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Putting technology to work on entrepreneur fund-raising

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By Simon Glass, CEO, Qodeo

 

Human relationships are behind the most successful venture capital deals. The chemistry between an investor and an entrepreneur, and their ability to work in harmony is vital, particularly when you consider that VC firms hold their investments for between five and seven years.  That’s a long time to keep civil if you don’t actually see eye to eye on the future of the business.

Such endurance makes the initial search, and getting a clear idea about mutual goals, very important. Like any other relationship, what both parties are looking for is a good match. For many entrepreneurs, however, setting off on the path to raising funds can be daunting. Even the language is confusing. Terms such as ‘stage’, ‘series’, ‘pre-seed’ and ‘seed’ are well known everyday expressions if you are a venture capitalist or work in a private equity firm, but even the difference between those types of funders can be confusing.

 

Getting on top of the funding process

It’s understandable that trying to get to grips with the sector can take entrepreneurs hundreds of hours. According to research conducted with the business school INSEAD many make huge investments in time, and in money too, only to give up or reach a dead-end.

A director at Qodeo, and the former Deputy CEO of Coutts Bank, Paul Wright, says the process of fundraising is like ‘pinballing’: being bounced from firm to firm without getting a result, or even in some cases, getting any kind of reply. Investors are interested, but they are simply overwhelmed with approaches and don’t have time to react to everything they receive. What is even more frustrating is that it is difficult to find out who the most appropriate contact would be. An entrepreneur can spend days trying to get on a shortlist, only to find out that the VC they have been targeting is not the right fit for them.

Outside London and the major conurbations, start-ups can also struggle to be noticed. It is discouraging for them to see firms that are very similar, but based in, or near to, major financial centres, announcing deals when they are unable to access the same sources of funding. Among this group – although the same happens in city-based firms too – there is a tendency to ask for too little money. This sounds counterintuitive, but deal size has grown exponentially in recent years. If an entrepreneur asks for only £500,000, they will automatically fall outside the VC radar, and into the business angel market.

 

Investors need to expand their networks

The difficulties of connecting also exist on the investor side of the equation. For decades VCs and private equity firms have fished in the same pool, using established networks, often forged in school or university, to find opportunities. We conducted research with Cambridge Judge Business School among 85 investor firms from across the UK, and when we asked about deal flow, we found that 29% were sourcing deals through entrepreneur contacts and referrals but only 19% said they used alternative channels.

Given the vast numbers of start-ups and young businesses that are ripe for investment right across the UK, this narrow approach needs to change if investors are to find more diverse opportunities and better returns.  An examination into this topic by Paul Gompers and published in Harvard Business Review found that: “Diversity significantly improves financial performance on measures such as profitable investments at the individual portfolio-company level and overall fund returns. And even though the desire to associate with similar people—a tendency academics call homophily—can bring social benefits to those who exhibit it, including a sense of shared culture and belonging, it can also lead investors and firms to leave a lot of money on the table.”

The question, to date, has been: how can entrepreneurs and VCs connect successfully? And the answer is through a trusted network supported by technology.

 

The funding dating service

Qodeo is an example of this. It is a digital subscription service that matches successful, diverse entrepreneurs with pre-vetted venture capitalists and private equity firms. The database of companies is not just regional or national, but in fact, draws from across the world, so if a UK-based company wants to expand into Africa or Asia, for example, a match can be found.

For a small subscription of just £10 per month, entrepreneurs can make use of this funding ‘dating’ service to dive into a wealth of reports and research, gain an understanding of the funding environment by attending talks and webinars, and get guidance on building a profile. This is essential, since the service uses an algorithm which, based on their profile, determines the best investor match for the entrepreneur.  It will match female investors with female companies, if that is what they want; but primarily it is strategic, aiming to make connections based on identifying specialism matches or filling skills gaps, creating the foundations for a working relationship for the long-term.

Technology-based services like Qodeo rely on the quality of their data and there is a reason that it is so rich. Venture capitalists may be keen to expand their horizons globally, but networking outside their usual groups does not come naturally. Most are not outward-focused or gregarious, and as we said earlier, they are very busy. So, they are signing up to be part of a database that is only being used by companies looking for funding, allowing the matching algorithm to do all the networking for them.

Dating services are not new, but this is the first time that their principle has been applied to the traditional funding industry, and it’s long overdue. After another disappointing search for money, entrepreneurs no longer need to hear that there are plenty more fish in the sea. Likewise, funders can, at last, break out through the walls of convention, and find new, exciting opportunities to make a big return.

Business

Hidden channel costs: how to find and tackle them

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By Mark Wass, Strategic Sales Director, UK and North EMEA at CloudBlue 

 

Growth for businesses will always be a key objective. However, in this digital age, if it occurs too rapidly, it can often unearth cracks that harbor hidden costs and pre-existing efficiencies.

 When it comes to channel distribution, for the majority of partners, hidden costs are widespread. A lot of partners work with multiple channels and systems, and this can become complicated. It can also affect their ability to track information.  On average, 30%-40% of IT spending  in large enterprises is accountable to inefficiencies caused by shadow IT.

 There is no single root cause of hidden costs. An array of issues such as wasted resources, labour, time constraints, poor implementation oversights and maintenance issues are all contributors, and the cuts only get deeper as partners scale. Here are the ways service providers can eliminate hidden costs.

 

Where to look for hidden costs 

 In general, unaccounted, or unattributed costs originate from four areas, with the first being shadow IT.

 Shadow IT is the use of systems, devices, software, applications, or services without explicit IT department approval. The phenomenon has grown in recent years due to the adoption of cloud-based applications and services, with the average company using 30% more unique SaaS (Software-as-a-Service) apps than they were in 2018. Thanks to the ease of adding new software, departments are going it alone and buying platforms that can be niche, or duplicate processes, and even in some cases using multiple versions of chat apps to communicate internally. 

Mark Wass

The next hidden cost stems from implementation and integration. Channel partners need to work within different systems, and almost always underestimate the budget needed to work with new software solutions. A consistent blind spot across the industry is the inconsistency of implementation and integration at budget.   

In terms of maintenance, it is especially difficult when partners create homegrown software to handle provisioning, relationship management, or data management. While such proprietary software might perform well for initial purposes, maintenance and upgrades can be a nightmare. Likewise, internal knowledge transfer in this situation is crucial.  

And finally, the scalability of expanding from one market to the next is not linear and neither is the cost. Partners that have already launched in one part of the world often think that it will cost around the same to expand into another region, like between the US and Europe. However, this thinking does not consider the additional effort to contend with the new currency, language, audience, and regulation, as well as local operations within the region.  

 

Tackling hidden costs  

The good news is that there are multiple remedies to hidden costs. Integrations, for example, successfully bring together disparate systems and improve efficiency. Partners that have manual processes and pull information from one system before typing it into another are wasting time and resources by dedicating an entire person to this process. Clearly, this should be automated to cut down on human errors and save in the long run. 

Along with integrations, partners should purchase software with scalability and unification at heart. There is no magic platform that does everything entirely so companies should opt for the best of breed, even if the initial investment is a bit more. This will help to offset the concerns of scalability, maintenance, lack of expertise, and potential unforeseen overheads. Moreover, best-in-class platforms help to paint a consistent long-term picture of the health of channel operations. 

For channel health, it is also integral to integrate outside experts to perform an overall business diagnostic. These can be consultants, solution architects, and those alike that know channel software and best industry practices to help architect a scalable and efficient platform. Working in conjunction with the team, these objective outsiders work to find the gaps and tighten any software screws. 

 

Helping the channel by combating inefficiencies

Hidden costs can become widespread, and this can lead to channel partners paying up to twice the price for half the output.

 More than the financial downside, though, hidden costs should be thought of as hidden inefficiencies. Especially in today’s accelerated digital transformation, inefficiencies can make or break fast-growing channel operations. Therefore, weeding out hidden costs with improved efficiencies can work wonders by saving budget and running a tighter ship. 

 Integrated software and platforms can then be used for change. By unifying and standardising existing systems, managers receive a single view of contracts, reporting, sales, marketing, and day-to-day operations. This  provides them with the right tools to achieve sustainable growth. Rather than overwhelming teams with several types of platforms and software, this single operational view allows for the much-needed oversight that is necessary to set a business up for success. 

 It is essential for channel partners to seize the moment and eliminate the perils of hidden costs, especially given the rapid growth of businesses in the digital and cloud spaces.

 

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Automation nation: Liberating workers from desks, data entry and the doldrums

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By

Gert-Jan Wijman, VP of EMEA at Celigo.

 

Just when businesses thought the tough times were over, even more challenges ensued. While still recovering from the financial effects of the pandemic, companies were hit with an economic downturn that’s now resulted in a recession in the UK.

In this economic context, teams are being forced to do more with less. This means onboarding with reduced manpower, delivering ground-breaking marketing campaigns with less budget and mitigating outlay in the middle of a cost-of-living crisis. Being nimble and streamlining operations has never been more imperative.

That’s where automation comes in. While automating before the recession would’ve been the ideal scenario, it’s never too late to get ahead of competitors. It’s only a matter of when – not if – automation becomes standardised, as businesses insistent on using legacy tech and manual processes will be outpaced by those savvy enough to embrace smarter alternatives. In fact, it’s predicted that in just two short years, 70% of large global enterprises will have over 70 hyperautomation initiatives.

For finance teams and the tech-strapped CFO in particular, automation can be a saving grace. Tech stacks are more complex than ever due to the proliferation of specialised finance SaaS applications for quote to cash, Accounts Receivable & Accounts Payable (AR / AP), cash management, tax, accounting close and corporate performance management. Having the tools to automate these processes enables modern CFOs to adapt to changing tech needs, scale quickly and future-proof their organisations.

Automating today to prepare for tomorrow

Too often, automation is viewed as a job killer. We’ve all heard the apocalyptic narratives about ‘robots taking over,’ but that’s an outdated notion. Instead, automation is a job enhancer. Not only does it minimise errors, speed up processes and help businesses cut down on admin, it liberates employees to dedicate their time to be more creative or perform complex tasks.

Take a company like WeTransfer, for example. Bogged down by manual processes, the team struggled with closing financial books and completing billing cycles on time. After integrating its tech stack, quote-to-cash automation worked immediately and the time to close reduced dramatically, significantly reducing the hours dedicated to manual data entry.

Its revenue accountant was then able to work on core tasks in the finance department and alongside sales operations on the process improvements, no longer worrying about completeness issues associated with the sales and financial systems integrations.

Not only that, it liberated employees physically and unlocked access to more valuable talents. Beneath all the technical and monetary benefits, these are the core principles behind why automation will soon become impossible for firms to ignore.

Physical Liberation

Hybrid work has been one of the biggest positive developments driven by the pandemic. However, while employees surely won’t miss long commute times or the constraints of office life, a disparate workforce comes with challenges. It’s vital that organisations can trust their data and business processes in order for effective collaboration to be possible.

Automation can enable this, as it allows cloud-based systems to share data across a business through integration, ensuring all workers have access to the resources they need to work together effectively wherever they are.

This makes businesses nimble, able to operate across multiple locations when needed and well equipped to decouple entirely from headquarters if needed. Workers can then be as effective from home as from the office, ensuring they can maintain a better work-life balance without compromising productivity.

It’s no wonder then that 78% of organisations worldwide think remote working will increase the proportion of their workforce using automation, while over two-thirds (71%) that have already implemented automation are beginning to feel the benefits.

Liberating Talent

Automation also ensures talent is no longer wasted on manual tasks. 3 in 5 (60%) occupations could technically automate more than 30% of their tasks, highlighting the bevy of possibilities and offering a glimpse at the future of work.

When workers spend their time crunching numbers and organising spreadsheets, it’s easy for them to feel like a cog in a machine. With automation, however, they have more room to share their ideas and feel connected to the operations of the business.

With menial tasks taken out of their hands, employees are freed up to perform more complicated and creative jobs, the sorts of work that could never be automated. And by filling workers’ days with more of these engaging responsibilities, they’re able to feel like they have a real stake in the company’s success.

There is also research to suggest that workers can get as many as 100 hours a year back as a result of their manual tasks being automated, meaning everyone could get an extra two weeks of paid leave without productivity taking a hit.

Automating into the future

Already, over 80% of organisations self-report increased or continued investment into hyperautomation initiatives. So the appetite is there, now comes making it a reality.

Automation at scale is the dream, but the transition won’t happen overnight. In a perfect world, organisations will be able to assign all manual and tedious tasks to the machines, with employees only needing to provide oversight when necessary, but there’s a journey to get there.

That’s why it’s critical that CFOs collaborate closely with their CIOs. Only then can we realise a scenario where manual processes are eliminated entirely, and data across systems can be accessed and updated in real-time. But this will require leaders to understand each other’s needs and challenges so they can align their visions.

As organisations become more disparate, this partnership will only grow in importance. CIOs can empower the CFO and their teams to implement the automation initiatives best for them, with IT maintaining oversight to ensure compliance.

With the right structure and mindset, CFOs and the entire C-Suite can be encouraged to pursue digital transformation in a way that’s most effective for them and the entire organization.

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