Congratulations for another excellent survey of technology and healthcare executives by SVB (with over 900 respondents). It (http://www.svb.com/innovation-economy-outlook/startup-outlook/uk/) is full of interesting commentary on topics such as how innovation companies are faring, hiring projections and how government policies are affecting business growth. From Ascendant’s perspective the slide in the deck which leaps out is the one covering startups’ view of the current fundraising environment. Among the UK startups surveyed, 80% believe the fundraising environment is challenging.
We published our own research last week on the UK Venture Market (https://www.linkedin.com/pulse/explosive-growth-tech-investment-stuart-mcknight?trk=hp-feed-article-title-publish) which saw explosive growth in 2015. So notionally this should be a great time to raise capital but we know from practical experience that many investors are struggling to process the sheer volume of deals that are being presented to them and many others are concerned about portfolios that are overweight in certain sectors or stages of development. The SVB survey clearly shows that CEOs of UK companies are experiencing this firsthand.
There is no magic formula to solve this – just hard work, persistence, time and the understanding that raising finance is a long tail game. This theory or approach coined by Chris Anderson, in 2004, states a larger share of population rests within the tail of a distribution, especially when it comes to buying (or VC Investment) patterns. Have a look at the following chart:
In the UK and Ireland in 2015, Ascendant tracked 534 tech venture deals with 421 institutional/professional investors (ie not individual angels). 12 investors participated in more than 10 deals, 115 VCs in 2 or more deals, leaving 294 who only did 1 deal in the whole of 2015! This is what many CEOs and their shareholders frequently do not understand – if the company gets declined by the alpha investors in the sector it is not the end of the world but it does mean that the team (and hopefully their advisers) are going have to market the business much more widely and find the long tail investors. They are out there…