At a recent awards dinner Dr Mike Lynch spoke about the difficulties in investing in new businesses and supporting innovative and growing companies. Since his departure from Autonomy he has created a £1bn fund, Invoke Capital, which recently made its first investment. What he was saying was basically every idea that was presented to his team could be over analysed and what he realised was that they could talk themselves out of any investment if they thought about it long enough. He even commented to his team that if his own business, Autonomy, was sitting in front of them they wouldn’t have invested.
And this brings about an interesting truth in that there has to be an element of faith and belief when investing or supporting a new business or idea. Faith and belief in the people running and building the company, but also in a bit of luck and a fair wind will see the business to success. It is certainly the biggest challenge successful business people have to overcome when they become wannabe investors and angels to the next generation of businesses.
The problem is we all forget the pain in starting and growing a business. The time involved, the unforeseen issues, and the opportunities that appear because you are in the right place at the right time. Unfortunately none of this can be quantified against an investment risk and so it means good businesses, even brilliant ones are not given the start they need because of a lack of funds. Now my personal belief is that most of these businesses will become great through the determination and ingenuity of their founders, but I am sure would have happened quicker and faster with the right support from the beginning.
The problem is America still leads on seed funding and will still be an incubator of new businesses for the foreseeable future. Even a friend of mine I spoke to this week is spending his time in San Francisco and finding much more support with his software projects than he ever has in London. We just need to help investors remember the heyday of their own business and the fact that not everything could be analysed or forecasted – some of it relied on a bit of luck.