scaling up
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TOP 100: THE GLASS CITY
INTRODUCING SR CONNECT
SR PORTFOLIO: GUN SHY
The latest research shows women are still being locked out of UK scale-ups
Discover our bespoke capital-raising service with SenSat, its first client
Antonio Banderas stars in Gun Shy by Simon West, Director of Con Air
SyndicateRoom The Pitt Building Trumpington Street Cambridge CB2 1RP editor@syndicateroom.com Issue // 02 // January 2018
DESIGN Sonia Caetano
EDITOR Ekaterina Bystrova
CONTRIBUTORS Tom Britton James Dean
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Miruna Girtu Lu Li Swen Lorenz James Sore Gonรงalo de Vasconcelos
dear SyndicateRoom member, At 11:30 am on the 29th of May 1953, Edmund Hillary of New Zealand and Tenzing Norgay, a Sherpa of Nepal, became the first people to reach the summit of Mount Everest, 29,028 feet above sea level – the highest point on earth. But, their success, which many attribute to the sheer willpower of one man, owed a lot to luck and, more importantly, the efforts of more than 400 people. The expedition party included 362 porters to do the heavy lifting and 20 sherpa mountaineers to guide the way. Not only that, three days before Hillary and Norgay went over the top, two others – Bourdillon and Evans – made a go of it, but were forced to turn back when Evans’ oxygen supply failed. At that point they’d reached the South Summit – just 300 vertical feet shy of their goal. And this wasn’t even the first time someone set out to take on Everest, it was the ninth British expedition. Norgay, who had joined the Everest expedition to take the place of another who had failed a medical test, had been part of three previous unsuccessful attempts. The one immediately preceding his ultimately successful attempt set a new altitude record and mapped out the route he and Hillary would use one year later.
Not to take too much away from the legend, the 400-strong team that had taken them so far did turn back at 27,900 feet, leaving Hillary and Norgay to climb the final 1,130 vertical feet on their own. And Hillary did wake up one morning to find his boots had frozen solid. Oh, and they were the first to summit Everest. Starting something is easy; the real challenge in life, in business, in anything, comes when you decide to scale. It’s at this point that the path you were following is no longer there, and the support team that had physically got you that far is now there only in spirit. And it’s faced with this challenge that so many fall down. As we grow at SyndicateRoom, and as the companies we fund do as well, it’s important to keep that in mind. There may be a great team behind the company, an experienced lead investor guiding the way, but at some point the air starts to thin, the legs start to wobble and the summit somehow seems to drift further away. And that’s when a bit of motivation, the opening of a door to a partner, a hire, an advisor or even another investor that could come in at a later round, might just be the difference between turning back 300 feet from the top, and making that final summit.
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contents // PAGE 6
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FROM THE CEO
2017 IN REVIEW
Gonçalo de Vasconcelos has three suggestions to improve Britain’s scale-up ecosystem
SyndicateRoom came a long way last year. Tom Britton recollects the highs – and the lows
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TOP 100: BEYOND CAPITAL
SR PORTFOLIO: SETTLED
Investors can bring a lot of value to a young company. We speak with six of the UK’s top scale-ups
We find out how Settled has been doing since completing its SyndicateRoom raise in 2015
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TOP 100: THE GLASS CITY
INTRODUCING SR CONNECT
When it comes to gender equality in business and investing, the UK still has a long way to go
Miruna Girtu announces the launch of our bespoke capitalraising service
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INTERVIEW: SENSAT
EVENTS: SR LIVE
We speak with James Dean, CEO of SenSat, about his experience of scaling up
Your opportunity to watch companies pitch and be grilled by our Investment Analysts live on air
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EIS DIVERSIFICATION: FUND TWENTY8
SR PORTFOLIO: GUN SHY
After raising over £4.5m from 233 investors last year, our passive EIS fund reopens for investment
Antonio Banderas stars in Gun Shy by Simon West, Director of Lara Croft: Tomb Raider and Con Air
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FOCUSED INVESTING: GROWTH FUND
WELCOME TO THE FUNDED CLUB
Our new EIS fund gives you access to later-stage high-growth opportunities
Let’s put our hands together for the latest companies to join the SyndicateRoom portfolio
from the ceo BRITAIN’S SCALE-UPS GONÇALO DE VASCONCELOS
New businesses are the lifeblood of Britain’s economy, fostering tireless innovation and giving investors the opportunity not only to diversify their portfolio, but to support truly inspirational entrepreneurs. But that’s not where it ends. Three years ago, The ScaleUp Institute found that a 1% boost to Britain’s scale-up population would bring about an additional 238,000 jobs and £225bn in Gross Value Added (GVA). Creating companies is the first step; the next is scaling them.
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In December 2017 we published a report titled Top 100: Britain’s Fastest-Growing Businesses based on valuation data from independent research agency, Beauhurst. The companies in this report are some of the most promising scale-up businesses in the UK, and they’re doing some remarkable things, from redefining our relationship with money to literally recreating the sun’s power on Earth. Together, they span 12 sectors, employ 10,200 people and generate £605,945,417 in revenue. The one thing they have in common is the attention they’re getting from investors: these are the fastest-growing private businesses by valuation over a three-year period. However, catching up with the founders and CEOs, it became clear that despite their impressive successes, they have a number of concerns about their continued growth.
Recruiting and retaining top talent was frequently referred to as a problem, one further compounded by the uncertainties surrounding post-Brexit employment laws. The other frequently mentioned issue was access to scale-up finance, especially for knowledge-intensive businesses developing world-changing technologies. There are three things we think could help. One. For the sake of high-growth companies, we’d love to see some sort of fast-track visa for technology workers arriving from Europe. This would not only help business, but also fortify Britain’s status as Europe’s tech hub. Two. In the 2017 budget, we were delighted to see Philip Hammond double the EIS allowance for ‘knowledge intensive’ companies. This is fantastic news and is expected to channel an additional £20bn into early-stage businesses. However, we believe more needs to be done to encourage the flow of VCT money into high-growth unlisted companies. Three. The industry needs to work harder to address the gender imbalance in UK business and investing (see page 24). Overall, I’m truly excited for what the future promises; there’s never been a better time for early-stage investing.
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DISCOVER THE MOST PROMISING SCALE-UP BUSINESSES IN THE UK. DOWNLOAD YOUR FREE COPY AT WWW.SYNDICATEROOM.COM/TOP100
beyond capital From introductions to others in the know to expert industry knowledge, many investors are happy to roll up their sleeves and lend a hand to ensure the business they’re backing has the best possible chance of success.
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We asked a few of our Top 100 scale-ups what their investors have brought to the table beyond capital.
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Glenn Shoosmith CEO AND FOUNDER, BOOKINGBUG
Investors should always be able to add value beyond capital. Everything from strategic guidance to network opportunities to knowledge of specific markets can be incredibly valuable when you start to scale.
I would say that all of our investors have brought value to the table. Many come from the industry, so have brought relationships with customers, suppliers and partners from labelling, regulation, logistics and supply chain. This has been really helpful.
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Others have taken active responsibilities within the business. For example, one of our directors contributed to commercial opportunities, another helped define our IP strategy. Another has taken us into two countries for commercial expansion. We’ve honestly been really lucky – most of the investors have contributed actively in some way.
Nic Gorini
CEO AND CO-FOUNDER, JOOLS DRINKS
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You learn from everybody – from every single investor in your company. Every single one of them. And that goes from knowledge about finance to introductions to things they’ve come across in their own career. You absorb everything you can. At times investors can add value and knowledge, and at other times investors can add value by not being in the way. You need to trust the founder of the management team. It’s a two-way conversation, but there needs to be an element of trust. And the same applies as a founder. Trust the people. If you see that they can do it, create the context and get out of their way.
Kris Naudts
CEO AND FOUNDER, THE CULTURE TRIP
We’ve opened up a network with our investor community and are really well connected. Some of these people have been invaluable in connecting me to the right people, while others have found us new talent.
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Our investors have been incredibly important sounding boards for me.
Alister Rollins CEO AND FOUNDER, MOVEGB
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We had endless supportive people who wanted to help us. In our very first round, we had a guy who made a little bit of money with an SEO business, so he used to come into our office quite frequently and help out our tech team. Our shareholders have been fantastic. They come from an incredibly broad area of expertise, and they’ve always sought to add value where they can.
Peter Behrens COO AND CO-FOUNDER, RATESETTER
We never wanted just cash for our business – that is not that difficult to find in this day and age for an ambitious, innovative startup. What we wanted were people who would also invest their time, energy and creativity in Medopad.
The
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By combining their expertise and experience, we could develop and bring to market a groundbreaking product to improve the lives of millions of people across the world.
Dan Vahdat
CEO AND CO-FOUNDER, MEDOPAD
SYNDICATE // scaling up // 24 The
feature THE GLASS CITY Ekaterina Bystrova, Editor
Early-stage businesses are often lauded as leading the way in levelling the playing field when it comes to gender representation, but truth is, we still have a long way to go. Last month SyndicateRoom published a report of the Top 100 fastest-growing businesses in the UK today using data from independent research agency Beauhurst. The ranking was based on valuation increase between 2014 and 2017, with the wider report looking at data around employment, geography and gender balance. And that last point is where the problem lies. Of the Top 100 fastest-growing British businesses, just seven are led by women.
This ratio extends well beyond our own report: only 7% of FTSE 100 companies are headed by a woman (and even less for the FTSE 250), a statistic perhaps best put into perspective by the title of this Fortune article: Men Named ‘David’ Outnumbered All of Britain’s Top Women CEOs Last Year. There are two main ways to read this. The first and very incorrect interpretation would be to say that clearly this demonstrates that women simply aren’t as savvy as men when it comes to business acumen (no pun intended). The second and far more sensible conclusion is that despite many outcries to the contrary, women remain at a major disadvantage when it comes to entrepreneurship.
It isn’t biology,
The
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it’s us.
IT’S A MAN’S WORLD
THE STEM OF THE ISSUE
Barclays’ 2017 report Untapped Unicorns found that women-led businesses achieve far lower levels of funding, with male entrepreneurs 86% more likely to be funded by a VC, and 56% more likely to secure angel investment.
It’s undeniable that most successful startups these days have at least some toes in tech. Of our Top 100 cohort, 44 classify themselves as technology/IP-based businesses – more than the next four largest sectors combined.
In the UK, men are about twice as likely as women to start a business. Global Entrepreneurship Monitor data shows that in 2016, there were 47 female entrepreneurs for every 100 male entrepreneurs in the UK – the lowest ratio since 2009. This figure also falls short of the European average of 59 female to 100 male entrepreneurs (52:100 in 2009).
This is a trend being encouraged from up top. In November’s budget announcement, Chancellor Philip Hammond confirmed that AI, 5G and broadband are to receive a £500m investment boost, declaring: ‘A new tech business is funded every hour and I want that to be every half hour.’
You might think ok, that’s around one female-led business for every two male-led – not an ideal ratio, sure, but a lot healthier than the 7% figure stated for high-growth UK businesses, or ‘scale-ups’. Ergo, the drop-off happens because the businesses founded by these women aren’t growing as quickly as those of their male counterparts. Why is that? Is it that the female founders’ ideas aren’t as innovative as the men’s? Do they have trouble organising their venture in such a way as to inspire investment? Perhaps they just don’t want it as much? Or maybe, it’s that the odds continue to be stacked against them.
While this ambition is fantastic news for technology companies, it is likely to exacerbate the chasm between tech and all other sectors – and by extension, the gender divide. The number of women working in tech and other STEM fields – science, technology, engineering and maths – is, frankly, upsetting. In 2016, women made up just 21% of the UK STEM workforce (down from the dizzy heights of 22% the year previous). This is despite 13,000 more women working in core STEM occupations in 2016. But it’s not all bad: in 2017, the number of women working in management roles in science, engineering and technology went up by 5,500! Yet even with this increase, women make up just 15% of the total.
The rate at which women are taking up these jobs simply doesn’t compare to that of men. What’s interesting is that this divide extends to founders. According to BNP Paribas’ Global Entrepreneurs Report 2016, male and female entrepreneurs gain the most funding in the same top three industries, with one exception: where men find success in technology, women tend to get more money in fashion. It’s a societal pattern that starts early on. In the UK, few girls choose to study computer science at GCSE level (the ones that do make up ~20% of the total number of students), at degree level (16%) and beyond; the statistics for the US are similar. While many reckon this is down to a universal biological difference in ability between the sexes – a conclusion outlined in the now infamous 2016 Google memo – this argument of nature versus nurture falls flat as soon as you glance at the corresponding statistics for other countries. ‘I walk into a classroom in India and it’s more than 50% girls, the same in Malaysia,’ Professor Dame Wendy Hall, a Director of the Web Science Institute at the University of Southampton, told the Guardian. ‘They are so passionate about coding, lots of women love coding. There just aren’t these gender differences there.’ So, the issue seems straightforward: it isn’t biology, it’s us.
FEMALE REPRESENTATION Why would girls be eager to throw themselves into science and technology when those fields continue to be dominated by men? We all learn by example, which is precisely why the concepts of representation and, yes, quotas are so important. Naturally, the go-to argument is ‘we want people that are great, not just someone who ticks a box’. As if it’s impossible to have both. The latest example is this month’s CES. The 2018 Consumer Electronics Show, which kicks off the technology world’s annual calendar, met with a flurry of online criticism last month for assembling an allmale (and mostly white) keynote lineup for the second year running. ‘For a show marketed as “the world’s gathering place for all who thrive on the business of consumer technologies”, it sure seems like “for all” really means “for all men”,’ retorted GenderAvenger, an advocate for equality in public dialogue. The Consumer Technology Association, which is behind the conference, responded via blog post to say there are simply too few female executives in existence: ‘As upsetting as it is, there is a limited pool when it comes to women in these positions. We feel your pain. It bothers us, too. The tech industry and every industry must do better.’
UNDERSTANDING THE MARKET It isn’t just the tech industry that’s underrepresenting. Last year, the overall percentage of women in boardrooms was around 22%, while 16% of companies had no female board members at all. But hey, don’t worry – almost 4% of companies had equal numbers of female and male directors, or boasted female-led boards. Given that women account for 85% of all consumer purchases, this trend goes beyond being a moral issue: it makes no sense from a capitalist perspective. And we’re not just talking about groceries here. Women apparently account for purchases that include 91% of new homes, 66% of PCs and 65% of new cars.
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The same research by Yankelovich Monitor and Greenfield Online found that 91% of women feel advertisers don’t understand them. I wonder why.
MOST ANGEL INVESTORS ARE MEN If you thought the figures around women founding companies were bad, take a look at the number of women investing in them. Google, Facebook and the like may be criticised for having workforces that are just 30–35% female (with a far smaller ratio in technical roles), but in the world of investment those numbers would represent an astronomical improvement.
Today in the US only one in five angels is female; in the UK it’s one in seven. In May of last year, Diversity VC, a non-profit partnership promoting diversity in venture capital, released its comprehensive Women in UK Venture Capital 2017 report, covering 160 active venture capital firms and over 1,500 employees. The study found that women make up 27% of the VC workforce in the UK. Not a great figure, right? It gets worse. Of those making the actual investment decisions, women represent just 13%. ‘It should be noted that by excluding the two biggest firms in our dataset (Bridges Ventures and IP Group), the representation of decision-makers at a senior level drops to 11%,’ the report continues, pointedly. ‘It’s sobering to see that women are so underrepresented in our industry. Only 13% of decision-makers (partners or equivalent) in UK venture capital are women, and a staggering 48% of investment teams have no women at all.’ This is incredibly important because gender bias does matter. A study conducted at Harvard Kennedy School found that investors prefer pitches presented by male entrepreneurs to those by female entrepreneurs, even when the content of the pitch was exactly the same.
Moreover, investors in this study rated the male entrepreneurs as being more persuasive, fact-based and logical. Again, the content of the pitches was exactly the same.
FAIR FUNDING According to the FT, one of the most common challenges female founders face is access to capital. ‘I have been struck and disappointed by the data showing that backing female founders is so low,’ said Debbie Wosskow, Founder of venture-backed LoveHomeSwap and AllBright, an angel investment network focused on female-founded businesses. ‘Only 10% of capital raised backs a business with a woman in the senior leadership team. Only 2.7% globally backs a business with a female CEO.’ These statistics seem particularly unfair given there is research to show female-led startups tend to outperform those led by men. BNP Paribas’ Global Entrepreneurs Report 2016 surveyed 2,600 high- and ultra-high-net-worth entrepreneurs from 18 countries. The results demonstrated that not only were the female entrepreneurs in the study more ambitious than their male counterparts, anticipating a greater increase in profits in coming years, but they were also more successful.
This trend goes beyond being a moral issue: it makes no sense from a capitalist perspective.
Companies led by female entrepreneurs had 13% higher revenues than those run by men, and finished 9% above the average for all entrepreneurs surveyed. Yet despite this, female-led startups continue to be underfunded. ‘It’s a well-documented fact that female founders receive less venture capital funding than their male counterparts,’ confirms a recent Fortune article, optimistically titled Venture Capital’s Funding Gender Gap Is Actually Getting Worse, before pointing out that in 2016, VCs invested $58.2bn in companies with allmale founders and just $1.46bn in femaleled ones. ‘What is perhaps more surprising is that things haven’t improved – and have actually worsened – over the past year.’
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Such a severe lack of funding means female founders are forced to concentrate on counting pennies instead of growing their business. Lu Li is the Founder of Blooming Founders, a business social network for early-stage female entrepreneurs, and female-focused members club Blooms London. ‘80% [of female founders] are bootstrapping the business from their own savings, which makes them more cautious about how to invest the money. The mantra is making ends meet, not growth,’ Lu told SyndicateRoom.
‘The general lack of funding is obviously a big road block, but typically femalefounded companies are under-resourced to begin with, so the likelihood to become “investment ready” is smaller. Women have to look for ways to get their businesses off the ground that doesn’t break the bank.’
SOME LIGHT FROM ON HIGH That’s the bad news. But here’s a ray of progress – while the diversity stats at tech companies are proving remarkably hard to change, the number of women angels, while still low, actually represents impressive gains. In an industry with a stubborn diversity problem, angel investing is heralding some progress. ‘Three years ago when we were founded, 13% of angel investors nationally were women. There was a huge divide,’ reports Miriam Bekkouche, Program Director of New York-based, all-female angel network 37 Angels. Last year the number was around 20–22%, depending on which report you read. How about in Britain? ‘Addidi Angels was the first female angel club, originally founded in 2009. At that time, less than 5% of angel investors were women and the club was set up with the specific objective of increasing that to 15%,’ explains Anna Sofat, Founder of Addidi, a
LuLi
FOUNDER OF BLOOMING FOUNDERS AND BLOOMS LONDON
female-focused wealth management firm that started one of the UK’s original female angel networks. She’s largely achieved her target – according to the UK Business Angels Association, women now make up 14.1% of British angels.
BREAKING THE CHAIN That’s a lot of ugly information to take in, so here’s a summary.
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Female entrepreneurs – particularly in tech – are in the minority, and they’re getting a tiny fraction of investor and VC funding, whether these investors are female or male – and they are overwhelmingly male. These largely male entrepreneurs go on to create products, the vast majority of which are bought by women, who nearly all feel that the people marketing these products don’t understand them. Which may be because the decisions in most boardrooms are made by men. Imagine what the statistics for minorities must look like. What is clear is that the problem of inequality is fundamentally circular. The perception of who women are, what they’re good at and what they should do is so ingrained in our society that it feeds off itself, making any sort of quick fix impossible.
It’s easy to think that because a problem is being talked about, it’s being addressed. But we need to be doing more. There is no single magical part that can be changed in order for us to have gender parity; we must strive to improve everything all at once for equality to become self-sustaining. Our Top 100 report, the one with seven female-led companies, also features ten entrepreneur interviews. All of these are with men. We’d sent out several nudges to the whole list asking who would be interested in being featured, and ten men are what we ended up with. The interviews are interesting and insightful, drawing on personal experience and dispensing advice that is invaluable to founders and investors alike. What they aren’t is representative. We should have tried harder.
You can download the report for FREE at: WWW.SYNDICATEROOM.COM/TOP100
Of the Top 100 fastest-growing British businesses, just seven
3%
UNKNOWN
‘TOP 100’ COHORT ENTREPRENEURS BY GENDER
are led by women.
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update 2017 IN REVIEW Tom Britton, Co-founder
I can’t believe the year has come to an end and I’m still pretending it’s quarter three. Every year is a whirlwind when you work for a young company, but somehow the accelerator on 2017 got stuck and we’ve not slowed down since this time last year, when I wrote the review for 2016. Nothing has changed, but everything has changed as well. Running through the year quarter by quarter seems to do it a disservice since it was one immense, ongoing effort, however, to provide some structure, that’s exactly what I’ve done. Before going into the details, I’d like to set the scene. In September we hit year four of being fully operational. While the team
has grown from just Gonçalo and me to 35 incredible individuals, only a few of those 35 were hired last year. Therefore, the achievements of 2017 cannot be put down to having additional resources; rather, they come from the increasing trust surrounding our brand, thanks to the values that are ingrained in everything we do, and from the incredible effort of each and every member of our team, who constantly find more efficient ways of working, improving on what we have while adding new value to our customer proposition. To the team, I want to say that I’m inspired by you every day. Thank you for tackling all the stress head on. We would be nothing without your effort, your smiles and your constant innovations.
Q1
FUND IS COMING
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People often talk about having a good product–market fit, but the flipside of this is less discussed. What do you do when you’ve got a large number of interested people signed up to your service, but the product– market fit for them is not quite right? Well, you work with them to find a version of your product that fits them better. For us, that came in the form of Fund Twenty8, our first venture fund. In Q1 we started to properly raise for Fund Twenty8. We did this largely by reaching out to our members and attending events, such as the wonderful Master Investor Show, as well as putting on our own: An Evening with Sherry Coutu. More than 700 people turned up to listen to Sherry, Chair of The ScaleUp Institute, discuss the struggles of scaling a business. (You can watch a recording of Sherry’s talk here. Additionally, if you want more insights into scaling up a business, I highly recommend listening to Reid Hoffman’s Masters of Scale podcast.) At the same time, we published a report titled Tax-Efficient Investing in a Digital World, which combined an analysis of UK investor trends, EIS investment case studies and a four-page EIS cheat sheet that gives you an outline of EIS tax relief, including three practical examples of EIS at work. Basically it’s a must read for anyone getting started with SEIS and EIS investments.
All that effort paid off: we closed Q1 having raised £4.5m for Fund Twenty8 and were named Alt-Fi’s Alternative Finance Platform of the Year. The year was off to a great start.
Q2
BETTER ISN’T GOOD ENOUGH I mentioned earlier that we didn’t add much in the way of resources to our team last year, instead focusing on providing a better customer service with the resources we already had. Some of this manifested itself with the release of our updated investor dashboard, which gave members a better view of their investments in addition to laying the groundwork for developments to be discussed in Q3 and Q4. More importantly though, we started to provide customers with additional ways of speaking with the companies in which they were considering investing. While most of our investors are comfortable investing based purely on a company’s written pitch, some want to speak with the founders directly before deciding whether or not the investment is a good fit for them. To address this, we launched our company webinars, each around 30 minutes long and providing the opportunity for Q&A. The modern equivalent of a conference call has proved a hit with our investors; every company that lists with us now conducts at least one webinar during its raise.
ALTE R
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2017
PLATFORM CE
IVE FINAN AT N
THE YEAR OF
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In Q2 we also started beta testing our boutique introduction service, SR Connect. SR Connect practically developed itself as we moved to become the equity partner of choice for a company’s entire funding journey. We witnessed a large number of our portfolio companies looking to find larger strategic investors in later-stage rounds. Despite how open our platform is, our discussions with these companies highlighted the need to proactively seek those investors who could lead these later rounds. Settled is one such example. Settled raised a little over £260,000 through the platform back in September 2015. Since the platform raise it has gone from strength to strength, raising a much larger round that included Connect Ventures and Piton Capital – two VCs we know. Had SR Connect been in place, we would have facilitated these introductions and likely saved Settled a fair amount of time. It’s win–win–win: we continue to be of use, the companies get open doors to the VCs and the VCs get access to our portfolio. You’ll hear a lot more about SR Connect in the future, but for now see page 44 to meet Miruna, the Strategic Partnerships Manager heading up SR Connect, and read an interview with a fascinating SR Connect company, SenSat. See page 42 to know more about Settled. The Settled platform
For-sale sign
Q3
IT’S ALIVE! A lot of milestones were achieved in Q3. Shortly after celebrating the fourth anniversary of our launch, we surpassed the £100m mark of investments facilitated through the platform. Quite an achievement for a company that in year one just squeezed past the £10m barrier. While we may not have hit £100m as quickly as other platforms, we’ve built the company on a set of principles that we believe put it in good stead for the long term. Shortcuts have presented themselves along the way, but we’ve politely declined.
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In line with the concept of giving our investors more ways to communicate with companies, in Q3 we implemented SR Live, a fortnightly pitching event that is streamed online, giving investors far and wide the chance to grill entrepreneurs live on air. This was hugely successful, with each evening generating views in the thousands.
Q4
WHAT, QUARTER FOUR!!?? Reflecting on Q4, it is apparent that a number of the things we delivered in the quarter were set in motion long before. A good example of this is Q2’s investor dashboard, which laid the foundation for
our Request for Help functionality (working title). In essence, this allows entrepreneurs to send targeted requests to their investor network in a way that ensures helpful responses. These Requests for Help have been used for everything from supplier introductions to recruitment. It was a huge success. Given the positive and genuinely helpful interactions we’ve seen born out of this function already, rest assured we’ll be building many more tools for entrepreneur– investor collaboration in the coming year. We also released The Due Diligence Guide for Investors in collaboration with Rob Murray Brown. Rob gets some stick from many in the industry because he’s relentless in pointing out the flaws in the system and highlighting where companies have either hidden information or consciously misled investors. But Rob’s aim is not to take the industry down. Quite the contrary, he wants it to thrive and knows more can be done to ensure investors don’t unknowingly fall into any traps. I commend him for his efforts; we’ve had a number of conversations and, while we don’t agree on everything, I respect his opinion immensely. Closing out Q4, we collaborated with Beauhurst to launch our report, Top 100: Britain’s Fastest-Growing Businesses. British tech doesn’t always get the credit it deserves, so the little we can do to show people how much is being done and how much value is being created by UK tech companies is worth the effort. At the same time, the report highlights that despite a
lot of successes, British scale-ups still have a ways to go, particularly when it comes to gender diversity (see page 24). That’s it, SyndicateRoom’s highlights of 2017. Oh, and on top of all of that, we helped fund 100% more companies than last year. Not bad for a year’s work.
I was taught that the way of progress was neither swift nor easy. MarieCurie
SyndicateRoom
SETTLED
Settled unpacks the home buying and selling experience, connecting all the steps and fixing the broken bits. It unites buyers and sellers, giving them the power to interact and make the choices that are theirs to make. In doing so, the business aims to reduce fall-through rates, strengthen chains and accelerate the journey to completion.
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Co-founders Gemma Young (CEO) and Paul Young (CMO) began their careers as estate agents, became digital experts and worked for some of the world’s largest technology companies. It was their intricate knowledge of the property market industry that enabled them to create Settled. Since its 2015 SyndicateRoom round, Settled has gone from strength to strength. Rebranding in November 2017, Settled rolled out a brand new logo, website and visual identity to better articulate its vision of a calmer, more streamlined homemoving process. The rebrand followed a strong period of growth for the company, which secured £1.2m funding from leading European VCs, Connect Ventures and Piton Capital in June 2017. In December 2017 Marc Abraham was appointed Chief Product Officer and Simon Guild, NED as the company entered its next stage of product development.
As humans, we strive for shelter; to make roots. Our vision is to simplify the way people buy and sell homes, enabling them in their search for sanctuary. We exist to make people feel truly settled.
INTRODUCING
We’re delighted to announce the launch of SR Connect, our bespoke capital-raising service. Complementary to our online investment platform and funds, we can now also help the more established private companies find a lead investor and, more widely, the right strategic investors.
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We’ve always had the ambition of helping trailblazing companies find great investors. As the European ecosystem keeps growing, there are many opportunities available for both investors and companies, but also a lot of noise. By facilitating the most relevant conversations, we hope to significantly increase the number of valuable connections established and, ultimately, investments. SenSat is the first company we’ve worked with through SR Connect. Operating at the cutting edge of innovation, SenSat is an award-winning geo-spatial tech startup whose mission is to ‘digitise the world’, recreating places and objects in incredible detail to render them into a virtual environment. Thanks to the company’s Mapp technology, in the future anyone will have the ability to access a digital copy of their world. I had the pleasure of asking James, Sensat’s CEO, a few questions.
MirunaGirtu
Strategic Partnerships Manager
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From left to right: Tara Shannon, Jack Lomas, James Dean, Harry Atkinson, Alfonso Vasquez
JAMES DEAN SenSat
The fantastic thing about innovation is its power to essentially transform how the world works. What will SenSat enable us to do that was not possible before? James: SenSat allows computers to speak to the real world in their own language. When we look at the internet today we can engage digitally with practically anything we want – news, music, people; all of human knowledge is digitally stored and accessible at our fingertips. Yet the one thing that matters the most, the physical world we live in, just isn’t there. In order to understand the world fully we need to build the tools that could rapidly create digital replicas of our physical world. This serves as the basis for placing our digital data into its real contextual scene. Having a digital copy of the real world is tremendously useful – it allows us to measure quickly, plan better, integrate diverse data and communicate more effectively. By allowing computers to interact for the first time with our physical world, we are unlocking untold potential. Digitisation is a step change even greater than the internet.
Punting boats moored up in Cambridge. The imagery is so high-resolution that you can count the number of ducks on the River Cam
Building credibility is one of the many early challenges faced by startups. How did you secure your first client?
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SenSat runs a weekly podcast (the SenCast) where we follow the life of a tech startup and discuss future technology with those who are creating it. When discussing startup success, one of the things that often comes up is the topic of credibility – how do you build credibility at different levels to let your clients, suppliers, financiers and partners trust you? We did this in a multistep approach (and the process is by no means over!). The starting point was creating a brand that conveys a message of capability whilst succinctly demonstrating our commercial value add. It never ceases to amaze me that I (and thousands of entrepreneurs around the world) have effectively built a business from our bedrooms using nothing more than a MacBook. So the first eight months of SenSat were spent marketing my idea, creating digital
Conquer a small market and then replicate your model.
collateral that represented our technology in everything but reality. This is a strange phenomenon if you think about it – to our first client, we sold something that didn’t exist! But, in a way, I see this as a risk-off approach – nothing gained, nothing lost. Once we were delivering commercial work (the most important first milestone) we could ‘invest’ time to hone our offering. We listened to clients, worked closely with them and honed our technology to deliver tangible value. I think too many people approach this the wrong way; they create a product then try to sell it. It’s much easier to listen to a problem and then solve it! This method brought more work, albeit slowly at first, but each project successfully delivered opened a new door.
As we developed we sought out ‘credibility checks’ – external validations of our idea, approach and technology. Some of these included various grant awards (they sure do their due diligence!) as well as building a network base in London. This last point is really important and where we are now. One of the things that makes me happiest as a founder is meeting new people who say that they have heard of our work; this is the greatest credibility you can ever gain.
When did you know you were on to something big? Our technology hasn’t changed over the past 18 months; it has evolved. I always had large ambitions for SenSat, but it is important that these do not cloud the focus of an early-stage company trying to achieve product fit. Indeed, this focus should be so tight that you wonder if you’ll ever get out of this niche. Conquer a small market and then replicate your model. Our ambition is to digitise the world, introducing a new dimension of senses to humans and the ability for computers to interact with the physical world for the first time. This is akin to (and indeed follows on from) the efforts of Turing and BernersLee, enhancing our human experience by passing work to machines with the ability to perform complex tasks that are unfeasible for humans. Finally, a good litmus test of value is not only ‘can you gain value from it’, but ‘does your idea enable others to realise value they didn’t have access to before’. SenSat’s plans open a whole new world of future economic potential; people can build entire industries onto the groundwork we have laid. To me this is incredibly exciting and I’m looking forward to seeing other people’s creativity and innovation stem from our early work.
Matthew Pinner (left) and James Dean (right) discuss flight plans ahead of takeoff for the scan of the M27 as part of Highways England’s Smart Motorways programme
SENSAT’S
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DRONE PHOTOS
All images © SenSat®
STRUCTURE FROM MOTION
SenSat is pioneering the use of a new cartographic technique called Structure from Motion (SfM) photogrammetry, which uses surveygrade GPS to digitally recreate the world in incredible detail. The method combines digital photographs, captured from the air, with highly sophisticated algorithms and computer vision to create threedimensional topographic maps that are accurate to within a few centimetres over hundreds of square kilometres.
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SenSat’s mapping drones fly about 80 metres above the ground, along preprogrammed routes, taking millions of measurements of a place to build a dimensionally accurate photo-realistic map. The result is up-to-date and highly accurate renditions of the world upon which people can depend.
Lack of focus is always one of the things that keeps me
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up at night.
Matthew Pinner holding the DT18 in Toulouse
Ever since our first meeting, I was impressed with how much you’ve managed to achieve before raising a seed round. Please share with us three key learnings from your journey. Focus. Don’t get distracted by everything. We have dropped some exciting and profitable business lines to focus more, and lack of focus for myself and the team is always one of the things that keeps me up at night. Be commercial. From day one we wanted to make money – I actually don’t understand how a startup can survive without making money. We’ve now closed our first round and are already at break even. This means we can do more with what we have and are in control of our own development. Work hard. it stands to reason that you and your competition are smart and have similar resources available to you. The one that works the hardest, digs a little deeper and believes that they make their own luck will win. I once saw an HSBC advert that read, ‘Funny just how many nights it takes to become an overnight success’. This is great.
What is the typical profile of an investor that you would like to have on board? They understand our ambition, aims, and are passionate about using technology to change the world for the better.
We have turned down offers from investors with the ‘wrong profile’. This has typically been investors without or unwilling to offer additional value add. We run our team as a portfolio of skills – everybody (including investors) contributes something to that matrix in order for us to succeed.
As the venture ecosystem develops, we are noticing more instances of founders turned funders. In the future, would you consider investing in early-stage companies? If so, what would you look for in a company before investing? I’ll say it publicly: my dream is to buy an island in the South Pacific, build a house and live as a hermit (of sorts). That area of the world is incredibly important to me, but I don’t think the venture scene is booming! Jack, our COO, is really passionate about helping small companies and indeed would like to run a fund in the future. He tells me he would look for founders with intuition, creativity, and a good technical knowledge to design and deliver on their ambitions. Although there is no recipe to success, I do believe there is a lot to be learnt from one another.
After strong interest, Fund Twenty8 – 2016 raised over £4.5m from 233 investors. Fund Twenty8 is the first fund to invest passively in EIS opportunities. The fund’s strategy is to use its algorithm to automatically build you a diversified portfolio of at least 28 EIS-eligible earlystage investments, across a broad range of sectors, targeting a return of over 20% IRR including EIS tax relief.
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Investors know that to mitigate risk, one must diversify. It’s the old ‘all eggs in one basket’ maxim. By building a portfolio of uncorrelated investments, across multiple sectors, you reduce your chances of a single sector experiencing a negative change and it bringing down your entire portfolio; think, for example, of how the shift in oil price dramatically affected a vast number of investments within that sector. SyndicateRoom works with companies from all sectors, choosing opportunities to list based on their quality, not their industry. By only backing companies that successfully reach their funding target on SyndicateRoom, Fund Twenty8 takes advantage of the expertise of its investor base of venture capitalists, business angels and sophisticated investors. Applications for Fund Twenty8 –2017 are currently open.
After repeated requests to provide a fund, we reviewed the market and discovered there were only single-sector funds and they offered only small portfolios to an investor – around five to eight investments per fund. We wanted to offer investors a different option.
James Sore
CHIEF INVESTMENT OFFICER
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AUTOMATIC EARLY-STAGE DIVERSIFICATION fundtwenty8@syndicateroom.com // 01223 478 558
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www.syndicateroom.com/fund-twenty8
FOCUSED GROWTH INVESTING growthfund@syndicateroom.com // 01223 478 558 www.syndicateroom.com/eis-growth-fund
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Having now funded over 110 trailblazing companies, we at SyndicateRoom are seeing a number of them raise significant series A and B investment from top-tier venture capitalists and institutional investors.
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With a four-year track record and our fast-growing portfolio of 110+ companies, SyndicateRoom is seeing the best-performing companies attracting significant investment from top-tier VCs. We’re delighted to see this incredible result, but at the same time frustrated that private investors are being excluded from these exciting growth-stage investment opportunities. SyndicateRoom’s Growth Fund will change this.
Gonçalo de Vasconcelos CEO
It’s a natural progression for the bestperforming businesses to go on to raise additional institutional capital, and a promising result for early SyndicateRoom investors. However, it is frustrating that while VCs are scooping up these deals, private investors are excluded, especially those looking for later-stage, growth-focused opportunities. SyndicateRoom’s Growth Fund will allow private investors to gain exposure to these select opportunities. Drawing on four years of established relationships, the Fund will invest growth capital into at least six of the best-performing portfolio businesses.
ACCESS TO LATER-STAGE HIGH-GROWTH OPPORTUNITIES Imagine backing TransferWise or Deliveroo a few years’ into their journeys rather than during the very risky early days. You’d still get very respectable capital growth, but with some of the risk mitigated.
fit better with institutional investors. Among SyndicateRoom’s extensive portfolio there are a number of companies that raised significant growth capital from venture capitalists, leaving no room for new private investors. SyndicateRoom’s Growth Fund aims to give private investors exposure to these exciting growth opportunities.
It is, however, difficult for private investors to access later-stage businesses; the size of those company’s funding rounds naturally
As of July 2017, the overall SyndicateRoom portfolio had increased in value to 163%, including EIS tax relief.
EVENTS
SR Live is a twice-monthly live-streamed event where investors get the chance to meet the companies raising on SyndicateRoom and watch them get grilled by our investment analysts live on air.
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Back in September 2017 we launched the first SR Live. The idea was simple: give busy investors the opportunity to meet and interact with entrepreneurs raising funds through SyndicateRoom from the comfort of their phone, laptop or tablet. The first few evenings were hosted in the London offices of our good friends Penningtons Manches, and were a huge success. At the beginning of 2018, we decided to shake things up a bit. We listened to your feedback and amended the format of the evening to give investors a greater opportunity to quiz the companies. We dispensed with the traditional presentation-pitch format, which tends to get formulaic very quickly and feature a few too many Powerpoint slides. Instead, entrepreneurs now kick off with a short
TED-style talk to give you a flavour of the business, tell the story behind its foundation and identify the problem it aims to solve. Each entrepreneur is then interviewed on air by one of SyndicateRoom’s very own Investment Analysts as part of the live Q&A, to which viewers can submit their own questions. This is a great chance to get into the grit of how the business works and its performance so far. January’s SR Live was hosted by Master Investor’s Swen Lorenz, a man who’s been a leading voice in UK investing for the past 25 years. To find out when the next SR Live will be broadcast, visit www.syndicateroom.com/ syndicateroom-live Please note, due to strict FCA regulations, only those registered to our site who have self-certified as high-net-worth individuals or sophisticated investors are able to watch SR Live.
Three pitches from exciting companies that already have lead investors, delivered at SyndicateRoom’s HQ, and broadcast to the SR Live web audience. What I particularly loved were the interludes of analysts as well as the web audience asking questions to the entrepreneurs. That’s where it all came together – the companies and their CEOs, the audience, analysts with sector knowhow, and SyndicateRoom as the facilitator who brings it all together!
SwenLorenz
DIRECTOR AT MASTER INVESTOR
The number of people attending the show is absolutely phenomenal, and so is the quality. Gonรงalo deVasconcelos
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SPONSOR: MASTER INVESTOR SHOW 2017
SyndicateRoom
GUN SHY
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In March 2015, Salty by Director/ Producer Simon West successfully raised £1.8m with the help of SyndicateRoom investors, becoming the first ever equitycrowdfunded Hollywood movie. The film was subsequently rebranded Gun Shy and released in January 2018. Simon West’s films have taken more than $1bn at the global box office. Of those, five have reached number one at the US box office and taken more than $100m in revenues, with his lowest-grossing film taking $62m. He is the Director/Producer of Con Air, The General’s Daughter, Tomb Raider, Black Hawk Down, When A Stranger Calls, The Mechanic and Expendables 2, to name but a few. With Salty, Simon was going independent. The film is based on the book Salty by Mark Haskell Smith, who helped adapt his novel for the screen together with screenwriter Toby Davies (That Mitchell and Webb Look, Dead Gorgeous).
THE STORY Turk Henry is your typical hasbeen megaplatinum rock star: wealthy, indulgent and entirely out of touch with everyday existence – traits made immediately apparent in the opening sequence, which sees Turk so filled with righteous fury at his widescreen TV that he orders the help to take the thing outside and throw it into the pool as he cracks open another beer. (Think BoJack Horseman but without the near constant existential crisis.)
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His supermodel wife is another matter. Once heralded as Turk’s ‘Yoko’, she wants to go out and see the world – or do something – while her husband seems content to sit by the pool, drinking beer and brooding over his glory days. Unfortunately, that’s precisely the kind of attitude that gets you abducted
by a group of renegade, shipless pirates while on llama safari. The rest of the narrative follows Turk as he attempts to rescue his wife with the aid (and occasionally, sabotage) of his agent’s assistant, a CIA operative and an aggressively Australian PI. Needless to say, hijinks ensue. Those of you familiar with Haskell Smith’s original will see a noticeable divergence from the novel – not least of which is the setting, which is moved from Thailand to Chile. The story of the film is necessarily condensed for the screen, and is significantly more PG than what’s in the book; even the ending is different, and features a series of comedy post-credit sequences, including a Bollywood number by Turk himself.
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CASTING During the May 2016 Cannes film festival, it was announced that international film star Antonio Banderas would play Gun Shy’s leading role. Famed for cult classics such as The Mask of Zorro, Desperado and Assassins, Banderas would now be portraying Turk Henry, ageing rock star and reformed sex addict. Bond girl Olga Kurylenko was confirmed to star alongside Banderas one month later as Sheila, Turk’s abducted supermodel wife. The Ukrainian-born actress and model is famed for her role opposite Daniel Craig in Quantum of Solace as well as films The November Man, The Seven Psychopaths, The Water Diviner and Oblivion. Further cast members include David Mitchell (That Mitchell and Webb Look, Peep Show), Ben Cura, Mark Valley, Aisling Loftus and Martin Dingle Wall.
Gun Shy was the first film funded on SyndicateRoom, demonstrating that equity investing can work well for independent films. Since Salty’s raise, two further film rounds have closed on our platform: Itchy Fish Film, whose classic British coming-of-age comedy The Bromley Boys is due to be released in 2018; and Boudica Indigo, with upcoming feature Kat and the Band, which is also heading up the first European initiative to redress historical gender disparities on and off screen. Gun Shy is now available to watch on Digital Download on iTunes and Amazon.
ENTERPRISE SOFTWARE
CELAME
TOTAL RAISED: £748,489 100% fully funded
Celame’s mission is to improve transparency and accessibility in the legal sector, as well as enhance and improve performance for legal firms seeking new digital clients.
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Celame was established in 2014 as a holding company for LegalBeagles, the consumer law advice forum, and its sister websites, JustBeagle (the comparison site) and GoBeagle (the SME site). Through these three distinct yet complementary domains, the company aims to cover all areas of the available legal market, from free consumer guides to professional legal assistance for SMEs. Co-founder and CEO Kate Briscoe started LegalBeagles while studying law and working in local government legal contracts as a senior manager of a 50-strong team. She switched to full-time legal practice in 2012, establishing a dedicated consumer litigation team within an established law firm. Kate undertakes much of Celame’s press and media appearances and is regularly featured on BBC consumer programmes, adding professional comment.
LIFE SCIENCES
CAMALLERGY TOTAL RAISED: £815,570 136% complete
Camallergy’s mission is to develop lifechanging treatments for people with food allergies. Its lead product treats peanut allergy, a serious and increasingly prevalent disease with no licensed treatment. Peanut allergy is the most common cause of severe reactions and food allergy deaths. The psychological effects of the risk of accidental exposure can be significant and children who are allergic to peanuts have been shown to experience reduced quality of life as a result. Camallergy’s lead product, CA002, is an oral immunotherapy drug which desensitises patients by gradual exposure to increasing amounts of characterised peanut allergens, and involves seven short treatment visits and two years of easy, daily administration. After confirming results in a Phase 3 study, Camallergy intends to file for regulatory licences to make this treatment widely available worldwide. Early clinical evidence suggests the treatment approach may also work for other allergens.
LIFE SCIENCES
MOMENTUM BIOSCIENCE TOTAL RAISED: ÂŁ1,788,800 149% lift round
Momentum is developing a range of innovative diagnostic products to help combat antibiotic resistance and sepsis. Momentum believes that although a number of companies are trying to produce instruments that could speed up testing patients at risk of sepsis, very few of them can, at the same time, accelerate confirmation of a negative result. Without this, there is wide pre-emptive antibiotic administration and therefore ever-increasing concern around antibiotic misuse.
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The team considers their assay to be one, if not the only, diagnostic instrument that can provide a result in less than one day and, at the same time for patients testing positive for sepsis, give valuable information on the type of infection to help doctors adjust antibiotic administration appropriately and thus better treat patients. William Mullen founded Momentum Bioscience Ltd in 2008. He has founded four other companies (one on AIM) and has previously worked for Abbott Laboratories in the US in technology acquisitions, as well as at Rowett Research Services as CEO, ANGLE Technology and Cambridge Life Sciences as Head of R&D.
MEDIA & LIFESTYLE
MAKE IT SOCIAL TOTAL RAISED: ÂŁ505,069 126% complete
Make it Social allows people to make group bookings and then have each person pay for their share individually, presenting numerous benefits for businesses and retailers alike. Based in Edinburgh, Make it Social aims to provide a number of benefits for both businesses and retailers alike. For consumers, one person no longer has to foot the bill and then chase friends for payment, while businesses benefit from having more customers referred to them. Make it Social estimates that consumers can refer an average of seven friends by sending peer-to-peer invitations with their checkout. The company was founded by Eddie Robb after he had been working for a period of time running his first startup, a travel company focused on group travel. Make it Social already boasts major partners, including enta, which runs the majority of London’s West End ticketing, and Ticketmaster Sport UK. It was voted Online Business of the Year at the 2017 Scottish SME Business Awards.
Issue // 02 // January 2018
Risk warning: Investing in early-stage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio. SyndicateRoom is targeted exclusively at sophisticated investors who understand these risks and make their own investment decisions. Tax relief depends on an individual’s circumstances and may change in the future. In addition, the availability of tax relief depends on the company invested in maintaining its qualifying status.
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Past performance is not a reliable indicator of future performance. You should not rely on any past performance as a guarantee of future investment performance. To read the full risk warning, go to https://www.syndicateroom.com/risk-warning. This publication has been approved as a financial promotion by Syndicate Room Ltd, which is authorised and regulated by the Financial Conduct Authority (No. 613021). Investments can be made only on the basis of information provided in each respective investment opportunity. Syndicate Room Ltd is registered in England and Wales. Number 07697935. Registered office: The Pitt Building, Trumpington Street, Cambridge CB2 1RP