If you’re an early-stage British technology business on the lookout for support to help you to get to the next stage, you’ve never had it so good. An explosion of start-up “accelerators”, which offer funding, office space and mentoring to entrepreneurs, has meant that ambitious companies are spoilt for choice when it comes to finding someone to help them to turn their bright idea into a world beater.
In London alone there are 600 of these organisations, which typically take an equity stake in the start-ups in return for the support.
However, Reshma Sohoni says that you can have too much of a good thing. The co-founder of Seedcamp, Europe’s oldest accelerator, believes that the UK’s booming start-up support industry is overdue for a reality check.
“It’s like cake — yes, I can always eat more, the more cake the better — but eventually your body can’t take it. There are definitely too many accelerators in that the economics don’t support it.”
Seedcamp was founded in 2007, when the accelerator industry was nascent in the United States and non-existent in Europe. “We wanted to give European founders a leg up,” Ms Sohoni says.
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Although the organisation is based in east London, the idea is to attract rough diamonds from across Britain and the Continent, give them funding, training and a network of experienced entrepreneurs and advisers, and help them to build world-class companies.
These were the days when east London’s technology scene amounted to a handful of companies still enjoying relatively cheap office space in Shoreditch. Rents have since soared, matching the rapid rise in start-ups in the area and the arrival of government patronage and tech giants including Google.
“We centred on London because it’s the strongest capital. I never wanted Seedcamp to be another run-of-the-mill, UK-only thing,” Ms Sohoni says. “We were going for a United States of Europe approach. I spent four years hitting the streets, from Prague to Bucharest to Dublin. I felt like I was preaching the Ten Commandments. Number one was you should start a company!”
Eight years on, the organisation is a qualified success. It says that it has helped companies to raise $280 million (£180 million). Of the 156 companies it has recorded going through its programme, 11 have been acquired, 34 failed and 111 remain operational. It has also offered training to 1,200 start-ups across 13,500 teaching sessions.
Its star alumnus is probably TransferWise, the peer-to-peer online currency transfer site that has secured backing from Sir Richard Branson and Index Ventures. Its last investment round valued the business at nearly $1 billion.
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Some of its other companies have been sold, but, like much of the rest of Europe’s internet technology investment sector, Seedcamp is still waiting for a famous flotation success.
“Instilling a commercial drive in companies and getting them to scale up is harder, and took longer, than we expected,” she acknowledges. “It’s a year or two harder than we thought.”
Carlos Espinal, a partner at Seedcamp, says there is a danger of there being too much support for the earliest-stage companies in the UK and not enough for those at the next level.
“It’s a pyramid,” he says. “As long as it all grows proportionally, it’s in balance. If we scale one aspect, we need to scale the other too.”
To that end, and in an effort to put some distance between itself and its hundreds of rivals, Seedcamp now describes itself as something of a halfway house between a start-up accelerator and a traditional venture capital investor. Thanks to a $30 million fund raised last year, it has more financial muscle than most other European examples of the former.
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Seedcamp makes about 30 to 40 investments a year, generally taking equity stakes of 3 per cent or 7 per cent, depending on how much early-stage funding a company needs.
Start-ups sign-up to a year-long teaching and advice programme in which Seedcamp aims to help change them from being merely promising ventures into genuine fast-growth companies.
With seven years of start-ups under its belt, Seedcamp should be prepared for the pitfalls as it takes the fight to its younger rivals. “You can’t stay static,” Ms Sohoni says. “You evolve with the market or you die.”