Worth Capital, investing in products, service or sales channel innovation

We talk with Matthew Cushen, a partner at Worth Capital.

PetaCrunch: What’s your investment strategy in a single tweet?

Matthew Cushen: Products, service or sales channel innovation; in high growth and/or underserved markets; with the potential to change consumption habits and build a loved brand. #SEIS #EIS

PC: How did Worth Capital start?

MC: My partner Paul and I are mates from university. Paul has built various businesses whilst I followed the big corporate and consulting career path. I invested in a business that Paul founded in 2003. We sold it to a private equity firm in 2008 and both did very well from it. From then we’ve been angel investing, mostly together and mostly successfully. In 2014, we had a rare moment of discipline in a pub and wrote down what we were doing that was helping, along with how we’d cocked-up. A couple of weeks later, looking at the paper napkin with our scribbles on it, we realised this was valuable insight, from which we could innovate a unique and effective investing methodology. So we created Worth Capital, with our approach to ‘competition investing’ and turned a hobby into a business.

PC: What do you look for in founders and their start-ups?

MC: Our broad criteria and weightings are:

Market 25% — we know a product will evolve but it is very difficult to change the market — so we want to see there is a decent scale, growth rate and room for innovation and a new entrant.

Team 25% — we want to see evidence of experience or unique empathy with the sector plus the personality traits needed to grow a business.

Big idea 20% — a proposition that is truly innovative and differentiated in the market.

Communication 15% — although the marketing might be rudimentary, we want to see the team can communicate their proposition in a compelling way. If we can’t see that, what chance do they have of persuading customers?

Commercial model 15% — as we invest at very early stage, this might still be very fuzzy and subject to some experimentation, but we do want to be able to convince ourselves there are a few different routes to making some cash.

PC: What’s the most exciting start-up you have funded recently and why?

MC: You can ask that this week and we’ll have one answer, whilst next week we’ll have a different answer — the growth journey for start-ups are so full of twists, turns, lumps & bumps. We constantly remind ourselves each investment is a long game.

However, we are excited with the April portfolio we put together for our investors:

Bedfolk — beautiful bedding, ethically sourced from an old mill in Portugal, sold direct to consumer, cutting out a retailer’s margin making it fantastic value for money. They are getting some lovely press coverage and sales have trebled in the three months since we invested (and from a reasonable base). But there is much more we can do, and quickly, with the brand, proposition and the marketing playbook to really ramp up the sales.

Weekly10 — a SaaS product, helping businesses to get a week-by-week handle on sentiment, engagement and performance against objectives. The market is bonkers huge but we’ve got a good way of segmenting and targeting. The founder has made bold decisions that we believe makes for a more useful product versus their competition and we like entrepreneurs that are willing to ‘zig whilst others zag’.

Vitrue Health — motion & depth sensing hardware & software for assessing joint & muscle movement. We believe this can fill a big healthcare gap and create an assessment and measurement standard for physiotherapists.

VeeLoop — an ecommerce payment option that gives tweens & teens the ability to browse and fill a basket whilst giving Mum & Dad easy visibility & control over individual items. There are huge brand reputation, GDPR and commercial reasons why retailers with a significant proportion of young customers should be using something like this. And we’ve already had interest from a perfectly placed strategic investor for both investing and getting intimately involved in the growth.

PC: What’s the most common error founders/start-ups make?

MC: Creating a fantastic product without understanding the market need. This is particularly true within the tech space, where we see too many attractive solutions desperately searching for a problem to solve.