Getting to "yes" in a world of "no"…

Posts tagged ‘Tech City Launchpad 1’

TSB funding workshop / pitch day…

And so it was that eighteen startups bearing £100K TSB promissory match-funding notes came to London to stand before a roomful of people (a good few of whom were genuinely angels) and have their eight-minute pitches evaluated for investability. On the same bill was the comic relief, the twenty nearly-but-not-quite-funded startups – myself included – whose two-minute pitches were abutted together to form a kind of weirdly psychedelic blur, intended to be some kind of mashed-up Powerpoint speed-dating session.

I love catching up with old faces, putting faces to email addresses, meeting new people and watching new pitches, and I thoroughly enjoy the inevitable rush of pitching (getting a big message across in two minutes is a great writing and performance challenge), so I had a thoroughly great time: and as far as the Technology Strategy Board goes, “I love it when a plan comes together“, regardless of whether David Bott and his crew did or didn’t shave a few corners to push through to the 128-day end line.

But putting all the adrenaline aside, though, the real issue is what to make of the whole event: and as I sat on the train coming back, I have to say that I felt a little bit of sadness. Even though a £100K TSB promissory note could well have been a wonderfully positive thing for my particular company, I do wonder whether it will genuinely help even half of the 18 grantees. For a start, the grim reality is that £100K doesn’t buy you much in Old Street: there’s a kind of implicit £20K “Tech City tax” (in terms of living, commuting, overheads etc) imposed on you just for the, ummm, privilege of working there, rather than (say) Croydon.

For another, because the TSB is only technically allowed to help companies back free-standing loss-making projects (to the point that if you make short-term money from the grant money, they probably won’t cover the payment), all you’re really allowed to do with the grant-plus-match-funding is learn stuff. Yes, in its own curious way the TSB forces grantees to run projects as learning-based “lean startups”, where the important outputs are all intangible, and the most important thing is failing fast, and then pivoting / iterating as a result.

Ultimately, this makes each TSB Tech City funding tranche contingent on finding one or more angels who would be happy to lose invest £100K in something entirely intangible as long as the TSB also loses invests £100K. And I have to say that I have met very few active UK angels who have pockets deep enough to make such truly conceptual calls: as a rule, they don’t yet get Eric Ries’ whole “lean startup” movement. For all the talk of digital media, most social media pitches are just short-term hacks: truly intangible angel investment has fallen drastically out of fashion over here (if it ever was in fashion, for some would loudly argue not).

However, arguably the biggest structural problem of all is that UK angel investors are, by and large, attuned to investing in tangible profit-making companies rather than free-standing intangible loss-making projects: and I suspect most of the angels who eagerly attended yesterday will have felt rather caught in the middle. This was perhaps best exemplified by the Somethin’ Else people, who essentially said: Option A is to invest in our high concept £200K 3d audio game project, while Option B is to invest in our £6.5m turnover (I don’t remember the precise figure) international audio production company from which Option A came. It’s no big secret that most angels are looking for something between the two, that somehow manages to extract the best of both worlds: I can see how presenting such a sharply polarized smorgasboard may end up getting neither (for all the individual merits of both Options A & B).

I don’t know: I suspect the TSB may (wrongly) believe that giving money to startups can only be a good thing for them, when everything comes at a cost. It all reminds me of a short story that popped fully-formed into my mind a few days ago:-

Once upon a time, a boy inherited a box of ancient Arabian junk. While polishing an eerily familiar lamp, out popped a genie. “Thank you immensely for releasing me from the magical prison in which I have languished these long millennia“, pronounced the genie, with more than a hint of Brian Blessed. “I therefore grant you two contingent wishes.

The boy was puzzled. “What on earth are ‘contingent wishes’?“, he asked.

My goodness – don’t schools teach you anything these days?” boomed the genie genially.

No, not really“, sighed the boy.

Well“, the genie heaved, “they give you what you want, but at a matching cost. For example, receiving great wealth would plunge all your friends and family into abject poverty and debt.

The boy sat and thought for a while. “My first contingent wish“, he said eventually, “is to be just a little luckier in everything I do for my whole life.”

Ah, a good choice!“, said the genie. “I grant you your wish, but with the contingent cost that if you tell anybody that you are the recipient of magical aid, you will instead be just a little less lucky in everything you do.

Then my second contingent wish is easy“, said the boy. “I wish to forget that I ever met you.

“No!”, exclaimed the genie, “that means…

But it was too late. With a loud squelch and a flash of green light, the genie was yanked sharply back into his lamp prison for another millennium. The boy stood there blinking blankly, with just a tarnished old lamp in his hand. What had he just been thinking about? He couldn’t remember. All the same, he did feel like it was going to be a good day…

Basically, there’s no such thing as a free lunch, or indeed a free grant. Just because you cannot immediately see the cost doesn’t mean that there isn’t one.

OK, so no grant this time… :-(

I’m disappointed to have missed out this time round, of course: but a Tech City grant was always going to be a bit of a long shot for a Surbiton-based non-social-media startup. Some of the TSB’s anonymous judges clearly liked my whole “Soft Factory” pitch: but given that the point of the competition was to fund loss-making collaborative Tech City projects rather than Tech City companies, perhaps I did ultimately end up veering too far towards the latter (certainly, one of the judges felt compelled to reiterate this point several times). And being in a consortium of one probably didn’t help either. Oh well. 😦

Still, I’ll be doing my 2-minute thing at the TSB’s investor day this Wednesday (please feel free to say hello!) in the 3.55pm-to-4.25pm Pitch Session #5 (AKA the mid-afternoon graveyard shift). Given the homeopathically low amount of interest that UK angels tend to have in manufacturing and the brutal-but-unavoidable fact that angels are mainly there to sniff around the 18 grantees, my expectations for positive funding outcomes from the day are perhaps even lower than the normal ankle-highness. All the same, it’s always nice both to catch up with people you already know and to meet new people. For example (going through the list of attendees), Twickenham-based Wren Capital looks interesting, as does MMC Ventures: and perhaps I should be cultivating more of a relationship with NESTA Investments. Anyone else there I should be talking with?

The TSB and baby elephants…

Well, there’s something that doesn’t happen to me every day – a fairly impromptu 1-hour meeting in a Starbucks on Piccadilly with David Bott, Director of Innovation Programmes at the Technology Strategy Board. Despite having gained his business experience at ICI and National Starch (which you might think would be enough to suck the marrow out of anyone’s bones), he turned out to actually be an interesting and surprisingly passionate guy. Incidentally, he claims that his blood boils if you ever call him the B-word (‘bureaucrat‘), so probably best avoid that if you happen to meet him, OK?

First off, he gave me a whistlestop tour of the secret political history of the TSB – basically, it started off as a fairly small advisory board to the old DTI (hence its name), but then got fashionably spun out into a Swindon-based quango, at which point most of the civil servants jumped ship. (What’s wrong with Swindon? I fondly remember the map of it inside XTC’s second album “Go 2“.) Anyway, when the music stopped, the TSB business people were left holding the baby a portfolio full of ‘tech fairy godmother’-esque give-away-money-for-collaboration-but-glacially-slowly programmes to administer: an unwitting reverse takeover, if you like. Yes, things were definitely more ‘calendar’ than ‘timetable’ back then, but they’ve generally managed to tighten The Process up so that a typical grant application is faster than your pet elephant’s pregnancy, which is without doubt A Good Thing (the improvement, I mean, not the pregnancy).

Continuing its kaizen, the TSB’s next stretch targets are clearly (a) aiming more at startups than established SMEs, and (b) trying to get to final grant insanely fast, both trends well exemplified in the recently-mislaunched Tech City Launchpad1 competition. But, of course, now that Round 1 of that is over (and my somewhat outrageous pitch got through successfully, thanks for asking), his group has embarked on an as-yet-not-quite-fully-focussed ‘hearts and minds’ short-term offensive aimed largely at business angels – for without angelic buy-in, the TSB’s promissory note Tech City prizes would amount to basically zero. As part of all that, Monsieur Bott will be talking at the BBAA’s big yearly shindig / summit tomorrow, so it’ll be interesting to see what reaction he gets there.

What next? Well, at this point in the blog ‘meta-script’, I’m supposed to run the gauntlet a bit: be a bit vituperative, prick a few bubbles, Tell It Like It Really Is – you know, the whole ‘Bite The Hand’ pattern. Or else I’m supposed to roll over in gratitude and relief at getting through the first round. But back in the real world, things are much more complicated than either of those comedy blogging extrema. I’m sure you can guess what I’d like the TSB to achieve at the angel pitch day in August: a barnstormer of an event, a televised tech evangelical hoedown, crackling with genuine investment fervour and (why not say it?) people signing standard contracts and writing cheques. But (though I’ll stress that David Bott didn’t explicitly say this, it’s just me reading between the lines a little) the TSB people seem to me to be in something close to awe of the angel community (and in particular the angel networks), which makes me wonder how on earth they’re going to pull that whole trick off while treading on eggshells.

What it all comes down to is this: I don’t honestly believe that UK entrepreneurs collectively lost the plot over the last four years, that en masse they all suddenly decided to pitch unfundable propositions. Rather, the real problem was that a lot of lead angels left the arena (wings seared by a down external market), at just the same time that banks were restructuring both working capital and early stage startups right out of their portfolios. All that’s left standing is a new generation of so-called ‘latent’ (i.e. wannabe) angels, enticed by the tax breaks but appalled by the increasing time to exit (which in turn has largely been caused by Euro VCs moving their portfolios downstream to ever later-stage businesses). As I discussed a while back, all the trends are headed in the wrong direction.

Hence from my perspective, the situation right now is that the TSB people have only just started engaging with the real startup finance disaster movie that’s been unfolding over recent years: so this is where their collective challenge suddenly morphs into something subtler, darker and trickier. Finding ways to give money to techies to help them build interesting, market challenge-driven stuff is essentially a fairly easy gig: but understanding, influencing and steering investment psychology is very much harder. Welcome to my world of pain, David! Enjoy!

Pitching: 99% rejection, 1% redemption…

Anyone pitching startups in London must have something of a deathwish (though if it’s any consolation, Surrey seems even worse), because the process is so inherently biased towards rejection – yes, the 99:1 ratio of the post title is a low estimate – that you can be pretty certain of which way the wind will blow long before the weather vane starts to turn.

Yet we keep on doing it. How does that old adage go – that repeating something but expecting a different outcome is a sign of madness?

Anyhoo, right now the biggest deal of the day is the Technology Strategy Board’s Tech City Launchpad 1 £100K funding competition (and not a whiff of equity, though you have to find matching funding soon afterwards). Round One (which closes in just a few days’ time) involves startups / SMEs submitting a two minute video pitch for a digital tech project to be executed somewhere near Silicon Roundabout. From the TSB’s point of view, this is intended as an efficient way of winnowing away the chaff thousands of high-quality entries they presumably expect: as I understand the process, at the round’s closing date it then hands the task of judging these over to a set of independent arbiters to score them, allowing it to start round two with only twenty companies in play – a far more manageable number.

The TSB also says that it will also take note of public opinion, by which it presumably means comments left on each video submission’s YouTube page during the assessment period (i.e. until the end of June 2011), if you choose to let it have public visibility. Is that a good thing or a bad thing? As with all things Internetty, it’s hard to tell: probably safest to say that YouTube commentry will always be somewhat problematic as a class of supporting evidence. Or perhaps it simply means that if a video goes viral but the judges all hated it, then the TSB reserves the right to advance the application to round two regardless. 🙂

So far, I’ve only managed to find two submitted applications: Robin Young and one another I can’t now find (but it was for an energy efficient internal combustion engine). Note that there are also quite a few other two-minute TSB video pitches all submitted in September 2010 (clicking on the stats button just below the video shows you when it first went live), so it’s clearly a first-round competition format the TSB has been toying with for a while.

I’m surprised that there aren’t more entries already, but perhaps the other 9,998 entrepreneurs are busy preparing their videos this weekend, and will all submit them microseconds before the deadline (noon on 26 May 2011, just so you know). Perhaps the combined video upload spike will bring YouTube to its knees, who knows? We shall see!