The Accelerator Group (TAG)

The cult of the founder

2012-01-02T18:48:00.001Z

In the world of technology, the founder is rightfully 'top dog'. Founders are put up on pedestals, its a badge of honour, the most admired of roles.
Settling for co-founder is certainly a better moniker than even CEO.

Founders take the risk, make the leap, make the sacrifices.
And we need the heroic and iconic founders - the Steve Jobs, Jeff Bezos, Marc Andreessen, Nikolas Zennstrom et al to inspire future ones. Their tales are the stuff of legends.

We all know, however, that it is far more complicated than that.
Seldom has a founder been able to realise a dream (or even formulate that dream) without the commitment, blood, sweat and tears of at least a few others. Think Steve Wozniak, Paul Allen, Kevin Colleran (who??) and bunch of others, Janus Friis, Craig Silverstein.

Founders often get disproportionate rewards - both financial and in terms of recognition.

Most recently, I have been consulted - along with many others - by the UK Government asking for ideas as to how to stimulate further the growth of entrepreneurialism in the tech sector.
The Government has been listening and have implemented some important tax and visa changes which are most helpful in this regard. Two of the policies illustrate just how founder focused they have been - and where there is room for further important enhancement.

Firstly, UK capital gains tax - the tax on the first £10m for entrepreneurs is now only 10%.
However, if you did not have founder shares, but joined after the founding of the company and have an option package, then providing its an approved scheme - eg EMI - then you'll be taxed at 28% - or if unapproved then possibly at 50%. Doesn't seem right, does it?
Often senior execs in a startup have taken considerable risk, leaving highly paid jobs, accepting far lower salaries in the expectation of making a significant capital gain.
We need to attract more of this type of talent to our startup companies and a change to the CGT rules will help significantly.

Secondly, the Entrepreneurs Visa. A big step forward enabling non EU entrepreneurs, with recognised backing to enter the UK. This does not yet apply to talented people - non founders.

So, lets hear it for the unsung backup teams - its tough to build a great company but doing it on your own is simply impossible.

Breakfast at No10 Downing Street

2011-11-11T15:16:00.001Z

This is a guest post from Rob Keve, Founder, CEO of Fizzback Group Ltd, a company backed by TAG and others.

"Last week I was invited to present to some MPs over breakfast in Parliament, about UK start-ups. In the first few minutes, their full English fry-up was clearly winning the battle for their attention.
The only serious question on all MPs lips is how to stimulate economic growth and they didn’t see the relevance of a venture capital backed start ups on economic growth.
I told them that we were only a five year old business having raised modest amounts of funding but had created over 100 jobs in the UK alone – they stopped sipping their tea from the exquisite House of Commons porcelain teacups.
Next I explained we had generated more in direct tax income for the economy than the amount we raised in the first place and had just injected a further $80M indirectly into the economy by way of sale pro-ceeds from an overseas buyer – they put down their forks and put away the HP sauce.
Finally, I explained that a small group of brethren calling themselves Fizzback had won some of the world’s largest brands as clients, was improving these brand’s competitiveness all whilst putting British technology on the global map – they looked up to see who was talking.
Tonight, when they go home, I hope that as they are pulling up the draw-bridge they will ‘get it’. Economic growth comes from innovation and self-initiative. It comes from a just a few dozen individuals in a few square feet of space designing a unique solution, garnering deep in-sight, selling & servicing to the top brands in the world.
That creates growth. That is economic leverage. The answer isn’t to be found in public sector spending, in UK policy board rooms or in banking regulation.
The answer is to be found at Fizzback and the other ground breaking start-ups like us. We create economic activity, jobs and wealth."
Rob Keve

Fizzback does a NICE deal

2011-09-19T11:05:00.000+01:00

Readers of this blog may have noticed that Fizzback, an investment we made in 2005, gets lots of coverage – here in and in tweets @robinklein. Aside from the fact that I’m passionate about customer service being a fundamental competitive advantage and one of the pillars of a great brand, I have a strong personal connection with the company.

Today we are announcing that a sale of Fizzback to Nice Systems (NASDAQ: NICE) for approximately $80m has been agreed. The transaction is scheduled to close in a few weeks.

In many ways this is a great result for the team and the investors to be celebrated. Nice is a very good home for Fizzback and Fizzback is going to add considerably to Nice (see product/market details below)

On the other hand, its a disappointment that a company which had begun to make a global impact in the world of Customer Experience Management, had captured some of the largest corporate clients worldwide, is not going solo ‘all the way’.

The TAG philosophy has always been to support founders and to recognize that entrepreneurs’ own motivation must ultimately be the deciding factor in these types of decisions.

Some history of this super company is relevant and I think interesting.

Our relationship with Rob Keve, Fizzback's founder, goes back about 15 years and we invested in IMI (Instant Market Intelligence – its former iteration) in 2005 - as part of the company's small seed round. I well remember the 4 hours Rob and I spent driving to and from the Cotswolds every month during 2003 for the Cotswold Company's board meetings. Rob was thinking about starting IMI.

Like many successful companies, the vision for Fizzback made a few pivots along the way.

Its initial vision was to address demand for rapid market research and new forms of customer insight- kind of vox pop via SMS. Selling a product to the market research community didn’t seem to me to be a place where we’d find good sized budgets. Rob had another much more appealing idea which he was running in parallel. A service to retailers and service providers which enabled consumers to provide feedback at the point of experience – in store, on the train etc – via their mobile phones – via SMS. IMI would interpret the message (using NLP appropriate to SMS ‘speak’), categorise and direct the message to the appropriate department for action.

This latter idea got me excited. I agreed to invest and join the board as Chairman.

Rob and I pulled together a small group of angels – including Jonathan McKay – and what a great decision that was! Jonathan, who is a real enterprise software/services guru, took over the Chair in 2008 and helped Rob build the stellar sales team and been an invaluable guide to the business.

Step one back in 2005 was hire a small team. Tech head was Herx Fisherman who conceived and built the original Fizzback Enterprise platform. Operations head was Jonathan Morris (my son-in-law) – still the Operations Director of the group, often holding things together …. another reason for the soft spot for this company.

Step two was creating a brand which would define a category. With the help of Phil Ley of Branded, Fizzback emerged. This was not about market intelligence, it was about actionable feedback.

The learnings gleaned from early clients like Butlins, National Express and others helped the evolution of the product.

The 2 relatively modest funding rounds – first from Advent £2.5m in October 2006 and later, at the end of 2009 £1.6m from Advent, Nauta and TAG helped focus the company on bravely targeting giant accounts like Tesco, Carphone Warehouse, BT, Vodafone, Virgin, O2, Waitrose, Eurostar and the rest.

These kinds of customers ensured that the Fizzback platform was always at full stretch – not just in terms of scaling but in their demands for enhanced functionality. Great customers demand great products and service!

The support from our VC backers has been magnificent – in the very early days from our good friends at Advent - first Frederic Court and then from Mike Chalfen – who is a master at the insightful intellectual challenge and has been an active practical support all the way.

Jordi Vinas, the Nauta board member provided the Euro perspective and his knowledge of the mobile vertical in particular has been hugely valuable.

So another great European company gets sold to a foreign company just 6 years after its foundation. No problem with that -and I do expect we'll see more of the proceeds being re-cycled and re-invested in the growing Euro tech eco-system.

Extracts from the press release:

The Fizzback SaaS offering is a real-time operational VoC solution. It sends consumers requests for feedback relating to a specific interaction or transaction via mobile, web or social media. The consumer is engaged at the point of experience, for example in the contact center, branch, point of sale (POS), mobile application, or web. The feedback is analyzed by the system to determine a relevant response, and automatically conduct a dialog with the consumer in natural language rather than a survey format.

Fizzback’s unique approach generates game-changing response rates of up to 50%, significantly higher than industry norms at under 10%, as it motivates consumers to provide relevant feedback, at the moment of interaction. Additionally, consumers provide feedback about their experience rather than only about what was asked in a survey. With more than 150 million feedbacks collected annually, Fizzback enables organizations to better understand their customers’ perceptions, and be agile across the organization, while improving customer experience at the various enterprise touch points.

The combination of Fizzback and NICE will both improve CEM as well as operationalize VoC both for the contact center and across the enterprise. Correlating customer feedback to specific interactions or transactions helps improve performance enterprise-wide with statistically validated responses, as well as enhance quality management and processes. Key efficiency metrics that can be significantly improved include First Contact Resolution (FCR) and Average Handle Time (AHT) in the contact center and employee performance in direct customer facing roles.

Capturing, analyzing and acting on the Voice of the Customer (VoC) is critical to the success of any Customer Experience initiative. NICE’s cross-channel analytics solutions support VoC programs by: (1) analyzing customer interaction content (indirect feedback), whether the customer is interacting with the organization or talking about the organization through the contact center, social media, or other channels, and by extracting insights from these interactions; and (2) by analyzing customer behavior (inferred feedback), such as transaction and web browsing patterns or their journey along different touch points. By adding direct customer feedback with the Fizzback solution, NICE now provides a complete CEM solution that delivers a holistic understanding of the customer by combining on one platform the VoC from each of the three feedback dimensions: direct, indirect and inferred.

Zeevi Bregman, President and CEO of NICE said, " The adoption of and demand for CEM solutions, at all levels of the organization, including Marketing, Finance and Operations, is on the rise. With the addition of Fizzback, NICE is expanding the scope of its capabilities of Impacting Every Customer Interaction by introducing a Customer Experience Management solution with the most complete Voice of the Customer offering. This enables our customers to more effectively capture, understand and leverage VoC as the foundation to a cross-enterprise CEM strategy.”

Rob Keve, CEO of Fizzback said, “Our unique solution has been enabling our customers to achieve exceptionally high response rates from their customers, and to receive feedback in real-time. This combination allows them to take immediate action for increasing customer loyalty and driving efficiency across the enterprise. This has resulted in extremely high usage rates for our customers, making Fizzback a strategic part of how our customers make decisions and run the business. Thus, we are proud to have experienced rapid growth and high rates of product adoption. We are looking forward to combining these capabilities with NICE’s real-time, cross-channel analytics to provide both NICE and Fizzback customers greater access to even broader capabilities with a more complete VoC solution.”

Under the terms of the agreement, NICE will acquire Fizzback for a total cash consideration of approximately $80 million. Subject to certain conditions and satisfaction of terms, the transaction is scheduled to close in the beginning of the fourth quarter of 2011 with 2 to 3 cents dilution of fully diluted Non-GAAP EPS for that quarter. In 2012, the acquisition is expected to add approximately $20 million to NICE’s non-GAAP revenues, to be slightly dilutive, and to become accretive to fully diluted Non-GAAP EPS within four quarters post closing.

http://www.marketwatch.com/story/nice-to-acquire-fizzback-introducing-the-most-complete-customer-experience-management-offering-with-the-integration-of-revolutionary-real-time-voice-of-the-customer-solution-2011-09-19

About Fizzback

Founded in 2004 headquartered in the UK and backed by Advent Venture Partners, Nauta Capital and TAG, Fizzback is a global provider of Voice of the Customer solutions, providing software solutions for Real-Time Customer Feedback that drive customer loyalty and employee performance. The award winning Fizzback solution helps companies listen, respond and act in real-time to their customers’ comments. Fizzback customers include tier-1 organizations from a variety of vertical industries, including, British Telecom (BT), O2, Best Buy Europe, Everything Everywhere, National Express Virgin Media, Tesco and several Tier 1 North American telecom carriers.

About NICE Systems
NICE Systems (NASDAQ: NICE), is the worldwide leader of intent-based solutions that capture and analyze interactions and transactions, realize intent, and extract and leverage insights to deliver impact in real time. Driven by cross-channel and multi-sensor analytics, NICE solutions enable organizations to improve business performance, increase operational efficiency, prevent financial crime, ensure compliance, and enhance safety and security. NICE serves over 25,000 organizations in the enterprise and security sectors, representing a variety of sizes and industries in more than 150 countries, and including over 80 of the Fortune 100 companies. www.nice.com.

Previous posts re Fizzback:
http://the-accelerator.blogspot.com/search?q=fizzback
http://the-accelerator.blogspot.com/2009/01/strong-momentum-for-fizzback.html
http://the-accelerator.blogspot.com/2008/07/fizzback-tops-them-all.html

TAG commits another 250K Euros to extend runway for Seedcamp companies

2011-09-12T14:33:00.000+01:00

Seedcamp is obviously in our bones at TAG, but for a little colour,
I remember:

brainstorming the concept while it was a twinkle in Saul and Reshma’s eye
being on the first Board with Mattias, Sara, Paul, Sumon and Jason
pitching to new investors and writing the first cheques to Seedcamp I and II
funding Zemanta, MyBuilder and Kublax in 2007; Toksta in 2008; Erply in 2009 and Editd in 2010
going to Mini Seedcamps in Ljublianga, New York, Tel Aviv, Paris, Copenhagen
working closely on Seedsummit and the latest Term Sheet program

So we love Seedcamp - that's a given.

But having just spent the week at Seedcamp in London, its clear that the Seedcamp platform and network has moved to a new level and finally there is also serious capital available.

But most importantly the latest group of Seedcamp companies are totally inspiring by:

the progress they have made,
the scale of their ambition
the amount they have achieved with little to no money.

Seedcamp has never shied away from the fact that to build something great takes time - and to building an ecocystem takes decades.

We still have a long way to go in the markets we operate, TAG is not ready to buy a tracker (and also we are fundamentally "stock pickers").

We’ve had our successes and failures at TAG, that’s part of investing and its especially so at the earliest stages. However, we are inspired by the progress we’re seeing - especially from Eastern Europe - and want to make sure that at least some of this year's 20 teams will have at least double their run-way and be able to take some more time to develop the right product, find the right customers and discover which investors share their vision and values.

So we are offering €50k as a convertible loan to 5 teams from this week’s Seedcamp in order to help extend their runways further and look forward to contributing in a small way to the continuation of their journey from seed to start-up to superstar.
As frequently happens, Techcrunch got a sniff and published this offer here:
http://eu.techcrunch.com/2011/09/12/seedcamp-week-2011-meet-the-finalists-the-winners-and-one-good-samaritan/
We would of course invite any other investors - European or otherwise to join us in this funding - this is a promising group and they deserve our support

Here are some edited highlights of Seedcamp Week.

Daily Video Highlights:
- Day 1 Founders - (Yandex) - http://www.youtube.com/watch?v=PnRBUCCWTE4
- Day 2 Product - (Mozilla, Soundcloud etc) - http://www.youtube.com/watch?v=A1TJ_TZ7pK8&feature=related
- Day 3 Growth - (FON, McClure) - http://www.youtube.com/watch?v=9ygYMB58FO8&feature=related
- Day 4 Demo Day - http://www.youtube.com/watch?v=xffj0TcXUf0&feature=related
Some of the news coverage:
Seedcamp announcements:
- Teams: http://www.seedcamp.com/2011/09/seedcamp-week-breaking-records-yet-again.html
- New partnerships: http://www.seedcamp.com/2011/09/seedcamp-partners-experts-and-angels.html
- New advisors & investors: http://www.seedcamp.com/2011/09/our-new-advisory-board-and-investors.html
- New corporate relationships: http://www.seedcamp.com/2011/09/seedcamp-founders-pack-sponsors-and-seedhack.html
- Investors at Demo Day: http://www.seedcamp.com/2011/09/top-20-seedcamp-teams-present-at-demo-day.html

Do we need more engineers in government?

2011-08-30T20:23:00.000+01:00

Its very interesting that the number of students applying for Engineering and Science courses at University has - at last - started to rise. In the UK anyway.

Have you ever thought about why it is that there are so few engineers and scientists in UK and US government.

The UK’s cabinet has six PPE (Politics, Philosophy and Economics) degrees, five history degrees, three law degrees, and plenty of other arts and humanities graduates.

The fact that most come from a couple of universities concerns me less than the fact that the 'gene pool' in terms of education, experience, ways of thinking
and problem solving seems very narrow indeed.
Politicians in the UK are often heard decrying the fact that we don't have enough engineers - they presumably don't mean in Government. They mean in industry.

Countries like China on the other hand have its politburo full of scientists and engineers. Hu Jintao, the country’s president, graduated with a degree in water conservancy engineering, while the rest of the group consists of chemical, electrical and radio engineers and the the odd geologist.

I'd like to advance a theory as to why this very obvious disparity between some western democracies and China in the people we get to lead us and take the profound decisions which affect our and our children's lives.

In the UK and the US, to get elected you need to be an orator, have the 'gift of the gab', be charismatic, media friendly, articulate, persuasive. Not necessarily the strengths of the average engineer or scientist - or anyone else with left-brain hemi-spherical dominance.

Does our democratic process unfairly disadvantage the engineers and the scientists?

In China, those that get top marks in the Sciences, its seems, get to the top.

Stick or Twist. Sell or swing for the fences.

2011-08-11T16:46:00.000+01:00

A number of the companies in the TAG portfolio are at very tricky junctions in their lives. Its the point where they are now faced with multiple options. I'm guessing there are many companies at this particular point.
None of these options is bad - but deciding on which to take is not at all easy.
Many startups of the 2006-2008 vintage are reaching the point where they are real businesses, generating cash and growing well.
So what is the problem?
Simply put - where to next?
The options broadly fall into these 4 categories:
1. Sell
2. Continue building with cash internally generated
3. Raise more cash at a good valuation and go for growth
4. A combination of 1 and 3 - ie take some cash off the table, raise more funds for the company and really go for it. [This can be done by an IPO or raising VC/Private Equity funds - but that's another issue]

Many entrepreneurs - mostly those outside of the US - are criticised for selling too early. I'm pretty sympathetic to a first time entrepreneur who having sweated for 5 years or more is sorely tempted to convert his/her shares into cash.
The amounts of cash a founder will receive for a good business are literally life changing - in a good way.

Investors often see the situation very differently. Especially if the company is still growing rapidly and is addressing a large market. There is frequently great frustration at the lost opportunity to build something really big - something fund returning.

Increasingly, enlightened investors are working closely with founders to enable option 4 - ie allow founders to sell ordinary shares - at nominal (or no) discount to the price paid for new preferred shares.

This would seem to be a good way forward for a founder who still has 'fire in the belly', wants to continue to build a huge company but also has the need to get their personal finances on a sound footing.

The lesson in all this for startups is that choosing investors who can help navigate through this rather tricky phase is pretty important.

A Bubble? - Chinese Style.

2011-05-02T19:52:00.000+01:00

You think we are experiencing a bubble? Sure we are - but in China, everything is bigger – much bigger.

I've just returned from China and made a couple of illuminating visits.

First to Innovation Works. The brain-child of Kai-Fu Lee, Innovation Works is an incubator, Beijing style.

Lee, having been with Apple and Silicon Graphics in the US, Microsoft China and then Google China, Kai-Fu knows a thing or two about identifying, attracting and nurturing talent.

He tells me that they have 120,000 graduates on their database on which to call to help staff the dozens of companies being incubated in his Beijing offices, a few blocks from Beijing University.

Innovation Works houses 400 young people working away at building a wide range of companies. About 30 of these are directly employed by Innovation Works and are called the ‘platform team’. These folks (average age I guess about 27/28) are business, finance and marketing graduates whose job it is to attend to the formation, funding, administrating, recruiting for the start-up companies and helping them with their ‘go to market’ plans.

In fact, they do everything other than build the product itself.

This was how incubators were meant to work during the ‘first bubble’ of the late 90’s and 2000.

The difference – as we all know - is that now the cost of building a product and getting it market tested is a fraction of what it once was AND in China it is a fraction of what it costs in the US or Europe.

Not only is working space extraordinarily cheap but engineers and graduates generally earn 1/5^th of their US/Euro counterparts – AND are apparently of high quality and in plentiful supply.

The effect of this is that the $200,000 which Innovation Works invests in these start-ups takes them a very long way indeed. So far that a typical Series A, Kai-Fu tells me, commands a $50m post money Series A.

Yes, that's $50m! I checked twice. Not $15m but $50m.

Given the number of $1bn+ funds which have been raised recently in China [Sequoia etc etc], it is not surprising that VCs aren’t much interested in placing a couple of million in a number of start-ups.

During my visit, Chris Evdemon, who runs the incubator, was just finalizing the judging for next crop of start-ups to join the line – following what I understood was a Seedcamp type application and review process.

It was difficult to get a good picture of what all these start-ups were working on and how their evolution may impact on world markets but my impression was that the vast majority (approx 90%) were aimed at the Chinese market – in ecommerce, mobile apps, social, Android development platforms and games.

The latter category being the most likely to be reaching global markets any time soon.

I expect that retaining star talent and building large, meaningful companies will become challenging as it becomes ever easier for talent to get their own backing and the skills required to build serious global businesses go beyond engineering and towards marketing, finance and management.

My second visit was to a relative veteran of the Chinese ecommerce world – Diane Wang, founder and CEO of DH Gate.

DH Gate is a B2B marketplace matching (with a number of important added value elements) SME buyers worldwide to Manufacturers in China.

DHgate.com was founded in early 2004. Before founding DHgate, Diane was one of the founders of Joyo.com, where she successfully led the company through the Internet boom, downturn and revival. After a year of its establishment, Joyo became the top B2C brand in China. Diane was also the Country Marketing Director of Cisco Systems. From 1993 to 1999, Diane was the Marketing Service Manager and Head of Business Development Department for Microsoft (China).

Thus far in her career, Diane has received "Outstanding Woman of China" and "Outstanding Woman of Beijing" awards—two of the highest forms of recognition given to professional women in China.

TAG was fortunate in investing a small amount in DH Gate’s $6m Series B round in 2007. At the time its gross monthly trading volume was around $1m. Today its at least 15X that and employs over 700 people.

Its interesting that the Chinese Government, as part of its recently published 5 year plan, has included information technology as a fundamental part of their strategy for stimulating internal demand and as a driver of growth. The focus on infra-structure development is truly astounding and with it will inevitably come very rapid growth.

Driven by ongoing urbanization, improving broadband infrastructure, and an influx of affordable smart devices and applications, China’s mass market consumers are starting to take up applications in Internet entertainment, e- commerce, digital content, and mobile Internet.

With an expected 750m netizens by 2015 and the Chinese telecom operators competing to take up broadband speed, and promote 3G wireless data with attractive tariff plans, subsidized smart phones and tablets for consumers the future looks bright for the Chinese technology sector.

[ref Jeffreys Asia Equity Research, April 2011]

Comparing China’s adoption of the web to the rest of the world is instructive.

Almost one quarter of everyone on the planet connected to the web is resident in China.

They have twice the web population of the US and 9 times that of the UK- today.

That said, the market to foreign web services is pretty inaccessible (unlike luxury goods)– as Google and others are finding. Local companies are adept at replicating, improving and adapting to their market.

Where are all the Euro talent acquirers?

2011-04-03T07:13:00.000+01:00

Facebook, Google, Microsoft et al routinely make 'talent acquisitions'.
In the last 10 years, Google has made 93 acquisitions
- the majority of these have been to get their hands on the talented founders and teams who have built some technology or have demonstrated such a capability. 75 of these acquisitions have been in North America and most of these in the San Francisco Bay Area.
Microsoft have made 140 acquisitions in the last 20 years - again the vast majority in the US.
Yahoo made 62 acquisitions in 15 years - only 10 outside the US.

Even the new kid on the block, Facebook, has made 14 buys - 10 in the US.

The possible answers to why the predominance of targets are US based are these:
1. They have better engineers in the US. [this I very much doubt - though no doubt I'll be corrected]
2. Tech companies in the US are building stuff targeted to be bought by one of the big boys.
3. If you're going to buy a company for their talent - you want to keep that talent and integrate it with your own operations or development teams.
4. The eco-system is such that the corporate development teams know the startups and vice versa. Not just know them but meet regularly at the many events and in the coffee bars on University Avenue and elsewhere.
5. Buying a talented team elsewhere (ie outside the US) is risky - there is the cultural gap, the legal hurdles, the distance, the time shift etc

These transactions - 250 of them between just the 3 mentioned - power the whole ecosystem. The funds generated for the founders, the VCs, the LPs are considerable and get recycled in a sometimes perfect virtuous circle.

So, where are all the Euro based talent acquirers?

I think the UK Government is listening to us

2011-03-25T17:54:00.001Z

Following hard on the heels of the Home Office's announcement relating to Entrepreneur visas, this week's budget had a distinctly enterprise supportive flavour.

I had very much hoped this would be the case and certainly the signals coming out of the Department for Business (in the shape of Mark Prisk - who attended Seedcamp's SeedSummit for a full hour and half), the PM in his Tech City announcement and No10's enterprise task force including treasury officials, gave one hope.

Government has the loudest megaphone in the land and once they 'discovered' Silicon Roundabout at Old Street it moved swiftly into the vernacular and the media have been making regular trips east ever since.

Its easy to be cynical when it comes to politics but I do believe we have a tech friendly Government determined - and able - to keep Britain as the best place to start a business in Europe.
I have reason to believe too, that the personal pressure which David Cameron has applied to Google, Facebook, Cisco and co to heavily invest in Tech City is being taken very seriously by those companies.

The details of the budget are well covered elsewhere but its worth summarising some of the key points which will directly impact early stage technology companies and entrepreneurship.

1. Expansion of Entrepreneurs Relief: limits capital gains tax to
10% on business sales under certain conditions. The “lifetime” limit on capital gains which can qualify for entrepreneurs relief will be doubled from 6 April to £10 million.

2. Changes to the Enterprise Investment Scheme
offers income and capital gains relief for investors in growth businesses.
The rate of income tax relief on EIS investments will rise from 20% to 30% from 6 April 2011.
This means if you invest £100,000 in a qualifying company, you immediately benefit from an income tax
deduction of £30,000. ..and the qualifications and type of shares are to be made much simpler and wider - limits now to 250 employees rather than 50. The annual allowance for individuals doubles to £1m

3. Corporation Tax:

The main rate of corporation tax will be reduced from 28% to 26% from April 2011.
The rate will then be reduced by a further 1% in each of the following three years, giving rise to a corporate tax rate of 23% by 2014. This will give the UK one of the lowest rates of corporate tax in Europe.
The small profits rate of corporation tax will fall from 21% to 20% from April 2011.

4. R&D Tax Credits:

There is a major boost in the Budget for small businesses investing in research and development. The rate of relief on qualifying R&D expenditure rises to 200% from April 2011, with a further increase to 225% from April 2012.

All in all there has never been a better time for start-ups in the UK!

UK Budget - not all bad for Entrepreneurs

2011-03-23T20:06:00.000Z

With thanks to Graeme Burnham of Complete Tax Solutions .....[the comments in italics are mine]
The highlights extracted from the Chancellor's 2011 Budget are as follows:

· Corporation tax rate is reduced to 26% [for those making profits]
· EIS relief will increase to 30% from 20% [Great boost for Angels]
· Entrepreneurs relief lifetime allowance has doubled to £10m [Excellent news for founders]
· Non-domiciles may be able to remit income/capital gains without
charge if invested in qualifying businesses [haven't examined the detail but this could bring a lot of non - dom cash into the eco-system]
· The business rate – relief holiday for small businesses will be
extended to October 2012 [All helps]
· Small businesses (less than 10 employees) will face less
regulation [must be good - again, lets see the detail]
· The small companies R&D tax credits will rise from 175% to 200%
to 225% [Excellent!]
· Short life asset allowance to increase to 8 years from 4 years
· National insurance will (at some point in time) be combined
with income tax
· Gift aid will be simplified and administration will be taken
on-line
· A 10% reduction in the inheritance tax rate if 10% of a legacy
is given to charity to be implemented in April 2012

London is a magnet for talent -update

2011-03-08T11:05:00.002Z

Image via Wikipedia

March 16th: UK Government introduces new visa rules ..... http://goo.gl/rKfOc

At a recent meeting at Fizzback, I became aware of the large number of non-Brits on the team. They may be an exception because after all they do a fair amount of semantic analysis using natural language processing in half a dozen languages but 38 out of a total of 66 Fizbackers were born outside of the UK.
That's 58%.

The non-UK nationalities represented are:

AMERICAN, ARGENTINIAN, CHINESE, DANISH, DUTCH, GEORGIAN, GERMAN, GREEK, INDIAN, INDONESIAN, IRISH, ISRAELI, IRANIAN, NIGERIAN, PORTUGESE, RUSSIAN, SWISS, SWEDISH, SERBIAN, SPANISH

That's pretty impressive - don't you think?

Looking around the London office of Index, there are only 6 British born - out of a total complement of 18.

At a time when Governments around the world are pushing for enterprise, start-ups, small businesses and technology to lead their economies back to health, its more important than ever that talented people who want to participate in a country's economy are encouraged and allowed to come.

Organisations like Seedcamp and SeedSummit have been lobbying the UK Government to make non-EU Visas easier to obtain to allow this very phenomenon to flourish. This is important and I hope that the strong words that the PM is using about enterprise and growth extends to ensuring that talent wanting to come to the UK will find it easy to do so.

[update, 16th March 2011 ...

Government 'rolls out the red carpet' for entrepreneurs and investors ...http://goo.gl/rKfOc ]

Just this past week, Techcunch ran a story entitled "Why Silicon Valley Immigrant Entrepreneurs Are Returning Home"

London clearly has some extra-ordinary pulling power despite the weather (which by comparison with many places is not that bad anyway)....and is producing some super companies. Saul wrote an interesting piece on this a couple of months ago.

The Prime Minister, David Cameron said yesterday: "Where there has been an aversion to risk, there needs to be boldness.

"I'm telling you today that your job under this government is not to frustrate local people and local ideas, it is to enable them."

If the Government can follow through on this rhetoric and continue to foster and develop an enterprise culture, there is no reason why London will not continue to be the startup capital of Europe.

If you have some stats on % of non-Brits in your London based startup, let me know.
Perhaps someone needs to pull together a comprehensive data set.

Best Practice - series

2011-03-05T10:28:00.000Z

Yesterday morning - March 4th - I received the fist of the monthly stats packages from a TAG portfolio company - for analysing February's results. In the next day or two, I'll get the full set of management accounts - P&Ls, Balance Sheet, commentary, the works. That's really good.

That same morning, I received the accounts package from another profitable and well run company - but for January.
It made me think about the very privileged position I have in being able to compare and contrast and draw conclusions as to best practice across a whole range of companies at different stages, with different priorities.
Having made more than 70 early stage investments in my 15 years of active investment, there is a certain pattern recognition which emerges and which I'm going to attempt to crystallise as 'Best Practice Tips'.

The best way to disseminate these - in the hope that they'll be useful to some - is to 'tweet a tip' every day.

The output will not be organised in sections or subject heads - nor will they necessarily follow logically one to the other but will be randomly put out - as they occur.

Two tweets have already gone out 'on test' - and I intend persisting with them as long as people are commenting.
Sometimes the 'best practice tip' (bpt) will be tough to get into 140 characters without being too obtuse or cryptic, in which case, deck.ly will do the job.

The 2 tips put out thus far are:
Tip1: know your cash balance every day
Tip 2:Get management accnts out by 10th of month,closing KPIs on the 1st. So Feb KPIs ar… (cont)http://deck.ly/~VZ17o

Want to keep getting the best practice tips? Follow me on Twitter ... @robinklein

Great Entrepreneurs focus on their mission rather than their competitors

2011-02-16T14:53:00.000Z

I’ve noticed a tendency of some early stage tech companies to be excessively distracted by what their competitors are doing, or what they think they are doing.

Understanding the landscape and differentiating your product – or approach to the market - is of course essential and there could be a number of areas of head-on competition. Competing for key words on Google as key distribution channels are examples of these.

But, the overriding focus of the CEO must be the customer/user not the competitor.

The questions to be answered are:

· What is our real mission
· What would make a better experience
· How can we deliver our service/product better, cheaper, faster? Than we are currently doing.

My own experiences have brought home the importance of this focus.

Joe Corre, co-founder of Agent Provocateur, never looked at a competitor’s product! I well remember the occasion that a new member of the design/marketing team went out and bought a pile of competitor’s bras for price, quality comparison. Joe absolutely flipped and practically threw both the offending garment and the unfortunate member of staff out of the office. He and Serena, his partner, had our clear vision of what the product should be like and they wanted no distraction of that vision.

This may be extreme but during my 5 years I was associated with AP I was able to see firsthand how this unfettered vision was instrumental in making AP one of the worlds admired fashion brands.

Steve Jobs at Apple clearly comes from a similar school.

Wonga, one of Europe’s start-up superstars, was founded and is run by two entrepreneurs (Errol Damelin and Jonty Hurwitz) who designed their business, product and service without any regard to competitors but rather by recognising a consumer need and filling it with precision and dedication to a great user experience.

The same can be said of Daniel Ek at Spotify.

Look around and I’m sure you’ll recognise the characteristics in most of the great new companies.

Great entrepreneurs and companies don’t spend large amounts of time and money refining and defining nuances of differentiation from competitors or indulging in feature wars with them.

Quite often the real competitor is NOT the other on line (or pure play) company but the off-line incumbents putting the user at the centre of the thinking, immediately flushes out who the real competitor is.

Index Seed Investments

2010-11-29T18:42:00.000Z

Following my post yesterday which presented an overview of Index Seed - 6 months after launch, I've been asked a few times to list the companies which we have invested in - that is, those which are not still in stealth.
Here they are:

Freejit is still in stealth but announced.
5 other announcements due soon.

Related articles

6 months on .....

2010-11-28T10:04:00.000Z

There is a tiny bit of PR wisdom to which I have tried to adhere most of my working life: "refrain from talking publicly about what you are going to do, talk about what you have done".

When we made the Index Seed announcement, it was clearly necessary to indicate what we were going to do. This was so that entrepreneurs and fellow travellers had some sense of our plans and could propose working together.

Now, given that it is almost exactly 6 months since we announced that TAG and Index were getting together to launch Index Seed, it is time to review what we've done and how well or otherwise we've done it.

All the leading technology VCs do some seed stage investing, the questions to be asked are: how many do they do? what resources are applied? what are the processes involved in getting from A to Z ? (ie from trying to get a date in the diary to cash in the bank) and how involved are they once the investment is made?

We set out to invest in a style that blended the best of TAG’s angel and Index’s institutional approaches.

So, what has been achieved?:

We have an active investment committee comprising 5 partners who meet weekly to review potential investments. Saul Klein, Neil Rimer, Mike Volpi, Danny Rimer and myself (Robin Klein)
We are supported by a dedicated Seed Associate, Terrence Rohan, by Alex Gezelius (Associate at Venture - who has been invaluable to us) and by Thai Tran - a brilliant engineer who has been an EIR at Index and has acted as our Technology advisor.
We have backing from the full Index Partnership as well as the operations team including, Legal and Admin - Nicola, Andre, Sayula, Nina and Pet
We have reviewed over 750 plans and met with over 250 companies
We have made 12 seed investments so far in 2010 (5 in London, 3 on the West Coast, 2 in Israel, 1 in Estonia and 1 in New York). Many are still in stealth so will only be announced at a time to suit the company's needs.
Amounts invested have ranged from $100k to $1m
We have a standard seed term sheet, refined and made founder friendly, closing deals at minimal legal cost
Every investment has been made with fellow travellers including: Chris Sacca, Dave McClure, Quincy Smith, Ariel Poler, Simon Levene, Aydin Senkut, Marten Mickos, Robert Dighero, Stefan Glaenzer, Alex Zubillaga, Jerry Yang, Yaniv Golan, Avichay Nussbaum, Fabrice Grinda, Michael van Swaaij, Seedcamp, Redpoint, First Round Capital, Betaworks, True Ventures, Polaris, Ron Conway, Joi Ito, Matt Cohler
Together with the other investors interested in supporting the earliest stage businesses like Eden, Notion Capital, Lars Hinrichs at HackFwd, we have actively backed Seedcamp with investment and attendance at events

What we're still working on:

Consistently providing a definitive answer to founders within 3 weeks of our first contact. We achieve this often but not always
Encouraging founders to get pre-endorsed by someone we know

We are really excited at the volume and quality of new start-ups coming from all geographies and fully intend keeping this pace of investment going during 2011.

KPIs - a really powerful tool

2010-09-27T11:56:00.000+01:00

"Not everything that can be counted counts, and not everything that counts can be counted."
Albert Einstein, (attributed)
US (German-born) physicist (1879 - 1955)

Image via Wikipedia

Deciding on a set of KPIs is one of the most important things we normally do when starting to work to build the business with a founding team.
What to measure? how frequently? what to publish? and to whom? are all good questions to be thought about.

Key Performance Indicators are a fundamental tool, the dashboard by which the company is monitored, guided, controlled and managed. It is surprising how frequently this really simple device is not properly used.

In many traditional businesses, the monthly management accounts serve as the barometer of corporate health and comparisons to budget help to drive actions by the philosophy of 'management by exception'. This approach is completely out-dated and inadequate for fast moving web businesses capable of generating vast amounts of meaningful data in real time.

Distilling all this data down to the key numbers and tracking them against expectations is where the effort needs to go in setting up the set of KPIs that are going to drive the business.

No board should burden the management team with data requirements beyond those which are needed to run and plan the business, so an agreement as to the KPI set - should be sought as soon as possible.

Make sure that everyone in the senior team 'owns' one of the KPIs. The big goals of the business which are agreed by the board should be represented at the targets against which the KPIs are measured.

I like to get an email containing KPIs at least once a week (preferably auto generated, untouched by human hand) and in some cases every day! I find this no burden at all - its easy enough to glance at the headline (in the subject line) and delete.

Some teams prefer to give non-execs access to the analytics or admin dashboards inviting them to look up the numbers when it suits.
For me this misses a very important point. That of being 'top of mind' for your board. Most NEDs sit on multiple boards and if you want them to think about your business and provide meaningful, helpful advice, contacts etc then its best that you keep reminding them of your existence.

You'd be amazed at how efficient your board meetings can become when everyone is up to date with the performance, has lived through the month's ups and downs through the KPIs and has a good idea of where the issues lie.
You will spend less time reviewing the month past and more time discussing the issues and planning the future.

Am I just naive? Or is this type of stuff just 'par for the course'?

2010-09-23T16:18:00.001+01:00

One of the things I really enjoy about the early stage technology scene is its collaborative nature. Companies routinely compete and co-operate and "frenemies" co-exist pretty happily.
Lots of people give freely of their time and expertise understanding that we are all part of a larger eco-system with many mutual dependencies.
There is a time to compete really strongly - and this is normally done by being faster and smarter.

I was shocked recently by the behaviour of one of MyBuilder's competitors - namely MyHammer.
This German company, with operations now in the UK has behaved in a way that is frankly very difficult to understand or justify.
[I need to declare a direct interest in this matter as a board member and investor in MyBuilder]
Firstly, MyHammer registered the MyBuilder trademark in the UK - back in June 2008, AFTER MyBuilder had launched their site in May 2008. Clearly this was an 'own goal' on MyBuilder's part and is a lesson to all startups to register your brand as soon as possible.

Then,recently, MyHammer initiated a PPC campaign / new affiliate site, my_builder.com (ie my underscore builder), just when MyBuilder's TV advertising campaign launched. See screen grabs below -

Following a strenuous complaint by MyBuilder, MyHammer agreed to take down the offending site - no doubt having hoovered up a decent number of potential customers. I would also hope that they would hand back to MyBuilder their brand registration and URL - the goodwill in which has been built by MyBuilder at considerable cost and over a number of years.

I'm interested in what people think about such practices and how widespread they are. Certainly there is no board that I sit on which would sanction such an approach to competition.

This is the TV commercial which is helping to build the MyBuilder brand:

Why we all love Wonga ... all who know it that is.

2010-08-23T08:25:00.005+01:00

Image via CrunchBase

Wonga.com (Wonga = English slang for cash) is a web phenomenon. It started offering small cash loans on the web 2.5 years ago, setting out to solve an important and pressing need that many have for emergency or instant cash in a very simple, clear, open WYSIWYG way - in fact, in a way which is entirely culturally compatible with the internet.

The regulations surrounding financial services are quite correctly stringent but have evolved for a very different era. They require all loans to be expressed as an effective APR (Annual Percentage Rate) - even if the loan is for 14 days - or 7 or 30.
It also includes any application fee (Bank's generally call these 'arrangement fees' - in commercial lending) and transmissions fee (for same day - or in Wonga's case, instant transfer) to be included as interest within the APR.

An example. if you borrowed £100 to tide you over for 14 days, you'd pay back £120. Wonga charges £20 to process the loan, transmit the cash, collect it and take the risk of non-payment - all for £20.
Wonga explains the APR question nicely on its website.

This APR issue has made Wonga a controversial brand - loved by many hundreds of thousands but misunderstood by some - and an easy target for those not ever likely to use the service.

I have gotten used to the visceral reaction of some on the social web to seeing the Wonga TV ads (latest version is below) and the APR in the thousands - but every now and then I notice people from the tech industry rushing for the moral high ground and shouting foul.

Why is Wonga one of the stand out successes of the internet?
[Europe's fastest growing company, according to GP Bullhound's Media Momentum Awards and still growing at around 500%]

It solves a very real and large problem - not solved elsewhere with the speed, convenience, flexibility and honesty that Wonga does.
Its customers really love it! With a NPS of around 79, there are very few brands that match it. I have been involved closely with some brands that elicited great loyalty and affection from its customers - none quite like this. 90% of respondents who had used another lender agreed that Wonga was a better service (30% ‘better’ and 60% ‘significantly better’).
The product is backed up by a determined customer service ethos which strives to be open, responsive and flexible to the needs of the customers - via a multitude of channels.
Lending decisions are made in real time referencing over 3500 data points and analysed in Wonga's proprietary risk engine.
The technology which makes all this possible is world class.

Little known facts about Wonga.

To be a customer of Wonga, you need to have a bank account.
99.7% of Wonga's customers own a mobile phone.
17% own an iPhone
Wonga sponsors Blackpool FC in the Premier League

Errol Damelin, Jonty Hurwitz and the team at Wonga are building a business to be proud of. I, for one am proud to be its Chairman.

Image by Wonga.com via CrunchBase

TAG and Index get together to drive Seed investing.

2010-04-23T20:00:00.004+01:00

Image via CrunchBase

The ecosystem has been alive with reams written about how active angels are becoming, how VCs have gotten too large, how companies need less cash and how the VC model is broken. And of course, there is the perennial complaint about the lack of early stage capital in Europe. [see links to some related articles below]

A number of the large US VC firms have made special arrangements or adjustments to their models, their PR or have re-emphasised their commitment to early stage and start-up investment.

Sequoia invested in or with YCombinator, Reid Hoffman joined Greylock, Andreessen Horowitz has been launched promising low friction, multiple investments in amounts ranging from $50K to $50m. They appear to have done 12 investments since August last year including 4 seed investments.

Super early stage investors with relatively modest fund sizes have emerged in the US - like First Round Capital, Union Square Ventures, True Ventures as have new institutional seed guys like Mike Maples and Jeff Clavier along with super angels -Aydin Senkut , Chris Dixon and the like.
Betaworks are building a different kind of incubator/investment company.

Whilst this is going on, we've seen very little from Europe's top tier-VCs.

Until now.

Index and The Accelerator Group (TAG) have announced a plan to directly address this opportunity.

Index will create Index Seed. In some ways similar to Index Growth which was announced in January 2008, Index Seed will benefit from clear focus, application of appropriate resources and a discreet pool of capital.

Index has invested continuously in seed since 1996 so this is no new space for them - on the contrary they are arguably the best tech seed investors in Europe. Inevitably, however, as the firm grew, the proportion of pure seed deals fell and with it the misconception grew that many deals were simply too small.

This will no longer be the case.
I will join Index as a venture partner - helping to lead the Seed investment activity together with Saul and with the support of Neil Rimer, Mike Volpi and Danny Rimer, (all partners in Index Ventures).

We will aim to make around 20 investments in the coming 24 months - with initial amounts from $50K to $1m. As TAG has done for many years, we will seek to invest alongside 'fellow travellers' - people with whom we have been investing for a number of years and the growing band of active angels in Europe and the US.

TAG will have co-investment rights in all seed deals but will have the freedom to invest on its own if circumstances dictate.

Some History:

Saul and Danny worked together first in 1995 in the US, while Saul was at Firefly & Microsoft and Danny was at H&Q (JP Morgan) and the Barksdale Group. As TAG, we worked with Index first in 2003 when they led the first institutional round of investment in our own startup, Video Island.....(which then acquired ScreenSelect, merged with LoveFilm)

We are co-investors in 14 companies (including Moo, My Heritage, Glasses Direct, OpenX, Stardoll, Moshi Monsters and LoveFilm). The introduction to these companies has been both ways - TAG's introduction to Index and sometimes Index inviting TAG's participation.

We know each other well and there is a congruency of purpose and values.

Despite this closeness, TAG has successfully worked, over many years with many other VCs such as Accel, Advent, Atlas, Balderton, Eden, Greylock, Octopus and Betaworks. Some of TAGs most successful investments like Wonga, Fizzback and Zoopla - as well as some emerging companies like Graze, MyBuilder, Bit.ly, Tweetdeck and FreeAgent - were made with these VCs and others.

A guiding principle for us has been that we never forget that we back entrepreneurs - the business is theirs and we are part of the support team - like their other team members. How much money? from whom? and when? is very much a team decision.

So, TAG will remain independent and Index Seed will seek to actively co-invest with 'fellow travellers' - large and small - at early stage.

There has never been a better time for technology Entrepreneurs.

It is thrilling for me to work closely with young, smart people who are - in many cases - genuinely changing the way in which people live or businesses work.

The leadership Index is demonstrating with its commitment to Seed and the eco-system in Europe and beyond is very significant and I am hoping its impact will extend far and wide.

Looking forward to hearing your views, comments, questions and will post again in week or so to expand on any topics.

----------------------------------------------------------------------------------
For those unfamiliar with the TAG details - a short summary:

The Accelerator Group (TAG) is the father and son investment team of Robin (@robinklein) and Saul (@cape) Klein, which last year was recognized at Techcrunch Europa's as European investor of the year (http://bit.ly/2lhP3J ). TAG has actively invested seed capital in over 60 ambitious entrepreneurs with global ambitions in the last 12 years.

Some of TAG's 10 exits include Agent Provocateur (3i), Sit Up TV (Virgin Media), Lastminute.com (IPO), Last.fm (CBS) and Dopplr (Nokia) where we've had the pleasure to work with great European founders like Brent Hoberman, Felix Miller, Martin Stiksel, RJ, Marko Ahtisaari, Matt Jones & Biddulph, John Egan and Ashley Faull, Joe Corre and Serena Rees as well as superb seed investors like Stefan Glaenzer, Reid Hoffman, Joi Ito, Esther Dyson and Martin Varsavsky.

TAG currently has 44 active investments with some of Europe and the US top investors, including:

• Lovefilm (Index, Balderton)
• Stardoll (Index, Klaus Hommels)
• Moshi Monsters (Index, Accel)
• Moo (Index, Atlas)
• Fizzback (Advent, Sherry Coutu)
• Zoopla (Atlas, William Reeve, Alex Chesterman, Simon Murdoch and Sherry Coutu)
• Songkick (Jeff Clavier, Index, Stefan Glaenzer, Alex Zubliaga and Betaworks)
• Wonga (Balderton, Accel, Greylock)
• Tweetdeck (Betaworks, Ron Conway, ProFounders)
• Twitterfeed (Betaworks)
• Bit.ly (Betaworks, O'Reilly Alpha Tech)
• Erply (Redpoint, Index, Dave McClure, Aydin Senkut)
• Mashery (First Round Capital)
• Slideshare (Ariel Poler, Dave McClure)
• Amee (Union Square, O'Reilly Alpha Tech, Toby Coppel, George Coehlo, Amadeus)
• Graze (William Reeve, Octopus)

We've had a particularly strong relationship over the years with Index, doing more than a dozen deals starting from Lovefilm in 2003 and including Moshi Monsters, Stardoll, Moo, Songkick, GlassesDirect, OpenX, Netlog, MyHeritage, AstleyClarke. In some of these cases, TAG and Index co-seeded the company.

Saul founded Seedcamp 2007 and TAG has been active in supporting Seedcamp ever since, in addition to investing directly in Seedcamp teams like Zemanta, MyBuilder, Skimlinks and Erply. We have also actively invested in YCombinator companies for several years - companies such as Songkick, Habit Stream and WebMynd.

FreeAgent powers ahead with Iris

2010-03-30T09:49:00.000+01:00

Image via CrunchBase

FreeAgent Central, has agreed a strategic partnership with Iris, the UK’s largest private software house, opening up the significant accounting practice market to their award-winning online accounting software ‘FreeAgent’ and positioning the company for rapid growth.

Iris, which supplies software to over 60,000 business customers, currently dominates the accountancy practice software market with over 14,000 practice customers (a market share of around 50%).

Iris is a software giant in the UK backed by Hellman and Friedman the private equity house that took Getty Images private in 2008.

CEO Martin Leuw has been building IRIS into an exceptional business with revenues of £120m and profits of £40m in 2009. Their strategy has been to focus on sectors which they serve really well with appropriate products.

Its a real endorsement and validation for what Ed Molyneux and Roan Lavery, the founders and the team have built at FreeAgent that Iris selected them to partner and invest in.

Iris is also investing investing in FreeAgent, acquiring a minority stake and Phill Robinson, Iris’s Accounting Practice Solutions’ Managing Director, is joining FreeAgent Central’s board.

Phill, well known in web circles, was formerly Chief Operating Officer and Chief Marketing Officer - Sales and Distribution at Salesforce.com and will be invaluable to FreeAgent Central as it looks to continue its rapid growth both in the UK and internationally.

This is an important milestone for FreeAgent Central and will bring online accounting to the mainstream of the accounting practice software market. Accountants have a unique opportunity to help small businesses thrive, and FreeAgent will help them that to do that even more effectively by connecting them live to their clients’ accounting data.

Users of FreeAgent become passionate advocates within days of starting to use the service and the FreeAgent team is planning to build some powerful analysis tools for Iris’s practice customers too.
The FreeAgent product has been getting rave reviews for some time. This distribution deal will empower many more freelancers.

Existing investors, including The Accelerator Group and serial angel investor Christoph Janz, also participated in the investment round.

Major coup for Seedcamp winner, ERPLY

2010-03-23T11:27:00.000Z

Investors in Seedcamp were universally impressed with Erply during Seedcamp week in London last September and then again during 'demo day' and 'investor day' at the end of 2009.

They were exposed again to 50 or so seed investors at SeedSummit in December 2009.

Now, following a visit that 10 of the Seedcamp finalists made to the US, Redpoint and Index have led a funding round which puts the business software start-up from Estonia firmly on the map.

This is an exciting development for Seedcamp and Erply.

For Seedcamp, this is an endorsement of its ability to find high potential companies and provide them with a global platform.

For Erply this round is a recognition of the strength of the product that Kris and his team have developed.

Also read: http://techcrunch.com/2010/03/22/erply-the-next-skype-of-business-software/

The press release follows:

Erply attracts funding from top tier investors for disruptive business software technology

Press Release: London & Tallinn, 23 March 2010 – Seedcamp winner Erply raises $2million from top tier US and European venture capitalists and angels in a Series A round.

Business software startup Erply today announced the closing of a $2 million funding round from Redpoint, Index Ventures and prominent entrepreneurs and angel investors Marten Mickos (former CEO of MySQL), Kenny van Zant (SVP & Chief Product Strategist at SolarWinds), Zack Urlocker (former EVP Products at MySQL), Aydin Senkut, Dave McClure and The Accelerator Group. The funding will be used to expand Erply’s customer base in key European markets and its upcoming expansion into the US. Satish Dharmaraj of Redpoint and Index Ventures partner Saul Klein will both join Erply’s Board of Directors.

The company, led by CEO Kris Hiiemaa, was founded in 2009 in Estonia by four experienced business software developers. Since winning Seedcamp in 2009, Erply has already seen rapid growth in new customers. Erply is revenue generating, profitable and has attracted a wide variety of customers, including car dealerships, toy shops and restaurants.

Erply’s easy-to-use business software that enables companies to perform every business function, including bookkeeping, customer relationship management and stock control. Erply is built on the latest web technologies, so it is as powerful and secure as any business software on the market. As a result, small businesses can easily integrate Erply and rapidly scale-up their operations.

While the USD $39 billion market for comparable business software is currently dominated by major players like SAP, Microsoft Dynamics and Oracle, their offerings are too costly and complex for the majority of small businesses. In contrast, Erply’s business software is available for a small fraction of its competitors’ and an average €55 monthly subscription fee is a more cost-effective option for small businesses. Erply is additionally well-positioned for success: where its competitors’ market is limited to tens of thousands of big businesses, Erply has a potential market of 45 million small businesses in Europe and the US alone.

Erply co-founder Kris Hiiemaa believes Erply’s new investors’ experience will prove pivotal to building on the company’s impressive start: “The main value in this funding round is in the enormous insight, experience and expertise our investors bring to Erply. Individually, each VC and angel has an incredible track record of identifying cutting-edge tech startups with fast-growth potential and helping them flourish. It’s a very exciting time for us.”

Redpoint partner and Zimbra co-founder Satish Dharmaraj: “Erply is to ERP what Zimbra was to email and collaboration. Having seen how rapidly Zimbra replaced Exchange and Outlook as an email solution for businesses for all sizes, I see promising synergies in the game change that Erply is set to do, and I’m thrilled to be involved with Erply.”

Former MySQL CEO Marten Mickos: “Similar to how MySQL made databases affordable for businesses all over the world, customers are already adopting Erply and recognising it as a great solution for their business software needs.”

Index Ventures’ Saul Klein: “Having seen at first hand the effect that Skype’s simplicity and pricing had on the telecoms industry, I’m delighted to support Erply as they try to do for business software what Skype did for telecoms.”

Erply Background Information
Erply (http://www.erply.com) was launched in Tallinn in 2009 by four Estonian software developers.

The company is incorporated in the UK and has its headquarters in Tallinn. Since winning Seedcamp London in September 2009, Erply has grown rapidly and now is generating revenue and is profitable.

Erply gives companies the ability to manage their business (including critical data and operations, inventory, stock control and accounting) in one easy-to-use package.

Erply is already available in seven languages and is fully customised for each geographic location’s particular tax laws.

Erply has four monthly subscription options, ranging from a basic free version to a fully-functional Premium account which costs €99 per month.

Europe needs to learn to play nicely

2010-03-11T16:03:00.001Z

Saul's latest inspiration to European entrepreneurs.

Europe needs to learn to play nicely

View more presentations from cape.

Skimkit is a major advance for publishers

2010-03-07T20:02:00.000Z

Newspapers and other media have long felt that they have gone unrewarded for the enormous boost that their reviews of product give to sales levels. A mention from an influential journalist or reviewer can shoot a book into the best seller list or a product into orbit.
Of course, writers need to be completely impartial when reviewing products and those journalists who are not, are very easily found out and no self-respecting editor would allow such bias - readers would leave in droves. The best reviewers are independent, even handed impartial - that does not mean that their publishers should not be rewarded for referencing the product or retailer in question.

In order to provide a real service to readers, a good reviewer should offer a link to the retailer or manufacturer, enabling the reader to buy directly.

Now publishers can do all of this with ease AND earn a referral commission - resulting in a win/win/win for the reader, medium and retailer.
All this happens in the background, without the journalist or the publisher getting involved in any of the grubby business of affiliate commissions. Retailers pay Skimlinks the affiliate commission and Skimlinks shares this with the publisher.
Skimlinks currently covers 23 different affiliate networks, 7500 merchants and over 100,000 products.

Finding a product and its deep link is really simple.
Whether the writer is doing a piece on 'the top ten red coats under £100', accessing a list of retailers that stock the Plasma TV they're reviewing, or reviewing the latest discount offer from their favourite skincare brand, Skimkit finds the products and produces the links to take the readers directly to the relevant products on the retailers website.
Skimlinks takes care of the all the commercials.

Skimlinks new tool, Skimkit is a significant advance. It changes little in the writing process and is extremely simple to use.
I expect Skimlinks growth to continue to accelerate with this initiative.

What's happening at Netflix?

2010-02-22T20:39:00.000Z

Image via Wikipedia

You'd expect me to follow Netflix closely - and indeed they have always been a beacon of the on-line revolution. Disrupting the established methods of distributing movies to consumers in a significant way - leading to the inevitable demise of Blockbuster (once the brief on-line battle had been won) their dedication to great customer service has been a constant theme.

Our own founding of Video Island - later to become LoveFilm after a series of mergers - has meant a more intensive tracking than normal of a much admired business. Listening to Reed Hastings, Netflix, outstanding founder and CEO and comparing his metrics with our own every quarter has been an education.
The Netflix stock-price has always suffered the overhang of those who believe that the DVD's days are numbered and that digital streamed delivery would render Netflix's obsolete or at least would open up significant more competition than it has experienced hitherto.
Netflix has consistently come up with the answers - first by explaining that DVDs would be around for a lot longer than people thought - then by offering streamed movies themselves and agreeing that DVDs would indeed die at some point not too far in the future. Mostly however, Netflix has delivered results. Consistently meeting and beating the street's forecasts.
After music, then books, newspapers and magazines, movies are bound to be the next digital 'goods' to be widely distributed over the new platforms.
So, is Netflix in a very vulnerable position? Or is it perfectly placed, with a fiscal relationship with 12m subscribers who pay them each month. Its relationship with the movie studios - who will ultimately decide how and when their product is distributed is clearly another factor.
There are a handful of digital companies (outside of the main utilities) with such a close, regular and continuing transactional relationship. Netflix is a more than a "DVD by post" business, they are an entertainment distribution platform.

Is this realisation behind the recent exceptional surge in the Netflix share price? It has trebled in the past year despite the continuing stream of news heralding new competitors. Walmart's acquisition of on-line movie service, Vudu is the latest. Hulu, Apple, YouTube, BestBuy the list is long and powerful.
The battle for movies will start soon.

Not even Reed Hastings sale of 10,000 shares last week has dented its apparent strength.

For all Facebook and Google's power, neither of them has a direct financial relationship with consumers. Though clearly they will move in that direction.

Beware the band of Angels

2010-02-21T13:55:00.000Z

There used to be a commonly held concern of entrepreneurs that taking investment funds from an angel investor, came with it a large dose of interference - not necessarily of the constructive kind.
After all, most angels are successful people, who made their money building or running businesses - not necessarily of the type that the entrepreneur was engaged in - and their keeness to assist often verged on intervention.

Current conventional wisdom is that entrepreneurs should strive to obtain 'smart money' - cash that comes with strong, in-depth knowledge of early stage, start-ups; an extensive rolodex; loads of management and recruiting expertise.

It hard to disagree with this although I have observed that having lots of 'smart money' in the project sometimes almost equates to having dumb money!

How so? Well, if a syndicate is put together of a collection of angels - a band of angels - unless there is a lead angel ie someone who takes responsibility for pulling the syndicate together, for staying close to the entrepreneur throughout, then the company may land up with the worst of all worlds.
The investment that each angel makes is often of little consequence to them, they take no 'ownership', get involved very occassionally and peripherally and if asked to advise they are seldom close enough to the situation to give really good advice.
Everyone gets that warm, comfortable feeling that they are co-investing with the great and the good of the eco-system, whereas in fact no-one really 'owns' the investment. No-one has the necessary unwritten but clearly articulated 'contract' with the entrepreneur that they will be their 'partner' in the venture.

Looking back on some of our failed investments, a few fall into this category.

Nowadays, if I'm asked to join a syndicate - "we're raising $1m and only need $200K - would be great to have you guys involved - I've heard how much value you add ...etc..." some of the questions I ask are: "who's the lead investor? Is he or she joining the board? How much time is he/she planning to spend? Are they being properly compensated for this time/effort?"

We are firm believers that choosing your investors is a fundamentally important decision to make. That they really do make a difference. Its not just quality that counts but the committment and willingness for that quality to be applied.
In the end, its hearts and minds that matter - not just cash and share certificates.

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