8 Attractions of an Innovative Technology Seed Fund: The investor perspective

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8 Attractions of an Innovative Technology Seed Fund: The investor perspective

During the last year, as Zoosh Ventures has worked on creating a new Seed Fund (Zoosh Investment Partnership or ZIP) - we spoke to quite a number of private investors (High Net Worth individuals & family offices) throughout Europe and beyond. The knowledge gained from these investor discussions became the foundations of the ZIP – an investor focused product.

These are some of the lessons Zoosh Ventures learnt from the primary investor research and creating an investor “friendly” seed fund like ZIP.

  1. There are very few pure concept/early seed funds in the marketplace. The reason being, investing in Startups at this early stage is very high risk & the market depends on “Friends & Family” money in tandem with public sources. The paradox from a Zoosh Ventures perspective, it that this is where we believe we have the greatest impact i.e. working with our experienced business promoters to turn their ideas into validated products for a validated market. Over the last four years this has been the “day job” and formed the basis for the ZIP. Acknowledging the risks involved in single “Friends & Family” investments, a seed fund like ZIP focuses on the spread of investments (i.e. 15+ over a period of 18 months or so). Within the spread there is a mix of “concept stage” – commercially driven promoters (customer focused) looking to build a technology company - and later stage (MVP) companies looking to start executing a business plan.

  2. On the structural side of a seed fund like this – not surprisingly no fees for the General Partner proves attractive for the investor! As well as waiving the annual 2% management fees associated with larger funds, the GP only gets a profit share once the investor receives their full capital/investment back. Motivation for the GP to find the right prospects and work with them on ensuring product-market fit from the very start.

  3. Although structured as a fund, the investors are essentially part of a Venture Club with multiple “horses in the race”. The investors become part of an extensive Due Diligence process with multiple Startups, at different stages, in different industries, different challenges etc. Through regular updates the investors can see the progress and indeed challenges facing each of the investee companies.  

  4. Investors who had not previously invested in technology because they “did not understand that world” saw a fund like ZIP as a good means of “dipping their toes in the water”. A General Partner that could find quality investments, the focus on SaaS/Cloud Startups and a process of moving investees from Concept through “Building Right Product” to moving towards a repeatable business model (the Zoosh Ventures factory Approach) gives a certain comfort to investors that want to dip their toes.

  5. Efficient Decision Making – whilst there are a number of sources of seed capital for post concept stage investments, one of the benefits of having a fund structure with a General Partner, is the ability to make informed decisions quickly. This can be extremely important to ensure that Startups that are showing real potential are not distracted for 6-12 months on fund raising thus losing commercial momentum whilst almost completely distracted by the fund-raising process. Having the Zoosh Ventures approach ensures that those Startups that are moving through the different phases are not stalled and distracted. Speed is critical, especially in the SaaS world where new competitors from all over the world are working on similar problem-solutions.   

  6. Co-investment strategy to leverage the effective size of the investment pot and to further de-risk the individual investments. This is constant de-risk approach and efficient use of capital is essential for an early seed fund. For example, in 2018 Zoosh Ventures has been building relationships with co-investment partners in Ireland, N. Ireland, UK, Hungary, Finland and increasingly in other parts of Europe. Having this spread of partners and also understanding that certain deals will appeals to certain partners, helps efficiencies in making investment decisions and fast-tracking those ZIP Startups that are demonstrating real potential.

  7. Having a strong pipeline of prospects when discussing a Seed Fund with investors - demonstrates both the approach and track record. As they say on all the best cookery shows – “ones we already prepared in the oven”.

  8. Recognising that there are new investment rounds coming down the line as a Startup evolves through various stages of development – the ability to follow-on was also appealing to some investors. Succession Planning was even mentioned during some investor meetings.

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Press Release August 31st

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Press Release August 31st

Zoosh Ventures announces new seed fund for domain expert entrepreneurs with ambitions to create cloud technology Startups

Zoosh Ventures, part of the Zoosh Group, is a growing Irish company with a European footprint. Zoosh employs forty people between the National Science Park in Mullingar, as well as its operations in Hungary and Finland.

Co-founded in 2014 by Zoosh Ventures CEO Bert Farrell – formerly a manager of Enterprise Ireland’s New Frontiers programme – the company focuses on funding and working closely with early stage technology Startups, concentrating on commercialisation, product build, entrepreneurial development and future growth strategy, while constantly increasing efficiencies and the value of the venture through each step of the development process. Zoosh’s other co-founders are Mervyn Graham (Ireland), Balazs Bakos (Hungary) and Kimmo Arppe (Finland).

Since its foundation in 2014, Zoosh has received funding from a number of successful business executives and entrepreneurs in Ireland, Hungary and Belgium, including Zoosh’s original investor, well-known Irish businessman David Brophy, founder of DMJB Consulting and previously with Smurfit Kappa and Ballymore Group. David is also Chairman of Zoosh Ventures.

The new Zoosh Ventures seed fund is available to what Bert Farrell refers to as ‘domain experts and experienced professionals within the Startup ecosystem’, which includes Startup ventures at both concept stage and those high potential Startups looking to grow their business. The seed fund will co-invest with other European investment vehicles.

Zoosh Ventures is particularly interested in domain experts – experienced business people with great ideas to start Software as a Service (SaaS)/B2B cloud technology companies. Technological expertise, where required, can be provided through another Zoosh company – Zoosh Digital, until the viability of the venture is established and the venture can build its own R&D team. Zoosh Digital provides highly skilled cloud design, system architecture and software development experts with a focus on usability, innovation and scalability of technology products. The commercialisation function continues to expand in Ireland, with system architecture and software development primarily carried out in Hungary and design between all three locations.

Rapid advances in cloud technologies and services allow Zoosh Ventures support commercially focused entrepreneurs build quality products, designed with the end-user in mind, in a cost-effective and professional manner. Zoosh supports their ventures by providing an all-embracing approach that builds the right product for the right market at the right time.

‘Using the Zoosh Investment Partnership (ZIP) we plan to make over fifteen investments in carefully chosen Startups over the next eighteen months,’ says Farrell. ‘The fund is geared to investing in entrepreneurial ventures at both the concept stage and at the early seed investment stage (High Potential Startup). Concept or idea stage investments will range from between €30,000 and €50,000, while High Potential Startup investments will range from €100,000 to €150,000 and be part of a larger round, co-investing with European partner investors. At every stage our aim is to achieve the most efficient use of investor capital and use our experience to support our Startups in focusing on customer traction and business model development from the very start.

‘We offer a lot more than money through our seed funding. We give our Startups the quality and expertise to get things successfully off the ground and then we act as partners through the different stages of development, allowing entrepreneurs to focus on proving there is a market for the product.’

The Zoosh Investment Partnership is structured as a limited partnership with a number of Irish and European investors involved. These are successful business people who view the quality and range of investments – as well as the Zoosh experience – as a key ingredient in de-risking their investment into the ZIP. As one investor commented, ‘I really like the idea of having multiple horses in the race’.

To date a number of very successful cloud Startups have come through the Zoosh stable. IDASO (Innovative Data Solutions) is based in Mullingar and is a pioneer in the area of automated vehicular traffic data collection services – generally provided for local authorities and engineering firms. Services include traffic counts, vehicle classification, turning movements, origin destination surveys, parking studies and pedestrian footfalls. These services are delivered using customised artificial intelligence software developed with Zoosh. As IDASO continues to expand internationally, they are currently building their own R&D team of artificial intelligence experts.

Tixserve, in Maynooth, County Kildare, headed by Pat Kirby, is a SaaS paperless ticket delivery platform for ticket sellers in the global sport, music and theatre live events market. Tickets are delivered directly to mobile phones in complete security, while eliminating high distribution costs and ensuring fraud prevention.

Kyzentree Technologies in Galway is in the business of maximising continuous improvement programmes. Using innovative technology, the company measures productivity in manual assembly operations much more effectively and efficiently than traditional manual, paper-based systems. Its advanced applications eliminate recurring operational problems and provide effective solutions in the areas of labour and equipment effectiveness, as well as space utilisation.

Profile 90 is a smart scouting platform that integrates scientific insights into athletes’ performances. It focuses objectively on the key areas of performance – physical, tactical/technical, psychological and social. It’s the first platform to provide a 360 view of players to identify talent before a club signing is made. This Startup is changing how clubs find their next generation of players. Swansea City and Burnley are among the Premier League sides that are committed to the Profile 90 scouting system.

Another sporting venture created through Zoosh technology is Fanlink, a joint venture with a Kilkenny-based company called Sportego. This app framework delivers a superior fan experience, while capturing fan data and creating revenue generation opportunities for sports teams. It provides OTT streaming, quizzes and polls, augmented reality, live scores, in-game data and e-ticketing capabilities. This is the ultimate way to interact and engage with sporting fans.

Xtract is a powerful claims tool developed in Ireland and based on advanced vehicle telematics that aggregates and visualises crash data at the moment of impact for the motor insurance industry. It transforms how motor claims are processed, by visualising crash data at First Notice of Loss (FNOL), facilitating claims and driving decision-making.  At the same time it allows accurate liability identification, detects fraudulent claims and eliminates significant claims costs. The system uses real-world incident data with mapping software and real time weather reporting to deliver accurate visual context to crash scenes.

As well as entrepreneur-led Startups, Zoosh Ventures is working with its Digital colleagues and corporate partners on innovative cloud products in areas such as eCommerce, Agtech and Logistics with the ultimate goal of commercialising those that can demonstrate customer traction

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5 Lessons from a SaaS Startup Factory

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5 Lessons from a SaaS Startup Factory

Since late 2013, Zoosh has been developing and refining our SaaS Startup Factory model. Zoosh is a technology/commercial Partner (in a number of cases Co-Founder) with early stage SaaS ventures. We work with our partner companies on both the technology development and in parallel commercial validation from the very beginning of the relationship. Zoosh support our partners on figuring out what the product needs to be, how it should look, how it should be built and how we get traction with the targeted customer segments. Zoosh is a European SaaS Startup Factory with teams in Ireland, Finland and Hungary.

There have been a number lessons along the way some good and some not so good but all extremely valuable in fine tuning the Zoosh “factory” model. The definition of a Startup Factory (or Startup Studio) varies depending on the particular context. It can sometimes refer to an accelerator programme or an incubator or investments by an organisation in multiple Startup companies. The common thread between all the definitions is that the factory has raw material (the entrepreneur or Startup) which it brings through a production process (can be as straight forward as a financial investment right through to a partnership process to help develop both the proposition and promoter). The output of the factory is very much dependent on the internal “production process”.

Which leads on nicely to Lesson 1:

 

Lesson 1: The Process

Defining, developing and refining the Zoosh factory process was enhanced with each Partner Company that was added into the mix. The initial challenge (Stage 1) starts with trying to find suitable promoters with exciting propositions. There are many sources for prospective partner companies throughout Europe including existing accelerators and entrepreneurial development programmes – however the critical aspect of this stage is that a strong partnership can be formed between Zoosh and the Startup to deliver a sustainable and scalable business.

Once the Partnership is forged the next step is to validate both Proposition and the Commercial Opportunity this involves the Startup working with Zoosh technical personnel (including UX & Infrastructure specialists) as well as commercial support in Customer Validation and development. On completion of the Validation Stage a decision is jointly made by both the Startup and Zoosh to enter production. The production phase delivers the first commercial product release that allows the Startup move into a Customer development or Growth phase. The ultimate objective of both parties is to create a company that can grow and scale.

A key component of the model and indeed the partnership approach is that all IP lies within the Startup. The objective during growth stage is that the Startup (now Growth company) aims to take full R&D ownership as soon as it is feasible. All value resides in the Partner Company.


Lesson 2: It is all about the People

Nothing surprising here it is all about people. The people in the Startup, the people in Zoosh that support the Startup, and the partnership between the Startup and Zoosh. The right talent available at the right time to help validate the technical and commercial aspects of the proposition as well as the Startups ability to execute. According to CB Insights survey of the Top 20 reasons Startups fail (https://www.cbinsights.com/blog/startup-failure-reasons-top/) the large majority of reasons relate to Human factors as opposed to technology issues

  • No Market Need (42%)
  • Ran out of Cash (29%)
  • Not the Right Team (23%)

This is one of the main reasons Zoosh work with our Partner Startups on the commercial-technical validation right from the start - everyone is aligned around what the product needs to be based on what we are discovering during our commercial validation. Feedback from Zoosh Partner companies that have moved from validation to Productionand also from Production to Growthstage are very positive about this approach.

 

Lesson 3: Validation, Validation, Validation

Yes, it is all about Validation. Everyone knows that investing in Startups is extremely risky and failure rates are high particularly at the early/idea stage. The Zoosh process puts enormous emphasis on Validation – “is there a market for the proposed solution”, “what does the solution need to be”, “how do we test our assumptions”, “how do we phase our commercial and technical approach”, and so on. Partner companies who go through the validation stage come to the conclusion on whether there is a market opportunity or not – “fail fast or learn quick”. In cases where it is evident that there is no commercial market for the proposed solution the validation process still proves invaluable to the promoter and allows them pivot or look at other opportunities within the Zoosh factory. The Agile approach to both technical and commercial development ensures we continuously focus on product- market fit with our partner companies.

 

Lesson 4: Innovation

Whilst one of the main objectives of any factory is throughput increases as the factory becomes more efficient in the case of SaaS Startup factory this translates to more rapid development during Stages 2 and 3. There is a certain amount of reusable standardfunctionality that already exists within the toolkit and which allows for more rapid development and deployment. The main focus during Validation stage is to identify the unique attributes of the proposed solution with the Zoosh IPR experts. They are involved at the very beginning to constantly monitor any potential IP opportunity that can add value to the Partner companies. Zoosh has found, that even with solutions where it was initially believed that no IP existed - the early validation stage unearthed a number of unique elements to the proposed solution that subsequently involved filing patents. This is another benefit of the focus on validation allows Partner company and Zoosh explore the proposed solution from a lot of different angles and not being limited by our own assumptions.

 

Lesson 5: Stuff happens accept it and work through it

It’s a fact of life and a Startup factory is no different. It is especially the case as the number of Partner companies increases and as these companies are moved through the various stages. There will always be challenges – but each challenge is just a “solution in waiting”!

© 2015 Zoosh - Blog

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