XFactor Venture Fund

An exciting new venture capital fund has made its appearance on the start-up scene. XFactor Ventures is the name of the new fund. What’s the unique aspect of XFactor? It’s run by women and aims to support start-ups with at least one female founder.

New start-ups often seek pre-seed and seed-stage funds in order to handle the costs associated with starting a business. Experts such as Henner Diekmann of Diekmann Associates, who help companies get set-up and put corporate structures and contracts in place, are familiar with the struggles companies face when seeking funding. The venture capital industry can be cut-throat, and funding is one of the biggest challenges that new companies face. In fact, 82% of businesses that fail do so as a result of cash flow issues. In addition, 27% of businesses report that they haven’t received the funding they need. 

Women can sometimes face more difficulties than men when it comes to successfully beginning a start-up, making XFactor Ventures a welcome change of pace. Unfortunate displays of sexism in the venture capital world can also result in skewed funding. XFactor Ventures may be able to eliminate some of these hurdles for women entrepreneurs.

Difficulties Women Founders Face

Women make up just 7% of the partner positions of the tech VC world. It’s easy to imagine that it’s harder for women to pitch to male VCs than women. This is highly likely, however there is research that shows that all VCs, men and women, show bias against women founders throughout the interview process. This results in devastating consequences. Women entrepreneurs are able to get only 2% of venture funding even though they own 38% of businesses in the US.

Researchers studied interactions between venture capitalists, both male and female, and entrepreneurs, also male and female, to discover why women consistently receive less funding than men. The results are shocking. Throughout interview processes, the researchers discovered that VCs asked men about potential for gains while they questioned women about potential losses. The bias was present across the board for both male and female VCs.

In numbers, 67% of questions asked of male entrepreneurs were focused on promotion oriented ideas such as hopes, ideals and achievements. On the contrary, 66% of questions asked of women focused on prevention which includes ideas such as safety, vigilance, responsibility, and security. 

The financial repercussions are staggering. Entrepreneurs who faced prevention-based questions only raised $2.3 million dollars throughout 2017 while those who answered promotion-based questions raised an average of $16.8 million.

Women entrepreneurs can buck the trend by answering prevention oriented questions with a promotion based answer. It doesn’t completely make up the difference, but it does help. 

XFactor Venture’s Premise

XFactor Venture is a unique venture capital fund because it’s run by women who have successfully founded their own companies. This follows a trend of many male VCs who start out as entrepreneurs and then move on to investment. 

The XFactor Venture team includes the following entrepreneurs: Jessica Mah (InDinero), Aubrie Pagano (Bow and Drape), Kathryn Minshew (The Muse), Liz Whitman (Manicube), Erica Brescia (Bitnami), Danielle Morrill (Mattermark) and Ooshma Garg (Gobble). The brains behind the team are Anna Palmer of Wondermile and Fashion Project and Chip Hazard of Flybridge. Chip is the lone male partner. 

The team of expert entrepreneurs will distribute $3 million in funding to 30 companies, with the requirement that each company has one female founder. It’s expected that each investment will be for $100,000. 

There’s more to the project than making a place for women in the world of start-ups and venture capital. The fund’s premise is actually based on concrete data about diversity in business. Women founders play vital roles in business success.

Why Women Founders Are Important

There’s evidence that having women play key roles in start-ups can make them more successful. Start-ups with one female founder perform 63% better in returns than all-male start-ups. That’s a significant difference worth investing in.

XFactor Ventures’ partners have all been through the drill of finding funding, meaning that they know exactly what it feels like to be on the other side of the table. This unique model is promising and makes a first step at evening out the access male and female entrepreneurs have to vital funding. Partners of XFactor stress that they will “generate phenomenal returns,” said Hazard. Pagano also made this point, saying that gender diverse teams outperform all-male teams, meaning that seeking mixed and female teams to invest is a promising venture.

Keep your eye on this exciting new venture firm. They’re sure to produce interesting results.

Government Makes New Plan to Support Start-Ups After Brexit

As the reality of Brexit sets in, the British finance ministry is making plans detailing how the country will continue to support new businesses now that funding from the European Investment Fund (EIF) may become unavailable. The treasury is working based on information from a study that shows British start-ups are missing out on £4 billion in funding when compared to what’s available to US firms. This funding gap exists even in the current set-up which includes EIF funding.

Experts that specialize in guidance and advice on company set-ups and corporate structures like Henner Diekmann of Diekmann Associates know just how crucial funding during the first years of business can be. Even promising businesses need funding to gain access to capital, staff and a marketing budget. In the UK, many start-ups aren’t able to gain access to this essential financial assistance so that they can move on to become important players in the country’s economy.

If the EIF funding were to disappear after Brexit, an even greater funding gap would exist. Last year alone, British companies were assisted by about £800 million of equity financing and £400 million of other additional assistance such as loan guarantees, all through the EIF. The fund also works with projects outside of the EU, but nothing is certain now that Britain will exit the bloc. 

The plan for creating a new funding solution is still in progress. As of now, the Treasury says it’s considering setting up a public-private partnership or putting the fund only on the government’s balance sheet with the possibility of selling it off at a later date. The fund could open up new possibilities for UK start-ups.

UK Start-up Needs

As mentioned above, there is a significant funding gap between UK and American firms. This funding gap can be seen clearly in the lack of fourth round investment funding available to UK start-ups. While in the USA nearly a quarter of start-ups receiving seed funding reach the fourth round of investment, only 1 in 10 British firms achieve this level of funding. Another interesting point is that although the UK leads the way in Europe in creating start-ups valuing $1 billion or more (also known as unicorns), the nation is far from leading the way on the world stage. The US creates a whopping 54% of the world’s unicorns, followed by China which creates 23%. One final interesting fact is that the top US firms are younger than the top British firms, suggesting that the US is better at growing new businesses into impressive, large-scale companies.

Based on these numbers, it seems obvious that the UK could stand to improve its numbers. If start-ups had better access to funding, it’s entirely possible that more UK businesses could be grown into big, stable companies capable of employing many more people.

Despite lagging behind the USA and China, Britain is still home to innovation and leads the way in Europe in terms of new successful start-ups. The goal is to take this innovation to new heights by eliminating the problems related to too little funding. The UK start-up sector will likely benefit from this initiative, even if it began due to concerns over the consequences of Brexit. 

Brexit: An Overview

This initiative to boost funding for start-ups appeared as a response to concerns about the economic consequences of Brexit. The process of Brexit has been looming in UK politics and among citizens for a few years. In June 2016, the entire UK had the opportunity to vote in a referendum to approve or reject leaving the European Union. The referendum to leave was approved in a narrow vote.

Currently, the UK is undergoing talks with the European Union council to discuss the terms of Brexit including fees that the UK will pay to the EU. The talks will take two years or more. The current scheduled leave date is 29^th March 2019. 

Brexit will have many consequences and will affect both Great Britain and the rest of the EU countries. However, to date, there haven’t been signs of immediate severe trouble for the British economy. In fact, the UK showed 1.8% growth in 2016, which is good when compared to other strong economies. Unemployment has also continued to fall, although growth has slowed in 2017.  Overall, things look pretty good considering that some predicted doom and gloom should Brexit be passed.

Turning to Start-ups After Brexit

A funding for start-ups initiative along with a growth in entrepreneurial spirit was noticed shortly after the Brexit vote was made. In London, over 600 start-ups were launched daily during the first 6 months of 2016, suggesting that Brexit will not deter the creation of businesses, but rather spur them on. This trend will only improve if more funding becomes available to help start-ups make the step to full-fledged, stable businesses.

The Top Young Investors of Venture Capital

Venture capital is an exciting area of investment. Investors in venture capital target young, promising companies they believe will grow into booming businesses. However, it may surprise you to learn that not all venture capitalists are seasoned experts in business and making investments. Some of the top investors are quite young, in their 20s or early 30s. Despite their young age, these investors are making a splash in the industry, attracting the attention of experts such as Henner Diekmann of Diekmann Associates. 

Here are some of the top young investors of venture capital:

Sam Altman

President of Y Combinator, Sam Altman is just 32 years old. The investor co-founded and sold his own start-up company, Loopt, which was closed down in 2012. He then moved to Y Combinator, where he has led the way in choosing the best start-ups to invest in. He has also invested on his own, backing companies such as Airbnb, Pinterest and Dropbox. He is interested in backing projects that have the power to change the world, such as nuclear energy.

Caitlin Strandberg

At age 28, Caitlin is already the vice president of an important venture capital firm, FirstMark. A graduate of Cornell, she began the school’s multimedia powerhouse called Slope Media. She went on to work at three different start-ups before heading to Harvard Business School for her MBA.

Stephanie Weiner

Stephanie Weiner was featured in Forbes’s 30 under 30 list in 2015 at the age of 22. Now 24, Stephanie has continued her path as an influential young venture capitalist. Stephanie began her life as an entrepreneur in middle school, when she started her own website. She went on to co-found Dorm Room Fund, a student-to-student investment company at the University of Pennsylvania, before working at Bain Capital Ventures.

Alex Banayan

At the young age of 19, Alex became a venture capitalist at Aslop Louie Partners in Silicon Valley. He had begun investing as a teen before he was hired in California by another young venture capitalist. Now 24 years old, Alex is a keynote speaker and author. He has spoken for prestigious organisations such as Apple, Nike, IBM, Harvard and Dell. 

Lu Zhang

One of this year’s 30 under 30 Forbes venture capitalists, Lu Zhang runs her own successful venture capital firm at the age of 28. She began her first company while studying as a graduate student at Stanford. Her first company was based on a new device for detecting diabetes. The company was later sold for over $10 million. The bright materials science and engineering grad from China went on to work at Fenox Venture Capital.  After her experience there, she decided to begin her own company, NewGen Capital.

Blake Byers

At the age of 32, Blake Byers is a partner at GV. With a doctorate in bioengineering and undergraduate degrees in biomedical engineering and economics, Blake makes the perfect investor in life science and digital companies. He also has experience investing on his own and beginning his own companies.

These impressive young people are helping to shape the future by selecting the start-up companies that will receive funds to move forward. As you can see, a few of these ambitious venture capitalists have decided to go solo by creating their own investment firm or simply through private investments. The other thing to note about these individuals is their expertise in a diversity of areas. While some are scientists with expertise in health, others are media experts, technology buffs and authors. While each has found their calling in venture capital, they all have other passions and areas of expertise that have helped inform their decision making and path up to this point.

Young venture capitalists provide fresh perspectives to their firms and also connections. Many young venture capitalists are recent graduates with access to the hum of what’s happening on college campuses, giving insight into the latest ideas for new companies and technologies. 

Those who are interested in venture capital should certainly keep an eye on the trends and special spark brought to the industry by the youngest venture capital investors. The good news is that young investors are also bringing more diversity to an industry typically associated with older, white males. The fresh perspective provided by the many women and people representing diverse backgrounds in the youngest generation of venture capitalists makes for a promising future. 

The youngest venture capital investors keep coming and making an entrance each year. You can learn more about them by keeping up to date with the latest Forbes 30 under 30 list and reading the latest industry news.

Start-Ups are Flourishing in Britain

Joris Magenti is a French national who grew up in Spain not far from the border between the two countries. After working for the United Nations, Magenti went on to earn a business degree from Oxford University. When he decided to build a technology start-up around his new dating app, DatePlay, London was the obvious location. According to Magenti it ‘takes weeks’ to build a business in Spain, while in Britain ‘you can register the company online’. Magenti and his partner, Vana Koutsomitis founded their company in 2015 and a public Beta launch of the new app, which designs a dating profile around gaming, is expected this year.

The UK government provides unprecedented support for new businesses, from financial assistance to advice on legal structure and low cost office space. Additionally, there are international law firms like Diekmann Associates, founded by Henner Diekmann, which provide guidance on company set-up, structuring and contracts. The plethora of resources has made Britain - and especially London - a hotbed of new technology start-ups, many headed by EU nationals like Magenti.



Britain’s Tech Sector

As mentioned in the last post, SVB’s Start-up Outlook Report found a favourable attitude among British businesses seven months after the initial Brexit vote. According to Phil Cox, president of SVB’s UK branch, ‘Businesses are seeing more opportunity than fear, which can only be a good thing’. However, there’s lingering concern about how many foreign workers and entrepreneurs will remain when Britain leaves the EU.

Currently, the tech sector accounts for 16 percent of the UK’s domestic output and about 10 percent of the country’s jobs. According to the Coalition for a Digital Economy (Coadec), a group which represents tech and digital start-ups, these numbers are likely to grow. A recent survey found the UK would need an extra 2 million digital workers by 2020 to fuel the current level of expansion in this sector.

Coadec estimates that about two-thirds of the average tech company’s workforce is made up of British nationals, while foreign workers account for the other third. Brexit will generate more opportunities for qualified British workers, but it could also create a talent shortage as education levels jump to meet the increased demand. Coadec has already recommended a special expedited visa for skilled foreign workers in the digital sector to help companies maintain current levels of expansion over the next few years.  

Brexit Repercussions

It remains to be seen whether leaving the EU will hurt Britain’s digital economy, but as yet the signs are hopeful. Start-ups are concerned, but the majority don’t plan to move elsewhere, given the many benefits that come with operation inside Britain. A plethora of job opportunities could make space for a new, digitally skilled British workforce, which would be an advantage over the long term.

British Businesses React to Brexit

Many have speculated that last year’s Brexit vote would put a damper on business in the UK. Preliminary results suggest that’s not the case. A recent survey conducted by Silicon Valley Bank, a lender that’s particularly geared toward start-ups, suggests British businesses have big plans for 2017 and most of them include staying in the UK. Additionally, many international companies have already shown they are committed to Britain regardless of EU membership.  


Embed This Graphic On Your Site: <img src="https://s-media-cache-ak0.pinimg.com/originals/16/c5/87/16c587f5d5166f4c52aa6d05c63acdae.jpg" width='540'><br /><a href='http://hennerdiekmann.blogspot.com/2017/07/british-businesses-react-to-brexit.html'><br /></a></p> <br /> <p> UK Startups: Brexit Plans [Infographic]</a></p> <br /> <p> </a>
A Closer Look

Of the 940 start-ups questioned by SVB, the majority (62 percent) did not plan to open a European office ahead of Brexit. Only 16 percent felt a need to relocate their headquarters, 11 percent to another European location and 5 percent outside of Europe altogether. One in five (21 percent) expected to establish European operations while keeping their headquarters in the UK. Even more promising, eighty-nine percent planned to expand their workforce over the coming year, while almost half (48 percent) thought 2017 would be a better year than 2016.  

Henner Diekmann, partner and lawyer with Diekmann Associates, assists start-ups with company set-up, corporate structure and contracts. Expanding opportunities among Britain’s newest companies suggests a positive future for the UK economy, but it’s not the only sign that a Brexit future may be better for business than some have predicted. In February, Amazon announced plans to expand its British operation, which included hiring some 5,000 new employees. Of these, at least 500 were highly skilled positions focused on developing some of Amazon’s latest technologies. Admittedly, Amazon’s plans are part of a wider European expansion, but other tech giants have also promised to step-up British operation. Last year, Google announced it would hire 3,000 people for its London office over the next few years, while Facebook expects to recruit 500 new workers in the UK in 2017 and Apple is planning to take over the old Battersea Power Station as a new, expanded UK headquarters.  



Top Concerns for Start-ups

The biggest problem post-Brexit may not be the number of jobs, but finding qualified people to fill them. The SVB survey found that diminishing opportunities for non-British workers was the biggest concern among 32 percent of the start-ups surveyed, while 12 percent were concerned about attracting talent from elsewhere in Europe. One in five (21 percent) were worried about rising costs while the same number had reservations about their continuing ability to attract venture capital. Read on to learn more about start-ups in the UK.

Venture Capital Trusts May Benefit from Brexit

Venture capital trust schemes may see a benefit from Brexit, according to industry experts. David Hall, managing director of YFM Equity Partners, suggests that regulations influenced by Brussels have not necessarily been beneficial to VCTs in the UK, and that changes in these decisions based on what is best for these organisations within the UK could well see positive results. Global investors such as Henner Diekmann of Diekmann Associates, who has interests in foreign direct investment as well as start-ups and venture capital, may find that Brexit releases certain restrictions on entrepreneurial growth and creates more choice for investors.  



Rule Changes Affecting UK VCTs

The argument of David Hall focuses on how rule changes coming from Brussels have had a negative impact on UK Venture Capital Trusts. Hall cites the set of changes announced in the Budget in 2015, which place restrictions on the amount that can be invested, the use of those investment funds and the age of companies that qualify for investment. These changes include a lifetime investment limit of £12 million for each VCT-qualifying company (£20 million for knowledge intensive companies) and an eligibility rule stating that qualifying companies must have made their first commercial sale within the last seven years (ten years for knowledge intensive companies). Hall believes it is important to allow and facilitate investment into a broader range of companies within the UK, and that the age of a company is not important when compared to speed of growth. A relaxation of these rules in the UK will result in more businesses being eligible for venture capital trust investment, thereby encouraging growth.  

What is a Venture Capital Trust?

Venture Capital Trusts, or VCTs, were first introduced in 1995 by the government as part of the Finance Act. Designed to encourage investment into new businesses, VCTs are unique in that they offer attractive tax reliefs for investors both when money is invested and when income is received from that investment. You will find a concise overview of VCTs in the infographic attachment to this post, and more information about specific tax reliefs in the accompanying PDF document. VCTs have proved over the past two decades to be much less risky than was originally anticipated. In the tax year from 2015 to 2016, Venture Capital Trusts in the UK raised £458 million.  

Embed This Graphic On Your Site: <img src="https://s-media-cache-ak0.pinimg.com/originals/e8/90/f4/e890f44459c9016e7393ebcabd77c43b.jpg" width='540'><br /><a href='http://hennerdiekmann.blogspot.com/2017/05/venture-capital-trusts-may-benefit-from.html'><br /></a></p> <br /> <p> What are Venture Capital Trusts? [Infographic]</a></p> <br /> <p> </a>

Venture Capital Trust Tax Reliefs

Shares in venture capital trusts can be purchased new or second-hand, such as through the stock market. Across all shares, tax relies include exemption from both income tax on dividends for those with ordinary shares and capital gains tax when shares are disposed of. For investors buying new shares, further tax reliefs are available in the form of income tax relief on investments per tax year of up to £200,000 of 30% if shares are held for at least five years. Investors in new shares purchased before April 6th 2004 also benefit from capital gains tax deferral.  

Investing in Venture Capital Trusts

The investor profile for venture capital trusts involves a level of comfortableness with risk, as investors can get back less than their original investment. However, the potential returns are higher in exchange for the elevated level of risk. The aim of a VCT is to encourage investors to take on riskier investments in smaller companies that are not listed on the stock exchange, alleviating some of that risk through the pooling of investments and spreading of funds over a number of smaller companies. In theory, shares in venture capital trusts can be sold at any time, but in practice investors need to be able to lock in their investment for a minimum period of five years for new shares. If shares are sold within this five-year period, HMRC are entitled to claim back any tax credit that has already been received. It can also be difficult to sell shares even after this time, as there tend to be fewer buyers for VCT shares than for other forms of investment. Venture capital trusts are not often suitable for novice or hands-off investors as the charges can not only be high but also complex and difficult to understand without in-depth investment knowledge.



The predictions of David Hall paint a rosy picture for venture capital trusts after Brexit, with the potential for a relaxation of rules that could benefit many smaller companies and venture capital investors in the UK over the coming years. However, as with any investment the value can go down as well as up. Potential new investors would be advised to consult an independent financial advisor for help in working out whether this type of investment is likely to meet their needs.

UK Fintech: Ones to Watch

In the previous post the figures and predictions for FinTech funding through 2015 to 2017 were discussed. Henner Diekmann and other investors will be buoyed by the news that, despite a shaky 2016 across most of the world, experts are confident that this was just a blip and 2017 will see increased funding within the FinTech sector across the world. As a global financial centre, London produces many hot new start-ups. Here you can find out more about some of the ones to watch throughout the coming year.

Atom Bank

One of the first to jump on the new digital-only banking bandwagon, Atom Bank markets itself to the new generation of internet-savvy consumers who want something different to traditional banking services. Licenced since June 2015, Atom Bank launched its mobile app in April 2016. Since that time added services include two-year fixed-rate residential mortgages, an SME business lending product and two Fixed Saver accounts, with current accounts planned for introduction later in 2017. £234 million in capital has been raised so far by Atom, including a recent £100 million venture round.  

TransferWise

The new peer-to-peer platform for money transfers known as TransferWise was devised by Taavet Hinrikus, formerly of Skype in London. The platform offers currency conversions that are transparent and help customers avoid paying inflated exchange rates and hidden banking fees when transferring money into another currency. Authorised by the UK Financial Conduct Authority, TransferWise attained unicorn status in May 2016 with a valuation of $1.1 billion.  

Nutmeg

Online wealth manager Nutmeg has so far raised £71 million, with investors including Pentech, Taipei Fubon and Armada Investment Group. Nutmeg works with investors with starting capital from as low as £500 and charges a management fee ranging from 0.3% to 0.95%, compared to an average of 1.58% for active fund management in the UK.

These are just a few examples of companies leading what will hopefully become a UK FinTech boom in 2017.