What must we do now post-Brexit?

As one technology Founder of many in the UK, a vote to leave the EU was not what we wanted, yet as entrepreneurs our task now is to find opportunity from the situation. If you’re a British national, indeed it is your responsibility.

After a painful post-War slide into depression (both economic and psychological) we have spent most of our own lifetime dragging the country’s economy, from public transport to bad 1980’s restaurant food, back to prosperity. Along with that has come a new sense of pride in what we can achieve and a glimpse of the confidence our forebears had – the leaders of the world’s Industrial Revolution.

The Victorian era championed Great Britain – and British values – while taking an outward looking, global and free-trade approach, albeit one akin to the times of Empire and gunboat diplomacy.

The Opening of the Great Industrial Exhibition of All Nations (London, 1851)

Our obligation now as their modern contemporaries, the leaders of a digital revolution, is to embrace this new challenge. Great Britain must not spin its wheels and risk sliding back in to the woe is us national unconsciousness of before, licking our self-inflicted wounds. We must waste no time in getting on with the job and uniting behind making the best of a bad job, something the British are renowned at doing!

With one of the world’s largest GDPs, we must fight hard to maintain our own confidence, find the positive in a result that none of us asked for. If we don’t we risk leaving our immediate future in the hands of the small-minded few, the baton-up-the-hatches brigade. The older demographic who have voted for this situation, too young to remember the glory of Empire but all too familiar with a bankrupt post-Empire nation and repeated humiliation at the French blocking our entry to the EEC in 1963 and 1967 (a rather ungrateful act for a President we put in power!), they don’t understand the realities of a globally interconnected world in an age of information ubiquity.

The Remain campaign failed miserably to acknowledge the failings of today’s EU, nor articulate a positive vision for the future. The Brexit campaign focused on the red herring of immigration, taking advantage of the failure of successive UK governments to lead a proper debate or make a proper case, leaving many paranoid and fearful.

We must all now focus our efforts on promoting this opportunity, to drown out the talk of local X with a positive dialogue of how to improve our international position. That means:

1. Finally tackling immigration head on. We must not allow the xenophobes to dictate policy but coming up with a better process to enable those who can help build our economy in, including progressive Entrepreneur’s VISAs; to know who is coming in and who is not (something an island should find easy!) to give naysayers confidence we have control of our own borders; of embracing true political and war torn refugees.
2. Be confident even though we don’t feel it. As business owners we know that smoke and mirrors play a part in selling a product or raising investment. Presenting an optimistic but realistic narrative about how we’re changing the future and why someone should invest in our startups. This country is no different. We must continue to attract investment, we must talk a better game than we did in the debate and win the confidence of the international economy.
3. Think Big. The risk you take in business should be proportional to the reward. We must articulate a vision for Great Britain which is not just positive but worthy of attention. As a startup investor I’m not interested in investing time, emotionally energy and money in companies who are not attempting to transform a market, to dominate their space. We must do the same for this country, and elect leadership who can articulate a goal based upon which decisions can be made, trade deals negotiated and policy crafted. A vision is needed behind which the country can unite.

In short, as a smaller nation than the EU as a whole, and without the shackles of having to compromise to the lowest common denominator, learning to move more quickly on policy and procedure is a prerequisite for our success. Estonia is a country of 1.5m which, with it’s digital mobile voting, digital e-citizenship and disproportionate entrepreneurial impact on the European tech ecosystem, has prove that smaller can indeed mean faster, learner and more successful. Maybe the UK should vote in a Prime Minister who can code, like Toomas Hendrik Ilves?

Anything is possible; no one knows what a renegotiation or a recreation of Great Britain’s relationship with Europe will look like.

One thing is for sure though, as the Liberal majority we’ve failed to quell the misguided rhetoric of the Brexit charlatans. We must not now let them dictate policy going forward and instead we have to dominate the conversation and make it one of opportunity, a chance to do things better, and of open borders to the World.

 

The Great Startup Famine of 2015

Starting (if you’ll excuse the pun) with bad weather in the Spring of 1315, universal crop failures struck Europe creating what became know as The Great Famine. It lasted through 1316 and well into 1317 from Russia and Great Britain all the way down to Southern Italy.

Angels Bootcamp has just announced that it is to train over 1,000 new angel investors by 2015 starting this June in Berlin. We should all cheer the announcement of Angels Bootcamp, which aims to do what it says on the tin:

“AngelsBootcamp is targeted at executives, entrepreneurs and finance professionals who have money in the bank to put into tech startups but who lack the knowledge about exactly what an angel investor should do.” (as TNW reports)

But Berlin, we have a problem.

While I heartily support anything which will accelerate Europe’s entrepreneurs (especially if it helps consolidate London’s position as Europe’s leading tech startup hub) where is the money going to come from so that all these newly invested startups can continue after their first $250,000 or $500,000 of investment?

It’s a metaphorical stretch, but there’s no point encouraging people to start a large family, if they won’t be able to feed themselves!

Europe and even London, Europe’s foremost tech cluster, already has a funding gap for adolescent startups. In actual fact, so does New York’s tech cluster.

“New York and London have more than 70 percent less risk capital available than Silicon Valley for Startups in the early, Pre-Product pre-Market Fit” Stages of the Startup Lifecycle.”  Startup Genome Report

And moreover even at the end of the rainbow, in the home of funding-food and plenty Silicon Valley, startups are experiencing an issue with follow on funding. Check out the graphs below, tracking the number of seed deals versus Series-A for U.S. startups: (courtesy Techcrunch, read the full article here)

 

“The “crunch” is perceived because of the boom in seed funding, which has brought a greater quantity of startups to the table looking for Series A funding…” (from the article Mining The Crunch)

Europe must find a way not to end up with a worse funding famine that of Silicon Valley now, which is that hundreds of startups funded by Xoogler’s and X-Facebooker’s are going bust -or becoming startup zombies– because they are either not worthy of further funding or because the market cannot sustain so many startups.

At a macro level, many of the much larger funds – the grandfathers of the tech VC in the U.S. and Europe – don’t perceive a problem. Possibly because they invest later stage and have extremely large funds (so are somewhat detached from the mass of earlier stage startups) or perhaps because those famous names get the very top pick of deals.

I was lucky enough to get Felda Hardymon from BVP on my panel at the recent Innotech Summit, along with Steve Schlenker from DN, plus others from Silicon Valley and L.A. to discuss this very topic (we even managed to co-opt Boris Johnson, the Mayor of London).

Boris gets to grips with a transatlantic Google Hangout

Perhaps not surprisingly (given that Felda has been at BVP since 1981 a full 16 years before I did my first startup) I agreed with almost every word Felda said. All of which was extremely insightful except that there isn’t a funding gap for startups in Europe.

There’s not a lack of capital for sure, but capital which people are prepared to risk at that critical, very high risk, very early stage of the startup life cycle? For sure there’s a dearth.

Perhaps the Series-A problem is that the whole approach to funding at that stage of a startups lifecycle needs to change, as one or two people I spoke to afterwards suggested.

After all, seed funding and angel funding has evolved immensely even in the last 5 years. But until that mid-stage funding environment does change, or until we teach our startups how to make a whole lot of revenue very very early on, it means that we need to educate our new European Angels not to make un-fundworthy investment decisions(!).

At the same time as a community we must find ways to open up the $1m to $4m investment bracket to more startups, by lobbying those with capital and the government for favourable incentives, alongside championing the value of technology startups both to society as a whole and as a vehicle for investment.

Venture investment (realistically, Series-A and above) create jobs. Fact. As crusades go, that’s a good a reason as any. (Read Nic Brisbournes full post on his excellent blog, which is where I stole this graph from)

In summary, Angel Bootcamp will go head and I wish it every success, but something needs to happen in the Series A world too, and there is much less chatter about solutions for this, or even talk of the problem, unless of course you’re a Founder trying to raise a Series-A round in Europe, and then you talk of nothing else..!

Europe did not fully recover until 1322 from the Great Famine of 1315, and while medieval starvation on a grotesque scale is more a human tragedy than any future mass deadpooling of startups, however severe, we should ask what can be done to ensure the tens of thousands of potential European jobs and startup Founder’s dreams, are not wasted away for lack of follow-on funding or Series A.

While supply and demand and market forces are one answer, I’m not sure a pure Friedman-esque approach to this growing problem is the only solution we should rely on.

The big fat UK investment “equity-gap-elephant-in-the-living-room” that nobody wants to mention

In reply to a post that someone replied to on Robert Scobles blog, saying that there was no issue with VC tech funding in Europe and that there was plenty money for startups and suggesting that it was just as easy to fund a company to build a multi-billion dollar business in Europe as the U.S. (the persons comments in italics), I recently wrote this response…

“There’s really no shortage of venture capital in Europe.”

Not true. There is no shortage of growth capital. There is no shortage of seed capital. There is a major shortage of Venture Capital for Series A with early stage companies. I dont know if you have raised capital for an early stage company in Europe, but if you have tried you’ll know there are literally only a handful of VCs who understand the tech ecosystem fully AND are prepared to invest early stage.

“If you want to build a billion dollar software tech company in Europe by using European VC money, it’s perfectly possible to do it”

I’d challenge you to give me 5 companies in this category who have grown to a billion dollar company, purely on European VC money (let alone UK), other than rolling out the usual suspects such as Skype et al. In contrast, I can probably name you 20 U.S. in the consumer internet sector, without breaking a sweat.

There is problem in Europe – its the equity gap. And its big. There are of course always exceptions to the rule, but in general U.S. seed investment is larger, and VC investment is earlier. In contrast, seed investment in the UK/Europe is smaller and VCs invest much later. That leaves a gaping hole between around £250,000 and £2m ($500k and $4m U.S.)

Everyone knows this, everyone will discuss it private, but nobody wants to spoil the party at European conferences by saying it. Which is a pity, as it needs to be said; because there is so much good stuff going on in Europe in the startup scene, thats its a disgrace that more support and more risk capital is not made available early enough.

Europeans (of which I am one) sometimes ask why there is no Yahoo, Google, Flickr, YouTube, MySpace etc etc of Europe; I believe the reason is what I have just described. Sadly, the same fate awaits us again in 4 years time when the consumer mobile internet services mature, and the same conversation will be had again.

The U.S. is now heavily investing in mobile startups and I believe has every chance to over take Europe in mobile services and take up, within 18 to 24 months. You read it here first.

The European tech sector needs to wake up to this reality and do something about it; until it does the U.S. will continue to dominate North American and European markets with web and mobile consumer brands, because they invest earlier and more aggressively, in more companies.

That was the gospel according to St. Andrew.