Themes From an Imaginary Fundraising


(Obscure Jack Bruce reference – answers on a postcard please, VCs under the age of 50 need not apply)

At Episode 1 we think of ourselves as stage specialists, investing in amazing founders with compelling insight into important problems. We try to be the best partner in leading them on the journey from Seed to Series A. Although our highest-level mandate is for UK businesses targeting software-enabled disruption, we invest opportunistically with no overarching thesis. However, we get asked a lot about themes, theses and sectors. And we talk a lot internally about ideas we like and patterns we see in the market, and then we’ll often enhance that with our own research and analysis. So while we are not beholden to a particular way of interpreting the World, we do like to use frameworks to understand it and to try and extrapolate potential success.

So we thought we would share some of our ideas with you, this will be the first part of a multipart blog-post. A word of caution – see the first paragraph above. Just because you think you fit in one of these buckets does not mean we are the right partner for you; nor does not fitting in one mean we wont invest. They are just ways we try and add order to this fast-paced dynamic maelstrom that is the technology sector. Who would be a tech research analyst?

Theme 1: From Research to Development

The UK (and the rest of Europe for that matter) has absolutely world-class academic institutions. We produce top-notch engineers, many of who – as anyone who has spent time in Silicon Valley will attest – end up in California taking leadership roles in the best valley firms. Universities like Oxford, Cambridge, Imperial and UCL here in the UK regularly rank in the top handful of research institutions globally – so why are we not commercializing more of that research, mobilizing more of our top graduates to create deep tech companies?

Well there are signs that this is changing. Accelerators like Entrepreneur First have specifically targeted this group, and many universities themselves are much more engaged in commercializing their research and enabling innovation and spinning out startups. I think it is fair to say – certainly compared to when I graduated – that more young engineers now think of a career in a start-up as not only being a considerably more exciting prospect than reaching platinum status on whichever airline the consulting firm they join prefers, but also offers a real prospect of career growth and financial reward. The Government has, in my opinion, done a good job supporting this through many of its programs, for example Innovate UK and the industrial Catapults.

What’s more, it is clear that the UK is getting a reputation for building these kinds of companies among the big US corporate giants. Recent exits of SwiftKey, DeepMind and Magic Pony show that the major platforms are prepared to pay a premium for top talent and great R&D. Now to be clear, in my view it is important for the early stage ecosystem in the UK that we take some of these companies to the next stage and scale them up – and I would be the last person to ever advise a young firm to build for acquisition. Priorities change and it is an impossible task to anticipate what CVC (Corporate Venture Capital) departments of large corporates have on their minds. But most early stage funds and founders would be very happy with exits like those above.

“Recent exits have shown that the major platforms are prepared to pay a premium for top talent and great R&D.”

If we see a company we think fits in this theme, the key decision factor for us will be absolutely having the best engineering talent. You can’t hire these people in – they need to be the founders. We want to see that their academic qualifications are first rate, that the department they come from rates them as people and thinkers, and that their area of research is potentially important. We want to see large hairy problems that if solved could create huge economic value – like “software that identifies things really, really well”, or “storing lots and lots of complex data and finding it amazingly quickly”, or “generally making stuff a lot faster” and so on. Important ideas that get you a seat at important tables.

If you come to us as a company trying to solve one of these problems, you can expect a lot of due diligence relating back to your academic background, your professors, your research interests.

“Important ideas that get you a seat at important tables.”

We are going to want to see you can hire similarly world class engineers, pull in advisors from relevant universities, and that much of the technology you are building lends itself to being patentable and defensible. Conversely, if you are trying to build a deep tech company and don’t have this kind of background it may well be hard to get funded. The UK, and Europe in general, do not have the history of building these kinds of companies and so it needs to be an exceptional team from an area where we are seen as having leading practitioners and research.

Of course all the usual things we expect to see still apply, such as complementary founders, commercial feedback, good business sense and so on.

In addition, your commercial offer and route-to-market are going to have to be figured out and so strong skills in product management and enterprise sales are of interest – but can probably come later. For us, at the stage of a first institutional investment it is – to flip the sound bite around – all about talent and tech.



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