Dear VCs: Look at the idea, not the postcode
October 12 Mike Butcher
I’m interrupting the normal coverage today to write about something I care deeply about. The long feature I wanted to post today will have to wait.
Let’s make one thing clear. The reason TechCrunch was started by Mike Arrington three years ago was to cover the wave of new startups appearing on the Internet scene in his stamping ground of Silicon Valley. Fast forward to 2007 and TechCrunch is a very well known blog with international reach and now country-specific sites like TechCrunch UK & Ireland, TechCrunch France and TechCrunch Japan. But the core proposition of what TechCrunch started with - covering startups, venture funding and ‘disruptive’ technology news - remains the same, whatever language you speak or wherever you come from.
That means here at TechCrunch UK & Ireland, even though often it ‘appears’ that I as editor will often cover news about startups coming out of the main conurbations like London and Dublin, frankly their location really doesn’t matter.
Let’s be crystal clear: I couldn’t give a shit.
In fact, I couldn’t give a shit where you come from or who you are. It’s what you do as a technology entrepreneur that counts.
It may well be that some of the more interesting companies will come out of the big cities, because, well, they happen to attract a lot of people. The chances are just higher as a result. There is also the issue that - let’s not be naive about this - the big capital cities usually provide access to the largest funds and backers.
But that’s not what this post is about. What I am driving at here is that even though a technology entrepreneur or a developer with just a plain good idea might not come from, say, London, they should still be given a fair hearing.
If you are sitting in deepest Cornwall, the most forgotten street in Glasgow or a suburb in Sligo, you could still be sitting on a potentially disruptive idea. And that’s what I love about this market. Anyone can have a go.
Which is why I was saddened to get this email today from an aspiring entrepreneur who is trying to win funding for his idea. I have decided to remove his name and location so as not to prejudice his chances:
Hi Mike
I am just dropping you a quick email to help expose what I think is a serious issue with the UK tech industry. As a developer I have been working on a web based product for over a year. There is a huge (untapped) market for this product, it requires minimal overheads and has potential for a massive amount of growth.
So, what’s the problem you may ask?
Unfortunately I am based in XXXXX, which has virtually no VC organisations. Therefore I am having to approach VCs in London. The problem is that they do not have the slightest interest in talking to people such as myself, unless you are refered to them or meet them personally. This is a very big problem from my location! I am taking the time to travel to London in November, but getting VCs to meet you is an even bigger problem.
I’m sure you have lots of other issues and topics to address, but people in this industry exist across the country and its very hard for us to break into the market.
With your position at TechCrunch UK, you have a lot of influence and if you ever have the time to address this problem with the correct people, you would have the support of a very large number of entrepreneurs / developers / CEO’s from north to south.
Many thanks for your time.
XXXX XXXXXXX
OK so I have no idea if this guy’s idea is any good. For all I know it sucks. It could be the next Google or the next Boo.com (version 1). Who knows.
But what really makes me boiling mad is that he is not getting a fair hearing from potential backers. Yes, maybe he is barking up the wrong tree and doesn’t need VC funding. Maybe he just needs a friendly push towards a different type of backer.
But it behoves people like VCs to give an entrepreneur a straight answer, not waste their time, and - from first principles - hear their idea first and not care where they come from.
Let’s also be clear that most VCs or venture backers do not behave in the way that this guy’s experience suggests. This week I had lunch with a guy from one of Europe’s biggest venture funds and even he will take a phone call or look at a PowerPoint of an idea, even if only for a half hour. But that’s the crucial thing. He looks at ideas, not the person’s postcode.
Unfortunately there remains a significant minority of potential backers who do still behave in this appalling way.
I really hope that this post will go some way to convincing people who are prejudiced against technology companies, concepts and ideas coming from “the regions” to realise that this prejudice is almost as bad as racism. Because from where I’m sitting, the end result is the same.
October 13th, 2007 at 8:35 am
October 15th, 2007 at 2:59 pm
October 15th, 2007 at 8:44 pm
December 8th, 2007 at 8:12 am
Comments
October 12th, 2007 at 4:54 pm
Thanks from East Kent!
October 12th, 2007 at 4:58 pm
Well said Mike - as you know - we are dispersed (London, Edinburgh, Spain) and the reality is we have to travel into London because that’s where the concentration of funding is coming from. VCs find it weird we’re able to operate in this way. It’s almost as though they’ve not heard of global operations. We know that if we’re to stand any chance of making our stuff work in the US then we’ll have to be in the Valley. Sad but true. Some things (and prejudices) don’t go away. At least for now.
October 12th, 2007 at 5:08 pm
I always thought that is was a tenet of faith for VCs not to meet anyone unless they had been personally introduced by a trusted friend. Though I have to say I’ve never ever run into this problem and have been to see most VCs in the business over the years (actually getting them to understand and fund my visionary startups is another matter of course). But I would suggest that, rather than rant at the VCs, why not open a few doors for this guy. Pick up the phone. It benefits everyone. That is, of course, so long as the guy isn’t a complete nutter …
October 12th, 2007 at 5:28 pm
Keep focusing on what you do best, developing technology. Leave the financing part to people who know more about that than you.
For location independent fund raising, try http://www.angelsden.co.uk/ or approach someone with an established network in the finance industry who can do the leg work for you whilst you focus on your project http://www.icomotionconsulting.com/Corporate_Finance.html
Those routes may well work out better.
October 12th, 2007 at 5:44 pm
Great post Mike - though I fear this is not limited to the world of VC. Indeed in an industry which need have no geographical bias that UK start-ups are still beholden to London.
October 12th, 2007 at 5:50 pm
It’s a shame you didn’t post where he’s based.
There is a bubbling hotpot of effort occuring to support Web startups in the middle of the country (within commuting distance of Leeds/Sheffield), pulling together the entrepreneurs, money men and skills.
It’s very early days but the vital signs are good and there is a strong driving force behind it.
So, if you’re feeling stranded, are within driving distance & want to be involved, check out http://thenetstart.com (site only been up for a few days, so if you want to know more drop an email to me or one of the guys - ‘andy’ at the domain ‘meecard’ - or come along to an Open Coffee).
October 12th, 2007 at 6:06 pm
@Ivan - on the mark!
My response was getting too long and it warranted a new post anyway. So, here goes http://segala.com/blog/stop-crying-and-get-out-there/
October 12th, 2007 at 6:41 pm
I am a vc.
1) I know of no quality vc that refuses to listen to an idea due to postcode.
However;
Investing in a business in a far flung place is a slightly different proposition (there was no clue if your email was from an entrepreneur from shropshire or ulan bator). You need to be able to get to board meetings within half a day. You need to understand the local legal and regulatory regs.you need to be able to add value by plugging their people into your network.sometimes you can’t invest due to these more administrative issues but if an idea was that earth shattering we would do the deal and spend 6 hours on a boat to get to a board meeting OR encourage the team to move (if we can’t get their eaily; how will their customers or partners?)
2) Ivan pope makes a comment that he’s never had a problem getting in touch with a vc. I hope this is true for lots of entrepreneurs. I think that vcs today recognise that web entrepreneurs are often first timers and we need to be more visible. Its why I sponsored the FOWA roadtrip round major european cities. Its why I write my blog when i should be spending time with my daughter; to make me and us more accessible
3) Wrt releying on a network, this has traditionally been because the quality of people in your network is the best way to filter a plan. If a powerpoint comes with somone else’s reputation attached to it then I know its got a seal of approval. I often tell entrepreneurs at an early stage to go off and build their ned or advisory board. If they are able to convince 2 seasoned veterans that they are the person with the right plan, then it becomes a no brainer for me. Even if you are based in the falkland islands, if you are able to get robin klien to see that your business will fundamentally change retail, I reckon he’d invest or join the board…
(Nb. We are invested in switzerland, southampton, bristol, paris, dublin, stuttgart and looking etc etc…)
October 12th, 2007 at 6:50 pm
Mike,
I’m sure the author of the email meant well, but I think he’s also a bit misguided …. http://blog.suthakamal.com/2007/10/moving-to-where-money-is.html
Cheers,
-Sutha
October 12th, 2007 at 6:55 pm
@Ivan - I’ll be happy to refer him to people, although that’s not really my role here. I just felt a point needed to be made, not just left unsaid or ‘assumed’.
@Paul Walsh - Without even knowing this guy or his predicament you make the assumption that he has not made the effort to meet people in London (incorrect) and that he has made no contact with any VCs (also incorrect). The issue here is that he is being ignored because he is based outside London (but not, I might add, in an unknown part of the UK), not because he is making no effort.
@Paul Fisher - points taken, but any entrepreneur (worth their salt) who gets backing is going to make the board meeting, that’s a given. It’s getting through the door in the first place based on your idea not your postcode is the issue at stake here.
October 12th, 2007 at 7:10 pm
@mike you really think he’s being ignored because he’s outside of London? I never assumed he’s never been to London, only that he hasn’t built a network there - that’s different.
October 12th, 2007 at 7:32 pm
Hey Mike, I understand that this is a bit of a ‘political’ piece and that the ins and outs of this particular guy’s conundrum are a non-sequiteur. And I agree that good ideas and (more importantly) good internet businesses might, and do, come from anywhere.
That said, I agree with some of the others that this sounds like a bit of a sob story. We both know 16-year olds with no backing that have managed to create a substantial internet presence. Not being able to do that, no matter how good the idea, points to some flaws in their business.
Maybe they need a marketeer/journalist/loudmouth business partner that’s capable of getting them noticed and talked about?
October 12th, 2007 at 9:33 pm
Dear all
Firstly I must thank Mike for posting my email. I am sure he will be happy to validate this comment from the email address I supplied.
I don’t mind saying that I am based in the North East, I wish I was 16 and that I am a very senior member of a large internet organisation.
I have now spent several weeks attempting to contact a number of VC organisations in attempt to arrange just one meeting during my time in London. Some of these organisations have received complete summary documents, screen shots, etc. Others haven’t. But I can say its not through lack of trying.
It is very hard to expand your network when you are based in a region that has no VC organisations, or be refered to people in London by people who don’t know you.
Also, i’m sure that anyone willing to spend the time to sit down and see the proposal I put together would be more than impressed. I have spent a great deal of time working on it!
I would hate for people to think that this is a ’sob story’, as this is not a concept that sits comfortably with me. I am just hoping that it may prompt the relative organisations to expand their networking areas, to support people such as myself who exist across the UK, whilst also reviewing applications from people that can’t always meet them face-
to-face at first. We do try.
Thanks to everyone for taking the time to read and reply.
October 12th, 2007 at 9:44 pm
Hey Mr Sender you got no problem in meeting up with a V.C let’s see MR Paul Fisher put hios money where his mouth is and arrange a meeting
October 12th, 2007 at 10:02 pm
The first thing I did 6 months ago (being a blogger) was to subscribe to about 20 VC blogs (alas mainly US based) but it started to give me an insight into how they think, what they look for and most importantly how to find/approach them. (it felt like I was stalking them.) (oh, and if anyone wants my OPML for VC blogs drop a comment back on my blog, or on here and I am sure Mike will forward it on.)
The second thing was to immerse myself in every online forum/chat/group that seemed to have any VC/Angel element, again to see how to plan out my final approach when it became necessary.
Then two months ago I started attending local events, and this is certainly where I can sympathize with the writer of the email, that when it came down to it I really needed to start networking in central london (£40 worth of travel for each day I go in). I did find smaller networking events (business link has lots around the UK) but they run much less often and are in generally attended by far fewer VC’s than you find in London.
So would I have got far if I had not put in all the planning/legwork? I don’t think so, bottom line, even if you have local access to VC’s it still does not mean they are going to listen unless you know what to say and how to get across what you are trying to sell.
October 12th, 2007 at 10:06 pm
Mike,
You’ve really hit a nerve here! Well done.
As a VC based in the North of England I have loads of fun backing great tech companies from an early stage, but to be honest we’ve seen very little of the large tech VC’s “up north”. I think Pond’s investment in Transitive Technologies 5/6 years ago (which looks like it’s likely to pay back big-time) is the most recent “large Series-A” from one of the well known London specialists. We’ve had more luck getting VC’s from Germany and Ireland coming to see portfolio companies around Manchester than from London!
However, there are lots of other ways to raise money for tech startups.
One final point, this whole conversation is replicated in the US completely- if it ain’t silicon valley it has a much lower chance of getting funded- they have identical debates about it too.
There’s a standing invitation to Paul and his peers to come and have a beer in the North anytime!
October 12th, 2007 at 10:59 pm
Does any of you guys have any idea of VC firms in The Netherlands?
Im just curious.
October 12th, 2007 at 11:04 pm
@Sender - you can build your network no matter where you are. A very good friend of mine runs a company in Birmingham. This company (Glaxstar) is responsible for building Mozilla’s mainstream Firefox extensions for companies such as Google, Yahoo!, eBay and PayPal (oh and Segala ;))
It’s about connecting with people around you. Get to know them, let them get to know you. It’s not difficult, it’s just time consuming. Start blogging if you’re not going it already - this is a great way to get to know people outside your area. I wasn’t taking a dig at you. I just think it’s time people stop blaming VCs for everything.
October 12th, 2007 at 11:34 pm
Agree with you wholeheartedly Mike! I’m currently based in Melbourne, Australia and having looked over most the VC options have concluded that some of the best options (and perhaps only) are really international - there’s a general lack of Australian VC interest in the Internet. Right now one of my best option appears to be returning to the UK and working from there.
October 13th, 2007 at 12:39 am
I’m from that ‘forgotten street in Glasgow’
I think there is a lot to be said for being where it’s happening. Not because VC’s aren’t interested in talking to you (which could be true but not my experience) but because it takes what Paul Walsh was saying - building connections - and that takes time.
If you’re based up in the frozen north it takes even more time, I’d love to get along to every tech event in London and if I lived in London I could take a few hours out and pop along.
As it is I can either fly, which takes around 3 hours each way including connections or get the train, around 5 hours each way. Whichever I choose if it’s a night event it means staying over.
So every meet-up takes a day or more and to build connections you need to be a regular which becomes very difficult.
My experience is that by not being in London it takes longer to build the right sort of network with the right sort of people.
October 13th, 2007 at 1:18 am
Sometimes not being around VCs and not having access to funding may be a blessing in disguise. Bootstrapping, putting in that extra blood/sweat/tears, making that last dollar or euro or rupee go that extra bit further could be worth it. Of course, at some point we all need funding to take on the world, but in the meantime, we can always keep our head down and focus on the product, on being disciplined, and doing it because you still believe.
Thats my two centimes. Yes, I live in Geneva.
Shafqat
http://www.newscred.com
October 13th, 2007 at 8:08 am
Saul and Robin Klein did a great job with OpenCoffeeClub in London (through which we made a lot of useful contacts), something Manoj Ranaweera has tried to replicate in Manchester. Folk up north could do worse than give that support or, if there’s enough demand, then create others that are more local. Just ‘cos they’re small doesn’t mean they won’t work.
October 13th, 2007 at 11:50 am
“Sometimes not being around VCs and not having access to funding may be a blessing in disguise”
I would have to agree with that one. After a fairly dismal period pitching to a series of VCs for a company that would commercialise a pretty successful open source product I’m now much happier that I didn’t go down that route.
So rather than giving up I decided to write the product anyway – now I believe it is a much better state than it would have been had we got a lump of cash a while back and I spent my time talking to VCs rather than users. The extra time taken working on the product means that we are now hopefully in a really strong position technologically with a much more open strategy than would otherwise have been possible.
Of course, there is an element of “making the best of things” – but not having external investors can sometimes be an advantage.
October 13th, 2007 at 12:51 pm
Hey Paul, it’s good to hear about the Falklands. As an ex-adviser to the Falkland Islands government and the person that proposed the Falkland Islands Internet Initiative a few years back, it’s good to know that I can come to you in the confidence that you will talk with some of the companies I work with!
The Internet world is only a few 10s of mS big (when its working) - smile and lol
Cheers
Chris
October 13th, 2007 at 1:30 pm
Great post Mike. Couldn’t agree more. The location of the idea and the company should be immaterial. I remember thinking this in an almost militant way as Silicon Valley accelerated out of the post-2001 dotdoom years into the current frenzy of activity.
London seemed to take that much longer with the establishment taking much longer to recover from having its fingers burnt the first time around. It felt to me that if you weren’t on the US West coast, you were out of the centre of the world.
At the last MediaTech event I attended, one of the VCs showed a slide comparing US and European dealflow. There was no competition, virtually all of the major successes came out of the US. Whilst I suspect this picture is changing - there are far wiser people on this subject - it’s hard to be the gravity of the cities where the money men ply their trade. It’s possible, but it requires more work.
Or…work harder, smarter and put a lot more effort into building and retaining connections. As some of the other commentors have already said, there’s some good discipline enforced if the route to money is that bit harder.
October 13th, 2007 at 11:03 pm
@The Sender - Bootstrap, Bag borrow or steal and Get some angels in your local area, start getting some traction and validate your idea before you go to the VCs. If you find the door doesn’t open, look for a window, don’t go smashing into the same door again.
London is full of people with ideas and VCs with money to spend, I know I’m here
, but these two groups usually don’t meet unless it’s open coffee (do you have it where you are, if not - start one ! http://www.opencoffeeclub.org). VCs will want to see some sort of traction and validation before they go in. It looks to me like a VC is not what you need right now anyway. If you have good progress in validating your plan, you will hopefully be able to pick and choose your VC.
October 13th, 2007 at 11:39 pm
If you own a property take the plunge and remortgage it,if not credit cards,personal loans,you could easily raise 20-30k to get your idea of the ground and once you are up and running and can show the idea works then the v.c’s will be a lot more interested in throwing cash at you.
October 14th, 2007 at 7:08 am
What an interesting post, Mike.
I very much agree with Paul Fiisher’s post and pleased to see Ivan Pope acknowleding that getttiing to see VCs is not as difficult as some would suggest.
I’d recommend entrepreneurs from outside London to take a look at the Vc’s websites, check out the location of their investments. I think you’ll see a wide geographical spread.
From a TAG point of view, we focus on backing people, teams and we work closely with them. There are only 2 of us and we have a lot of investments, therefore we are either backing people we know really well (who can be far away) or else people with whom we can easily and efficiently work.
http://the-accelerator.blogspot.com/
OpenCoffee [http://www.opencoffeeclub.org/] has been a huge global success with ‘clubs’ in over 80 cities and towns around the world. This simple idea - which costs nothing to run - is enabling entrepreneurs in some very small communities to meet and network very efficietly and easily.
Seedcamp [www.seedcamp.com] too demostrates how much supprt there is for tech entrpreneurship outside of London. 268 applications from 40 countries!
And the finalists hailed from all over.
October 14th, 2007 at 11:35 am
Hi Mike
Thank you for raising this important issue.
May I propose you make this entrepreneur aware of WirelessMatch, subject to his/her activities relate to wireless, mobile internet, online media and mobile telecoms activities requiring funding up to £2.5m
Most of our investors are sector/technology orientated, rather than location-based.
Best regards
Steven Dotsch
Managing director
WirelessMatch Ltd - UK’s Wireless Funding Network
URL: http://www.WirelessMatch.co.uk
Em: steven@WirelessMatch.co.uk
Tel: 020 8374 8718
October 14th, 2007 at 12:20 pm
Sorry if I now become the spoiler of the romantic dream that all places are equally good for setting up a business.
It just happens that your chances of success may be slightly higher when you are based close to or in a relevant industry cluster. Maybe the VCs know this?
Check http://en.wikipedia.org/wiki/Industry_cluster
October 14th, 2007 at 1:50 pm
Guys, there is a very similar discussion happenng over on Ryan Carson’s blog. Check it out.
http://www.carsonified.com/fowa/response-to-paul-graham-on-startup-hubs
ps. If anyone wants to catch up, please mail me.
October 14th, 2007 at 5:25 pm
As a serial event attendee and organiser of both the Refresh Newcastle and OpenCoffee Newcastle events I agree it’s alot to do with your network.
I stumbled upon on a Mashup event in London a few weeks ago and what struck me was the level of interest and the volume of attendees from finance or business.
The vast majority of small tech companies in the North East are service based, so networking events are generally orientated around selling or promoting services. Mashup had a completely different spin - were the product or idea was king. I’m not sure whether this is the same for other outlying regions?
Having said that their are a number of things going on ‘up north’ to try and change this, so we’ll have to see how the next few years play out I reckon. I know of incubator/accelerator/funding setups getting going in the North West, The North East and as mentioned in West Yorkshire.
October 15th, 2007 at 11:31 am
Well said Mike!
I’m a Brit working from home for the past year and a half building podcast.com with the rest of the very small company (4) in Boston, USA. I’ve been over there for many a VC meeting/pitch and ther a feeling that everyone needs to be in Silicon Valley. The money seems greener and the ideas better.
Absolute rubbish. I’m building the future of information aggregation and organisation (note spelling - no ‘z’ heh) and the guys in Silly Con Valley don’t even realise it yet
Oh but they will… they will. Mu hu hu harr. etc.. (web 3.0)
I decided to work in the web about 12 years ago, realising that by do so it meant I could work for ANYONE, ANYWHERE.
ps: You need to update the copyright date in your template - it still says 2006
October 15th, 2007 at 1:22 pm
A couple of points to toss in as well.
I too am an outsider to the VC world, but while it may be a bit daunting I’ve had fairly good luck with phoning people and getting meetings. Sure there are a few VC’s out there that want nothing but a bulletproof business plan with sound metrics/financials, but on the same side I’ve gotten meetings based on nothing more than a 2 minute phone chat and/or a 10 slide powerpoint.
I echo Nick’s comments on building up a list of good VC blogs, if nothing else you can see what gets funded and what people are talking about. Outside of that, you do have to get yourself out there and network like your life depends on it.
October 31st, 2007 at 1:05 pm
Just wanted to chime in that it’s totally possible to do it from the “middle of nowhere”. I live in the middle of nowhere myself (deepest Lincolnshire) and two years ago built a startup and got funding from the US. A few months ago we sold, cashed out and the business is now with some happy new owners. If I can do it from the middle of Lincolnshire, location definitely isn’t a killer!