I had the pleasure of bumping into Jock Millican, revered director of Scottish angel firm Equity Gap at a recent Converge pitching session at RBS Gogarburn where I was the guest of Heriot-Watt’s chief entrepreneurial executive David Richardson.
Jock remarked on a noteworthy year for Scottish angels in 2018, with the collective investing more than £50 million of early-stage capital into the Scottish ecosystem for the first time.
A few weeks’ back at CodeBase, the great and the good of Scotland’s start-up scene gathered to discuss the closely related subject of raising a seed round in Edinburgh. Sponsored by ADV, one of the only early-stage venture capitalists (VCs) who focus on areas outside London, investors and founders explored their experiences of raising investment at the seed stage.
As the amount of investment into companies in Edinburgh increases and the region grabs the attention of investors from around the UK, how can start-ups take advantage? This was a chance to hear from some prolific angels, microfunds, VCs and institutional investors on what they look for, as well as some helpful guidance and key learnings from founders.
ADV itself is on a mission to fix many of the problems in the venture capital world that hold back some of the brightest European start-ups. One big problem is transparency between founders and investors that can create misalignment. ADV has actively encouraged some of its fund partners in London to improve their engagement outside the UK capital, local evidence of which came last summer when ADV led record early-stage investment rounds (technically seed extension rounds) for both Care Sourcer and Snap40 (since rebranded Current Health). In the case of care-matching site Care Sourcer, ADV illustrated its credentials by bringing Legal & General in on the round to the tune of £8.5m.
Andy Sloane, co-founder and investment lead at ADV, said: “Edinburgh has become one of Europe’s most productive tech ecosystems. The companies that have been built, the talent that has both developed from and moved to the city and the venture capital now being committed is testament to that. We’ve backed a number of start-ups across Scotland and are always looking for more founders with the potential to build generation-defining companies. It’s been great to have witnessed the ongoing growth and development of this country’s start-up community.”
Care Sourcer’s Andrew Parfery, Callum Murray from Amiqus and Lantum’s Melissa Morris were the start-up founders sharing their thoughts on the night, while Andy Sloane engaged in a fireside chat with FanDuel co-founder Rob Jones who talked about his latest start-up venture, Flick. The investor perspective was given by Siobhan Clarke from Episode 1, Techstart’s Mark Hogarth, Kate McKay of Galvanise and ADV’s Tong Gu. Episode 1 is a so-called “conviction investor” focused on investing at the seed stage and preparing companies for Series A, while Techstart is newer to the Edinburgh ecosystem and is positioned to invest between pre-seed and seed. Each founder said that if they could go back in time, they would do even more homework around investors. Of course, different companies have different funding requirements and the ADV event illustrated the range of investors available to start-ups seeking to fuel their next phase of growth.
When I caught up with Amiqus’ chief executive and founder Murray post-event, he reminded me that the founders of Scottish tech firms Intelligent Point of Sale (sold to iZettle in 2016) and Kotikan (sold to FanDuel in 2015) were both very early-stage investors in his own start-up. Murray says: “We’ve got the ability to equal any other ecosystem. Edinburgh and Scotland have the potential to do things differently by, one hand, returning significant amounts of capital to investors but also by taking a longer-term view and behaving in a way that benefits everyone involved.”
Nick Freer is a founding director at the Freer Consultancy and Full Circle Partners