Hampton Consulting Ltd. Entrepreneurship & Venture Capital (VC) Investment A Risky Business?

Hampton Consulting Ltd. Experience – Before MBA (03-04)  13 years in mobile telecoms & IT  Co-founder / CEO of CopperEye High performance indexing for databases Raised c. £6M institutional funding Catalyst: MIT’s Entrepreneurship competition  Prior to CopperEye: I was a “corporate career person” Stagnating in operational senior management Overworked, under-challenged, under-rewarded

Hampton Consulting Ltd. Experience – Post MBA  Co-founder / MD of Hampton Consulting Advice to start-up technology companies Consultancy to mobile telecoms companies  Co-founder / Non-exec director of Aquantra Specialist Bath-based technology recruitment company Self-funded (a little!) plus organic growth  Co-founder / CEO of Zenulta Providing enterprise event correlation solutions Delivered 2 rounds of funding  Co-founder / CEO of iRooms Providing enhanced utilisation of space Self-funded by founders – relationship with electronics manufacturer

Hampton Consulting Ltd. Entrepreneurial Motivation  Reduced bureaucracy Ability to take decisions Speed to market  Share in the fruits of your labour  Unlimited upside potential. Downside potential?  Faster career progression Less rigid role definitions

Hampton Consulting Ltd. Recipe for Success?  Experienced team Diverse skill sets “Stand on the shoulders of giants” (I. Newton)  Find a unique angle on a business problem  Network like crazy  Build strong reference customers

Hampton Consulting Ltd. Funding a Business  Bank loans Secured loan Often matched by personal investment High personal risk  Venture Capital (& angel) investment Can provide “value added” operational skills Low personal risk

Hampton Consulting Ltd. Why is Venture Capital the Lower Risk Route?  No personal financial risk Just warranties & disclosures  Job security in large companies? Yeah right!! Funding gives run of at least 1 year Follow on funding Longer notice periods (6 months)  Saleable commercial experience

Hampton Consulting Ltd. How do you get VC Funding? (1)  Find a good idea – a solution to a problem Network with individuals in different vertical markets “Know your onions” Exit value £60M -> £300M  Do market research Know your competitors Build a business plan

Hampton Consulting Ltd. How do you get VC Funding? (2)  Draw up a shortlist of VCs who invest in your marketplace  “Value added” investment, or “dumb money”?  Try to get personal introductions / referrals  Choose your professional advisors carefully

Hampton Consulting Ltd. MBA Summer Project  “Leveraging the VC Relationship – The Entrepreneurs’ Perspective”  Interviewed 6 entrepreneurs in areas of: Relationship with VCs Legal & commercial terms used in investment agreements Board balance & composition Control within the relationship

Hampton Consulting Ltd. Earlier Research  Relationship between entrepreneur & VC MUST be balanced & cooperative for a company to be successful If an entrepreneur loses influence due to poor performance or greedy investors, the company will fail

Hampton Consulting Ltd. Project Findings (1)  Entrepreneurs have most influence at first funding round Negotiate then “play the long game”  Board structure has no effect on entrepreneur’s influence within relationship  Founder mentoring is a good idea

Hampton Consulting Ltd. Project Findings (2)  Choose a VC with entrepreneurial experience if this is your first company Fairer terms  Fairer terms promote trust and cooperative behaviour Greater chance of success

Hampton Consulting Ltd. Project Findings (3)  Entrepreneurs should raise more capital than they think they need  Maintain influence by recognising “domain expertise”

Hampton Consulting Ltd. What’s next for me?  Developing my current businesses  Helping others grow theirs Advisor capacity on strategy & investment  Conducting venture capital “due diligence”

Hampton Consulting Ltd. QUESTIONS