The final Digital Dún Laoghaire Morning MeetUp in the current series was held on Wednesday 9th May in Starbucks Coffee Shop in Dún Laoghaire. The topic discussed was:
How to make your digital business investor ready.
Research shows that companies who can access funding at the right stage in their growth curve have better outcomes including; increased sales, higher staffing levels and faster growth.
Better funded companies have better outcomes.
During the meetup invited guest Grainne Lennon, InterTradeIreland gave insights into the Seedcorn Competition. Closing date for initial applications is 26th May 2017.
Key advice and tips were shared by the panel on what investors look for in a company when they are considering investing that all important cash.
What are the key factors investors look for in early stage digital companies?
Conor O’Connor said that in his opinion one of the key factors was Market Traction. Investors are trying to find a safe bet. They will want to know how quickly, where and why traction is happening and how it’s linking to potential new customers. Investors will also want to know about a company’s ability to access the key decision makers in the industry.
Digital investors also want to see a model that works, how businesses can scale up, and monitor their progress. At the core of any successful business is the ability to attract new customers.
Conor gave the example of Phorest a company that had obtained traction and attracted investment.
Established in Ireland in 2003 this is a leading Salon Software provider. Operating in the UK and Irish market it is growing rapidly. Central to its success is being able to understand its target audience. Over the years it has focused on product development. Its constant engagement with its customer base and development of their needs is the key to its success.
John Phelan listed three key factors that investors look for:
– Quality of team
– Domain knowledge
John agreed with Conor and used a favourite phrase of his, The Disney Story when companies come to him looking for investment and say, just believe me!
Unfortunately, he explained that this isn’t really enough for investment. Proof of traction is a great way of building trust, confidence and credibility and companies with traction demonstrate that they have commercial value.
Team balance and the ability to execute are definitely things investors look for in businesses.
Ensuring the team fully understand their domain knowledge, i.e. the industry they are trying to crack, and having the connections to break into it globally are also very important.
John mentioned Mark Little as an example of a person who really knew his industry when looking for early investment. Investors from HBAN were very impressed in the team knowledge and this was an important decisive factor.
Mike Brennan reminded attendees that Venture Capitalists (VC’s) are simple folk who are looking to make money. Therefore there has to be an opportunity in it for them. Businesses need to be solving real problems in order to attract large levels of investment.
When VC’s get involved they are thinking of a ten year plan so they will consider the founder carefully, i.e., whether if he/she is going to stick at it?
Mark outlined his key factors as:
– Market opportunity
– Problems being solved
– The team
What are the hot sectors for investment?
Conor was quick to highlight that Fintech has been exploding in the last couple of years and doesn’t seem to be slowing down.
Two other exciting areas are Chemtech and Medtech, e.g. real time patient monitoring where doctors can remotely monitor patients conditions.
From a wider perspective anything involving automation in the service sector, e.g. Artificial Intelligence (AI) in terms of system learnings from the throughput. Internationally, many companies in this space are attracting interest.
In the context of Ireland there’s quite a wide base. Traditionally the focus has been wider than narrower.
The interaction between hardware and data and the security around data is also an interesting area that is attracting funding.
What are they key factors influencing investment in a growth area?
AI is the new electricity
John Phelan said that from a Fintech perspective PSD2 is coming down the line and companies in Ireland are a little behind the curve.
John agreed with Conor that AI was massively important and is the new electricity.
Big data is another growth area that’s been around for a while, e.g. predictive analytics. The key is finding out what to do with all this big data and how to gain insights that give value for businesses.
HBAN Investment Levels are broken down as follows:
– 60% ICT
– 25% Medtech
– 15% Other
Mike also believed that Fintech was a rapidly growing area. He highlighted Deep Tech, as its referred to in Europe and Frontier Tech in the US – AI, Drones, Robotics, AR & VR.
At the crossroads of Frontier Tech and Fintech, this is where the smart money is.
Insure Tech, a subset of Fintech, e.g. on-demand premiums. Technology can be used to review where you drive and what you’re doing, it’s all getting very interesting.
AI has advanced and now actual problems are being solved, making it a much more investible area.
Top tips to secure investment.
– Show why you’re different.
– Illustrate your reach into the market.
– Clearly explain these two points to investors.
– Know the landscape.
– The team.
– Sales process.
– Challenge an investor on their assumptions both technically and commercially.
– A recipe to validate your model, demonstrate it works.
– Keep the capital clean, watch who gets equity.
Date for your Diary – DLR Summit – Digital Transformation Conference
The Digital Dún Laoghaire meetups are taking a short Summer break and will return in the Autumn – so, watch this space.
In the meantime Digital Dún Laoghaire would like to invite you to the DLR Summit – Digital Transformation Conference on 8th June 2017.
Co-written by Catherine Duggan and Carl McEvoy
Photograph by: Antony Ramirez Ferrigno team member, Digital Dún Laoghaire