Introduction to SEIS

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The slides from my “Introduction to SEIS” talk at the Hacker News London meetup on 25th May 2012 (video below) can be downloaded here.

Written by jackgavigan

May 25, 2012 at 4:00 pm

Back to the Future?

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After the idea of the browser as a dumb terminal had occurred to me, but before I’d finished drafting this post, Mark Suster drew an identical comparison in a post on his blog, in which he presents a robust defence of the Mobile Web in the context of the Apps vs Web debate.

Until the ‘70s, the average computer was a huge, expensive mainframe locked away in an air-conditioned room. It’s users interacted with it through what we refer to nowadays as a dumb terminal – little more than a screen and keyboard on the end of a long cable. The advent of the personal computer in the late ‘70s changed all that by putting computing power on the user’s desktop. In the ‘80s local area networking technologies allowed PCs to share expensive resources like storage and printers, and allowed the people using those PCs to share information with their colleagues. No longer did you have to copy a spreadsheet onto a floppy disk and carry it across the office – you simply stored the file on a network drive. The Internet now allows us to do this on a global scale; we can now publish, access and share information quicker, easier and with more people than has ever been possible before.

But somewhere along the line, we seem to have regressed towards the days of the dumb terminal. Despite the fact that modern personal computing devices rival 80s-era supercomputers in terms of raw computing power, we seem to be progressing down a path where they are little more than displays for accessing information and services stored in “the Cloud”. The web browser is the modern equivalent of the dumb terminal and many mobile apps are simply custom-designed interfaces for an application running on a back-end server. Instead of connecting directly with our friends online, we congregate on sites like Facebook. Instead of collaborating directly with our colleagues, we do so through something like Sharepoint, Huddle or Basecamp.

Am I the only one who finds the concept of logging onto a website (that’s probably hosted on a server thousands of miles away) in order to collaborate or share with someone who’s sitting a few feet away, to be faintly ridiculous? We might be “connected” but not to each other.

Modern technology offers us incredible power and flexibility. It feels like we’re wasting the opportunity to use that technology to create tools and services of real, intrinsic value that are tailored to and fulfil users’ needs, instead of constraining them because it’s easier, from a technical perspective, to centralise data, or because the company’s business model relies on those constraints.

Wouldn’t it be sad if the reason we never got our personal jetpack was because it was more lucrative to keep selling tyres?

The picture above is of Ben Kingsley and Robert Redford sitting on a Cray Y-MP supercomputer in a scene from one of my favourite  movies: ‘Sneakers’.

Written by jackgavigan

December 22, 2011 at 1:58 pm

Posted in Innovation

UK angel investment on hold ’til April?

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On Tuesday, the Chancellor delivered his Autumn Statement to Parliament. It included the news that, following this summer’s Treasury consultation, a new Seed Enterprise Investment Scheme (SEIS) will be introduced next April, offering “50 per cent income tax relief on investments” and “a capital gains tax exemption on gains realised in 2012-13 and then invested through SEIS in the same year”. There will also be changes to the rules governing EIS and venture capital trusts.

I’m not going to regurgitate all the details here – you can read all about them in the Statement itself – but it’s clear to me that the new scheme will spark interest in angel investing amongst high net worth individuals (i.e. rich people) who might not otherwise have considered it and that can only be a good thing. From a personal perspective, I’m pleased that the government is enacting measures that will benefit startups across the whole of the UK, instead of just in one small region.

However, there’s one small problem – these measures don’t come into effect until 6th April 2012. We’ve got a whole four months between now and then, during which (a) any potential angel knows that a new, more favourable tax treatment of angel investments will be coming into effect in April, and (b) the old rules will still be in effect.

Since yesterday, I’ve been trying to figure out why an angel who will be able to take advantage of SEIS would choose to invest between now and April. I thought I was missing something but, if I am, nobody has yet enlightened me. In fact, Robin Klein is of the opinion that angels should wait, if they can. If they do, this raises the prospect that, for the next four months, very little, if any, angel investing will take place here in the UK. However, come April 6th, we’re likely to see a flurry of deals.

So, sit tight, batten down the hatches, tighten your belt and don’t book any holidays for the first week in April.

Written by jackgavigan

November 30, 2011 at 8:51 pm

Innovation

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I occasionally speak on the topic of innovation to people from banks and, over time, I’ve gradually put together a set of speaking notes that I have on my iPad, ready to whip out at a moment’s notice.

Here they are, turned into a Prezi.

Written by jackgavigan

October 2, 2011 at 7:13 pm

Posted in Innovation

Like shooting fish in a barrel…

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More information emerged today about self-proclaimed “trader” and financial markets “expert” Alessio Rastani. The Independent reported that Rastani “hosts seminars for The Wealth Training Company”, which claims to offer “The UK’s Number 1 Stock Market Training Course”, and named his boss as Darren Winters. Sure enough, Rastani (and his now-infamous BBC interview) are featured on The Wealth Training Company’s website (and what a slick and professional-looking website it is, too!).

A spot of Google research revealed that The Wealth Training Company isn’t the first company Darren Winters has run that offers stock market training. He previously ran WIN Investing which, as it turns out, has had a few dissatisfied customers in its time and was censured by the Advertising Standards Authority for making unsubstantiated claims in its adverts. It also appears that, despite running a company that claims to be able to teach you how to make money from trading the stock market, Winters has some trouble keeping his own ventures afloat – he was director of a software company that went bankrupt, owing over £250,000 and WIN Investing itself came very close to collapsing in 2009.

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Written by jackgavigan

September 28, 2011 at 9:34 pm

What makes a trader?

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 Update: While I was busy tapping away at this blog post, the Telegraph published an article on their website in which they quote Rastani confessing that he’s “an attention seeker. That is the main reason I speak.”, before going on to reveal that “Trading is a like a hobby. It is not a business. I am a talker. I talk a lot. I love the whole idea of public speaking.”

Yesterday, the BBC News channel broadcast a live interview with a “trader” named Alessio Rastani, in which he made various provocative statements that have been widely reported and debated across both traditional and social media. The story came to my attention yesterday evening, so I watched the interview online.

He didn’t come across as the sort of person who works in the financial markets. In fact, to me, he came across as the sort of person you occasionally encounter in various fields who claim to be an “expert” or a “guru” but who are, in fact, self-promoting attention-seekers. You see a lot of these in the tech startup industry or the information (or “cyber”) security space. A good starting-point for determining whether someone is a genuine expert or a charlatan is to find out what he does, where he works, what his background is, that sort of thing. So, I decided to do a quick background check on Mr Rastani.

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Written by jackgavigan

September 27, 2011 at 7:28 pm

Can Groupon Pivot?

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Last week, I wrote about the fact that the single largest threat to Groupon’s survival is a loss of confidence on the part of its merchants, in Groupon’s ability to pay its debts. Just as Lehman Brothers was brought down when other banks stopped lending it money because they feared that Lehmans wouldn’t be able to repay, Groupon could be brought down were merchants to stop supplying Groupon with deals if they feared that Groupon wouldn’t be able to pay up in 60 days time.

Since then, Groupon’s IPO has been delayed and news has emerged that Groupon employees are suing the company (credit to Eamonn Carey for bringing that last piece of news to my attention). Meanwhile, Groupon’s competitors continue to gain ground and Google has expanded the “beta” version of its Google Offers service to five more cities.

The bad news is piling up and one has to ask oneself: “Is this the beginning of the end for Groupon?”

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Written by jackgavigan

September 11, 2011 at 11:47 pm

Posted in Bubble 2.0, Innovation

Will Groupon be able to pay me in 60 days time?

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Update: Commentary added on 7th September after news emerged that the Groupon IPO may be delayed.

The traditional path from startup to success used to be as follows: a company gets founded, it gets funded by VCs and then it either IPOs or gets sold to another company, allowing the founders, VCs and employees who have been granted share options, to cash out their shareholdings and reap their just rewards.

Over the past few years, however, things have begun to change. Companies like Facebook and Twitter are now eschewing IPOs in favour of staying private, in order to avoid the public disclosure requirements and regulations that a public company must comply with. The downside of this is that the time horizon for founders and employees to receive their pay-off stretches out into the dim and distant future. To solve this problem, it has become common practise for shareholders to cash out small portions of their shareholdings as part of investment rounds, thereby liquidating some of their wealth and enabling them to buy a house, a Ferrari or whatever else they fancy. However, when this occurs, it normally only accounts for a small fraction of the investment round, with the majority of the money raised going into the company, to fund its growth and expansion towards an eventual exit (or, if they opt to remain private, profitability).

Groupon have been doing things slightly differently.

Between its founding in 2007 and the Series E round in November 2009, Groupon raised $35.8m.

Then it stepped up a gear. Since the beginning of 2010, the company has raised over a billion dollars – $1,098.2m to be exact.

Here’s the interesting thing: of that $1,098.2m, $946.8m (more than 86%) has been distributed to the founders or earlier investors in the form of share buybacks.

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Written by jackgavigan

September 5, 2011 at 12:07 am

Posted in Bubble 2.0, Investing

A Tech City University?

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UC Berkeley's Sather Tower, more commonly referred to as the Campanile

I’ve been openly skeptical about David Cameron’s plans to turn East London into a “Tech City” to rival Silicon Valley, blogging about the important role the California state government’s Master Plan for Higher Education played in supporting the development of Silicon Valley and opining that, instead of focusing on one tiny area, “Cameron should concentrate on doing his job (improving the educational system) and simply get out of the way of entrepreneurs by reducing taxes, red tape and other costs for all start-ups, not just the ones in East London.”

In late May, a poll conducted at London Business School’s Global Leadership Summit reinforced my opinion. Attendees were asked “How best can government stimulate entrepreneurship?” and given four options. The results were:

  1. By improving incentives (e.g. by taxing entrepreneurs less) – 33%
  2. By creating incubators, and other geographical clusters of entrepreneurial activity – 18%
  3. By preferential procurement from entrepreneurial start-ups – 5%
  4. By reducing red tape and promoting greater flexibility in the business environment – 44%

A few things have happened since then.

Firstly, the Treasury has begun an open consultation on plans to encourage seed investment by angels and word has emerged that the Tech City Launchpad concept is to be “rolled out nationally” (although what exactly that entails remains to be seen – with luck, it means that the kind of support offered to Shoreditch-based tech startups will be available to any startup, anywhere in the UK).

This is very welcome news. It indicates that the government is actually interested in doing more than just jumping on a bandwagon and generating a few positive headlines.

Goofing around at the Googleplex

Secondly, I’ve just spent a few days in Silicon Valley. I’ve spent a lot of time in California over the past few years but, this time, I made a point of deliberately hanging out in Silicon Valley for a couple of days. I went to a 106 Miles meetup, visited the Googleplex, hung out at the Coupa Café in Palo Alto (I can recommend the mango smoothies) and met, informally, with a couple of VCs.

Driving down Sand Hill Road (a mecca for anyone seeking to raise money from VCs) brought home to me the pivotal role Stanford University has played in the development of Silicon Valley. I knew, intellectually, that Silicon Valley had been built on an education master plan but it wasn’t until I was driving along, with the Stanford campus on my right and a slew of VC firms’ offices on my left that I really understood Stanford’s role as the focal point of Silicon Valley.

Last night I stayed in Berkeley, just a couple of blocks from the UCB campus. In fact, I can see the Campanile from my hotel room. Walking around downtown Berkeley yesterday, I could see the influence the university has had on the vicinity. Its left-leaning, libertarian culture permeates the local area – street vendors hawk hippyish jewellery and knick-knacks, the coffee shops’ noticeboards display posters for political and literature-themed events, there’s a bustling all-vegetarian café and a Tibetan souvenir store within a stone’s throw of the campus boundary, and the surrounding streets house various Centres for research into this or that.

You don’t really get the same degree of influence around the various schools and colleges of the University of London, probably because LBS, LSE, UCL, KCL and ICL are located within central London, while both Stanford and Berkeley are geographically removed from San Francisco.

Some people get embarrassed and/or defensive when they’re wrong. I like to think that I don’t (although I say “like to” because I’m sure that my friends and colleagues can cite many instances when I have, in fact, been both embarrassed and defensive when I’ve been proven wrong). I could write an entire blog post on the topic of being wrong (and I probably will, when I get the time) but the pertinent fact here is that I now believe that Cameron’s vision of building the British equivalent of Silicon Valley in East London may not be such a silly idea after all. However, I still think it’s going to take more than £200m and a catchy name to make it happen.

If I’m right and Stanford did (and continues to) play a pivotal role in the development of Silicon Valley, then the way to create a British Silicon Valley is to establish a British Stanford. It just so happens that, in the Olympic Park, we have the perfect site for a new campus for a University of London School of Technology, Innovation & Entrepreneurship, with plenty of space for commercial premises that can be leased by startups and joint ventures affiliated with the new university.

The opportunity to establish a new university, on its own, contiguous campus, is one that will probably not present itself again in our lifetime.

Written by jackgavigan

August 13, 2011 at 5:58 am

HM Treasury consults on encouraging seed investment by angels

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Seed stage funding is not easy to come by in the UK. My friend Hussein (who is far more experienced and knowledgable in this space than I am) reckons that a large part of the reason for this is the lack of competition amongst VCs in Europe. In the US, investing at the seed stage is a way of reserving a seat at the table for the ‘A’ round. Here in the UK, there’s so little competition amongst VCs that they don’t need to compete for a seat at the table. As a result, startups are starting to eschew the UK/European scene and raise money in Silicon Valley instead.

Credit where credit’s due – the government has not only recognised that the lack of seed funding is hampering startups in the UK but they’re actually doing something meaningful about it.

On July 6th, HM Treasury announced a consultation on a proposed scheme called the Business Angel Seed Investment Scheme (BASIS). In my opinion, this is an incredibly important consultation and the outcome is likely to have an impact on startups in this sector for years to come.

The government is effectively asking for our opinions on what steps they should be taking to encourage seed investment and improve the EIS and VCT tax-relief schemes. They are considering introducing EIS-style tax breaks for business angels and one of the things that I’m particularly glad about is that it looks like convertible debt stands a good chance of being included within the scope of eligible investments.

If you are at all interested in this sector, you should download and read the consultation document and submit your answers to the Treasury’s questions ahead of the submissions deadline on 28th September.

Written by jackgavigan

July 26, 2011 at 8:51 pm

Posted in Entrepreneurship