What a year it’s been as we’ve all tried to navigate a new normal. While Covid has been a difficult beast to predict and plan for, once again we’ve been amazed by the resilience our founders and their teams have displayed throughout this challenging environment.
The current landscape for early stage companies
The early stage tech sector has delivered another stellar year. The recent State of European Tech annual report highlights that Europe is firmly positioned as a global tech player in 2021, with a record $100B of capital invested, 98 new unicorns, and the strongest ever start up pipeline, now on par with the US. European tech is creating value at its fastest pace, adding $1 trillion in just 8 months.
At Oxford Capital, as early stage investors our commitment to our companies goes way beyond the initial investment. Our aim is to back founders throughout all stages of building their companies from seed stage and beyond, through the numerous ups and downs they will face. But what will this mean in 2022 and what are the biggest challenges that founders are likely to face?
What should founders prioritise in 2022?
1. Surround themselves with the right team
It may sound like an obvious point but it’s crucial for a founder to surround themselves with the right team at all stages of growing their business. At the initial seed stage this may be about ensuring they have the right COO in place, the right developers to enhance their offering or simply the right marketing consultant to really push their growth. From a founder’s perspective they need to consider the culture of the company and their requirements for growth at each stage. In addition to gaining an understanding of where the gaps are in their own knowledge and expertise – a founder can’t be all things to all people.
We believe that bringing in an independent Chair is almost always a force for good, so we encourage companies to seek one from the earliest possible stage. For example, portfolio company, saving and investing app Moneybox recently appointed Laurel Powers-Freeling as its new Independent Chair. While the company has grown phenomenally since launch and now has over £2bn in assets under administration, Laurel’s significant experience will help support the founders as they approach their next phase of growth.
2. Building their mental resilience
This year as our founders have continued to navigate the challenges of building a business throughout the pandemic, we have placed additional focus on nurturing and maintaining their mental resilience. As early stage investors we have adopted a ‘mindful VC’ approach, ensuring that we check in with our founders on a regular basis, don’t take ‘I’m fine’ as an answer and support them through any challenges they’re experiencing that maybe impacting both their personal and professional lives.
As we head into 2022, they will continue to face bumps along the road that may impact their future growth and we will provide support and guidance to enable them to get the best out of their businesses.
3. Consider their impact on the environment and society
Measuring ESG considerations and a company’s impact on society and the environment has never been more important. It’s no longer a tick box exercise at monthly Board meetings – it really matters and a company needs to deliver more than just financial returns. Several of our companies have achieved or are working towards achieving B-Corporation status – these are businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.
Our portfolio company, Bower Collective has just been through the process of becoming a B-Corp, the digital-first sustainable consumer goods company has met rigorous social and environmental standards which represent their commitment to goals outside of shareholder profit, putting people and planet first. Significantly, it has provided them with a robust framework for keeping every aspect of their social and environmental responsibility to the highest standard as they grow. A number of our companies are also currently B-Corp pending and should receive their certification in 2022.
By achieving B-Corp status, early stage companies can ensure their sustainable principles remain at the heart of their philosophy as they grow.
4. Funding runway
When it comes to building their businesses, financing risk is often the biggest risk and should be one of the number one priorities for founders. Running out of money can ruin a dream, and this is one of the first things we will start to focus on post our initial investment in a company.
In recent months, commentators have reported a golden age of entrepreneurship while others have talked of a bubble. As we head into 2022 the economic environment remains relatively unknown as Covid continues to impact multiple sectors. So, it will be important for a founder to plan follow-on funding decisions further in advance to help maintain a solid cash buffer.
The outlook for 2022
One thing that 2021 has taught us is that despite a challenging environment, the opportunities for starting a business to address an unmet need or market opportunity have continued to grow and the risks and stigma associated with failure have also reduced.
We believe that more start-ups will lead to more successes in the long term. There will be more experience in the talent pool, more depth of knowledge in the ecosystem and more capital available to back the most promising businesses. By providing support and guidance to our founders through the next 12 months we can help foster this growth further and develop the potential unicorns of the future.
Co-founder of Oxford Capital Partners. Husband, father, triathlete and polar marathon runner. Represent Great Britain at master level in Modern Pentathlon.