👋🏾 Hi friends!

Well I’m back in Italy to take in some air, some sun and a fair amount of heat.

It’s been a tremendously trying 6 months on a lot of fronts and it’s always worth remembering to give yourself time to reflect, regroup and recharge.

And, let’s face it, with views like these, why wouldn’t you?

Whatever you’re doing this summer, whether watching the Olympics or building your business, I hope you get the opportunity to take a break and just… Breathe!

As you know, I’m well underway writing about all the things I’ve learned from the last couple of decades as founder, CFO and CEO, so sign up for early access to Off Balance – The Book and feel free to share with anyone else you think might enjoy it 😄. I’m setting myself the target of getting through a large portion of it whilst I’m away in Italy during August – wish me luck!

Now let’s get down to business…

𝗛𝗼𝘄 𝘁𝗼 𝘀𝘁𝗿𝗲𝗮𝗺 𝘁𝗼 𝟱𝟬𝗺 𝗱𝗼𝗴𝘀 𝗮𝗻𝗱 𝗰𝗮𝘁𝘀 𝘄𝗵𝗶𝗹𝘀𝘁 𝘀𝗽𝗲𝗻𝗱𝗶𝗻𝗴 𝗭𝗘𝗥𝗢 𝗼𝗻 𝗺𝗮𝗿𝗸𝗲𝘁𝗶𝗻𝗴

I’ve talked to a lot of VCs and venture backed founders on Nothing Ventured, but what about the success stories from folk who’ve taken a different path?

On our latest episode, I spoke to Amman Ahmed, founder of MusicForPets, a bootstrapped business producing relaxing music and TV for mans best friends to help with a range of anxiety issues, think of it as Netflix for your pets, or just Petflix!

MusicForPets exited to Create Music Group in 2023 and Amman remains as President for MusicForPets and VP Business Development.

Prior to founding MusicForPets, Amman founded rormix, an app to help you discover emerging music and roundwaves s network of YouTube channels that focus on making music to help you sleep, relax and concentrate.

What did his journey look like?

💰 Took VC funding.
😭 His team told him he was useless.
⚙️ Quit and built side hustle of his side hustle, completely bootstrapped.
🐕 Streamed to 50m pets globally having spent only FIVE THOUSAND DOLLARS on marketing over 7 years.
🤢 Got courted by investment bankers who tried to sell him to pet food companies.
🤯 Found an email in his spam that led to an 8 figure exit to a globally renowned record label.

You. Could. Not. Make. This. S#it. Up.

❓ Want to know what happened next…?

Check it out on YouTube!

Else listen on Spotify or Apple

If you have any feedback, or if there’s something you’re desperate to see me include, just reply to this mail or ping me online – I’m very open to conversations.

If you like what I’m putting out, do give me a follow on LinkedIn, Twitter and Instagram.

(If you are trying to connect with me on LinkedIn, maybe read this post I wrote and make sure to start your request with “Off Balance” and, more importantly, tell me why you’d like to connect 💪🏾)

Don’t forget to like, rate and subscribe to Nothing Ventured on Apple, Spotify or YouTube, it really helps more people see what we’re doing – you can find links to these (and more including my Office Hours) right here!

As always, my office hours are open, if you’d like to chat about anything finance, tech or venture releated, just grab some time 😊.

I hope you found Off Balance #46 valuable. As always, I’d love to get your feedback and understand the sort of topics you would love to hear about.

Just hit reply to this mail or drop me a line at [email protected] and let me know 😊

🚀And that’s a wrap for this edition of Off Balance – I’d appreciate your feedback so just reply to this email if you’ve got something you’d like to say.

📨 If you think someone else might love this, please forward it on to them,

🎧 Finally, if you’re a fan of the Nothing Ventured podcast, please don’t forget to like, rate and subscribe wherever you get your pods – it really helps us spread the word.

That’s it from me so until next time…

Stay liquid 🙂

Aarish

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👋🏾 Hi friends!

We’re coming up to the end of this season of Nothing Ventured, this week we have Nicola Sinclair, Founding Partner at Twin Track Ventures on the pod, but check out who we’re bringing on for the last episode of the season in a few weeks 🤯👇🏾

None other than Piers Linney – ex Dragon on the BBCs Dragons’ Den but more importantly massive advocate for SMEs, tech, startups and good governance from the government all the way down.

Be sure to subscribe so you don’t miss out on this absolute banger of an episode 💪🏾

I’m taking my annual trip down to Italy later this week, keep your fingers crossed that the ol’ Tesla doesn’t conk out on me – I already had to replace 2 of the tyres this last week which wasn’t a particularly pleasant thing to have had to do.

But for now, let’s settle in for another dive into the world of venture capital ✨

I’m well underway writing about all the things I’ve learned from the last couple of decades as founder, CFO and CEO, so sign up for early access to Off Balance – The Book and feel free to share with anyone else you think might enjoy it 😄.

Now let’s get down to business…

In this weeks Off Balance:

🎙️ Nicola Sinclair, Founder of Twin Track Ventures on Nothing Ventured
📑 HSBC Innovation Banking’s 2024 Venture Capital Term Sheet Guide: Key Insights for Founders and Investors

𝙃𝙖𝙫𝙚 𝙬𝙚 𝙧𝙚𝙖𝙘𝙝𝙚𝙙 𝙥𝙚𝙖𝙠 𝙙𝙧𝙤𝙣𝙚?

In the latest episode of Nothing Ventured, I sat down with Nicola Sinclair – Founder and General Partner of Twin Track Ventures, a dual use venture capital firm based in London backing founders raising pre-seed and seed rounds with a focus on teams building deeptech solutions for critical challenges.

Prior to Twin Track, Nicola was fund manager of the Air Innovation Fund having spent close to two decades as an officer in the Royal Air Force.

My top takes:

➡️ 𝗧𝗵𝗲 𝗘𝘃𝗼𝗹𝘂𝘁𝗶𝗼𝗻 𝗼𝗳 𝗠𝗶𝗹𝗶𝘁𝗮𝗿𝘆 𝗜𝗻𝗻𝗼𝘃𝗮𝘁𝗶𝗼𝗻

Nicola shared her firsthand experience of the transformation in military technology from the dark ages of defense services to the present day. She highlighted the shift from outdated communication methods, like pen and paper, to the integration of advanced technologies like drones and AI in defense operations. This evolution underscores the importance of embracing innovation to enhance military capabilities and efficiency.

➡️ 𝗗𝘂𝗮𝗹-𝗨𝘀𝗲 𝗧𝗲𝗰𝗵𝗻𝗼𝗹𝗼𝗴𝗶𝗲𝘀

We explored the concept of dual-use technologies, which are commercial technologies with applications in both civilian and defense sectors. Nicola noted the significance of investing in technologies that not only benefit national security but also have broader societal impacts. By focusing on dual-use technologies, businesses can drive innovation while addressing critical challenges in various industries.

➡️ 𝗜𝗻𝘁𝗲𝗿𝗻𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗖𝗼𝗹𝗹𝗮𝗯𝗼𝗿𝗮𝘁𝗶𝗼𝗻 𝗮𝗻𝗱 𝗥𝗲𝗴𝘂𝗹𝗮𝘁𝗼𝗿𝘆 𝗜𝗺𝗽𝗮𝗰𝘁

The discussion also touched upon the ITAR exemptions and the implications for businesses in the UK and Europe. With the AUKUS pact and the focus on emerging technologies, there is a growing need for streamlined regulations to facilitate collaboration between nations and enhance technological advancements in defense. This regulatory shift is crucial for companies looking to engage with the US Department of Defense and expand their market reach.

We also talked about:

💻 Living through the dark ages of the defence when 8 people would use one laptop.
🔫 What do you do when you get sent a drone with a gun on it?
🖨️ Printing aircraft parts at the point of use to bring time to repair down by weeks.
🤝 Countries have different priorities, how to leverage interoperability whilst maintaining a point of difference.
🔬 The role of science within defence.
🌐 How to reconnect disconnected communities.
🕵🏿‍♂️ How there aren’t many people who have worn a uniform but also understand how to fund innovation.

Listen on YouTube, Spotify, Apple or wherever you get your podcasts!

If you have any feedback on the podcast or the newsletter, just reply to this mail or ping me online!

If you like what I’m putting out, do give me a follow on LinkedIn and Twitter.

(If you are trying to connect with me on LinkedIn, maybe read this post I wrote and make sure to start your request with “Off Balance” and, importantly, tell me why you’d like to connect 💪🏾)

Now let’s get into it.

Off Balance

HSBC Innovation Banking has released its second annual Venture Capital Term Sheet Guide, offering valuable insights into the current state of VC term sheets and market trends. This report, based on an analysis of 426 final and completed term sheets from 2023, is a comprehensive guide to the complex world of VC equity terms for founders and provides a benchmark for investors.

And I read it so you wouldn’t have to 🙂 

HSBC Innovation Banking’s 2024 Venture Capital Term Sheet Guide: Key Insights for Founders and Investors

Market Context and Investment Trends

Despite the challenging economic climate, European VC investment activity stabilised during 2023. While there was a decline in overall investment value compared to 2022, 2023 still emerged as the third-largest European VC investment year on record.

Some initial observations:

Investment volume declined less than investment value (25% vs 38% respectively), indicating a shift towards smaller, earlier-stage transactions.

The second half of 2023 saw an 18% increase in investment value compared to the first half, suggesting a gradual recovery in investor confidence.

ClimateTech and AI investments gained significant traction, increasing their combined share of total term sheets from ~9% in 2022 to ~20% in 2023. This trend was also reflected in the broader market, with these sectors representing ~40% of total European VC investment in 2023.

There was a notable uptick in seed-stage investments (<£2m) between 2021-2023, demonstrating the resilience of early-stage funding – in sharp contrast to later stage fundraises.

Later-stage UK venture-backed businesses continued to seek funding from international investors, particularly from the US and Europe, as they focused on larger funding sizes and scaling opportunities.

Term Sheet Analysis – Key Findings

The report’s analysis of 426 term sheets, representing an aggregate investment value of £4.5 billion, revealed a number of important trends:

Valuation Shift, Not Structural Change: Surprisingly, despite market uncertainties, term sheets did not become significantly more investor-friendly in 2023. Key clauses remained broadly in line with 2022 standards. It will be interesting to see how this trend continues in 2024, anecdotally, they certainly seem to have hardened with investors looking for both better economics as well as more control.

Liquidation Preference: A 1x non-participating liquidation preference continues to be the standard preference share type, which is considered the most founder-friendly option and almost guaranteed for any company taking on VC funding.

Board Representation: Control and oversight remain crucial, with 79% of term sheets including an investor board appointment (86% if including observer-only seats). This delicate balance between investor control and founder autonomy is something that, in 2024, will continue to skew towards investors where, again anecdotally, we are seeing investors wanting to influence the direction of their portfolio companies in ways that would not have been considered normal a few years ago.

Company Warranties: The survey confirmed an increasing market norm of company-only warranties, present in ~80% of term sheets reviewed. This aligns with the new BVCA model form documents.

Founder Warranties: There was a significant decrease in founder warranties, declining by 25 percentage points to 44% of term sheets in 2023.

Anti-Dilution: These terms saw a decrease across the total survey, primarily due to the increased proportion of seed-stage investments, where such terms are typically less prevalent. But, again, this is one that founders should be looking out for in 2024 as they can have significant impact on the cap table in future rounds.

Investor Landscape and Geographic Trends

The report provides insights into the geographic distribution of investors and companies:

Company Headquarters: 95% of the companies in the surveyed term sheets were headquartered in the UK, with the remaining 5% in Europe. This is on trend with the UKs prominence in the venture ecosystem outside of the US and China.

Lead Investor Location: The mix was more diverse in terms of where investors were based, with 58% from the UK, 22% from Europe, 15% from the US, and 5% from other regions (Middle East, Africa, and Asia).

Seed Investment: This stage was dominated by UK domestic investors.

Later-Stage Funding: UK venture-backed businesses continued to seek funding from international investors, particularly for larger rounds and scaling opportunities. This is something that we have discussed a great deal on Nothing Ventured, the paucity of later stage capital in Europe ‘forces’ founders to look overseas – typically the USA – when trying to secure rounds post Series B.

Venture Debt Insights

While the primary focus of the report is on equity term sheets, it also touches on venture debt, recognising its growing importance as founders seek to minimise dilution while extending cash runways. The guide includes a summary of key structural and economic terms of venture debt agreements based on market experience.

2024 Outlook

The report offers several predictions for the VC landscape in 2024:

Gradual Recovery: European VC investment levels are expected to steadily recover as investors return to new deal activity.

Early-Stage Momentum: Continued strong interest in early-stage investments is anticipated.

Late-Stage Market Bifurcation: High-performing companies may see climbing valuations based on public market reference points, while others may struggle with recaps and down rounds.

Increased Cross-Border Investment: More US VC investors are expected to invest in UK and European companies.

US Market Focus: Increased focus from UK and European companies on scaling into the US market.

Conclusion

The stability in term sheet structures, despite market uncertainties, suggests a maturing VC ecosystem that values founder-friendly terms. However, the shift towards earlier-stage investments and the growing importance of sectors like ClimateTech and AI indicate evolving priorities in the VC world.

As the VC landscape continues to change in 2024, this guide serves as an useful resource for understanding the complexities of fundraising and investment.

But as the report is ‘backwards looking’ we will only understand the true nature of the fundraising landscape in 2024 well into the next year.

What me and the CFOs in my team are seeing in the market suggests that not only has fundraising continued to be difficult for founders especially post seed, but also that the valuation and terms on offer show a significant shift towards investors looking to protect – and exert their protection over – their investments. Whilst this may seem an obvious choice, one of the realities of venture investing has been to incentivise and empower founders to go out and build big.

The expectation seems to be in 2024 that they should go out and build big, but with much tighter scruitiny from their investors at the same time.

As always, my office hours are open, if you’d like to chat about this or anything else, just grab some time 😊.

I hope you found Off Balance #45 useful. As always, I’d love to get your feedback and understand the sort of topics you would love to hear about.

Just hit reply to this mail or drop me a line at [email protected] and let me know 😊

🚀And that’s a wrap for this edition of Off Balance – I’d appreciate your feedback so just reply to this email if you’ve got something you’d like to say.

📨 And if you think someone else might love this, please forward it on to them,

🎧 Finally, if you’re a fan of the Nothing Ventured podcast, please don’t forget to like, rate and subscribe wherever you get your pods – it really helps us spread the word.

That’s it from me so until next time…

Stay liquid 🙂

Aarish

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👋🏾 Hi friends!

Here we are mid way through July and the rain is coming down in buckets. In the last week someone tried to assassinate Donald Trump, England lost to Spain in the finals of the Euros and the weather seems to be reflecting the general mood.

And beyond that, I’ve been reflecting on the important stuff in life especially after the news that one of my oldest friends mother, who I had spent huge amounts of time with as a child, had suddenly passed away.

One of the things that I was really conscious of was the wealth of experience that those in that generation have and how so few of us take the time to capture it for posterity – and more importantly – for legacy. So this month I sat down in the studio and recorded my dad’s story over two mega 1.5 hour long sessions.

I would recommend to anyone who’s parents are ‘getting to that age’ to sit down with them, even if it’s with a cuppa and recording the conversation on your phone to do this so as to better understand the life that they have led so you can ensure that your children, and in turn their children, can learn where they came from.

In other news, a good friend of mine – Dr Andrea Isoni – is going to be running an AI Masterclass to help you enhance your business, designed for decision-makers. The course will help you gain a comprehensive understanding of Generative AI, its ROI, and practical applications as well as helping you learn to manage AI vendors, ensure AI safety, and govern implementations effectively. The course includes hands-on experience, expert insights, and a bonus AI use case review. Join Andrea on July 27-28, 2024, to stay ahead in the AI-driven market.

You can register here using the code NOTHINGVENTURED24 to get a massive 50% off.

As you know, I’m well underway writing about all the things I’ve learned from the last couple of decades as founder, CFO and CEO, so sign up for early access to Off Balance – The Book and feel free to share with anyone else you think might enjoy it 😄. I’m setting myself the target of getting through a large portion of it whilst I’m away in Italy during August – wish me luck!

Now let’s get down to business…

𝗗𝗼𝗲𝘀 𝗘𝘂𝗿𝗼𝗽𝗲 𝗻𝗲𝗲𝗱𝘀 𝗺𝗼𝗿𝗲 𝗶𝗻𝘃𝗲𝘀𝘁𝗼𝗿𝘀 𝘄𝗶𝘁𝗵 𝗳𝗼𝘂𝗻𝗱𝗲𝗿 𝗯𝗮𝗰𝗸𝗴𝗿𝗼𝘂𝗻𝗱𝘀?

In this week’s Nothing Ventured, I sat down for a wide ranging conversation with TWICE exited founder turned VC, Jan Reichelt.

An entrepreneur at heart, Jan has spent his career in technology start-ups, online businesses, professional information services and digital media.

Jan is now a founding and general partner of 10x Founders, a network-driven investor backed by over 200 entrepreneurs and angels.

Previously, he founded the scientific collaboration platform Mendeley (acquired by RELX / Elsevier PLC) and Kopernio, a ‘Spotify for research papers’ (acquired by Clarivate).

At Clarivate, Jan was Managing Director for Web of Science, responsible for revenues of over $250m.

In 2013, he was named “European Founder of the Year 2013” by TechCrunch / The Europas.

Top Takeaways:

𝗚𝗹𝗼𝗯𝗮𝗹 𝗜𝗺𝗽𝗮𝗰𝘁 𝗼𝗳 𝗘𝗱𝗧𝗲𝗰𝗵: Jan highlighted the immediate global reach of the education and edtech industry, especially in higher education and academic research. The industry’s common standard and global nature present vast opportunities for innovation and growth.

𝗙𝗼𝘂𝗻𝗱𝗲𝗿 𝗜𝗻𝘃𝗲𝘀𝘁𝗼𝗿 𝗦𝘂𝗰𝗰𝗲𝘀𝘀: Jan shared valuable insights on the success of founder investors in the VC space. Data suggests that founder VCs with successful exits tend to have a higher investment success rate, emphasising the importance of founder backgrounds in making impactful investment decisions.

𝗕𝗮𝗹𝗮𝗻𝗰𝗶𝗻𝗴 𝗘𝗻𝘁𝗿𝗲𝗽𝗿𝗲𝗻𝗲𝘂𝗿𝘀𝗵𝗶𝗽 𝗮𝘀 𝗮 𝗟𝗶𝗳𝗲𝘀𝘁𝘆𝗹𝗲: Jan spoke about the significance of treating entrepreneurship as a lifestyle rather than just a job. He highlighted the importance of designing a balanced life around the entrepreneurial journey, acknowledging the emotional toll and rewards that come with it.

We also covered:

💥 If you can create value and people are prepared to pay, there will always be an exit route.
⛔️ Sometimes listening to too much external advice as a founder can be counterproductive – be confident in yourself as a founder.
🪟 How windows of opportunity led to Jan selling his second business.
👼🏽 Why you can’t scale investing as an angel.
⚖️ How entrepreneurship wasn’t a job, it was his life; so he designed his life to ensure he had the balance.
💡 Jan’s contrarian advice: You shouldn’t only talk to the partners at a VC fund.

Check it out on YouTube!

Else listen on Spotify or Apple

If you have any feedback, or if there’s something you’re desperate to see me include, just reply to this mail or ping me online – I’m very open to conversations.

If you like what I’m putting out, do give me a follow on LinkedIn, Twitter and Instagram.

(If you are trying to connect with me on LinkedIn, maybe read this post I wrote and make sure to start your request with “Off Balance” and, more importantly, tell me why you’d like to connect 💪🏾)

Don’t forget to like, rate and subscribe to Nothing Ventured on Apple, Spotify or YouTube, it really helps more people see what we’re doing – you can find links to these (and more including my Office Hours) right here!

As always, my office hours are open, if you’d like to chat about anything finance, tech or venture releated, just grab some time 😊.

I hope you found Off Balance #44 valuable. As always, I’d love to get your feedback and understand the sort of topics you would love to hear about.

Just hit reply to this mail or drop me a line at [email protected] and let me know 😊

🚀And that’s a wrap for this edition of Off Balance – I’d appreciate your feedback so just reply to this email if you’ve got something you’d like to say.

📨 If you think someone else might love this, please forward it on to them,

🎧 Finally, if you’re a fan of the Nothing Ventured podcast, please don’t forget to like, rate and subscribe wherever you get your pods – it really helps us spread the word.

That’s it from me so until next time…

Stay liquid 🙂

Aarish

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👋🏾 Hi friends!

European summer is on, and, whilst the trope goes that everyone is off for the next couple of months, that certainly hasn’t been my experience over the last few years!

I’ve had more meetings packed into the diary over the next few weeks than I have in a while, and despite the fact that the last year or so seems to have been a slow grind, something feels like it has been unlocked over the last few weeks. Maybe as the election drew to a close, confidence was picking up, or maybe it’s just that all the dry powder out there is flowing a bit more freely.

Whatever it is, the UK feels like it’s back in business! So to celebrate, today’s post is a bit of a dig into what are the trends in the UK ecosystem in 2024 🚀

I’m well underway writing about all the things I’ve learned from the last couple of decades as founder, CFO and CEO, so sign up for early access to Off Balance – The Book and feel free to share with anyone else you think might enjoy it 😄.

Now let’s get down to business…

In this weeks Off Balance:

🎙️ Edward Kliphuis, Partner at Sofinnova Partners on Nothing Ventured
🇬🇧 UK Venture in 2024

𝗪𝗵𝘆 𝘁𝗵𝗲 𝗰𝗼𝗻𝘃𝗲𝗿𝗴𝗲𝗻𝗰𝗲 𝗼𝗳 𝗰𝗼𝗺𝗽𝘂𝘁𝗮𝘁𝗶𝗼𝗻 𝗮𝗻𝗱 𝗵𝗲𝗮𝗹𝘁𝗵𝗰𝗮𝗿𝗲 𝘄𝗶𝗹𝗹 𝗯𝗲 𝘁𝗿𝗮𝗻𝘀𝗳𝗼𝗿𝗺𝗮𝘁𝗶𝗼𝗻𝗮𝗹

In this week’s epsiode of Nothing Ventured, Aarish sat down with Edward Kliphuis, Partner at Sofinnova Partners, a leading European venture capital firm in life sciences, specializing in healthcare and sustainability.

Based in Paris, London and Milan, the firm brings together a team of professionals from all over the world with strong scientific, medical and business expertise.

Prior to joining Sofinnova Partners, Edward spent close to a decade in venture with Amadeus Capital Partners and M Ventures.

My top takes:

1️⃣ 𝗖𝗼𝗻𝘃𝗲𝗿𝗴𝗲𝗻𝗰𝗲 𝗼𝗳 𝗗𝗮𝘁𝗮 𝗮𝗻𝗱 𝗖𝗼𝗺𝗽𝘂𝘁𝗮𝘁𝗶𝗼𝗻: Edward highlighted the significance of the convergence of data and computation in healthcare. Large biology models, akin to large language models, are revolutionising our understanding of biology. By capturing individual variability and isolating cause and effect, we are moving towards personalized and tailored medicine.

2️⃣ 𝗖𝗵𝗮𝗹𝗹𝗲𝗻𝗴𝗲𝘀 𝗶𝗻 𝗛𝗲𝗮𝗹𝘁𝗵𝗰𝗮𝗿𝗲 𝗦𝘆𝘀𝘁𝗲𝗺𝘀: We discussed the challenges faced by healthcare systems globally, including rising costs, demographic changes, and a shortage of practitioners. Edward highlighted the need for innovation to address these systemic issues and ensure accessible and affordable healthcare for all.

3️⃣ 𝗧𝗿𝘂𝘀𝘁 𝗮𝗻𝗱 𝗜𝗻𝗳𝗼𝗿𝗺𝗮𝘁𝗶𝗼𝗻 𝗶𝗻 𝗛𝗲𝗮𝗹𝘁𝗵𝗰𝗮𝗿𝗲: The conversation also touched upon the importance of trust and information in healthcare. With the proliferation of information and misinformation, coupled with the rapid pace of innovation, maintaining trust and delivering accurate information to patients is crucial for the future of healthcare.

We also talked about:

🔎 Life sciences through the lens of three strategies – existing tech through new channels, new tech through existing channels and new tech through a new channel.
🔬 Taking healthcare to the individual level.
🦠 Large biology models as a parallel to large language models.

Listen on YouTube, Spotify, Apple or wherever you get your podcasts!

If you have any feedback on the podcast or the newsletter, just reply to this mail or ping me online!

If you like what I’m putting out, do give me a follow on LinkedIn and Twitter.

(If you are trying to connect with me on LinkedIn, maybe read this post I wrote and make sure to start your request with “Off Balance” and, importantly, tell me why you’d like to connect 💪🏾)

Now let’s get into it.

Off Balance

Last time I wrote about what the various political parties policies might mean for the UK venture ecosystem, sticking with the UK theme, this week I explored what are the 2024 trends that are worth keeping an eye on over here.

Whilst headlines often focus on broad trends, this deep dive reveals some of the less obvious, albeit highly impactful shifts in the UK’s VC ecosystem.

It’ll be interested to see how these continue to play out and what impact they might have on as the tech sector continues to grow.

UK Venture Capital in 2024: Trends and Opportunities for Tech Founders and CFOs

UK’s Resilience Amid Global Slowdown

Despite global venture capital having experienced significant contractions, the UK market has shown some strong resilience.

From 2019 to 2023, UK VC investment grew by 19%, outperforming both the United States (-7%) and China (-25%).

This growth trajectory shows the UK’s strong position in the global VC landscape and its ability to attract capital even in challenging economic conditions – though it is worth remembering that the volume of capital deployed here is still a mere fraction of the cash floating around the US and China.

What does this mean for founders and CFOs?

Confidence in the UK market remains high, providing a solid foundation for fundraising efforts.

The UK’s outperformance suggests a maturing ecosystem that can weather global economic storms more effectively.

Startups should leverage this positive sentiment in their pitches to both domestic and international investors to maximise their chance of success.

Seed Stage Momentum

A really interesting trend is starting to show at seed with UK startups. The median deal size for seed companies is rising, reflecting both escalating startup ambitions and increased investor confidence in ‘hot’ sectors. This trend is particularly of note as it suggests a shift in how early-stage companies are being valued and funded.

Key takeaways:

Founders should be prepared to articulate more ambitious visions and growth plans, even at the seed stage.

CFOs need to adjust their financial models and fundraising strategies to align with these higher expectations.

There’s an opportunity for startups to secure more substantial seed funding, potentially extending their runway and accelerating growth, especially as later stage fundings remain depressed.

US Funds Entering UK Seed Stage

In a significant shift, US VC firms are rapidly increasing their presence in early-stage UK deals, particularly in the tech and life sciences sectors. This trend is reshaping the competitive landscape for both startups and local VCs.

Implications:

UK startups now have access to a broader pool of capital and potentially valuable US market connections.

Competition for top deals is intensifying, which could lead to more founder-friendly terms – though this is not guaranteed as I am seeing in live term sheets today.

Founders and CFOs should familiarize themselves with US VC expectations and practices, as differ from UK norms, as does the style of approach and directness of some firms on that side of the Atlantic.

Corporate VC Stability

Despite the overall funding decline in the UK, corporate venture capital has maintained a steady 20% share of all UK equity funding in 2023. This stability in corporate VC participation is a testament to the strategic value that startups can offer to established companies. I’ll be talking to Alokik Advani from Fidelity International Strategic Investors to discuss this later in the year.

Opportunities to explore:

Startups should actively consider corporate VC as part of their fundraising strategy, especially if there are potential strategic alignments.

CFOs can leverage corporate VC relationships for more than just capital, including market access, technical expertise, and potential exit opportunities.

Founders should be prepared to articulate how their product suite or customer base can add value to a corporate partner’s existing business or future strategy.

Impact Investing Growth

The UK is witnessing a burgeoning community of impact investors, often overlapping with traditional VC in supporting startups that effect positive societal change. This trend reflects a growing alignment between financial returns and social / environmental impact. I have spoken to a number of guests on Nothing Ventured about how they approach this and how companies should think about measuring their impact.

What it means for startups:

There’s an opportunity to tap into a new pool of capital by emphasising the positive impact of your business model.

Startups should consider integrating impact metrics into their KPIs and reporting, making them more attractive to this growing investor segment.

CFOs should be prepared to demonstrate both financial returns and impact outcomes in their projections and reports and crucially, create a narrative that shows how one positively drives the other.

Sector-Specific Trends

While broad market trends are important, here are some sector-specific insights that might provide a more nuanced understanding of where the opportunities are in the UK market right now:

AI: Unprecedented Appetite

The enthusiasm for AI startups in the UK has reached absolute fever pitch, with some investors prioritising first meetings over detailed traction for AI-focused companies. This presents both opportunities and challenges for founders in the space.

➡️ Opportunity: Easier access to initial meetings and potential funding for AI startups.
➡️ Challenge: Increased competition and potential for inflated valuations that may be hard to justify in later rounds.
➡️ Action item: AI startups should strike while the iron is hot but also focus on building sustainable business models that can withstand future scrutiny.

Digital Health: Gaining Momentum

The UK’s healthcare staff shortages have created a fertile ground for digital health startups. Investors are increasingly interested in solutions that can address these systemic challenges as well as wider interest in the medical and life sciences space.

➡️ Opportunity: Alignment with a clear market need and potential for public sector contracts.
➡️ Challenge: Navigating the complex regulatory landscape of healthcare technology.
➡️ Action item: Digital health startups should emphasise how their solutions specifically address UK healthcare challenges in their pitches.

Climate Tech: Sustained Interest

Climate technology continues to attract significant interest from UK investors, reflecting both global trends and the UK’s commitment to net-zero targets.

➡️ Opportunity: Access to both dedicated climate funds and generalist VCs with climate mandates.
➡️ Challenge: Demonstrating scalability and profitability in what can be capital-intensive sectors.
➡️ Action item: Climate tech startups should focus on clearly articulating their path to profitability alongside their environmental impact.

Geographic Neutrality

Contrary to popular belief, UK VCs are actively investing across Europe, focusing more on talent quality and future potential than company location. This trend is breaking down geographical barriers and creating a more integrated European startup ecosystem – though as I argue on the pod constantly, more needs to be done to unlock even more opportunity, especially at the later stages.

What it means for founders:

UK-based startups should be prepared for increased competition from European counterparts for UK VC attention.

Startups based elsewhere in Europe shouldn’t rule out UK VCs and should actively include them in their fundraising strategies if they’re not already.

The ability to attract and retain top talent, regardless of location, is becoming increasingly crucial in VC assessments.

Billion-Dollar Deals Driving Growth

In May 2024, two £1B+ deals contributed to a 1.6% YOY increase in total VC funding, despite a 17.3% decrease in deal volume. This concentration of capital in mega-rounds is creating a bit of a bifurcated market.

Implications for the ecosystem:

While headline numbers may look positive, the reality for most startups may be more challenging.

There’s a potential for a “barbell effect” where very early-stage and very late-stage companies find funding, while those in the middle face a tougher environment as we have been seeing for much of the last 12 months.

CFOs need to be prepared for a potentially longer and more challenging path to mega-rounds, focusing on milestone-based fundraising strategies.

Wrapping it all up

The UK venture capital landscape in 2024 still presents a complex but opportunity-rich environment for startups. Understanding these trends and adapting strategies accordingly, founders and CFOs might find it easier to position their companies for success as the ecosystem continues to evolve.

As we navigate these changes, it’s clear that the most successful startups will be those that can align with emerging investor priorities, demonstrate clear value propositions, and build sustainable, impactful businesses – whilst still satisfying the normal VC growth requirements. The challenge for founders and CFOs is to balance short-term opportunities with long-term viability – this is a difficult needle to thread, especially in the current environment where rounds are taking longer to close and runways are needing to be stretched constantly.

As always, would love to hear what you’re seeing out in the market yourselves, just reply to this email and let me know your thoughts.

Sources: Chambers and Partners, Carta, Insider

As always, my office hours are open, if you’d like to chat about this or anything else, just grab some time 😊.

I hope you found Off Balance #43 useful. As always, I’d love to get your feedback and understand the sort of topics you would love to hear about.

Just hit reply to this mail or drop me a line at [email protected] and let me know 😊

🚀And that’s a wrap for this edition of Off Balance – I’d appreciate your feedback so just reply to this email if you’ve got something you’d like to say.

📨 And if you think someone else might love this, please forward it on to them,

🎧 Finally, if you’re a fan of the Nothing Ventured podcast, please don’t forget to like, rate and subscribe wherever you get your pods – it really helps us spread the word.

That’s it from me so until next time…

Stay liquid 🙂

Aarish

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👋🏾 Hi friends!

Where does the time go eh? First half of the year done and I may just to a bit of a retrospective on the state of the market from my perspective in next week’s Off Balance, but today is all about my conversation with Asif Ahmed, Partner and Head of Early Stage, Tech and High Growth at Cooper Parry.

Last week, I was blown away by the Tech CFO ‘24 event that Asif and the Cooper Parry team held and where they announced their partnership with Founders Forum to create the CFO Forum, which will launch later this year – not only that, but Rory Sutherland of Ogilvy fame gave us a rip roaring romp through his thoughts on how to influence behaviour and why you should only execute on a decision when you’ve made it sober, and then drunk – just like the ancients apparently did!

I’m well underway writing about all the things I’ve learned from the last couple of decades as founder, CFO and CEO, so sign up for early access to Off Balance – The Book and feel free to share with anyone else you think might enjoy it 😄.

Now let’s get down to business…

𝗕𝘂𝗶𝗹𝗱𝗶𝗻𝗴 𝗮 𝗽𝗿𝗮𝗰𝘁𝗶𝗰𝗲 𝘁𝗵𝗮𝘁 𝗳𝗼𝗰𝘂𝘀𝘀𝗲𝘀 𝗼𝗻 𝘄𝗵𝗮𝘁 𝗳𝗼𝘂𝗻𝗱𝗲𝗿𝘀 𝗻𝗲𝗲𝗱 𝗿𝗮𝘁𝗵𝗲𝗿 𝘁𝗵𝗮𝗻 𝘄𝗵𝗮𝘁 𝗳𝗼𝘂𝗻𝗱𝗲𝗿𝘀 𝘁𝗵𝗶𝗻𝗸 𝘁𝗵𝗲𝘆 𝘄𝗮𝗻𝘁.

This week on Nothing Ventured, I sat down with the incredibly thoughtful Asif Ahmed, Partner and Head of Early Stage, Tech and High Growth at Cooper Parry, an accountancy firm rooted in working with entrepreneurial, fast growth businesses across the UK to help them grow, become more tax efficient, get up to speed with their Tech and transform their culture.

Prior to joining Cooper Parry, Asif was the founder and managing director of Acclivity Advisors, co founder of The Finance Department™ – a resource for entrepreneurs and their finance teams and is the author of the best selling book ‘The Finance Playbook for Entrepreneurs‘.

Our top takes:

𝗙𝗼𝗰𝘂𝘀 𝗼𝗻 𝗪𝗵𝗮𝘁 𝗙𝗼𝘂𝗻𝗱𝗲𝗿𝘀 𝗡𝗲𝗲𝗱

Asif emphasised the importance of focusing on what founders need rather than what they want. By providing the right guidance and solutions tailored to their actual needs, businesses can thrive and grow effectively. This approach ensures long-term success and value creation for startups.

𝗥𝗲𝘁𝗵𝗶𝗻𝗸𝗶𝗻𝗴 𝗥&𝗗 𝗮𝗻𝗱 𝗙𝗼𝘂𝗻𝗱𝗲𝗿-𝗔𝗱𝘃𝗶𝘀𝗼𝗿 𝗙𝗶𝘁

We discussed the evolving landscape of R&D relief and the challenges founders face in navigating the complexities of tax legislation. Asif highlighted the significance of founder-advisor fit, where aligning with advisors who understand the founder’s journey and needs can lead to better outcomes and strategic decisions.

𝗧𝗵𝗲 𝗥𝗶𝘀𝗲 𝗼𝗳 𝘁𝗵𝗲 𝗦𝗼𝗹𝗼𝗽𝗿𝗲𝗻𝗲𝘂𝗿

A fascinating trend they explored was the rise of the solopreneur in today’s tech-driven world. With advancements in technology and the creator economy booming, individuals are empowered to unleash their inner artist and creativity. This shift challenges traditional VC models and opens up new possibilities for self-sufficient entrepreneurs.

We also discussed:

🧩 Whether there is such a thing as founder advisor fit.
👩🏼‍⚖️ R&D is a term from legislation, not from the dictionary.
🖖🏽 Segregating the business from the founder.
❓ Are we witnessing the rise of the solopreneur.

Check it out!

Else listen on Spotify or Apple

If you have any feedback, or if there’s something you’re desperate to see me include, just reply to this mail or ping me online – I’m very open to conversations.

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Don’t forget to like, rate and subscribe to Nothing Ventured on Apple, Spotify or YouTube, it really helps more people see what we’re doing – you can find links to these (and more including my Office Hours) right here!

As always, my office hours are open, if you’d like to chat about anything finance, tech or venture releated, just grab some time 😊.

I hope you found Off Balance #42 valuable. As always, I’d love to get your feedback and understand the sort of topics you would love to hear about.

Just hit reply to this mail or drop me a line at [email protected] and let me know 😊

🚀And that’s a wrap for this edition of Off Balance – I’d appreciate your feedback so just reply to this email if you’ve got something you’d like to say.

📨 If you think someone else might love this, please forward it on to them,

🎧 Finally, if you’re a fan of the Nothing Ventured podcast, please don’t forget to like, rate and subscribe wherever you get your pods – it really helps us spread the word.

That’s it from me so until next time…

Stay liquid 🙂

Aarish