QIB Q3 2019: People Powered Investment

On Thursday 12th September, Engine Shed hosted the latest in the series of Quarterly Investment Briefing events. We welcomed c. 35 investors and enablers of investment to network, share and learn. The goal of this regular event is to support the community of investors and enablers of investment and to raise the profile of investment opportunities in the West of England.

The theme of the event this quarter was 'people-powered investment,' a title intended to answer such questions as 'who makes investment happen?' and 'how can our regional culture facilitate more effective investment?' I also wanted to explore how we can level the playing field and make sure all investable (or potentially investable) businesses get equitable access to support.

So, to get people in the zone, I opened the event with a few selected headlines related to investment (for more information on these, check out the slides below):

  • Tim Morgan announced the 3rd cohort of his SW MBA for early-stage founders.
  • British Business Bank has announced a £10m investment in Dow Schofield Watts Angels Group which will see them expand to the SW and Midlands.
  • Bristol company Reach Robotics that made fighting 'spider' sold by Apple has gone into administration.
  • Octopus has acquired Seccl, a Bath-based wealth technology business for £10M.

I also talked through some highlights from the 2018 UK Business Angels Association and British Business Bank research on angel investors to highlight some of the demographic details of the population. We learned that 91% of the 648 angels surveyed were men, with the remaining 9% women. We also discovered that men are more likely than women to invest independently, outside of an angel syndicate and that women own 45% of the UK’s wealth yet only 14% of Angel Investors are women. We pondered what the drivers were - whether social, cultural or financial. If you would like to find out more about this research, check out the full report here: https://www.british-business-bank.co.uk/wp-content/uploads/2018/06/Business-Angel-Reportweb.pdf

You might also like to mark your diary to participate in the 2019 survey which launches on the 16th of September.

Lightning talk 1 - Dr. Zara Nanu, Gapsquare

Our first speaker for this event was Dr. Zara Nanu, Founder, and CEO at GapSquare. Zara shared a little about the growth trajectory of her business since its inception in 2015 and talked about the implications of being funded through revenues to date. Gapsquare exists to address a changing employment environment - in which 65% of employees would leave a job if they felt that they, or a colleague, were being paid unfairly, and in which pressures for fair and inclusive pay are growing. She shared a vision for the company and invited investors to contact her if they are interested to learn more - she's currently raising £1m.

The second half of Zara's talk highlighted a key piece of research by Dana Kanze et al. (2015) into the 'real reason why female entrepreneurs get less funding.' In this research and the brilliant accompanying TED talk, Dana describes a world in which "women own 39 percent of all businesses in the US, but female entrepreneurs get only two percent of venture funding." The research, described, endorsed and illustrated by Zara explains that there is no difference in the pitch structure or presentation of the 1000s of pitches analysed from Startup Grind. The difference comes in the type of questions asked of male and female founders. According to the research, male founders are asked 'positive reinforcement questions' which major on words like 'Accomplish, Achieve, Aspire' and ask them to describe their big vision, whilst female founders are asked defensive questions that encourage them to focus on detail and address specific concerns. For example, men are asked promotion questions like 'How do you plan to monetise this?' and women are asked prevention questions like 'How long will it take for you to break even?' Watch the TED talk here to find out more.

So what can you do about this? Investors are encouraged to have a set of questions and ask them the same way for everyone. Female founders are encouraged to take a leaf out of a politician's book and reframe the questions to be positive reinforcement/promotion questions and answer those, not the negatively framed question that they are asked.

Lightning talk 2 - Bruce Molyneux, Angel Investor

Bruce is a local angel investor who has been active for the last 5 years or so. He opened his talk by asking the audience some of the questions that trouble me too - who is investing here? To what level? How often? How many years experience do they have? In syndicates? Where do they learn? It was interesting to see how many hands were raised in the room and to ponder how these questions would apply if we surveyed the community locally. As he described his own journey - which began with investments in Scotland and Manchester, Bruce shared observations about how much better organised those northern ecosystems are - 'more straight forward' and 'upfront about deals' as one audience member described the Mancunians.

Bruce described his frustration in finding the right people to network with locally and ultimately to co-invest with. He talked about the supernodes that he has found in his network (a theme that is close to my heart), those people who are super-connected and willing to utilise their network to help others. He invited the audience to consider and act on their own mission when investing - whether for a particular cause, for fun, for a reliable family income.

I found myself wondering what more we can do to support this network and enable angel investment in our region - to find those people with deep pockets that haven't yet discovered this investment type, or that 85 % of investors who are investing from our region into companies in London. The equally pertinent question for me, as a (slightly competitive and socially focused) network weaver myself is how we better organise and mobilise for good so that we have an even better level of coordination and organisation than Manchester!

Lightning talk 3 - Rick Chapman, SETsquared Bristol

Rick has been an Entrepreneur in Residence at SETsquared Bristol for 7 years. In that time he's worked with 54 companies of which 37 have gone for investment and 34 of those have successfully raised. So, it's fair to say that he understands the investment process locally pretty well and is a great person to share some observations. He described every process that he's observed as being different from the last, not everyone uses term sheets, every angel group application is different, the legal agreement could be 5 pages or 65, the list goes on. He shared a view that the companies locally are well-practiced when it comes to pitching, but it's often the Q&A that catches them out - companies don't prepare for the most challenging questions.

Rick's top tips for the investors in the room included inviting them to be absolutely transparent about their process - to publish is clearly and to be upfront about specifics e.g. whether you're open to following on with the next round of investment.

Rick had done some analysis of the female founder ratio in SETsquared too - his pie charts clearly illustrated the significant increase in funding rounds closed by female founders in just the last year - which has gone from 18% to 45%. Sadly though, when you consider those funding rounds by value, you discover that the uplift in the same timeframe is just from 4% to 7%. Rick suggested that this is largely due to a lag - the female-founded businesses are not yet at a series C raise like Bluwireless or other SETsquared alumni companies so it's harder to make a mark when it comes to value of fundraisings.

Rick invited founders and investors to watch out for his forthcoming blog with SETsquared Bristol entitled 'Am I Ready for Investment? Well that depends...' if you want to be sure not to miss it, subscribe to the SETsquared Bristol newsletter here: https://setsquared.us16.list-manage.com/subscribe?u=e4748f093f47cabb99d9d5c9e&id=86f83b6741

For a little light relief, and insight into Rick's sense of humour, he suggests that you watch this video to find your inner thought leader...

Who is raising in Q3 2019?

In time-honoured tradition, I then gave a quick run-through of investment data and those companies that successfully raised investment in the region in Q2 this year using data from Beauhurst. You'll find the top 12 on slide 44 in the deck below. To mention the top 3 by name, Bluevenn closed an £8m investment with Boost & Co. which will see them fund their further US expansion. Insphere, founded in 2013, raised £1.5m with the Foresight Williams Tech EIS Fund to develop core IP and Huboo, a fulfillment company for e-commerce retailers launched in 2017 and based in Salisbury closed a round led by Episode 1.

I then went on to share news of those 26 companies that I know of that are currently raising investment in the region. How do I find these companies you might ask - well, as with previous events, I put out an open call to invite companies to share their one-page proposition summaries with me. I then print these and present information about a few of them at the event. The following day, I send a link to a password protected page to the QIB in Brief newsletter subscribers around the country so that investors can access this information even if they can't physically be at the event.

So, these companies don't come with any specific recommendation from me, I'm definitely not regulated and haven't done any due diligence - that's up to you. Their asks this quarter range from £3M to £150k and they offer products from bed linen to IoT processors, from corporate travel to scaleable UX. Some are already part-funded whether through crowdcube or a lead investor and others are new to this process. You'll find their details on slides 45-47 below and if you're an investor, please drop me a line to ask for the link to view the one-pagers online.

Finally, I shared some more personal news - that I will be leaving Engine Shed at the end of October to join the team at Rocketmakers. Keep an eye on the Engine Shed newsletter for more information about our plans for the QIB and other projects that I lead. Sign up here: https://engine-shed.us8.list-manage.com/subscribe?u=b9e747da9238aeae38a752c8e&id=0893a30478

*The QIB is only possible thanks to our generous sponsorship from TLT Solicitors, KPMG and Smith & Williamson and it is one small part of my work as Scaleup Enabler for the West of England. *

To sign up for future QIB events and newsletters, read more about the initiative and complete the form here: https://www.scaleupgenerator.co.uk/articles/qib-101