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An investor view: What to consider when analysing the opportunity in volatile markets

Published

9 months ago

January 5, 2023

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By Andreas Wuchner, Angel Investor of Venari Security

The government’s ‘mini-budget’ announcement in September had a huge impact on the stability of UK financial markets. In the months following, the value of the pound plummeted and interest and borrowing rates rose substantially. The continued uncertainty within the UK economy has meant that some investors are beginning to question whether now an appropriate time is to invest in UK start-up businesses. However, what’s clear is that there are still fantastic opportunities in the UK.

This is particularly true in cybersecurity – which has seen significant demand and growth in the last few years, owing to the evolving threat landscape. Despite the undercurrent of volatility that has remained within UK markets, the UK’s cyber security industry is one that has risen to that challenge. Cyber security threats don’t simply stop in a recession, so companies can no more stop using cyber tech than they can cut off their electricity.

While these opportunities are present, competition is fierce and new start-ups in the space need to be perfectly optimised for success. As such, it’s increasingly important for investors to look beyond the macro environment as the core indicator of business success. While the general health of any financial system is important, investors should take a very close look at the businesses they are considering for investment, and whether they are facilitating social change. As an investor, I should question whether I am able to add genuine value and expertise. This has been the core of my investment strategy in recent years and was a major deciding factor in my investment in Venari Security. As a rule, I only look to support innovations and ideas that have a lasting impact, even if it’s in a small way. Beyond this, there are several key indicators which can demonstrate whether a start-up is properly set up for success and longevity.

Leadership is important

Andreas Wuchner

Often, the leadership of a company can ensure its successful navigation through instability in financial markets, particularly if the product or idea is of high value. Ultimately, leadership can determine the long-term viability of a business. Strong leaders will demonstrate an obvious understanding and enthusiasm for the company and the industry that it is operating in. They will also ensure they are evolving in line with the requirements of their workforce.

Leadership Development – the goal of building workplace meaning and relationships, and interpersonal competence – is a crucial factor in the success of a start-up, according to a study from the Journal of Business Venturing Insights. Additionally, the World Economic Forum found that vision, patience and tenacity were all leadership traits most indicative of business success. While previously, investors may have looked solely at market and financial details to ground investment decisions, these fail to account for the level of leadership present at a company.

Personal investment can also be a particularly useful indicator of stability and commitment from the leadership of an organisation – both important factors for long-term sustainability. A company with a hired CEO or leader could find that they are more willing to leave at difficult junctures, compared to someone with a significant stake or investment.

When finalising any investment decision, building up a realistic picture of the background and traits of a company’s leader is crucial. A leader with a personal investment, that can demonstrate their commitment, a clear plan for navigating financial uncertainty and present their company’s values and story with avidity – all of which are highly desirable traits from an investment point of view.

Connections make the difference

Personal connections and influence are almost as important as the profile of a leader. Having strong industry connections and the ability to get in front of the right vendor or partner can be the ultimate difference between success and failure. A leader with a vast network, that they can use as a launchpad for a product or service, is extremely valuable.

In essence, a healthy network can assist in business growth, even in difficult markets. Having a pool to source investment and business advice from will lessen the impact of market shocks and improve resilience. Angel investors themselves will bring a range of different experiences and their own networks, meaning start-ups can immediately access the support and knowledge then need from a variety of different sources.

Research from Computers in Human Behaviour found that social connectedness was the ultimate predictor of successful funding for start-ups, and this had a correlation on the level of financing sourced. With this considered, founders who have a well-developed network of experts to call on for advice or for future investment, are well placed to ensure the viability of the start-up moving forward.

Understanding target market

Financial instability can enhance competition between start-up businesses. As such, investors should carry out sufficient due diligence on each company before they invest.

Even in markets that are particularly healthy, companies should be able to outline a very clear understanding of their customer and what problem their product or service solves. Companies should be in a position to answer key questions about their audience profile, including: Why are they interested in your product? What do you offer that your competitors don’t? And ultimately, what specific issues are customers looking to solve by engaging your company? It’s very hard to justify investment without sufficient answers to these questions.

Venari Security is a perfect example of a start-up business that had cognisance of its target market, and was able to demonstrate this as they sought investment. The cybersecurity market, in which Venari Security sits, has ever evolving risks and legislation, like the rise in encryption. Venari has a very detailed understanding of the market, and was able to develop an Encryption Traffic Analysis tool, which prevents malicious cyberattacks hiding within in encrypted traffic – a significant business problem. This ensures they are a valuable option to security teams across various industries and therefore are a very attractive proposition in the eyes of investors.

Workforce is key

When investing into a company, you’re also investing into the workforce and the expertise they have in completing tasks on a day-to-day basis. A diverse workforce that can collaborate to overcome professional challenges are those most likely to deliver business growth. On the other hand, a business with a high turnover of staff may have poor leadership, or work practices that are unethical. This not only presents a risk to business growth in the immediate term, but can also lead to reputational damage and the inability to recruit talent later down the line. As outlined by Harvard Business Review, two thirds of start-up companies fail due to problems within the workforce.

Diversity is also a key consideration in evaluating the potential long-term success of a start-up. Interestingly, research from Gartner found that performance improves by 12%, and intent to stay by 20% in workforces that are considered diverse. Those companies with a range of different people, thoughts and opinions are best set-up to tackle business challenges, sustain future growth, and ultimately make the most attractive investment propositions.

Predicting future success

Of course, stability in the financial markets is an important consideration when making any investment decisions and should be examined before of agreeing any deal. However, this is not the only indicator of business success in the long-term, with a myriad of other factors equally important to viability. The best investments are made when markets are considered alongside other predictors of business success, like leadership, and the product or service being able to solve a vital business need.

Investors should carefully consider all of these points, and what value they might also bring to an organisation when making investment decisions. While risk always exists, these can help investors to predict whether a business is set-up sufficiently for future success.

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Emerging technology will power long-term sustainability within the UK banking industry

Published

3 days ago

September 26, 2023

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By Peter-Jan Van De Venn, VP Global Digital Banking at Hexaware Mobiquity.

Sustainability has been a big focus for the banking industry in recent years, with the issue becoming increasingly important for consumers. It’s no wonder that sustainability has become baked into the purposes of almost every bank, from Natwest to HSBC.

However, the economic uncertainty of the last year has led to many banks putting it on the back burner. Challenging market conditions have forced financial institutions to change their priorities to concentrate on protecting the bottom line. Our research found there’s been a significant drop in the number of UK banks saying that sustainability remains a key business strategy. 12 months ago it was a major priority for 100 per cent of banks, but now that number has shrunk to 60 percent.

Whilst it’s understandable that banks are feeling the pressure at the moment, there’s a risk that they will miss out if they hit the pause button. From cost savings brought by innovative digital products and services, to improved brand reputation and increased profitability, there are a lot of longer-term benefits they could be failing to unlock. So how can they keep moving forward?

Losing momentum

Emerging technology holds the key to their success, with the power to disrupt current behaviours and promote a more sustainable culture. Banks are already aware of this, with 76 percent using digital transformation to drive sustainability, but a lack of leadership has made it difficult to build momentum in the last 12 months. Currently just over half (54 percent) of banks have tasked an executive at board level with overseeing sustainability – way down from 83% just 12 months ago.

This lack of board authority means banks are struggling to engage the entire organisation to move ahead with sustainable initiatives. As a result, almost two-thirds of banks are seeing progress slow, admitting they are not actively taking steps to foster more sustainable behaviours throughout the organisation. Those that have taken their foot off the gas need to find a way to move forward again.

No time for standing still

Banks know that technology can drive sustainable behaviour. For instance, many of them are already encouraging their workforce to work remotely, as a way of reducing travel. This has two benefits – not only does it cut the costs of running physical offices at full capacity, but also reduces the bank’s carbon footprint. There has never been a better time to invest in technology to drive more sustainable behaviours.

New digital products and services can also extend the benefits beyond employees to encompass the wider customer base. A fair number of banks are already investing to make this happen. More than a third (35 percent) of banking organisations are using Machine Learning (ML), Artificial Intelligence (AI), cloud and analytics to make digital services more easily accessible. Investment in these technologies will be critical as the number of physical bank branches continues to decrease, with figures from Which? showing this is taking place at a rate of 54 branch closures each month.

Hitting environmental and social responsibility goals

Emerging technologies can also help banks keep pace with tightening ESG rules and regulations. Banks are faced with demands for increasingly granular reporting and transparency on ESG – demanding a new approach. In line, 41% of them are developing data visualisation tools to improve stakeholder engagement and understanding of ESG risks and opportunities, while 37% are using machine learning and artificial intelligence to identify and track ESG risks and opportunities across a wide range of data sources.

More than one in three are also using the blockchain to improve transparency and traceability in supply chains, and implementing digital tools and platforms to collect, analyse, and report ESG data and metrics in a standardised and consistent manner. All these applications of emerging technology will put banks on track to address global environmental challenges and unlock a greener future.

Long-term sustainability

As the economic pressures hopefully start to subside, increasing numbers of banks will start investigating how they can use emerging technologies to provide engaging experiences and value-added services for customers, to drive greater revenue and efficiencies.

Whilst banks are right to focus on their revenue under difficult trading conditions, it’s important they don’t miss out on the long-term benefits that sustainability can bring. To capitalise on this, banks must keep pushing the boundaries and invest in emerging innovations to drive more sustainable banking behaviours, benefiting the planet and driving great digital experiences for customers.

Banking

The Future of Banking: Streamlined Cash Management for ATMs

Published

3 days ago

September 26, 2023

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Gaetano Ziri, Innovation Manager, Auriga

“Maintaining free access to cash for the community demands robust strategies to mitigate the escalating costs incurred by banks and ATM operators in handling cash. A pivotal step in this direction is modernising cash management systems to foster efficiency and reduce operational costs.

Back in 2018, a report by McKinsey underscored the urgent need to overhaul the largely manual and disjointed systems relied upon by nearly half the banks worldwide for forecasting cash requirements at branches and ATMs. Despite the decrease in cash usage noted by the European Central Bank, the cost of managing cash has not abated, primarily due to surging labour costs.

To reconcile the demand for free access to cash with the requisite cost reductions, banks are increasingly turning towards tech-driven solutions in cash management that elevate service levels while driving down expenses.

The Complex Landscape of ATM Network Management

Operating a vast ATM network can be a double-edged sword for banks, simultaneously offering customer convenience and engendering considerable challenges, including substantial cash handling, management, transit and security costs. Each ATM embodies a multifaceted operation involving numerous cash transfer operatives, necessitating a coordinated strategy to forestall costly inefficiencies.

The remedy is a holistic, data-centric approach to streamline the management of intricate ATM networks and counter the escalating costs associated with cash access. The merits of such an approach, grounded in continuous data collection and analysis across ATM networks, encompass:

Strategic Planning: Leveraging real-time data to craft bespoke strategies for individual branches or regions, assuring optimal cash flow management and averting superfluous cash loading orders.
Operational Transparency: Facilitating stakeholders with instantaneous access to accounting and operational data relating to cash supply chains, thereby enabling timely interventions and adaptations.
Enhanced Customer Experience: Minimising ATM downtimes to guarantee uninterrupted cash access to customers, enhancing their banking experience.

Innovations in Cash Management: A Closer Look

So, how does this revolutionary cash management technology function? The answer lies in a series of sophisticated features that employ cutting-edge predictive analytics, automation, and data-driven decision-making:

Predictive Analysis: Forward-thinking solutions predict cash necessities of distinct units, offering precise demand and cash flow projections by considering variables such as seasonal fluctuations, holidays, and daily usage trends.
Automation and Monitoring: Swapping manual processes or basic mathematical functions with modern software solutions for cash management ushers in real-time monitoring and efficient intervention planning, which can potentially diminish order management costs by a significant margin, whilst improving precision and operational fluidity.
Optimised Cash Transit Management: Utilising predictive analytics to strategically plan cash restocks, thereby reducing the likelihood of ATMs depleting their cash reserves and improving customer satisfaction.
Data-Driven Decision Making: Availing a comprehensive dashboard to generate timely reports and monitor critical metrics facilitates strategic decision-making grounded in accurate data, substantially reducing residual cash stock in ATMs.

As the financial landscape evolves, banks and financial institutions are impelled to adapt and innovate. Traditional cash management approaches are increasingly becoming outdated, paving the way for modern, data-driven solutions. These not only embody a commitment to technological advancement but also signify a strategic movement towards future readiness.

Embracing such technologies promises streamlined operations, substantial cost reductions, and a superior customer experience, setting a new standard in ATM network management.”