I’ve read a lot of new books this year but haven’t got round to writing up little reviews of them like I was doing last year. So I thought I might try and catch-up with posts about the standouts over the next few months.
The grime scene started in Bow, a mile or so away from where I live in East London. You can see the ‘three flats’ in the photo on the cover of the book from our window. The book is the story of grime from about 2003 through to the current day.
The headlines would have you believe that grime was just about gangs, guns and knives but it was also a creative outpouring about how badly politicians and the people who ran London at the time misjudged the impact of their policies on the lives of poor people (particularly poor black people) in East London. People in the grime scene were persecuted by the police, the city and politicians — in a way that was only thinly veiled racism.
The music was (and is) incredibly claustrophobic. Lots of the early lyrics focused on a few square miles around Roman Road and Bow. Dan Hancox contrasts it with the expansive, epic ‘Empire State of Mind’ by Jay-Z about New York which is full of wealth, bling and private jets. Grime is about what it feels like to have no hope of escape and Hancox thinks Dizzee Rascal called his album ‘Boy in Da Corner’ because he felt trapped. The urban music scenes in the US and UK scenes were very different. These days people from both scenes are multi-millionaires but the music came from very different places.
I remember going to grime nights in Shoreditch in 2005/6 and having no idea what was going on. Ten years later and some of the people who were there are some of the most successful artists in the UK music industry. Not only have they become successful themselves but they’ve changed the way the music industry is organised. Grime was about being an outsider and independent which meant that it took them ages to actually break through — as Hancox points out, grime wasn’t really commercially successful until 2016 (except for a few artists who had to morph their style to get mainstream acceptance). Now the independence that grime artists hung on to is much more the norm. The music industry has been transformed.
The book is a fantastic story of some of the people who hung on in there for over a decade while the music they loved gradually gained acceptance. Take Wiley who is interviewed throughout the book — you get the feeling he believed it it would be big from one day. He was always building up people, and helping out younger artists. There’s a hint of satisfaction in the later interviews with him, that a bunch of poor black teenagers from an estate in East London made their mark. You can’t help but root for him. Against the mainstream, against discrimination, against politics, against the police, their message finally made it — like he always knew it would.
I’ve been thinking about Michael Young a lot recently. Not least because it’s all change at the Young Foundation with the appointment of Helen Goulden as Chief Executive there which is great news. But when we topped 90 ventures supported at Bethnal Green Ventures, I remembered that people say Michael helped to create that number of organisations.
Perhaps it’s easier these days to start a new venture as technology allows you to prototype and test services in a way that wasn’t possible for much of Michael’s life. According to one (tongue in cheek) account of Michael’s method, it doesn’t sound like it was too hard though:
“So here’s what you do: you spot a problem, imagine a solution and give it a working title. Then you write to everyone who might conceivably have an interest in it, and many who don’t; produce a paper taking in the resulting comments, without once losing sight of the original notion; form a steering committee; set up a charitable trust or a company limited by guarantee (preferably both); meet someone by chance on a train outside Basingstoke and invite him or her to become the unpaid director of the new organization; launch the new body at a press conference, couple this with an article in the Guardian, carpet-bomb the charitable foundations with grant applications, stick with the fledgling organisation for precisely as long as is necessary and then push it out of the crow’s nest to make room for the other six institutions which you are waiting to hatch that week.”
Michael was notoriously single-minded and tricky to work with but he always tried to make sure there was a strong link with the people who might benefit from the organisations he created. It was no accident that the Institute for Community Studies wasn’t an ivory towered university or shiny research park in the green belt, it was in Bethnal Green. Michael’s introduction to starting to work there always stays in my mind:
“The fog became thicker as I crossed the canal from Bow and by the time I left the housing office I could not see on the ground … I abandoned the old London taxi … and that was when the enquiry began. Waiting until I heard some steps, I put my first question: I asked the way to the nearest Tube station. ‘Search me, mate,’ came back the voice, curiously loud in the fog. Then a woman spoke from nearer me. ‘The Tube? Yes, dearie, you go straight on till you get to the traffic lights. You turn left and you’ll see it right in front of you. What a game, eh?’ With the help of other faceless friends, I felt my way, tapping my foot against the kerbstones as I went. I am still tapping. So I know when the enquiry began. What I am much less clear about is why. What brought me to the housing office? So far as I can remember, the point of departure for my journey into the fog was an interest in the social services, particularly in housing.”
I worry that it’s too easy for us at BGV to be disconnected from the people who benefit from the ventures we help get going. I spend a lot of time with the ventures we invest in but I know I should really be spending more time with the people who face the problems they’re trying to solve. That’s a bit harder in Bethnal Green than when Michael was based here. I’ve never seen a ‘pea-souper’ and while there is still a great deal of poverty, it’s becoming a very different place.
Michael made another contribution that is often misunderstood. He coined the term ‘meritocracy’ and his book ‘The Rise of the Meritocracy’ is a very strong part of the narrative in Europe and the US at the moment, and even more so in the tech industry. But Michael thought a pure meritocracy was an insidious thing. He abhorred the idea of a society based on a narrow notion of merit where the winners see their success as validating themselves (and not based on luck which is more often the case), and the failures of others as just being about their shortcomings rather than based on problems beyond their control.
When people have said ‘yes’ to investing in your venture and you’ve agreed on the basic terms, you’d imagine things might get easier. Unfortunately it’s usually trickier than that. Seed rounds can rumble on for several months before you actually get the money in the bank and start building the business.
There are a few reasons for this, each of which you can do something about to help speed things along.
Not everything is in the term sheet — when you go from term sheet to the actual documents that will be used in your investment deal, you’ll tend to find that the wording of clauses gets a bit more complex and causes a few surprises. I think that’s proabably especially true for social ventures where there might be some wording around safeguarding the social aims. Using lawyers who are experienced with seed investment deals will help here. They’ll know how to go from standard term sheets to standard documents.
Due diligence — at seed stage the due diligence done by investors varies from fairly rudimentary to pretty officious and will often take the form of covenants where you promise that you’ve done or disclosed everything that’s in a list — some will get you to prove each thing. The way to keep this process short is to keep all your key documents organised and ready. Everything from your incorporation certificate to each contract or agreement you’ve signed. Keep them all in a folder in Dropbox.
You need a bit more money to close the round — even when you’ve got one investor committed it might not mean you have enough money committed to get to your next major milestone. If you do need to ‘fill up your round’ ask the people who have committed if they know others who might be interested. Keep your AngelList profile up to date and let the team there know you’re looking for help.
Co-ordination problems — the final reason it takes time to close a round is that there are usually quite a few people involved. Previous investors, founders, lawyers, accountants, as well as the new investors which could be multiple people if you’re working with angels. The only way around this is to be clear with everybody about the process and then overcommunicate so everybody knows what is required of them and when. Working with good lawyers will help here. There are some in London who will patiently explain the practical process as well as watching your back. If you find you get stuck, ask somebody who has been through it before. When you’re in the middle of what can seem like an interminable process, another perspective can help you see the best next step.
So there you go. Seed investment in the bank. Next week we’ll look at other forms of seed financing including what grants are available for tech-based social ventures in the UK.
We’re very proud of all the 2013 BGV teams. Last Thursday was our public Demo Day and they all did a fantastic job of explaining why what they are doing is important and why they’re the right people to do it. The audience certainly seemed to be impressed and there’s been a lot of follow up. A huge thank you to all the teams, funders, mentors and supporters as well as the BGV team of Lily, Laura and Glen for helping to make it all happen. Related articles
Well that went pretty well. Last night we opened the doors to the Tech for Good London Meetup and 150 people showed up. There’s been a lot of Tech for Evil news over the past few weeks so it was heartening to hear some stories of people doing useful things. As well as launching the next BGV call for ideas, we heard from five startups:
Echo (previously Hackney Shares) — bringing businesses-to-business time banking to the UK to improve the links between companies and their local communities
Open Sensors (from Atomic Data Labs) — sensors in the home to help older people live independently for longer
Speakset — tackling loneliness through simple video calling for older people
Flip Yourself — helping young people show their skills by using their social networks
What was also interesting was how indistinguishable in business terms some of the pitches were from non-social startups. Winnow Solutions won Seedcamp last week with their pitch about resource efficiency and Speakset gave a very convincing argument about older people being the biggest business opportunity of the next 20 years.
At the end of the evening we opened it up for people to give plugs for funding schemes or events coming up and there were plenty of those too. It does feel like something is happening around this in London. Long may it continue.
Many thanks to Lily for making it all happen, Eze at Google Campus for hosting us, and our speakers for telling us about their ideas. Related articles
I’ve noticed two schools of thought in negotiating startup investment deals.
The first, which comes much more naturally to me, is to agree to a deal face-to-face and all the major points and then to follow up with a legal process where there should be ‘no surprises’. At BGV we go even further and are deliberately very open about our terms so that teams can decide even before they meet us whether we’re right for them. The best tech investors I’ve come across work this way and spend their time concentrating on how best to help startups rather than how best to structure the deal.
The second way that it seems to happen is much more tactical and, in some cases, adversarial. If I was to be harsh I would say it was characterised by investors ‘trying it on’. When the email comes through with the terms there are some ‘extras’ or it turns out that they’d like special terms over other investors they hadn’t mentioned before. It then goes round and round for a while, distracting the team from making progress and making founders wonder whether they’re going to have to argue everything this way in the future.
You can probably tell that I’m not a fan of the second process. As far as I’m concerned, if you find yourself negotiating tactically, you’ve both lost. Unless a startup and its investors are on the same side from day one your chances of success go down rapidly.
Despite the good growth in the London startup scene, it still hasn’t reached critical mass and if as a startup you want to do a deal you probably won’t have a huge number of options. In the long run though I think it’s better for the startup world if investors err on the side of generosity. Of course there are limits — crazy valuations can be just as damaging as dodgy terms and institutional investors have a duty to protect their limited partners’ cash. But there’s no doubt that the power balance is shifting towards founders and personally I think that’s a very good thing. Related articles
I’ve been cycling to work pretty much every day for six months now. For some reason I chose one of the coldest, darkest, windiest days of the winter to start and now we’re in a lovely warm stretch with long summer evenings so I’ve seen most things that London can throw at you. A few things I’ve noticed:
It really doesn’t rain that much in London especially in the mornings
There are some hilariously bad bits of ‘cycle path’ around the city which stop and start without any warning
Pumping your tyres up makes a big difference
The number of cyclists seems to increase almost every day — the Old Street ‘pelotons’ that build up just before 9am are now often 30–40 bikes strong
Watched a funny little episode unfold last week as we walked past the Royal Festival Hall. As we crossed across Waterloo bridge we spotted what I first thought was one of those cameras they have hanging from wires at sports stadiums — but then we noticed there weren’t any wires. It was one of these:
A team were using it to film in and around the concrete buildings and it was pretty eerie to watch. As Â soon as they let go of the controls it just assumes a perfectly still and level position hovering in the air. What was funny was that they had a crew of people in high viz jackets to close off the area on the ground anywhere near where it went. It reminded me of the man with the red flag walking in front of the first motor cars. I wonder how long it will be before having drones around feels normal.
It’s always fun to read about the history of places you know. My brother got me a copy of Bradshaw’s ‘London’ from 1862 for Christmas and I turned straight to Bethnal Green where I live knowing that it probably wouldn’t get a very good write up. Sure enough:
The houses are generally miserably small and densely inhabited. The line of the Eastern Counties Railway traverses the heart of this squalid region.
Bethnal Green rarely gets good reviews because of the deprivation it has suffered. It reminded me of Michael Young’s first impressions of a Bethnal Green pea-souper in the thesis which went on to become Family and Kinship in East London:
The fog became thicker as I crossed the canal from Bow and by the time I left the housing office I could not see on the ground … I abandoned the old London taxi … and that was when the enquiry began. Waiting until I heard some steps, I put my first question: I asked the way to the nearest Tube station. ‘Search me, mate,’ came back the voice, curiously loud in the fog.
The railway is still here and the houses are densely inhabited but we don’t have pea-soupers and I don’t think I’d call Bethnal Green squalid any more.
I’m no fan of buzzwords or phrases but sometimes there is something substantive behind them. Over the past few years ‘social investment’ (also known as ‘impact investment’ in some quarters, particularly the US) has been growing as an idea and, while I was a bit of a cynic early on, I’m coming round to the idea that it is more than just flavour of the month.
I got the chance to see Sir Ron Cohen give a couple of talks in London earlier this year. You might have seen him on Newsnight or similar over the past few months as he’s become more high profile as Chairman of Big Society Capital. His back-story is that he played a very significant role in the development of the venture capital and private equity industries in the UK and elsewhere, setting up Apax Partners in the 1970s. There’s a long list of interesting companies he’s either invested in early on or turned around using a more private equity like approach.
He tells the story of social investment slightly more formally in this SSIR article but about twelve years ago (apparently after a phone call from the Treasury of Gordon Brown’s era) he started thinking about how the approach he’d developed in financing businesses and delivering a return to investors could be applied to tackling social issues. The scale of the challenge was what interested him. He saw social problems getting bigger but charities and the public sector less able to innovate because all their time was spent servicing existing needs.
He set about proving that social investment could have an impact so co-founded Bridges and the Social Investment Business and played a role in the creation of social impact bonds that are now spreading to other countries.Â Sir Ronnie talks about social investment having a range of returns and for Big Society Capital he talks about an average return of 5–6%. Some people think that’s very ambitious in the current economic climate, but in the venture investment world that’s pretty low. VC funds that go fundraising would be predicting a 15–20% IRR.
Investors often talk about a ‘pipeline’ of investment. I’ve been watching this field develop over the last few years in the UK and one of the things I realised is that there’s a kink in the pipe right by the tap. As Seedcamp has done a fantastic job in solving that in for European tech startups over the past 5 years, the social investment world has to now focus on creating opportunities for the brightest and the best to start new ventures.Â BGV is our attempt to do that and I think it’s good that a few other people seem to be doing that too.
I think social investment will continue to grow and start to be an appealing source of finance for founders where they can see a match between their aims and those of their investors. It’s already becoming a bigger part of the investment world in Silicon Valley with many of the big names (such as Mitch Kapor) setting up ‘impact funds’. I’m sure there will be plenty of mistakes along the way but I’m pretty hopeful that the growth of social investment will be a good thing.