Partner Article

Five key VC funding trends

Byline: Leslie Uzan, Head of Alternative Investments at St. James’s Place Wealth Management

Working with a large number of fund managers within the UK venture capital industry, notably in the tax-advantaged space, investing across many different sectors, we have a unique insight into the small business ecosystem. Further to our engagement with managers over the past year, we have seen several themes emerge.

Whether or not you are looking for venture capital funding or already have external funding, these key topics should provide food for thought in the current fast-moving business environment.

1.  Growth prospects post-COVID 
   

Whilst a large number of businesses and industries have been affected by the pandemic, there has still been a lot of investment activity over the past year. Some investors have avoided certain areas of the market altogether, however interestingly some businesses operating in affected sectors have still managed to obtain funding. They have done this by focusing on the growth story for their business, and providing a compelling business case for growth post-COVID. One example is Feast It, an events booking platform, which successfully raised £1.7m in January 2021. The co-founder of the business is predicting a boom in the events industry, with many events being delayed rather than cancelled. Feast It has also adapted its offering to cater for the virtual events market, which has further supported their business case and allowed them to gain support from investors.

2.  Agility and adaptability 
   

With all companies, large and small, having to operate in a very difficult and unpredictable business environment over the past 12 months there has been a focus on agility and adaptability. Beyond rigorous planning, strong leadership has been critical during the crisis. The adaptive DNA of UK small businesses has been really inspiring and has helped them find opportunity in times of crisis. From an investor perspective, diversification of revenue streams has been encouraged, and many businesses have looked to expand their offering. For example, Pasta Evangelist, a fresh pasta recipe delivery service, which was well positioned entering the pandemic, but saw a real opportunity to expand their services. The company has been offering e-workshops, as well as virtual team events and corporate experiences. After a successful 2020, Barilla bought a majority stake in the British business in January 2021.

3.  Responsible business practices 
   

This has become such a hot topic for all investors, within the venture capital space and beyond, as well as for customers. There has been an increased focus on using money for good, and there is now a real expectation for companies to implement responsible and sustainable business practices. This will look different to different business, but here are some areas which your business could explore and consider:

Reducing your carbon footprint and/or using renewable energy sources Ensuring you have ethical supply chains Reducing waste and ensuring environmentally friendly packaging Promoting a diverse and inclusive workforce

4.  Capitalising on long-term trends 
   

As a small business, it is important to be aware of key societal, economic and technological trends, as well as key trends within your industry. Positioning your business so that it can adapt to such trends is crucial. However, if your business can capitalise on the relevant trends then that is even better. For example, the large majority of businesses being funded these days have a strong online presence and/or some element of technology behind the business. This could mean a robust social media strategy, a sophisticated and attractive website or a phone app for your services. You may have come across a business called Gousto, a meal kit retailer that has become one of the latest British “unicorns” (companies valued at over $1bn). Whilst on the surface, this appears to be a simple food delivery business, actually Gousto have positioned themselves as a tech business. According to an article in Private Equity Wire, Gousto is “the global leader in automation technology within the sector and all of the fulfilment centres will utilise the Company’s proprietary algorithms which maximise speed of pick, daily volumes and pick accuracy, whilst minimising cost and food waste”. There is no doubt that focusing on presenting and delivering a strong technology proposition would have played a key part in the success of the business and also in making it attractive to investors.

5.  Funding for female founders 
   

Despite being home to a large number of innovative start-ups, the UK has a disappointingly high gender funding gap. According to a report commissioned by the British Business Bank, for every £1 of VC investment, less than 1p went to all-female teams and only 10p to mixed-gender teams. The initial reaction may be to point fingers at the VC industry, however interestingly the report also noted that in fact only 5% of all pitchdecks received are from all-female teams. Therefore, perhaps the real issue to be tackled is how do we get more female-led businesses appearing in the VC pipeline? There is a lot of help, support and advice out there for female founders, and this article provides some actionable tips to maximise your chances of successfully raising capital for your business.

This was posted in Bdaily's Members' News section by St. James's Place Wealth Management .