George Whitehead, venture partner manager, Octopus Investments
The entrepreneurial scene in the UK, particularly in London, is waking up and beginning to blossom. A combination of factors are starting to converge to create the perfect climate for what we predict will become an exceptional vintage of new businesses.
First, there is the maturing of the angel market. There is no greater a sign of a maturing angel market than when private investors are willing to come out of the shadows and publicly announce their interests. The success of AngelList, and its ability to continue to add to its register of A-grade investors, is a sign the market is moving to a new phase. Another is the increase in entrepreneur- and angel-led boutique investors, partly inspired by the likes of Profounders but now followed by EC1 Capital, Capitalise Partners, the Octopus Venture Partners and Wren Capital.
Take the example of Swiftkey. Having received just £275,000 investment in September 2010, with the support of the Venture Partners, the start-up company’s predictive text app recently beat Google Wallet and Shazam to win the award for the most innovative app at this year’s Mobile World Congress. With the right support, even the smaller funding rounds can help establish game-changing businesses.
Second, there are the UK tax breaks. The Government is going to great lengths to encourage investment in early stage companies. It’s not just the Enterprise Investment Scheme but also the Seed Enterprise Investment Scheme – an excellent initiative providing an unbeatable set of tax incentives to encourage seed-stage investment. In addition, there is also the newly created Angel CoFund to help angels to syndicate and invest larger investment rounds.
There also exists a culture of support right across the entrepreneurial ecosystem – from corporates, like Microsoft BizSpark, through to investors and experienced entrepreneurs. Seedcamp’s model exemplifies the extraordinary connections that are available to the brightest entrepreneurs and their most recent road trip to the US proves that this new breed of support is worlds away from the traditional low-grade bricks and mortar “serviced office space” style incubators. Today, the best support is focused on providing A-grade connections to selected businesses that have significant growth potential. Seedcamp, Springboard, Techhub, Design London and Campus, to name just a few are all part of the new culture of openness, which makes access to extraordinary people more achievable than ever before.
Finally, investors and entrepreneurs are gaining the confidence to swing for big wins rather than selling out early. There are numerous examples of seasoned entrepreneurs who choose to spend their gains on building new businesses rather than disappearing into an early retirement. These are the people who have the scars and practical experience of what it takes to raise funding, to attract great teams and rapidly build world-class brands.
When Octopus backed LoveFilm from the earliest seed stages right through to a successful exit, we not only benefited from a great return on investment but a relationship and mutual respect was formed between our fund and some outstanding entrepreneurs. Out of those connections we have been introduced to Graze, Zoopla and SecretEscapes – all of which were connected to seasoned entrepreneurs who grew from the LoveFilm success and have come around again to build new companies with equal, if not greater, ambitions. It is clear that a much deeper, almost cultural change is happening around us, where entrepreneurship is ready to thrive.
As with any change of season, it has happened gradually, but if you lift your head up for a moment you’ll begin to notice that spring is most definitely here.
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