Early Stage Venture Capital: A window on the future

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Kurtosys is proud to be backed by True Ventures, an early stage venture capital firm based in Silicon Valley.  Why?
Well, in part it’s because back when Kurtosys were originally funded, 5 years ago, we had tiny revenues but a big idea.  True Ventures saw the same opportunities that we did and backed us for the long term to help turn our passion into profit.  Since then, markets and technology have changed and evolved.  Our ideas have too and, through it all, True Ventures have ‘been there’ offering their support and encouragement.
But it’s bigger than that.  Venture capital serves an economic purpose stretching far beyond individual success stories, punching far above its weight.  Consider the fact that although VC investment accounts for just 0.02% of US GDP, the revenue from those VC companies represents 18% of that same GDP.  Think about the fact that according to US Census Bureau data for 1980 – 2005, analysed by the Kauffman Foundation, virtually all net job creation occurred in firms less than 5 years old, or that once you exclude start-ups, net job creation for the American economy would be negative in all but a handful of years.  The Startup America Partnership reports that 40% of the US GDP comes from firms that weren’t in existence in 1980.
Yes, that’s America and venture capital is certainly a different beast over there.  In the UK c.4% of British investment goes to venture capital, whilst in the US the figure is over 30%.  But perhaps that’s why Britain doesn’t yet have a Microsoft, an Apple, a Google or an Amazon.  All of them started with the help of venture capital.
The FT’s Global 500 list for 2010, which ranks the world’s biggest companies by market value, had businesses originally backed by VC funding in 3rd and 5th position; Microsoft ($257m) and Apple ($213m).  Google, at no.30, have completed the leap from fledgling start-up to being voted the most reputable company in the US, and there are many more examples on the list, covering every major sector and market niche.
All of them, plus many other more recent examples such as Facebook, Groupon and the like, started life in back rooms or university dorms and grew at exponential rates because of early stage backing.  True Ventures are in exactly that market.  They are spotting talent, ideas and opportunities in the digital economy that will materially affect the way we live our lives and the future landscape of the world’s leading companies.
When you look back over the list of VC success stories, it’s rather like going back to the future.  These companies were spotted because they had something.  A spark.  An idea.  Because they were the next big thing.  How strange then that financial services companies, who look so hard for sure bets that can drive up profits, pay such scant attention to early stage businesses that operate in the digital economy.
Most financial services institutions, indeed large organisations in every sector, are dragging their heels when it comes to seizing hold of the services and opportunities presented that cutting edge technology presents.
The objections generally stem from concerns over how small these companies are, or the early stage of maturity they are in.  Notwithstanding the slight irony of such concerns given the recent financial crisis and its lessons on how even the most mature of structures are liable to collapse, I would challenge this line of thought.
To wait until these innovative pioneers are mature means missing the boat, delaying the economic benefits that harnessing such technologies could be delivering to your stakeholders and customers.  Moreover, much of the concern about the risk of technology companies failing lies in the fact that financial institutions have not understood to channel the best out from this type of innovation.
Taking an attractive proposition, a ground breaking digital economy product developed by an early stage start-up and subjecting it to a 6 month RFP process including external consultants and ‘global’ stakeholders that need to present to the ‘board’ is to suck the lifeblood from the opportunity.  Not to mention the fact that there is a 99% chance that you will not end up actually buying it.
On the other hand, if you choose a pilot geography, find a bright energetic employee who wants to make a difference, prove to their boss that within weeks they can demonstrate meaningful, material benefits to their organisation or customers, then you’re in with a chance of hitting the jackpot.  Infact, you’re doing more than that.  You are changing the culture of your company.
As well as the commitment Kurtosys has made to helping clients transform through technology, here are a handful of the companies I met at True Ventures latest Founder Camp in San Francisco that could help revolutionise your company (apologies to the many others not mentioned here – there are simply too many of you with truly amazing products and visions, all showcased on the True Ventures portfolio pages.)
Assistly – ready to transform customer interaction
SocialCast – they will bring your organisation together, irrespective of where your employees actually are, or what they do within your company.
Urban Airship – forget Blackberry push, this is push notifications on a global, multi-media scale to any app your customer happens to like.
Backtype – they will help you tap into your company’s profile across the social media and digital landscape.
As mentioned, I have named but a few.  I will never do these companies justice so I encourage you to visit their websites… and the amazing thing is yet to come.  You have no idea how cost effective these types of products are.  Why?  Enterprise software is dead.  Cloud based ‘services’ are very much the now.

mash patel

mash patel