Alpesh Patel speaking at Echelon 2014 in Singapore
Constantly looking for outstanding entrepreneurs with exceptional intellectual property, products, services, technologies and concepts, Alpesh Patel, Founding Principal at private equity firm Praefinium Partners, and Senior Dealmaker and Ministerial and Strategic Relationships responsible for India, China, Malaysia and Singapore, UK Trade and Investment (UKTI), seeks out firms that can be grown into global companies, under the Global Entrepreneur Programme (GEP).
Speaking at Echelon 2014, Patel reflected on the various companies that the GEP has brought into the UK and evaluated the benefits that come with being UK-based entrepreneurs and what they need to succeed. He spoke on the rise of global entrepreneurship and on what he termed ‘Entrepreneurial DNA’.
The UK’s appeal He started his keynote by stating that most companies selected by UKTI are at least three-years old, indicating relative maturity and stability as an organisation, given 90 per cent of startups fold after three years. GEP’s value, according to him, lies in the benefits it offered to companies. Chief among them is the strong brand value of being London-based.
Other benefits include market access to the UK and the European Union. In terms of market size, the UK is the fourth largest economy in the world (as of 2014) and the third largest in Europe, after Germany and France. With the EU being the largest economy in the world, this provides ample opportunities for UK-based startups, given the free trade possible in an economy with a GDP worth £14 trillion and a larger population than the USA.
He also noted that more global companies tend to base their headquarters in London, increasing the brand strength and network effects associated with being UK-based.
Successful ventures and funding Going back to UKTI’s data, as well as those received from angel investors and VC firms, he remarked that most successful entrepreneurs whom the GEP selected were university graduates, observing that despite popular opinion, university dropouts like Bill Gates, Steve Jobs and Mark Zuckerberg are exceptions.
On companies securing funds, he observed that it largely depended on their respective industry and market capitalisation. Those startups that easily secured funds tended to be in sectors “…where growth is through the roof”.He further added that there were certain sectors that enjoyed ample growth, but wheresecuring funds was challenging.
He noted that SaaS (Software-as-a-Service) and e-commerce are growth areas where funding can be raised easily, while cloud computing enjoys comparable investment. However, businesses related to cloud hosting and infrastructure are unable to secure funding. 3D printing, despite extensive positive media coverage, is a sector where fundraising is difficult.
Junk food and cybersecurity are performing well, with protein food supplements enjoying good value and growth, as well as gambling equipment makers, informed Patel. Firms in travel-related purchases (e.g. Priceline) are performing well too, while e-auctions (i.e. eBay) are facing performance issues. In general, entrepreneurs and startups whose listed counterparts have risen in value, enjoy greater chances of raising capital for their startups.
Sectors and entrepreneurial attitudes Patel then spoke of sectors which are new and therefore, unheard by many. He explained about clean technology or cleantech, presenting the example of an invention by a NASA scientist — a pocket-size air purification device that can filter out contaminants from a room. Another sector he touched upon was water purification technologies, where Middle Eastern firms invest heavily.
He claimed that most companies are founded by entrepreneurs with a background in the same industry. He cited examples from the mobile gaming and e-commerce sector, where a large number of companies and startups are enjoying considerable success.
Entrepreneurs’ attitudes are qualitatively evaluated by UKTI, explained Patel. The research said that those who had most funding and success often had ambitions to go global from the beginning, whereas those who expanded step-by-step had less commercial success. For Asian companies, global ambition was crucial as their home markets couldn’t fit their ambitions. Patel explained how they diversified risk by expanding into the European and US markets, noting that for companies: “A lot of errors are forgiven when you are swimming in an ocean of customers”.
Sirius Programme and angel investors Patel touched upon the support the UK provides in the Sirius Programme. Under Sirius, enterprises are wholly owned by graduate teams, with no equity taken through the programme. Founder shareholders relocate to the UK, enjoying financial support, mentoring and advice. UKTI found that big companies had a greater willingness to work with governments than smaller firms in order to open doors.
He shared how Sirius granted equivalent support to smaller ventures as the government did to larger firms, an example being how entrepreneurs were brought along with ministerial trade delegations to other countries to support and explore market access. This reflected the commitment of the government to “…attract entrepreneurial genes”.
Disclosing data from UKTI’s research, Patel said that 40 per cent of angel investors suffered losses; 26 per cent had sold to third parties; 16 per cent sold to other shareholders and only eight per cent enjoyed an IPO. Only 10 per cent of angels interviewed made more than a 100 per cent return. Angels rejected 60 per cent of all companies within 10 minute, 25 per cent within three hours and selected only two per cent. The key was that 80 per cent of selected ventures wanted an opening. The winners were those who showed the greatest initiative and drive.
In short, winners are those with the greatest drive, global ambition, at least a tertiary education and who know their product and sectors in-depth, at a time when the listed companies operating in that sector are growing. These takeaways are the key to the success of entrepreneurial ventures.