‘Lack of visibility has its advantages’Since alternative finance took off a few years ago, it has never been easier for new businesses to raise capital. Aside from venture capital, there are a myriad of options from traditional bank funding, angel, friends & family and crowd funding, not to mention the many other hybrid variants.
Key to issues of raising capital is a company’s stage in its life cycle; venture capital is primarily concerned with businesses that are early stage and hence potentially inherently more risky than established late-stage revenue producing companies further along in their journey.
Pandemic EraThe lists of known unknowns for the world economy are currently innumerable. Macro projections and their glacial pace prognostics for the future are being hyper accelerated. As such existing business models and routes to revenue are being thrown into turmoil, company forecasts upended as shifting consumer trends throw even the most Teflon coated plans into disarray.
Total investment in start-ups has fallen by 50% to £1.6bn in the past three months compared with the same period last year. Yet companies raising capital in the early stage/seed funding is only down circa 10%.
Life Cycle Risk; Early Stage EdifiedIn a recent survey (US) conducted by the Venture Capital Journal, nearly two thirds of respondents said they have seen early stage valuations drop 20-30 percent. Perhaps a harbinger of more 'sensible' valuations and a potentially required development in the evolution of venture financing.
Clearly more so now, in 2020, than ever, a flexible, malleable approach around a core focus is a pre-requisite for all would be start-ups.
As such, companies in the seed stage, many of whom are yet to produce revenue or fully identify their paths to market are ideally placed to take advantage of the current landscape. It’s a richly rewarding time for organisations afforded the luxury to able to refine and navigate the pitfalls befalling slower moving larger (and commensurately valued) competitors who lack the ability to quickly cut cost and pivot. Speed boats and tankers...
One can certainly argue that in a ‘new normal’ pandemic world, being lean, nimble and early in the life cycle of your growth can yield outsize opportunities - with less ‘risk’ than is currently priced...
In the kingdom of the blind, the one eyed man is king.
About Fuel Ventures:
- Fuel Ventures is a leading early-stage technology investor, investing in fast-growth UK and European businesses that have the potential to return between 10x and 100x.
- Entrepreneurial driven fund led by multi-exit entrepreneurs with £200m+ in exits.
- An advisory committee with over 50+ years’ experience, and exits totalling £2b+
- We now have 35 portfolio companies and after only 4 years our first fund has a 7.4X valuation uplift, validated by third-party follow-on investors.
- We screen 3500+ companies a year using our thorough due diligence processes internally, cherry picking the best 10 companies that have the potential to achieve 100x returns
- We put a director on the Board of every company we invest in and take an active and hands-on role in the management and development of each company, plus bring added extra value through our network of sector experts.
- We invest in commercially scalable technology companies, with operating gross margins between 30% - 90%
- Targeting a minimum of 10x return on investments over a 5-7 year horizon.
- Generous HMRC EIS tax benefits including 30% income tax relief, 0% capital gains tax on exit, loss relief, and inheritance tax relief for UK taxpayers.
- We invest in every fund ourselves, with a large 10% personal investment alongside our investors, this is £2,000,000 - £3,000,000 into every fund!