“The rate of startups in the past two years has accelerated. There’s certainly no shortage of new ideas,” comments Charles Grimsdale of Eden Ventures, who founded and sold two companies before becoming a VC, raising finance for early-stage startups. “But angel investors suffered badly with the dotcom bust and they’ve been absolutely hammered in the past 12 months. If you’re an entrepreneur raising finance for a new enterprise in this recession, you’re in for a tough ride.”
Grimsdale says he wouldn’t even consider investing in an entrepreneur unless they ooze commitment and determination: “Even if I was asked to invest £300,000 in an absolutely amazing idea, I wouldn’t back the entrepreneur unless they’d given up their jobs and got stuck in themselves.”
Jay Patel of Spark Ventures says this stagnant period in business funding is nothing new: “Before 1999, raising finance was virtually impossible for entrepreneurs. Between 1999 and 2001, it was easy. Now’s we’re going through a time of capital scarcity again. But there are success stories out there – look at Gü or Innocent, for example. Entrepreneurs with sensible business plans will still attract business funding.”
Mike Reid worked at 3i for 13 years but got “pissed off” when the private equity firm raised its minimum business funding investment to £40m. Now he runs Frog Capital, investing predominantly in cleantech and digital media companies.
“There are five different sources of business funding,” he says. “Mainstream VCs, which are still out there but they are much more internally focussed; the AIM markets – there’s a real lack of IPOs at the moment but if you’re already listed on there, raising finance can take just two to three weeks; business angels, who are on their knees; banks – a complete nightmare; and government funds.” Reid says he completed his last two deals within an astonishingly quick three weeks.
The venture capitalists revealed their views at yesterday’s panel discussion on raising finance at the Entrepreneur Country Forum. When asked who they rated as the county’s “game changers”, the panellists picked the following entrepreneurs:
Brent Hoberman, Mydeco.comMike Smith, Mind CandyMatteo Berlucchi, LivestationMichael Comish, BlinkboxSteve Purdham, We7Alastair Mitchell, Huddle