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Kevin Douglas 
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"I write to know what I think", Joan Didion

March 1, 2019

Much has been written to help high growth companies think about whether they are suitable for venture capital or not. I like simple models that are easily consumable and was thinking about how companies that are considering raising growth capital could assess the decision to grow organically, sell or raise growth capital to grow more rapidly.

When thinking about growth capital I think of 2 buckets:

  1. venture-backed businesses that are growing rapidly and are now of a scale where they are at Series B stage -> with proven business models etc.

  2. businesses that are growing at more modest rates typically in a smaller niche, having raised modest or no funding

My focus here is on the latter. While venture investors have become more transparent about their investment parameters – growth investors ha...

June 14, 2018

Its interesting that just when the trend of unbundling financial services that has been so successful in terms of growth is starting to convert into meaningful exits with iZettle being acquired by PayPal, and the apparently imminent IPO's of Adyen, and Funding Circle , some of the other early winners and newer entrants are rapidly expanding their offerings most notably Revolut, direct rival RobinHood , Transferwise and Zopa.

In many cases the investors backing the unbundling strategy are the same as those backing the bundlers. Looking to interpret why you might pursue the two different strategies I have a few thoughts but by no means the answers:

  1. Products with very profitable economic models and exceptional growth prospects provide a stronger argument for sticking with one product for longe...

April 30, 2018

We know that the number of early stage rounds are rapidly reducing – down from over 13,000 in 2014 to under 6,000 in 2017. At the same time private fundraising amounts are increasing as investors gravitate towards later rounds resulting in more headlines about mega-rounds.

Given this context it’s easy to forget that the milestones required for early stage institutional funding are as demanding as ever. I like this table that sums up part of the equation in terms of pure benchmark levels for different types of firms here, but the levels of themselves are not sufficient to provide any kind of assurance of success post seed capital, breakout growth is also essential with growth levels of at least 100% p.a critical until you reach about £5m of revenue for B2B businesses and considerably more for consum...

December 11, 2017

Investors urge Companies to achieve product/market fit to enable scaling. VC investors know they should do the same – ie. Build a system or competency that can easily be marketed that creates clear differentiation to attract the best (not most) deals. In the early days of building a VC’s visibility this can mean taking the risk of investing before there is either critical mass in terms of scale or very rapid growth. However as the investor develops their brand the incentive to take this early risk decreases.

Clearly the best indicator of future growth, which in technology terms is closely correlated with value, is current growth.

The thing is, entrepreneurial success is surely not always that predictable. Real disruptive potential combined with lasting differentiation can take time to create, at the...

November 27, 2017

The last few weeks have yielded more announcements of challenger brands receiving funding from strategic investors. Tracing the funding rounds of robo-advisors over the last 12 months reveals a distinct trend:

This isn’t really a great surprise – the so-called robo-advisor model is disruptive to the extent that it dramatically lowers the cost of servicing HNW (or indeed non-HNW) customers, but it is an area where the barriers to earning trust are significant and whilst challenger brands are busy earning that trust, its suffering from challenging unit economics. This is not a uniquely UK-centric or European problem.

It feels like a necessary component of this earned trust is thriving over a prolonged period of time – which is something that Zopa would seem to have benefitted from in the alternative l...

October 31, 2017

As a high growth challenger business it is sometimes hard to know how to balance the conflicting challenges of optimising for revenue, profitability or cash. This tension comes into play when planning a strategic path for your business. Operationally the need to avoid running out of cash will of course trump other prerogatives.

I have a simple rule of thumb for addressing this question and it’s determined by market opportunity.

If you compete in a very large market with relatively low barriers to global expansion; and gaining leadership in that market would be extremely valuable and has some probability of being achieved, this market is likely to become competitive and populated by well-funded businesses and you should consider optimising for growth. Only the highest growth Companies will attract eq...

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Kevin Douglas 
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" The thoughts on this blog are my own, not those of Princelet Partners or other firms I represent." 

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- Previous Founder of Meridian Venture           Partners (2007-2015)

 

- Co-founder alternative lender (2005-2006)

 

- Trader with Commerzbank (2001-2004)

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© 2017 by Kevin Douglas.