Established by Barclays Bank and now receiving government funding to support the U.K. startup community, Eagle Labs has launched an online directory platform aimed at connecting founders with investors. Given that fundraising can be difficult and time-consuming at the best of times, anything that makes the process easier should probably be welcomed. But investment – as we’re constantly told – is a people business. So what role can an online matchmaking service really play?
Even when you know what to do, raising capital is no easy undertaking, especially if it’s a first foray into the world of VCs and angels. Attracting the attention of investors usually involves researching the market, building a profile at startup fairs, making countless phone calls to arrange meetings, and participating in pitching events. For others, however, fundraising is quite simply a mystery. How do you do it? Who do you contact? Frankly, who knows? Without the necessary market knowledge, it’s very easy to conclude that securing investment is something that other people do.
In announcing the launch of its “Demo Directory” Barclays Eagle Labs is potentially helping both of those groups by providing an easier and more efficient way to take the first tentative steps towards attracting investors.
But how will it work in practice? I spoke to Benjamin Storey, Head of Demo Directory at Barclays, to find out.
A Problem For Both Sides
As Storey sees it, the new platform is helping both startups and investors. From a founder’s perspective, too much time has to be devoted to finding investors. Meanwhile, angels and funds face problems of their own. “Investors spend time sifting through businesses that aren’t relevant,” he says. And at the same time, VCs and angels are missing opportunities because they aren’t aware of some of the businesses that would be appealing to them.
That much is well known. But can the Barclays Demo Directory provide a solution that works for both sides?
The concept is simple and familiar. To sign up for the platform, founders must answer a series of questions. “They tell us about their businesses, their teams and the technologies they use,” says Storey. “All the questions we ask have been defined by investors.”
That last point is important. To operate successfully a platform of this kind requires investor buy-in. Or to put it another way, unless it’s providing some sort of value to the VC and angel communities, they may feel that sifting through hundreds of hopeful pitches is a further drain on their already limited time.
Storey says Barclays has worked closely with investors to ensure that the questions asked of businesses provide necessary and useful information on the startups hoping to catch their eyes. To avoide overload, there is a barrier to entry. Companies hoping to list on the directory must provide evidence that they are viable and investment-ready. Storey says helping companies to become investible is one of the functions of Eagle Labs.
An Early Stage Focus
The focus is on early-stage companies. Drawing data from the pilot and the first few weeks of operation,” Storey says 65 percent of participating startups are seeking to raise between £250,000 and £2.4 million. “The most popular range is between “£250,000 and £500,000,” he adds.
So what happens when a company joins the directory? “The power is then very much in the investors’ hands,” says Storey. If members of the VC and angel community like what they see, they can get in touch directly. At that point, the process of engagement begins in earnest.
A Better Chance?
That question is, does the platform actually improve a startup’s chance of securing investment? Storey thinks it does. “Data from the pilot shows that 49.3 percent of companies raised capital within six months of joining the platform. That wasn’t just about us but we helped to get them in front of the right investors,” he says.
Equally important, Storey points to the ability of the platform to connect investors to founders who are not located in one of the major innovation economy hubs. “It’s very important to give people an equal opportunity to raise capital,” he says.
And there’s a geographical bias. Storey cites the angel community. “Seventy-five percent of angels invest in their own region. Sixty-five percent of them live in London and the South East of England. Thus, the tendency of companies in the most prosperous region of England to suck up the lion’s share of investment becomes self-perpetuating. The good news, Storey says, is that angels are keen to invest outside their regions should they be able to identify opportunities.
In that respect, the platform provides an opportunity to spread investment more widely, not only in terms of geography but also across gender, socio-economic and ethnic lines. To date, 54 percent of applicants identify as being from an ethnic minority background, 39 per are female and 48 percent are from outside the London, Oxford, Cambridge triangle.
Of course, the concept of this kind of platform isn’t new and success or failure depends – as previously mentioned – on investor buy-in and the quality of the startups. Around 350 investors were involved in the pilot, suggesting a good degree of engagement. Meanwhile, Barclays is engaging with thousands of startups through its Eagle Labs program, which operates physical hubs across the United Kingdom. Barclays also says that this the first initiative of its kind operated by a major UK bank, so there are opportunities to promote the scheme to business customers.
Another useful tool for U.K. startups.