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Meet the Deal Makers
Episode 1 VC

Discover tips and advice from leading venture capital firm on how to secure funding, what qualities you need for success and what trneds you need to be aware of.

By Ollie Forsyth | Head of Growth & Insights | June 27, 2019

BLOG

Meet the Deal Makers
Episode 1 VC

Discover tips and advice from leading venture capital firm on how to secure funding, what qualities you need for success and what trneds you need to be aware of.

By Ollie Forsyth | Head of Growth & Insights | June 27, 2019

Each month we meet one of the UK’s leading VC’s to find out their top tips and advice for founders on raising cash and scaling their business. We also discover what qualities investors are looking for in entrepreneurs and advice on pitching. In this month’s interview we hear the thoughts of Hector Mason Ivestor at Episode1, a leading VC that invests in the hottest technology companies that focus on marketplaces, deep-tech and B2B software companies.

In this Q&A, you will learn:

• What qualities you should have to pitch for investment
• Current and up and coming technology trends
• Advice to founders

Tell us about Episode1 VC?
Episode 1 is a seed-stage VC firm based in London. We have two funds now, with around £100m under management. Our team of nine come from varied backgrounds, many having setup and sold businesses to the likes of Amazon. For the size of the fund, it’s a relatively large team because to add real value to our portfolio companies, we have to dedicate a lot of time to them. Often, the clear winners and clear losers in a fund become apparent quite quickly. By focussing efforts on the middle of the pack, we can really move the needle for those companies, boosting returns for the fund.

What does Episode1 invest in?
In fund 2, we invest in B2B software businesses, deep tech and marketplace businesses. In fund 1, the focus was roughly the same but we’ve taken a few learnings and applied them to fund 2. In
fund 2 we stay away from B2C, largely because of the huge marketing spend that’s required to
build a national brand. However, we do like B2B2C (we’d hate to leave out consumers
altogether). One such example in our portfolio is Carwow, which has performed extremely well.
What are the three qualities you look for in founders when they come and pitch to you?
Tricky question! It’s really difficult to pinpoint what it is about founders that we like, as there’s no set formula that determines whether someone’s going to create a valuable business. If there was,
being a VC would be much too easy! I think three underlying qualities, however, are: tenacity,
constantly seeking improvement, and electric enthusiasm for the company vision (if you can call
that a quality). I think it’s easy to look at certain founders (think Elon Musk, Richard Branson,
Steve Jobs), and assume all founders have to be visionary orators when actually there are lots of
introverted, mathematically-minded or operator-type founders who are highly successful. To
read more on this, take a look at Simon’s blog (Managing Partner at Episode 1).

What are you looking for in the companies when they raise with you?
The two over-arching things we look for are incredible founders and huge addressable markets.
We’ve seen from experience that if you back the right people in a good market, they will find a
way to penetrate and monetise that market in a radical way.

Do you have any pitching tips for founders who are looking to raise?

Yes! Know your business inside out and back to front and try to have solid, evidence-based answers to the criticisms/concerns we’re likely to have. To dig these out, go through the pitch pretending you’re someone who has to find any excuse not to invest. Then, hone your skills in persuading the investor that these reasons are not insurmountable. It’s important, however, to recognise that the journey will be fraught with obstacles, don’t just dismiss all those obstacles as menial!

There are so many exciting trends right now that founders are disrupting, but what are your favourite two trends?
Everyone in the office has different thoughts on this, which sparks many healthy debates. Personally,

I like edge computing and IoT. Both of these are going to proliferate with the upcoming rollout
of 5G and they’ll significantly improve our lives in the long run. The benefits are not particularly
well known right now, but as was the case with the world wide web, the technology rustles
around quietly for a while and then hits the mass market in an extraordinary way.

What sectors do you think are still yet to be disrupted?
Insurance is a good one, perhaps a p2p insurance company (earn returns by insuring peoples’ stuff) -no one’s really nailed it yet as far as I know. And the same with property. A huge amount is being  done in these sectors but I think the bottleneck is consumers’ lack of appetite and trust for
digital services – it just hasn’t grown as fast as people expected. Things are rapidly changing
though, and disruption in one sector may open the flood gates to others (eg. digital banking
opens the gate to insurance). I also think AgeTech and AgriTech are interesting areas. The ageing population is going to make some people very rich and I love the idea of robots doing our farming and AI making it so much less wasteful

How much capital does Episode1 typical invest per company?
Our typical deal is around £1m although we’re highly flexible. We’ll invest anything north of £250k and can follow on with up to about £3m in series A.

What advice would you give to founders?

Ask some good people whether they think it’s worth a shot and if they say yes, go for it. If they say no, but you’re pretty sure your head’s screwed on properly, give it a go anyway. Actually, that’s more for people thinking about starting something. For people who’ve already ‘founded’, I think seeking out good advice and then acting on that advice is very useful. Lots of successful entrepreneurs will be happy to spend five minutes of their day giving you advice, so reach out to them on LinkedIn, build relationships, ask for candid advice and act on it. It’s easy to listen to advice and only adhere to it after you’ve been stung by not following it… Save yourself the pain and just act!

 The most interesting pitch you have received to date?

We see so many interesting pitches but the sad reality is we only make about eight investments per year, so we have to say no to most of them. In my time at Episode 1, we haven’t had any
entrepreneurs fly their pitch deck through our window with a drone or anything like that (I’m
not advocating that as a good idea by the way – but it would be interesting). I think the most
interesting pitches are the ones seeking to address the biggest problems. I love autonomous
vehicles and saw a company recently which is approaching the software for autonomous
vehicles in a really novel way which would drastically lower the power consumption of computer
chips used in the cars, thus increasing range and also lowering the quality requirement of the
onboard sensors and chips, reducing cost.

 

That was cool. Naturally, all the companies in our portfolio had interesting pitch decks. Take a look at CloudNC, Touch Surgery, ThirdEye and FatMap – all awesome companies in our portfolio.

 

Hector Mason
Investor, Episode 1VC

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Each month we meet one of the UK’s leading VC’s to find out their top tips and advice for founders on raising cash and scaling their business. We also discover what qualities investors are looking for in entrepreneurs and advice on pitching. In this month’s interview we hear the thoughts of Hector Mason Ivestor at Episode1, a leading VC that invests in the hottest technology companies that focus on marketplaces, deep-tech and B2B software companies.

In this Q&A, you will learn:

• What qualities you should have to pitch for investment
• Current and up and coming technology trends
• Advice to founders

Tell us about Episode1 VC?
Episode 1 is a seed-stage VC firm based in London. We have two funds now, with around £100m under management. Our team of nine come from varied backgrounds, many having setup and sold businesses to the likes of Amazon. For the size of the fund, it’s a relatively large team because to add real value to our portfolio companies, we have to dedicate a lot of time to them. Often, the clear winners and clear losers in a fund become apparent quite quickly. By focussing efforts on the middle of the pack, we can really move the needle for those companies, boosting returns for the fund.

What does Episode1 invest in?
In fund 2, we invest in B2B software businesses, deep tech and marketplace businesses. In fund 1, the focus was roughly the same but we’ve taken a few learnings and applied them to fund 2. In
fund 2 we stay away from B2C, largely because of the huge marketing spend that’s required to
build a national brand. However, we do like B2B2C (we’d hate to leave out consumers
altogether). One such example in our portfolio is Carwow, which has performed extremely well.
What are the three qualities you look for in founders when they come and pitch to you?
Tricky question! It’s really difficult to pinpoint what it is about founders that we like, as there’s no set formula that determines whether someone’s going to create a valuable business. If there was,
being a VC would be much too easy! I think three underlying qualities, however, are: tenacity,
constantly seeking improvement, and electric enthusiasm for the company vision (if you can call
that a quality). I think it’s easy to look at certain founders (think Elon Musk, Richard Branson,
Steve Jobs), and assume all founders have to be visionary orators when actually there are lots of
introverted, mathematically-minded or operator-type founders who are highly successful. To
read more on this, take a look at Simon’s blog (Managing Partner at Episode 1).

What are you looking for in the companies when they raise with you?
The two over-arching things we look for are incredible founders and huge addressable markets.
We’ve seen from experience that if you back the right people in a good market, they will find a
way to penetrate and monetise that market in a radical way.

Do you have any pitching tips for founders who are looking to raise?

Yes! Know your business inside out and back to front and try to have solid, evidence-based answers to the criticisms/concerns we’re likely to have. To dig these out, go through the pitch pretending you’re someone who has to find any excuse not to invest. Then, hone your skills in persuading the investor that these reasons are not insurmountable. It’s important, however, to recognise that the journey will be fraught with obstacles, don’t just dismiss all those obstacles as menial!

There are so many exciting trends right now that founders are disrupting, but what are your favourite two trends?
Everyone in the office has different thoughts on this, which sparks many healthy debates. Personally,

I like edge computing and IoT. Both of these are going to proliferate with the upcoming rollout
of 5G and they’ll significantly improve our lives in the long run. The benefits are not particularly
well known right now, but as was the case with the world wide web, the technology rustles
around quietly for a while and then hits the mass market in an extraordinary way.

What sectors do you think are still yet to be disrupted?
Insurance is a good one, perhaps a p2p insurance company (earn returns by insuring peoples’ stuff) -no one’s really nailed it yet as far as I know. And the same with property. A huge amount is being  done in these sectors but I think the bottleneck is consumers’ lack of appetite and trust for
digital services – it just hasn’t grown as fast as people expected. Things are rapidly changing
though, and disruption in one sector may open the flood gates to others (eg. digital banking
opens the gate to insurance). I also think AgeTech and AgriTech are interesting areas. The ageing population is going to make some people very rich and I love the idea of robots doing our farming and AI making it so much less wasteful

How much capital does Episode1 typical invest per company?
Our typical deal is around £1m although we’re highly flexible. We’ll invest anything north of £250k and can follow on with up to about £3m in series A.

What advice would you give to founders?

Ask some good people whether they think it’s worth a shot and if they say yes, go for it. If they say no, but you’re pretty sure your head’s screwed on properly, give it a go anyway. Actually, that’s more for people thinking about starting something. For people who’ve already ‘founded’, I think seeking out good advice and then acting on that advice is very useful. Lots of successful entrepreneurs will be happy to spend five minutes of their day giving you advice, so reach out to them on LinkedIn, build relationships, ask for candid advice and act on it. It’s easy to listen to advice and only adhere to it after you’ve been stung by not following it… Save yourself the pain and just act!

 The most interesting pitch you have received to date?

We see so many interesting pitches but the sad reality is we only make about eight investments per year, so we have to say no to most of them. In my time at Episode 1, we haven’t had any
entrepreneurs fly their pitch deck through our window with a drone or anything like that (I’m
not advocating that as a good idea by the way – but it would be interesting). I think the most
interesting pitches are the ones seeking to address the biggest problems. I love autonomous
vehicles and saw a company recently which is approaching the software for autonomous
vehicles in a really novel way which would drastically lower the power consumption of computer
chips used in the cars, thus increasing range and also lowering the quality requirement of the
onboard sensors and chips, reducing cost.

 

That was cool. Naturally, all the companies in our portfolio had interesting pitch decks. Take a look at CloudNC, Touch Surgery, ThirdEye and FatMap – all awesome companies in our portfolio.

 

Hector Mason
Investor, Episode 1VC

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