- You have a strong background both in economics and technology, what is the importance of data analysis in Syndicate Room’s process?
Data is essential to all that we do, though it has played the biggest role in our indexing and analysis of the startup market and the design of our fund.
We indexed every private market funding round that’s taken place in the UK going back 10 years – several million data points – and analysed it to death.
We then used that data to model the ideal portfolio size, the ideal round sizes to get involved in, whether to write a fixed check or vary our check size, whether to follow-on our initial investments or not, and most importantly, which investors we should align ourselves to to achieve superior returns.
Fun fact: if you’d invested in all of the 600 odd companies that raised at least a true seed round back in 2011, you’d now have witnessed an annualised 28% year on year in portfolio growth, with 19% year on year in cash.
Further, there is a group of about 150 super angels who, as an average exceed that return by over 50%. Those are the angels we co-invest with.
- How do you envision the role data will play in the future of Venture Capital companies?
At the earlier stages, when company level performance metrics are thin, the data is used to remove bias from the decision making process. For example, the reason we write a fixed check size is that we know that at the stage we invest we are more likely to get it wrong than right if we wrote variable checks sizes – this makes for fun conversations with our angels when we compare notes on their returns vs what our simulated returns with fixed checks and no follow-on rounds would have returned.
At later stages, when there is more company level performance data, you can start to introduce variability to the equation on things like the company valuation and the investment you would make given said valuation.
What’s not yet been cracked, and I would love to see someone do it, is quantifying the team dynamics and key personalities in the business. A lot of what separates the good from the great is not the product but the people, how they work together, and how well they can execute. Standard personality tests just don’t cut it in the startup space.
- Your EIS fund hasn’t been operating for all that long, what are some of the struggles you encounter as a relatively new company on the Angel Investment scene?
We’ve had a brilliant response to the fund from our existing investor base and from those that find us directly. BBI has just committed £10m which is a fantastic achievement for a fund so early in its journey.
The super angels get the concept immediately. We offer efficient capital at the earlier stages of investment that can help the companies go further and achieve more before needing their next round. What’s not to like from their perspective?
However, it’s taken time to get the advised market – IFAs and Wealth Managers – interested in the product. This is because we do not have the length of track record that many of the other funds have. Despite being able to show the extensive track records of the angels we co-invest with, who in many ways act like General Partners of a more traditional fund (they source the deals, set the terms and valuations, and they are committed to the rounds if not the fund), the fund itself has only been operating for 15 months.
They are starting to come around though and the investment from BBI has opened doors to them as well as other institutional investors.
- Syndicate Room has backed a very broad range of start-ups – is there a theme that ties them together?
The theme that ties them all together is that they have all attracted the interest, and investment, of at least one of our super angels whom we co-invest with. That, and they are all relatively early in their journey.
The diversity of our portfolio, not just in terms of size, but in being cross-sector, is one of our fund’s strengths. We don’t worry about single sectors blowing hot or cold because we have exceptional angels that are experts in so many. It brings a balance to the portfolio and also makes for quite varied portfolio updates.
Tom Britton Biography
Tom grew up in Los Angeles and, thanks to his Scottish-born father, was always interested in trying to make a career out of playing football. He moved to Edinburgh in 2006 to pursue this goal and played in the lower leagues for three years, during which he added two league titles to his collection.
Tom has always been a techie at heart and it was no surprise to anyone when he went into product development soon after retiring from football. He headed up the initial mobile application development at thetrainline.com before electing to work on his master’s.
Tom completed his MBA at Cambridge, where he focused on entrepreneurship and strategy. While Tom heads up the technology team at SyndicateRoom, his skills and experience ensure that he does a lot more than just that.
In his spare time Tom volunteers for Camp Footprints, rock climbs and still plays the odd five-a-side game (when they don’t make him play in defence).
The rest of this editorial will appear in print at a later time.