Taking advantage of digital disruption in early-stage investment

 By Oliver Woolley, CEO, Envestors.

 

The landscape we have today is the same landscape we had fifty years ago. We’ve got investment networks, clubs, incubators and accelerators, all of whom actively help investors to find opportunities and scale-ups to secure funding – but they are all closed and separate. Our vision for the future is one in which all these groups connect to one another, without sacrificing control or independence. We’ve built a software platform to do just that. Using an aggregated approach, we can bring the world of early-stage investing together in a way that benefits all of those involved.

 

For scale ups, it means working with one party and gaining wide exposure rather than promoting a deal through a number of disparate networks. For investors, it means having access to a near unlimited number of deals, all filtered according to interest and managed in a single location – regardless of network of origin. For investment facilitators, it means a greatly improved experience for their investors and decreased operational overheads.

 

Results – right now

 

We live in an age of instant gratification. This spans across all areas of our lives – from instantaneous validation on Twitter and one-hour Amazon delivery, to 24-hour news at our fingertips. So why should the investment experience be any different? If I can find out about anything in the world from wherever I happen to be, why should I – as an investor – wait for a pitch session to find out about investment opportunities?

 

The ROBO Effect

 

Borrowing a term from the retail industry, ROBO (Research Online, Buy Offline) reflects a broad behavioural change. People no longer head to a shopping centre to browse for an item, they go online and find what they want and then go down to the store to get it. In many cases, they opt not to go to the store, satisfied with the information they have found online, and make an immediate purchase. This behaviour isn’t particular to consumers: a study, by Forrester Research, found that 68% of business to business buyers researched online independently and a further 62% say they go as far as developing a selection criteria and vendor list based on digital content.

 

So, why is it different with investing? When people prefer to get information instantaneously and independently, why do we ask them to wait for a pitch event? Using digital, information on potential investment opportunities and any relevant details can be ready for investors to read at their leisure. Further to that, information can be interactive. Potential investors can ask management teams questions – using online channels – and get answers in real time.

 

Seeking a diverse portfolio

 

Digitisation has fuelled the unprecedented growth of start-ups in the UK. This has produced a vast – and occasionally overwhelming – array of opportunities, resulting in a trend showing networks are becoming more niche and sector specific. While regional investment networks have long been part of the landscape, they are joined by networks specialising in – for example – Greentech, MedTech or women-owned businesses.  This is not a bad thing, but it has caused further fragmentation.

 

Experienced investors know, that if they are to get the best chance of a return on their investments, a diverse portfolio is a must. However, such specificity throws diversity out the window, leaving investors only one option – joining multiple networks and doing a lot of leg work to build and manage their portfolios.

 

Digital to the rescue. With an aggregated platform, regional and niche networks can connect to one another and share deals at the click of a button. This allows networks to protect their greatest asset – their investors – while offering them a broader array of investment opportunities without doing all of the vetting and admin.

 

The uncertainty factor

 

By mid-2018, the impact of a looming Brexit was already starting to be felt across the industry.  With predictions of economic troubles in the UK in the short term, many investors tightened their purse strings, becoming increasingly selective over which investments to make. Yet, at the same time, reports show that foreign investment is at an all-time high: in 2017, a whopping £6bn was invested over the course of the year, with 396 of these deals involving at least one investor from abroad.

 

This is another opportunity that could be capitalised by digital. With a digital platform, deals can flow across borders – giving investors the ability to further diversify their portfolios, while giving businesses a better opportunity to find investment.

 

Key players, like The SetSquared Partnership and Britbots, are already well on their way to adopting digital. Digital disruption has begun so as entrepreneurs and investors you can take advantage of the many benefits.

 

About the Author

Oliver is CEO and Co-founder of Envestors. Oliver sits on the Board of the UK Crowdfunding Association (UKCFA) and sat on the Board of the UK Business Angels Association (UKBAA) from 2006 to 2014. He is also a Member of Court at Imperial College (London).

 

After completing a degree in Finance, Oliver decided not to become an accountant but instead raised equity and bank debt to start Woolleys Healthfoods. The business comprised three retail catering outlets in central London, three organic sausage shops and a factory in the south-east of England, which wholesaled to 200 establishments including Harrods. In 1997 he sold the business to Northern Foods and moved into early-stage investing.

 

Web: https://www.envestors.co.uk/
LinkedIn: https://www.linkedin.com/company/envestors-llp/
Twitter: @EnvestorsLondon
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