people & expertise; to absorb advice, be inspired, to show off, and to express frustration; to laugh.
Are there any common themes for the companies attending?
Companies must have at least one former Google Employee as a founder, be committed enough to the goal to be working on it full time, to have raised initial seed at least from friends & family, right up to series A and be rallying further funds. Companies will need to have an initial MVP to showcase and be able to demonstrate customer traction.
How does Google support Xoogler startups?
We have folks from inside & outside Google who help out; it’s entirely voluntarily – Xooglers tend to be self-reliant and like most things at Google, people help out because they are interested, not because they have to. We may look to syndicate further virtual demos to become more self reliant.
How would you describe the characteristics of a Xoogler?
It’s a terrific blend of folks who are smart & humble enough to get through Google’s interviews, schooled in how to create globally scalable tech, and a desire & determination to now do things themselves.
What type of investors are you expecting?
We have everything from Googlers who are starting to fund early stage ex-colleagues, about 50 seasoned angel investors, right up to companies like Atomico, Sequoia, Seedcamp, etc.
Have there been exciting successes from previous years?
It’s always fantastic when people you know do well, like Ex-Google Engineer Lewis Hemens, co-founder of dataform.co, who pitched in 2017, going on to complete Y Combinator & raise a seed round with a top European VC. The most recent exit is Irish based Pointy for $163m, and then (ironically) acquired by Google in Jan 2020.
How has Covid affected the demo day?
In response to Covid-19, XDD is now virtual, which has brought the future forward suddenly.
This makes it easier for more speculative investors to attend, but also means it’s even more requisite, because those coffee morning conversations and water cooler moments, in real life, are less frequent. Online community is increasingly important to promulgate this sector.
Are there any practical takeaways for our entrepreneurs?
Now is the time to get your startup sorted, to be ready to take UK/Europe out of lockdown Spring 2021. It will come quickly and there are plenty of gaps to fill that big corps are too busy scaling and often aren’t agile enough to notice.
What was the biggest thing that you learnt personally whilst working at Google?
Always assume best intent.
If you are an investor interested in attending the event, or a suitable start up, you can apply here.
In his second guest post for Angel Investment Network, Dan Simmons, CEO of Propelia, explains ‘How understanding the shift from Product Market Fit to Founder Market Fit in the pre-seed space can now help influence your early stage thinking and planning’:
Understanding The Shift
There is a recognisable shift starting to happen in the early stage space. A shift that is important to be aware of and understand whether you are a founder or investor. A shift away from Product Market Fit and towards Founder Market Fit around and for pre-seed investment. This shift essentially means the way certain angel investors are starting to evaluate early stage founders is beginning to change. Change away from the traditional lenses that model and evaluate Product Market Fit towards a new phase where different tools, frameworks and assessment criteria are at play.
We can see this shift clearly by comparing and contrasting the two diagrams below:
We can see from the Product Market Fit diagram, that as you move forward, it essentially at each stage relies on and is informed by tools and lenses like OKRs, YOY, NPS, KPIs, CAC and CLV to chart founder progression and development. A progression that many founders when trying to structure and project the progress of their start up onto find very difficult to navigate. A difficulty that often then causes them to come up with and put forward assumptions and future projections that are essentially best guesses – just to align with Product Market Fit based questioning and be attractive to and try and close their potential investment.
However we can see that by shifting the focus towards Founder Market Fit, the nature of the early stage journey distinctly and meaningfully changes.
Here we can see that different criteria are being used to assess value and progress of the founder, that utilise much more human language and exploratory values when compared to the tools and lenses of Product Market Fit. This is critical as to why this shift is increasingly attractive to and in the interest of early stage pre-seed founders.
Why This Shift Is Occurring Now?
For a long time the tools of Product Market Fit have been the only way to really evaluate an early stage founder and their future start up journey. This often creates an asymmetry and many ensuing systemic problems in the ongoing dynamics between founder and investor. Both parties when evaluating an early stage funding deal, are of course looking to gain comfort that the road ahead is valuable and worth pursuing together. The tools around Product Market Fit have been an attempt to create that comfort and generate that degree of future certainty.
A certainty that was always speculative at best. Ask any founder who has been asked over and over again to create and then endlessly tweak a 3 year spreadsheet of projections and you will be met with the frustrations and self-evident limitations of this methodology and approach in the pre-seed space.
However will market conditions now very much being set to ‘Uncertain’ post-COVID, it is clear that any founder predicting more than 6 months out is simply putting ‘their finger in the air’ and practising some sort of start up fortune telling with no real basis in the reality of events unfolding on the ground. For the first time, both investors and founders can agree that a change is needed to adapt to this underlying uncertainty – particularly around evaluating those first 6 months in the early stage space. This is all important in creating the conditions for the shift from Product Market Fit to Founder Market Fit.
Who Are Some Of The Key Stakeholders Helping Make This Shift Happen?
This shift is being fuelled by various key stakeholders in the early stage space that are sensing the market timing and opportunity to fuel and propel it forward. These range from early stage funds that are realising that updating towards Founder Market Fit is both valuable, viable and attractive as their pre-seed market positioning. Indeed by adopting this approach it could immediately make them more ‘founder friendly’ and differentiate them from their rival funding firms who are still focused on the tools of Product Market Fit and therefore lack this new perspective. Forward Partners and The Fund are good examples of this or early stage firms talking this language.
However there are also additional stakeholders that are worth noting and exploring further. Here’s a few of them worth exploring.
The legal parties that specialise in the early stage space. Companies like SeedLegals offering Agile Funding solutions that enable founders to take on smaller tranches of funding in a much more fluid and ongoing manner than if they were completing a larger round – see here:
The increasing awareness around Founder wellbeing and how applying the lens and pressure of Product Market Fit too early can have adverse effects on mental health. Many founders report the same symptoms and sleepless nights having to prove the projections they previously plucked from the ‘spreadsheet ether’ last quarter at their next investor meeting. See founder peer support groups like Foundrs who are there to ‘help one another break new ground without breaking ourselves’ and Courier’s excellent Founder wellbeing report.
In recent years this shift has been enabled by the application of R&D and Innovation Grants to the early stage space by forward thinking companies such as GrantTree and Data Fox. These companies have been able to reclaim capital spent and invested in innovative new products, services, processes, software or systems and are often willing to be engaged on a no-win, no-fee, no-risk basis. This has provided an alternative route to financing and capital in the early stage and is particularly well orientated to outputs of Founder Market Fit.
A final stakeholder that has emerged in recent years that helps value this shift differently are firms like Coller IP and Valuation Consulting who are managing to put the softer and intangible assets – like brand, business models, know-how and sweat equity – on the early stage balance so that they can be factored into larger rounds. This starts to assign an actual value to the dynamics of Founder Market Fit that were previously considered to have a marginal worth at best when compared to the more tangible metrics and measures of Product Market Fit.
How This Shift Might Affect Early Stage Funding?
If you are currently engaged in an early stage funding round or indeed considering one, it might be useful to pause and think about the difference in approaches between Product Market Fit and Founder Market Fit. Whilst this shift is visible and happening it is still quite new, even to sophisticated investors who regularly fund founders and their pre-seed start ups.
You should both as founders and investors feel like you have the permission from the outset to discuss and delineate which approach is being taken. They are both very different with different paths with different evaluative criteria and measured outcomes. Critically once you are down one path and everyone is aligned to that approach, it is notoriously hard to reverse out of.
However factored in up front an awareness of the choice around this shift could help fuel a different type of initial conversation between founder and investor that helps from the outset frame and articulate future aims, expectations and values. It could even form part of an early whiteboarding or brainstorming session between founder (and their team) and potential investors.
Just by being aware of the shift and bringing it into the conversation is at the very least a sophisticated early basis for discussion.
How Do You Assess Where You Are On This Shift?
Finally a quick diagram to assess where you are at in relation to this shift. It is suggested that if you are in the pre-seed space then Founder Market Fit may well be the more suitable approach. This may also be the case if you are still in the Seed funding stage.
However it is likely that if you are in the Series A or above that you are further down the line in the territory and terrain of Product Market Fit and its evaluative tools and approach are still more suited to you.
The good news for everyone, is that by being aware of where you are in relationship to this shift, then all conversations and their related lenses, tools and frameworks, can start to hopefully become more ‘fit for purpose’ and ultimately as a result, more valuable for all parties and stakeholders involved.
Propelia is the UK accelerator navigating the use of Pilot Rounds in the pre-seed space in our post-COVID times. A Pilot Round is designed to rapidly connect early stage founders with aligned investors, to enable them to leverage SEIS capital to fuel, test and iterate uncertain market assumptions and prove Founder Market Fit over the next 6 months. Once completed, this enables them to then evaluate and ideally increase the value of the greenlighting of a subsequent larger round to fund the further launch of their product and operations. All diagrams in this article remain the Copyright of Propelia Limited