Doug Scott, loud mouth Geordie entrepreneur living in the Midlands.

VE Interactive goes into Administration

VE Interactive goes into Administration

https://www.ft.com/content/9e153f8f-3be8-331a-89f1-675c4d113c57

The founders and some of their investors in their heads thought they were a Unicorn…… oops

ve-screenshot-1200x385

Dave Brown the founder of VE Interactive

Congrats to Kadhim at the FT, who has been digging through all the data about VE Interactive for ages.

My post from last year:

VE Interactive UK Unicorn Curious?

I am not one who ever wanted them to fail, but I always believed the stories they were telling the world were not good for the eco system.

 

Doug

 

 

That Sherman Lee ( Good Audience, Rocco ) bloke asked me again to invest

That Sherman Lee bloke asked me again to invest

Can you believe it?

Remember Sherman:

The guy from San Fran who came to London and asked me to invest and then wrote a blog about how it all went wrong

 

2014-08-10-GoodAudience_Founders_ShermanLee_KarlGusner

 

Who I then replied with this:

My responce

Well seems like he wants some more money and has asked me again………what do people think of that then??

Founders have a gall don’t they.

Wow who would wanted to be an investor?? :):)

Doug

 

Angel Investing and Taking a Break

Angel Investing and Taking a Break

January starts and things always change.

So over the past few months I have been more involved in our own companies helping to sort some things out. This means over the past 2/3 months I have not been investing at the same pace as in the past, thus have had time to reflect on investing. For over 3 years I have been the first seed money into almost 50 startup investments, mostly in the UK, but also now across the globe, and indirectly invested via Ignite, Entrepreneurs First and Techstars in over 200 other companies. Many of these companies have gone onto become proper companies, many have raised millions in follow on money. The paper value of my portfolio has become very significant. We created one of the largest syndicates on Angellist in Europe. I have become friends with many founders, angels and VC’s around the world. Thanks goto James Routledge, YC and Yeemun for helping me do this, I cannot thank them enough as they are lovely, hard working  smart, moralistic and I am honored that they helped me and become friends.

cehdmoyo

When I started it was all about helping out a friend, Paul Smith of Ignite fame, that then grew to helping some other people. This helping evolved into investing people I liked, with ideas I thought I could help with. It felt great to be loved by so many people:) I will not go into the all the details as they can be read on my linkedin profile.

Slowly over time these investments became  more transactional investing than helping people. People started becoming a commodity in a system and I also started becoming a commodity in other people’s system. We started to get inundated with random emails with requests for money or help and people even got pissed off when we said no or told them their idea was crap OR that raising money was not what they should do in their best interests.

For over 18 months, myself James, YC, Yeemun and my long term business partner and friend Andy, discussed raising a fund. we got offered cash to do it, but every time I said no as it felt wrong. We had moral discussions many many times of why it felt wrong and we could never really nail it, but it just did feel wrong. So over the past few weeks whilst I have been on holiday I have had time to reflect:

  • We watched VC’s we knew who are nice people fight each other to get into a deal
  • We watched founders who were nice people lie to people to raise money
  • We watched nice angels/founders/vc’s screw and lie to each
  • We watched people almost grovel when a large VC was in the room or having one of lunches
  • We watched good companies with good people go bust as good VC’s had backed them and loaded up the fixed costs and then decided they were not going to be their Unicorn company and drop them
  • We watched founders fall into the trap that they should raise capital and be huge when they never should.
  • We watched many people who had become in positions of so called GOD in the established system who I do not think have the abilities or the morals to hold such positions
  • We watched founders become depressed as they “failed” doing something they never should have done
The morals of the system just seemed wrong. I have talked to many many people about how the system works, angels/VC’s etc and in public they are all very pro the established system, but in private many have their doubts about how it has evolved and how it is evolving. I thought we could be different in how we did things, and I think we were, but the system is established and many people are on the gravy train and can’t get off. I am in the fortunate position that I can choose to get off and so that is what I have decided to do and stop angel investing for a while

I will see you round

As a well known VC said to me recently:

love the people hate the system :(

Doug

Harry Stebbings thetwentyminutevc, Atomico should not be a VC

Harry Stebbings thetwentyminutevc, Atomico should not be a VC

Congrats to “Wor Harry:, the famous Geordie ex radio presenter:

hp-cae3c33a-4904-4266-8f09-e5ef38f6a33b

“Wor Harry” should not be a VC and I have told him many times. He is a 20 year old who has built TheTwentyMinuteVC like a startup, he had an idea and he has hussled and ducked and dived to build it. Ever since our first chat 2 years I told him it was always better to play on the pitch than to to be a part time advisor watching from the stands.

Congrats “Wor Harrry” on being a VC as it is what you wanted, but when you get bored of sitting in the dug out welcome back to the team on the pitch.

Just think of a another great Geordie player and what happened to him after he stopped playing.

paul-gascogine

Good luck “Wor Harry”

Doug

Ps. You are going to come and see me, remember…I don’t forget:):)

Overview of Seedrs Performance

Overview of Seedrs Performance

Seedrs produced lots of data for investors:

https://assets.seedrs.com/documents/portfolio_update_2016.pdf

The basic overview for lazy people is this:

  1. the more deals you invest in the closer you will get to being lucky and hitting the average
  2. the best performing type of business’s are hybrid digital/non digital
  3. the best performing sectors have been finance, property and Saas/Pas
  4. the best companies are a mix of B2C and B2B

Thus to have got best returns you will have probably  invested in LOTS of companies that do  finance, property, saas/pas companies in a B2c and B2B market, with a mix of digital and none digital stuff.

Then been lucky:)

gambling-addiction-truecounsellor

Cheers

 

Doug

AIM Creates Method for UK Early Stage Investors to Cash Out

AIM Creates Method for UK Early Stage Investors to Cash Out

One of the biggest issue that early stage investors moan about is how long they will have to wait to get any money back….typically 10 years plus, assuming they do well. As companies stay private globally longer and longer then early stage investors have to wait longer and longer…I wrote about this recently:

Are Angel Investors in the UK Becoming Disillusioned?

Well AIM has recently listed Freeagent, this is a startup who is doing ok…ok being a relative term in VC world, they are growing at 30% per annum. Probably not fast enough growth for many VC’s, but none the less a nice growing company. The company wanted more cash to grow faster and have risen £10 million on AIM. There are 2 interesting parts about this:

  • By listing on AIM they have allowed many more investors and investor types to back the company.
  • But the real interesting part is that they have now allowed early stage investors to be able to trade shares in what would have been a private company. Hence creating a sort of liquidity event

Cheers to Robin for pointing this out:

freeagent-ipo-a-sign-of-things-to-come

Doug

More Yplans type companies please die soon

More Yplans type companies please die soon

  • Create startup
  • Raise money
  • Spend money
  • Die

Can it please happen more, we can then have people build companies who are actually decent and not propped up by a non sustainable VC eco system.

  • a rising tide floats all boats – you are probably a boat operating on a rising tide

Doug

 

 

 

 

 

VC’s are so clever?

VC’s are so clever?

This follows from a rant I have had on twitter about Yplan and how someone may have been stupid and why I would want more data if I was to invest in the founders again ??

index

I have no data to prove they were stupid but I have the following data:

  • Raised $31 million
  • Live for 24 months
  • Had 70 staff
  • $4 acquisition cost per user
  • 2500 4.5* reviews on app store

Somone on twitter then said this to me:

“with the quality of investors and brainpower in the biz it’s tough to believe anything went wrong beyond”

So lets make some other quotes about companies that have gone bust:

Mode Media – “The general consensus of the employee base is that there was mismanagement of finances,” said one former company executive

Kior – The lack of people with real operational experience “hurt KiOR a lot,”

Terralliance – All told, the investors had sunk nearly half-a-billion dollars into Terralliance, an astounding sum given the audacity of the company’s aspirations — and the paucity of its accomplishments.

Pets.com – As a result, the firm was selling supplies below cost the entire time.

Canopy Financial – …company management discovered earlier this month financial records provided to investors and lenders that were “fraudulent,” as well as “significant financial and accounting irregularities.

I could go on and on and on.

My concern with Yplan is they made themselves to be a media darling in the UK on the way up and so why don’t they be a media darling now and help the eco system by showing everyone issues so others understand.

 

Doug

 

 

 

 

Go big or go home – utter crp you are not good enough

Go big or go home – utter crp you are not good enough and you already know it

Accept it and live with it, you are not good enough to build Uber, Google, etc etc.

original

Stop messing about with that shitty startup of yours trying to build the best greatest thing since sliced bread….you are simply not talented enough to do it.

Techcrunch has created loads of utter idiot people who are going to raise money and build something huge. Reality is you are not. The idea you have is great but the missing piece of the jigsaw to greatness is you…live with it baby.

I hear it all day and always ask founders why do you want to be huge? Why? Why? Why? Very few can even give me a vague answer that is not bollocks.

Just consider this:

  • some people love jobs and are brilliant at them and benefit society massively
  • some people create nice, good companies that tick along and allow them to do what they want with their lives whilst benefiting society
  • a handful of people on the planet have the ability and luck to land in the right place at the right time and create something huge like Google or Facebook or even Ford

Each of the above have pro’s and con’s for your life, make sure you know what is important to you.

I will be wasting my breath probably here as everyone in tech succumbs to crap that the media is producing about tech….go big or go home, aim for he moon, etc etc. Maybe just consider that you have got caught up in doing what you think others think you should do. VC’s only make money when founders hit the moon, so are you playing their game or yours?

As a wise man said to me many years ago, when you put a ladder against a wall make sure it is against the wall you want to climb and not taking you no where or a place that you don’t want to go.

laddertosky-nowhere

 

Doug is  good enough to swing for the fences in some aspects of his life and not in others, he decided not to spend his life swinging for fences in his company :)

Are Angel Investors in the UK Becoming Disillusioned?

Are Angel Investors in the UK Becoming Disillusioned?

As a prolific investor in early stage tech in the UK I am starting to have concerns and I am probably in a position to understand. In 2012 I started Angel investing in the UK ( admittedly because of the tax advantages of SEIS/EIS ). So now 4 years what has happened:

  • 40-50 direct seed investments
  • over 100 indirect seed investments, simply via Accelerators like Ignite, EF, Springboard, Techstars ( in the early days they were all setup to accept SEIS money )
  • we created www.potential.vc to not be a VC but to be a front for myself and a few friends
  • I become known for my silly pink bandana and being one of the most prolific investors in mad very early stage founders in the UK
  • many of these investments have gone on to raise millions
  • many of those investments have died as companies
  • I have met some great new friends

But I have become saddened by what I now see. The system in the UK seems broken and many early seed investors are saying the same.

 

4t9onjmqc

Seed investors pile into startups with no thinking about how they will ever get their money out. Admittedly in the UK it is derisked investing because of SEIS/EIS and the reduction in income tax when investing.

So lets compare what happens if you are a seed investor in US compared to the UK :

  1. company goes bust – in US and UK no one gets anything ( in both countries there will be tax methods to derisk the loss )
  2. company gets aqua hired for about $1 million per staff member in US ( in UK if aquahire happens then company will be bought for pennies and founders will be paid nice salary at new company )
  3. company gets bought for a small amount – simply the price will be more in the US
  4. company goes huge and becomes a unicorn – this happens very rarely and is a long term bet but as an investor you feel good as the investment keeps growing – but any exit or IPO may be less value than a US exit

So as an investor you want to feel that you are winning to continue. In the US you can feel like you have won in scenarios 2, 3 and 4, but in the UK you only feel you have won in scenarios 3 and 4 and not won as much.

Thus early stage investors in the UK invest for a while and then stop.

So UK investors are disillusioned.

 

 

Doug

 

 

 

 

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