This may be stating the obvious, but sometimes it really helps if you know what you are doing. Want more practical advice? Try to do what you can do, not what you would like to do. If that sounds patronising it is not intended to be so, but the look on the face of James King, founder of Find Invest Grow, the early stage investment Company for young entrepreneurs and their start-ups, and Managing Director of New Model Venture Capital, as we discuss the plight of the “want-trepreneur”, says it all.
“Starting a business because you want to run a business is the worst motivation in the world” he sighs, and he should know. The evening when Find Invest Grow opened the doors of FIG Village 2013, an 18,000 sq. ft. disused Royal Mail sorting warehouse in White City, with its own gym and basketball court, £1.5 million was invested on the spot, and the space was fully let within 3 weeks.
FIG has attracted 244 investors to date, and some 3,500 companies have applied for funding via the website in 2013 alone. FIG Village is sadly no more, due to the expansion of the Westfield Shopping Centre, but it served its purpose well, allowing James to take the hot-seat at NMVC and launch the Evergreen Discretionary Asset Management Scheme (EDAMS), “An offering with a transparent and incentive-aligned fee-structure that is better for the investor, better for the investee and if executed correctly, better for the manager.”
If that sounds corporate, it’s because it is. If Find Invest Grow is serious about finding enterprising companies and helping them deliver their products to market, then NMVC is serious about making sure it delivers returns to its investors. The fund is authorised by the FCA and takes a 15% cut of an investor’s profits, fair enough when you are currently delivering annualised growth of 59%. There’s no timeframe attached to the returns, but James estimates 5-10 years to be the most reasonable timeframe. Simple then? Provided you know what you are doing.
James, who lists his interests variously as Rugby, Classical Guitar and Photography, is surprisingly fresh faced for a man who has been working on a deal that first began its fundraise at 4pm on Friday, and completed this Monday morning at 10am, raising somewhere in the region £0.5m. But he is used to this kind of environment, even suggesting that leaving the day-to-day running of FIG to Co-founder Mark Hanington, while he concentrates full time on NMVC, has reinvigorated him, as “it feels good to be working in a start-up again”. Not just any start-up either; his reputation as an early bird who, more often than not, gets the worm, means that the fund is already over-subscribed with professional investors anticipating a feeding frenzy, and access to capital is, he pauses, “more than we could have hoped for”. Having invested just north of £2.5m in the past two months, they “have a lot left in the tank”.
There’s no rush, however, James explains. FIG is already looking after 14 seed companies, including EyeQuant, the neuroscientific web analysts, Innoture, a medical devices company from Cardiff University specialising in microneedles, MuJo Mechanics, a manufacturer of patented rehabilitation and fitness equipment, and Wazoku, innovation management specialists working with Aviva, the BBC and NHS, to name a few.
James is open-minded when choosing companies to invest in. He’s not sector specific, but his team of analysts (there are 6 staff at NMVC) work through each submission, making recommendations, with the final decision taken by an investment committee of 3, including James. A portfolio manager is appointed who will typically deal with up to 3 companies at any time, and James is at pains to point out that there is no “rinse and repeat” formula for making a Company successful, each Company works because it is different from the others.
He is not a fan of the incubator / accelerator model, explaining that this is specific to the culture in US, where rigid expectations can be set by these service providers, and timeframes for support for a particular size of equity investment established as the ecosystem is sufficiently developed so that the support is provided by angels where the incubators and accelerators services stop. In the UK, you cannot simply lump promising students together and expect to create successful companies (though many have tried, and some are still trying).
So how did FIG come about? Well, James began his career training to be an accountant at KPMG, before attending university where he set up a small events company and began to invest in other students’ ventures; helping friends raise money from investors. Further investments in companies followed, before his first brush with danger, an investment angel that was anything but, led him to conclude that there “had to be a better way”. Drowning his sorrows in the pub after work one day, his long-time friend and collaborator, James Herbert, a Durham graduate who founded Brightsparks Recruitment, decided to take a leap of faith and entrust James, Mark Hanington and Marco Geninazza with the funds to launch FIG. The guys have never looked back.
During the course of our wide ranging conversation, we discuss the East London and Tech City, and it is interesting to hear a West Londoner’s take. Is the hype justified? James’ view is that it doesn’t matter where you are based, as long as you deliver your product and your company’s products to market successfully. Ever the pragmatist, he questions the infrastructure of the Silicon Roundabout: its fibre is not great, the rent is prohibitive, and most of the key decision makers are still based in the West. East is great if that’s where your customers are, but you won’t find James scouring Tech Crunch or studying The Hackney Gazette for his next investment.
Finally, we discuss risk. Early stage investments are risky, right, and a portfolio of risky companies, now that the “search for yield” has been consigned to a bygone age, is best avoided? Look at it this way, says James: firstly, the risk is priced into the valuation of the Company. Secondly, if you are investing under EIS you get back 30% of your capital on day one and your total downside is limited to 30 – 40% of your capital. That may seem like a lot, but, as we have said before, if you know what you are doing, you don’t tend to pick turkeys.
One of the worst aspects of James’ job is delivering the bad news to entrepreneurs. We don’t like your idea. FIG cannot turn a bad idea into a good one, and it cannot support a business idea if nobody knows how it can be delivered. There must be a clear process and route to market. James’ first question is always “can we have a meaningful impact on your business?”
James says he is looking to work with people and companies that are smarter than he is to achieve the leverage his clients demand. As one of the smartest people in the room, however, he sets the standard. He knows what he is doing. Do you?
James King is co-founder of Find Invest Grow (FIG), and Managing Director of New Model Venture Capital