Capital Enterprise’s October Tech Round-up
Hello! This is the first blog post in a series, where we will be exploring news in the early stage tech scene. We hope to explore and provide input in a range of different tech areas, highlight interesting startups, and speak about tech events of note.
1. What’s new in early stage investment, by John Spindler
The Pitchbook review of Q2 VC activity in Europe came out and revealed a mixed picture for the UK and Europe. In my view the 3 key take-aways are:
No impact of Brexit yet — a year after the vote, 40% of all European VC deals were made in the UK. This is on par with historical levels, and demonstrates how important the UK, and especially London, is to funding innovative high growth companies in Europe.
There has been a big decline in Seed and Series A funding of startups since 2016, with this fall continuing to accelerate. In particular, the total funding invested by European VC’s in first rounds of startups during the first two quarters of 2017 was only €0.8m, which is a 50% decline from the first two quarters of 2016. Sometimes it seems that there is an army of startups getting investment from VC’s, but the actual number for the whole of Europe in the first 6 months of 2017, was 343 (approximately 135 in UK & Ireland).
When it comes to new VC funds, there has been a flight of Pension Funds, Family offices and Government to invest in large VC funds that have over €500m under management, signalling a move away from investing in funds with less than €50M under management. In fact, Pitchbook report just 4 new funds under €50M under management have been raised so far this year, in stark contrast to the 81 such size funds in 2011. This reinforces the evidence elsewhere in the Pitchbook report that the money is going into startups that are in effect scale-ups that are over 3 years old, raising much more capital to scale up their operations, and that money is moving away from early stage, much riskier, startups.
The final point is interesting because it belies the UK government’s own “Patient Capital Review”, which states that there is presently less capital available for investments in scale-ups (not true according to Pitchbook), and that the reason why the UK is not generating unicorns (only 9 out of the 215 worldwide unicorns according to CB Insights) is because the UK needs more mega-funds. The facts on the ground do not back this up, and Capital Enterprise will be putting in its own submission to the Patient Capital Review to state that all the evidence points to a persistent and present market gap in funding for tech startups raising late Seed and Series A rounds (between £1m-£2m).
Although we welcome the emergence of Mega government financed funds in the regions (Northern Powerhouse, Midlands Engine, Scottish Enterprise), the first closes of successful late Series A / B funds such as Balderton, and the increased participation of corporate VC’s and investors such as Goldman Sachs, Google Ventures, Cisco and Soft Bank in late Series A, Series B and later stage rounds, mean we would like more action from the British Business Bank and the Treasury to support Seed and early stage A funds.
This is an even more important priority given the Treasury’s own research finding that over 60% of Business Angels are using the Enterprise Investment Scheme to de-risk investments in startups. Investments are motivated by “Capital Preservation” and not “Capital Accumulation”, and are therefore focused on investing in safer low risk/low return investment opportunities, rather than high tech innovative, high growth startups.
Of course if the government asked startups, they would tell them the obvious fact that raising capital when you do not have the evidence that the startup team, technology and traction achievements is sufficient to prove that they can generate a good return for an investor is always difficult (Doh), and that it becomes much easier to raise when you do.
So finally, applauds should go to those funds in this difficult environment that are raising funds to invest in the Seed and Series A rounds of tech startups. Hats off to the new funds that will soon be announced, including Episode 1 and Seedcamp, and our own AI Seed which was launched on 25th September.
2. Our favourite blogs and articles from the past month, by John Spindler
What I look for in a Pitch → By Sarah Guo, Venture Capitalist at Greylock Partners
A great guide on how to assess an early stage VC deal.
The Seven Deadly Sins for Predicting AI → By Rodney Brooks
This post puts the dystopian predictions around AI into perspective by reviewing where we are today and the challenges ahead.
Making Sense of The Different Types of AI Companies — A framework for understanding how companies use AI → By Justin Gage, Analyst at Cornerstone Venture Partners covering AI/ML, previously Data Science at NYU
A really useful way to categorise early stage AI startups, and certainly one we will refer to at AI Seed.
Our favourite interview this month is from Matt Turck, of FirstMark Capital, where reveals why he believes AI startups cannot be Lean Startups.
I think there is a lot of truth in this argument.
3. This month’s top 5 startups that have raised
London startup AppyParking has raised £2.25m in funding from Aviva Ventures and Breed Reply.
Founded in 2013 by CEO Dan Hubert, AppyParking created an app that helps drivers find the nearest and cheapest on- and off-street parking. The app, which informs drivers of any restrictions and tariffs that apply, started off just covering London, but it can now be used in 20 of the UK’s biggest cities including Birmingham, Edinburgh and Manchester. The new funding will be used to roll out the service in more UK cities as AppyParking works towards its goal of being available nationwide.
London-based FinTech firm GoCardless has received an additional $22.5m (£16.6m) from existing investors Accel, Balderton, Notion and Passion Capital. It comes after the company raised $13m (£9.6m) in a Series C round led by Notion Capital last March.
GoCardless has built a proprietary tech platform with the sole purpose of facilitating the way in which recurring payments are collected.
Anon AI have just raised a pre-seed investment round led by the AI Seed Fund. Anon AI are a UCL spin out using AI to automate data anonymisation. This helps businesses share data securely, which is a major pain point for data-intensive businesses, especially with the new GDPR regulations on the immediate horizon. The investment will help the team develop their NLP-based classification system that allows them to accurately identify the personal information in arbitrary data sets. This is a key aspect of their ability to automate the previously time and resource intensive data anonymisation process.
Bud, the world’s first universal banking platform, have raised an undisclosed round, led by a specialist bank and asset management company. With this seed round, Bud are well positioned to take advantage of new open banking API that will go live in January 2018.
9fin, a Fintech startup founded by Steven Hunter & Huss El-Sheikh, has closed a seed round to bring its AI data offering to the bond market.
The company uses machine learning and computer vision to analyse thousands of debt documents & extract key financial insights. This information can then be searched, filtered and analysed at 9fin.com.
AI Seed Fund led the round with a number of angel investors, Seedcamp and 500 Startups.
4. FCA Regulatory Sandbox Cohort 2 - Introduction to the new cohort
The Regulatory Sandbox allows businesses to test innovative products, services, business models and delivery mechanisms in the real market, with real consumers. We are interested in highlighting these businesses as the Regulatory Sandbox provides good opportunity to embrace and boost innovation.
24 businesses are currently part of Cohort 2, with their businesses covering web-based platforms, blockchain-based service providers, automated services, and combinations of artificial intelligence and data analytics, to name a few. The full list of those in Cohort 2 can be found here.
5. Tech Events of note:
- Entrepreneur First’s 8th London Demo Day
EF8, Entrepreneur First’s 8th London Demo Day, took place on the 15th September and showcased some of the startups that are advancing the tech scene. A few of our favourites were:
Robik AI builds autonomous vehicles to slash the cost of last-mile delivery. They have trials agreed with three delivery companies, including Quiqup.
Kiroku is developing technology that understands conversation and derives actionable information. They are starting with the dental market, with the potential to save $40bn worldwide. Kiroku is being trialled by beta testers, with 100 more on the waiting list.
GTN search the enormous space of potential drug molecules to discover better drugs more quickly and at half the cost. GTN are working with Leo Pharmaceuticals and have 5 of the 10 largest pharma companies in the pipeline.
Sensum Technologies use advanced statistical and machine learning algorithms to predict and prevent preterm birth. Having already won an Innovate UK grant, they are shortlisted for a prestigious NHS research grant. Clinical trials will start in early 2018 in 20 UK hospitals.
Portify are building an infrastructure that aims to give workers the flexibility of gig-work with the benefits of traditional employment, operated through a smartphone. The infrastructure will help 600,000 self-employed workers navigate Universal Credit.
Migacore Technologies use natural language processing to enable travel companies to make sense of the plethora of news, social media, and event information available online. Migacore have already won their first paid trial and secured two high level data sharing agreements.
CargoMate Technologies aim to save the shipping industry and companies $1bn each year by providing real-time data, to improve schedule reliability and allow them to manage their fleet. They have started a trial with a top five shipping company where they will be making annual savings of up to $39m.
- World Summit AI, Amsterdam, 11th-12th October
The World Summit AI is bringing together over 100 of the brightest brains in artificial intelligence, along with 2,000 of the world’s most active AI explorers from over 55 countries.
Our CEO John, advisor Thomas Stone - co-founder of PredictionIO, and Ben Medlock - co-founder of SwiftKey, are leading a panel, where they, as founders of startups that have been acquired, share their challenges and experiences.
If you’re attending the event, make sure you go and check out their panel! More information and the full event programme can be found here.
- Capital Enterprise University Round Table, Tuesday 10th October
We are hosting a University Round Table event on 10th October, where universities from across London will be coming together to discuss student entrepreneurship, talent, support, and collaboration.
Universities such as Imperial, Kings College, Westminster, and organisations such as the Accelerator Network will be involved.
- AI Seed Fund Launch
We launched our newest fund, the AI Seed Fund, on Monday 25th September.
During the launch we found out how startups are commercialising fast growing AI technology and applying it to every industry, from finance to healthcare, agriculture, construction, and retail. We also looked at how the AI Seed Fund targets best in class innovation in this space and learnt more about the growing appetite of global investors for AI and machine learning startups.
World class presenters at the leading edge of AI and machine learning technology, such as 9fin, ThinkSono, Observe and Evolution ai, discussed new trends and AI development.
Below is some information about the startups mentioned above:
9fin use AI powered financial data for the bond market.
ThinkSono is the world’s first software to diagnose a deadly disease called Deep Vein Thrombosis (DVT).
Observe use powerful machine learning algorithms to extract real-time analytics of the behavior and movement of aquaculture stock.
Evolution AI transforms businesses by extracting value from data
- CASTS Conference, Thursday 12th October at Techspace, Shoreditch
Our annual tech conference is back this year on Thursday 12th October at Techspace, Shoreditch.
Featuring over 20 speakers including Alastair Moore (UCL), Shetal Edwards (EDF), Max Kelly (Techstars), David Galsworthy (TechSpace), and Angelika Burawska (Startup Funding Club), we will be covering topics such as:
- The rise and development of AI
- Cryptocurrencies and ICOs
- How to access investment — Raising your first seed round
- Post-Brexit Accelerator — What are the benefits of keeping London as a base for your startup
- Scaling Up — Mistakes Made and Lessons Learnt
The afternoon will be filled with panel discussions, workshops, and smaller discussion, with the chance to meet a range of investors, startups, institutions and organisations.
In addition, if you’re a CTO looking for a new role, or a startup looking to hire someone new, be sure to pop into our workshop on hiring a CTO, giving founders the opportunity to pitch to an audience of prospective CTOs about why their startup is the one they want to work for!
The event was a real success last year so we are hoping for an even bigger — and better — event this time round. This isn’t one you’ll want to miss! More information about the event can be found via the Eventbrite link.
5. Opportunities
- Founders Choice, Imperial College London and Imperial Innovations
Founders Choice™ is a pilot programme operated by Imperial Innovations and Imperial College London for 18 months, beginning 1st August 2017.
The programme is designed to facilitate Imperial College staff who consider that they are capable of finding the resources, finance and expertise necessary to make a spin-out company successful (with minimum of assistance from Imperial Innovations).
In addition to Imperial Innovations’ existing spinout program, which provides roughly equal equity stakes to the TTO and to founders, academics will now also have the opportunity to retain 95% of equity.
The university hopes the Founders Choice program will lead to more spinouts and boost the ecosystem.
- Machine Learning Academy, UCL Engineering
Through the ERDF CASTS programme, the Machine Learning Academy offers students, entrepreneurs, SMEs and corporate innovators a collaborative learning environment to develop a grounding in machine learning methods and how to work with artificial intelligence in a business context.
Acting as a deep dive introduction to Machine Learning and Artificial Intelligence, the program provides participants with an overview of the different methodologies and their applications from both research and enterprise perspectives.
Historically, the course is being held over six weeks at IDEALondon, the Innovation Hub in Shoreditch.
Content by John Spindler, Nick Slater and Gracie Jones
