Startup Grind Scotland take tech founders to Helsinki - Nick Freer

Early stage investment firm Race Capital’s general partner Alfred Chuang was in the media this week talking about right-sizing valuations during the tech downturn and the opportunity that exists for startup founders in spite of economic woes.

When Alfred Chuang speaks, people listen, to the extent that venture capital heavyweight Andreessen Horowitz refers to him as “Silicon Valley CEO’s CEO”. BEA Systems, the enterprise software group co-founded and led by Chuang, was sold to Oracle for $8.5 billion in 2008, after which he entered venture investing, going on to help transform an array of startups into some of the Valley’s most iconic technology companies.

In the arena of all things crypto, blockchain, and web 3.0, companies like FTX, Solana, and Databricks are among Race’s portfolio, and Chuang is bullish about Web 3.0, viewed by commentators as the next seismic shift in the evolution of the internet, via decentralisation where ownership is by users rather than behemoth corporates.

Chuang uses the example of Amazon Web Services (AWS) controlling over one-third of the western world’s internet infrastructure. Crucially, Silicon Valley CEO’s CEO says, the decentralisation of the internet addresses the concentration of power wielded by dominating tech groups.

Slush tech conference, Helsinki, Finland

While the growth and late stage venture market has been dampened by the recent market crash, the rate and quantum of early state investment deals remain strong and, according to Chuang, this is down to three factors.

Firstly, seed funding is not tied to revenue, and market slowdowns have a limited impact on early stage founders. VC firms like Race look for what they describe as “founder-market fit”, providing startups with investment for 18-24 months of runway to penetrate target markets.

Secondly, exits don’t have to be initial public offerings (IPO), which dry up when tech valuations go south. The vast majority of exits are by way of acquisitions. Just think of Scotland’s biggest tech exits of recent times - TVSquared, Current Health, Skyscanner, FanDuel etc.

Thirdly, venture capitalist investors are sitting on top of USD162 billion of cash for new investments.

So, how is this relevant in the Scottish context? Tech trends Stateside tend to migrate - there is that old adage about America sneezing, and the rest of the world catching a cold.

The findings of the 6th annual Scottish Startup Survey were announced this week, a survey of startup founders run by the EIE investor readiness programme at the University of Edinburgh’s Bayes Centre in tandem with my own agency.

While 93 percent of respondents said Scotland is a good place to launch a startup, 88 percent of startups are targeting investors outside Scotland.

London and Rest of the UK (46 percent), followed by North America (30 percent), and Europe (21 percent) are the most targeted investor regions.

If the mountain won’t come to Muhammad, then Muhammad must go to the mountain. Along these lines, and after its successful Silicon Valley trip earlier this year, Startup Grind Scotland will be taking 10 Scottish tech founders to the Slush tech conference in Helsinki next month. For the lucky guys and gals that are picked, the Finland swing will afford a fantastic opportunity to meet some of Europe’s top venture capital firms.

Nick Freer is the founding director of strategic corporate communications agency the Freer Consultancy