Since January this year I have listened to pitches from over 120 startups all over Europe, as part of our mini-Seedcamp tour. For those of you who don’t know we run a series of events aimed at encouraging, supporting and funding start-ups all over Europe. The pitches I see are the ‘best-of-the-best’ in their region. I’ve seen people pitch in TelAviv and Warsaw, Slovenia and London. You might be surprised to learn that there are a lot of common themes which have emerged along the way.
First, let’s talk about some trends. What I’ll share with you here is anecdotal. We are in the process of analyzing the more than 400 applications we’ve had this year, to identify key trends which are emerging. I expect the analysis to be done by August and will be happy to share it when it’s complete.
There are a few key themes which inevitably emerge at each series of pitches. We are seeing lots of start-ups in the area of the Semantic web, particularly in relation to search and information management. Mobile is increasingly popular, particularly any iPhone apps, and specific developments for smartphones. In terms of sectors financial services, health, education, medical and rich media are the most popular (particularly video).
As a start-up or investor, there are two conclusions you could draw from this: focus on these areas as they are clearly of universal interest or look at other areas, which aren’t quite so competitive. Frankly, I would encourage entrepreneurs to look at other areas, particularly around e-commerce/marketplaces. In today’s economic climate start-ups that can help industries cut costs and bring more transactions online are going to be able to build successful businesses. That’s just one area of potential. The key is to find other areas like this. Go with the flow of change. Don’t fight against it.
For some years I have been watching the US vs. Europe debate when it comes to start-ups. And recently, I am very encouraged by what I see in Europe. Without a doubt, when it comes to an exit strategy, all eyes still focus west to the U.S. That’s just where the big deals seem to happen. There are exceptions, though. The German media industry is snapping up start-ups and look at the acquisition of mobile social networking company Zyb by telecoms giant Vodafone earlier this year – an all-European deal. I’d certainly like to see more of these.
A lot has been written about the environment in the U.S. which encourages start-ups to flourish. But I genuinely believe Europe has a lot to offer. Diverse markets are a challenge, yes, but they also hold immense opportunity. Start-ups in Europe shouldn’t have a blinkered view when it comes to target customers. I love it when I see Slovenian start-ups competing in London and British start-ups in Berlin.
Our diversity is what makes us unique, and we need to get better at embracing it. European eco-systems are thriving – entrepreneurs have access to some of the rock stars of the start-up world over here; Niklas Zennstrom, Michael Birch, Brent Hoberman, Marten Mikos. There is a strong, vibrant sense of community, and an enthusiasm and energy second to none.
In fact, the spirit of mentorship and ‘giving back’ that so many successful European entrepreneurs are engaging in, is a trend I believe Seedcamp helped give rise to, in our earliest days. These days, it is unusual to see new initiatives springing up where there isn’t some sort of mentorship involved. I believe this is a good thing, and will play an increasingly important role in establishing Europe as a genuine player in the entrepreneurial landscape.
The key ingredients are coming together in Europe, faster than ever before. The VC community has matured well in the past two decades; angels are re-investing and more of them are entering the investment landscape. Talent is getting recycled as role models who got their starts in the likes of Yahoo, Google, and Skype, are offering advice to new entrepreneurs, in addition to starting up their own companies.
That said, I do think it could be several years (or I might be as bold to say another decade) before we start to see the same level of start-up activity in Europe as you see in the US today.
A big part of the Seedcamp events is giving start-ups access to very successful entrepreneurs, and people with money to invest. So are there any trends in terms of the advice that is shared by these mentors and investors? Again, the answer is yes. No matter what city we are in, and how different the mentors and investors are, there are five key tips which keep coming up. They are:
Communications is key: There’s not much point in having ‘the big idea’ if you can’t communicate it to the people who matter. Spend time honing your key message, avoid jargon, and practice your pitch. In most cases, your ability to communicate your idea is as important as the idea itself.
Think of fundraising as relationship-building: Particularly in this economy, investors cannot simply be treated as banks. It is critical that you put effort into building lasting, long-term relationships with existing or potential investors. Be it angel investors or VCs, these people need to buy into your dream. Start-ups need to recognize the value that investors can bring, apart from the cold, hard cash. It is about connections, support, and experience.
Measure, measure, measure: Again, particularly in these economic times, it is critical that you include key measurement criteria into your business plan, and then measure against it religiously.
Listen to the customer: It is critical to listen to what your customers want. It’s all too easy to be led by what technology can do – this is a lesson a lot of start-ups learn after much heartache. Once you identify your target audience, you need to understand them inside-out and give them something they want.
Show me the money: There was a time when all investors really focused on was the ability to attract large numbers of customers (paying or not) very fast. But times have changed. These days, a viable business model is absolutely critical. Know where you revenue is going to come from, and when.
There are undoubtedly exceptions and additions to these tips, but if you are starting a company right now, you won’t go far wrong if you use these as guiding principles. Of course, this assumes that you have some of the basic business principles covered – including a focus on cash, and a strong product.
This is an exciting time for entrepreneurs. Yes, the risks are great, but in starting a business now, you will learn some of the most fundamental lessons in running a business efficiently and effectively.
Reshma Sohoni is CEO of Seedcamp [www.seedcamp.org], the global organization started two years ago, and dedicated to helping entrepreneurs grow successful businesses. Prior to her role at Seedcamp she was an associate on the Venture Team at 3i [www.3i.com], and Senior Manager in Commercial Strategy at Vodafone