I think the UK Government is listening to us

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!

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• HIGHLIGHTS-UK's Osborne delivers 2011 budget statement (reuters.com)
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• Facebook And Seedcamp Sow European Social Startups (allfacebook.com)
• 'Silicon Roundabout' ready to ignite (ft.com)
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Major coup for Seedcamp winner, ERPLY

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.

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TAG Investment stats

In thinking about today's inaugural Seed Summit (a Seedcamp initiative), I did a quick canter through the last 10 years of angel/seed investing that we have done at The Accelerator Group (TAG).

Image via CrunchBase

We've invested directly in about 64 companies.
The current portfolio is listed alongside here.

The stats look like like this:
10 sold
12 closed
42 active

These can be further analysed as follows:
Of the 10 sold, 4 were at 10X or better; 3 were 3X or better and 3 were at a loss
The 12 closed were total write-offs for us.

Of the 42 still active:
11 have reached EBITDA breakeven - or better
31 have yet to get there.
Of these, 9 are pre-revenue.

Seed and angel investing are fundamental to the health of the start-up eco system. VCs provide the bulk of the cash but seed investors fund the bulk of the companies.
27 times as many companies are seeded by angels in the US than by VCs according to Basil Peters

More comment on Seed Summit here: http://twitter.com/#search?q=%23seedsummit

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MyBuilder comes of age

No one who was present at Seedcamp 2007 when Ryan Notz, founder of MyBuilder, made his acceptance speech could have failed to be moved.
Without any of the "Oscar gushing" , Ryan very simply explained what his mission to build his marketplace for builders and consumers meant to him and his family.
Here was a guy with real passion and deep knowledge of his industry.
A stonemason turned internet entrepreneur was always going to be a great press story - and so it proved.

It wasn't all that obvious, however, that Ryan would also build a really good business.
This he has done - or certainly is in the process of doing. The company has been profitable for a number of months now and is growing strongly.

Marketplaces are notoriously difficult to build successfully. It takes time to build critical mass and before reaching this point, your utility to both buyers and sellers is pretty limited.
Bringing the giant Travis Perkins/Wicks on board as shareholders certainly helped. They have been outstandingly supportive, contributing meaningfully to board debate and providing access to the right parts of the organisation. The direct involvement of Geoff Cooper, CEO and John Carter, COO has been meaningful and a great example of how a corporate partnership can be made to work for a small web start-up.

Now, MyBuilder welcomes 4iP to the fold. See Techcrunch 21 Sept.
4iP is Channel 4's
Channel 4 have dominated the TV landscape in the field of Home Improvement with such programmes as Grand Designs; Location, Location, Location; The Home Show etc.

The 4iP investment will be used to accelerate growth and to build out the strong team that Ryan is assembling.

Note:

"4iP (4 Innovation for the Public) is a significant new initiative designed to stimulate public service digital media across the UK. The 4iP Fund aims to deliver publicly valuable content and services on digital media platforms – this means supporting great ideas for websites, games and mobile services which help people improve their lives."

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To: Alistair Darling, Lord Drayson - an Open Letter

Dear Lord Drayson,
Put £100,000 into 10,000 startups - not £10m into 100!

There has been a lot of chatter about the Government's apparent initiative to make £1bn available for innovative early-stage companies.
Apparently, Lord Drayson, the Minister of Science and Innovation in the Department for Universities and Skills is driving this. The BVCA is keen to promote the idea through its influential contacts that this money should be channelled via the large established VC funds.

From where we sit, putting lots more money into the large funds achieves the
exact opposite of what I understand the desired the objectives to be.

What is urgently needed in the UK - in order to promote entrepreneurship and
encourage innovation - is funding at the very earliest stages.

One of the major drivers for Silicon Valley's success has been the readily available, quickly raised seed capital. Its not uncommon, even in today's funding climate to find start-ups funded with $500K in a matter of weeks by angel syndicates led by an agile tech VC.

There is more than enough capital available once companies have proven their
technologies, validated the market need and have real momentum. This capital
is NOT venture, it is development or growth capital.

The so-called funding gap has never been adequately filled and the growth in
size of the leading funds has forced them to move up the food chain and to
back relatively fewer pure start-ups.

We have all been wringing our hands at this gap for many years and in the current environment the gap is noticeably widening.

Seed funds are extremely difficult to make work effectively on the classic
2/20 model since it is important that seed funds invest in a large and diverse portfolio (in order to find the winners) while at the same time need to provide a lot of hand-holding to these companies (implying a larger organisation - more partners).

The BVCA’s position is interesting in that it looks at the whole issue
from the 'industry's perspective' – you can’t blame them for that – its their job. Its certainly not being looked at from the entrepreneurs perspective!

We at TAG have had terrific support from some of the large tech VCs but their ability to do many seed fundings is very limited. We need healthy and growing seed capital partners to join us in our quest to find and nurture the next world beaters.

One of the most important and effective vehicles for promoting entrepreneurship in the tech arena in recent years has been Seedcamp - the flood of applicants and the rising quality of these applicants attest to the strength of innovation emanating from Europe.

They are deserving of far greater financial backing.

Robin Klein

Partner, The Accelerator Group (TAG)

PS: TAG is an early stage technology investor with 43 investments currently in its portfolio. We invest actively mainly in the UK but also across Europe and in the US.

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Seedcamp - Day 4

Seedcamp Day 4 Highlights from Seedcamp on Vimeo.

Seedcamp - Day 2

Seedcamp Day 2 Highlights from Seedcamp on Vimeo.

Looking Forward to Seedcamp 08

One of the highlights of my year - without a doubt - is Seedcamp. The one week of mentoring, networking, working, learning is really exhilarating.

Seedcamp is itself a start-up and its formation, evolution, development and growth is not unlike many of the start-ups in which I have been involved.

In my view, Seedcamp is destined to become a significant brand in the technology world. A founder with amazing vision (Saul), strong backing and goodwill from almost all the leading players in the industry and a brilliantly determined and smart CEO (Reshma) is a pretty good cocktail.

As was made clear last year, Seedcamp is not all about the relatively small amount of funding which the winners receive, it is designed to provide a publicity platform, an incredible network and some intensive and expert mentoring to the 20 or so finalists.

Every day this week, Seedcamp will be featuring highlights of the day on their site. Check it out.

The blog too has loads of interesting stuff - I particularly liked Michael Orland's post on the Zeitgeist:

It read in part: "Our 2008 application zeitgeist post exactly one month ago generated some attention, which is why when it was suggested we do a follow-up for our finalists I was a little hesitant. There's a fine line between a useful device and a gimmick, and I feared we might stray into the latter territory. After actually performing the analysis though, I see there are some interesting contrasts: "mobile" has dropped off the top of the "what are you creating?" list to be replaced by "travel", "advertising" is less of a top-line panacea (and yes, we realize the tautology of "revenue" as a way to make money - thankfully it was substantiated a bit more than that), and Amazon has replaced Google as the cloud solution of choice. There are other differences as well - which is why I'll cease my yammering and leave you to draw your own conclusions."

You should read the whole article.

As Michael acknowleges, its a bit of fun ....but ...interesting to see what teams are building and what the judges thought was going to be most successful.

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MyBuilder starts building

Ryan Notz applied to Seedcamp 07 with his Buildersite plan(since relaunched as MyBuilder). He came all the way through and got his funding and with it many column inches of publicity. Like the piece in the Observer. Ryan's presentations at Seedcamp will be remembered for the obvious passion and sincerity that he displayed for his project. His own experience as a Stonemason and his intimate experience of the way in which the building trade works and what a nightmare it generally is for consumers, has guided the development of the business. He has chosen the success-fee marketplace approach rather than the lead generation model believing that it particularly attractive to both buidlers and consumers because unlike the lead generation sites, MyBuilder is able to retain their builders through both the good and the tough times. Lee Dryden, a builder registered on the site says: "This site is great. I paid for lots of leads with another site and didn't get any work at all. I'm more than happy to pay MyBuilder's fee when I get work -it's fair!" Ryan says that the approach works better for consumers too. "If you want to find a great builder, you need a lot of choice. A lead generation site can only put you in touch with builders who have bought your lead. Worse, they can only sell your lead to a few tradesmen (or they'll get an even bigger drop-out rate). Consumers prefer to choose their builder based on feedback, distance, skills, qualifications and experience, rather than simply those who buy their lead. MyBuilder gets around this problem by providing an open platform where consumers can search the entire database of over 10,000 tradesmen, and tradesmen can look at and enquire about all the jobs (currently at 1000 a month and growing). It ensures a better match, with satisfied customers that come back, and tell other people about the site. The network effect with this model is powerful, and it also enables MyBuilder to publish search results of both live jobs and registered tradesmen, which helps implement valuable partnership deals." Key to MyBuilder's 'go to market' plan has been the partnership with Travis Perkins (including Wickes) who joined Alex Hoye, TAG and others in a post Seedcamp funding round. A major PLC with sales exceeding £3bn, Travis Perkins is a leading company in the builders’ merchant and home improvement markets, and is a main supplier to the building and construction market, one of the largest industries in the UK.
The Mail on Sunday covered Travis' investment in MyBuilder here.

The Seedcamp Video

The concept of Seedcamp is not difficult to explain. What is tougher is to convey the spirit of the enterprise.
Seedcamp have recently published its video. Its a 10 minute piece edited from 80 hours of film which is worth the watch if you have an interest in the entrepreneurial scene in Europe and what practical steps people are taking to fuel it in the tech arena.


The filming, editing and production was done by Bonney and Klein (the Klein being Anthony Klein, my nephew). This post would have been up a month or two ago but I was waiting the the guys to get their website up - to give them a well-deserved plug.
Alex and Anthony are very talented film-makers who are applying their talents in a number of creative ways.
For example: FilmWorks is a film-making ‘boot camp’ developed by
Bonney and Klein Productions for companies wanting interesting and exciting training and team-building programs.

Bonney and Klein did a superb job on 80 hours of Seedcamp footage - thanks guys!

Seedcamp Sprouting

Saul referred to Seedcamp on Thursday last at the Library House Event, Essential Web.
The Seedcamp website went live on the same day and some of blogs have picked up on the story - as did the Guardian on-line.
There is quite a lot that isn't conventional about Seedcamp and perhaps this post will help to elucidate.

The theme of why we need to keep seeding European start-ups is a well covered one.

Like the Opencoffee Club, Seedcamp is essentially designed to promote entrepreneurship in the tech community in a down-to-earth, direct and practical way.
Like Opencoffee it is aims to be collaborative, inclusive and participative.

The idea is simple, Seedcamp will help to kick-start the best of European ventures through the provision of a small amount of money but more importantly by providing direct access to the best mentors in the ecosystem.

The website explains it in some detail.

Seedcamp will be owned by a wide range of VCs, Successful Entrepreneurs and Professionals.
Announcements will follow soon of those who are backing it.

In just a week and a bit - since Essential Web - rapid progress has been made on a few fronts.

1) 3 days ago, we had 12 fully submitted applications and 96 signed-up users. I am amazed at this given the application form only went up 4 days previously.

2) We have a number of backers on board. Our plan is to make a public announcement about our 1st group of investor/supporters in the coming week.

3) We started up a Facebook group around Seedcamp. There are 411 members today! Word-of-mouth and blogging is very active as we can tell by the links on our website and the emails we are getting

If you think you can add to Seedcamp as Investor/Sponsor/Mentor or you have a business plan which needs support please go to www.Seedcamp.com and contact us via the blog or the email.

If you can help spread the word, that too will benefit the community.