Beyond the obvious: Today’s start-ups and venture capital

Here are their key learning points:

• Despite the macro-economic headwinds, there are still plenty of investors out there; however, there is a renewed emphasis on financial resilience with investors re-focussing on traditional metrics. As the ‘tide goes out’, certain investments of the last two years will increasingly look like an aberration, rather than the ‘new normal’. Speakers emphasised the value to founders of ensuring that they can support their growth claims with solid business plans reflecting verifiable revenue growth and EBITDA projections.

• Given the ongoing war for talent in the Western world, investors are keen to understand what steps start-ups are taking to guarantee high levels of talent density. Whilst cuts may need to be made in an era of retrenched consumer spending, the speakers urged caution in reducing or deskilling workforces, in case this impairs start-ups’ ability to scale at pace in future. The way businesses think about talent should be reframed and that talent should be thought of as the core of any future growth plans, instead of a pure cost centre for a business.

• New technologies, in particular NFTs, are providing businesses with the opportunity to explore new markets and commercialise new asset classes. Taking advantage of this new market requires careful consideration of the relevant legal implications. The speakers stressed that any business interested in exploring this opportunity should take advice on the intellectual property considerations as early as possible to make sure they maximise the opportunity, whilst avoiding the legal pitfalls.

• A perennial theme at any venture capital event – national regulatory bodies – were identified as a key concern for any start-up seeking to scale, especially when that growth covers multiple jurisdictions. The experts relayed their experiences of dealing with various national regulators. Early, clear and consistent engagement was mentioned as the best means of avoiding an antagonistic and costly relationship with regulators. Early engagement with external counsel was also recommended to avoid unnecessary regulatory hurdles, helping to identify and resolve potentially material regulatory concerns.

• As a result of the increased geo-political disruption seen in 2022, the experts highlighted that the rise in the value of the US dollar could result in increased deal flow from the US into the UK and Europe, as US investors look to capitalise on a weaker pound / euro. It was noted that founders looking for US capital should consider how they can make their businesses as attractive to US investors as possible.

Reflecting on the key lessons from the conference Mike and Matt had this to say:

“PAKCon 2022 was a fantastic event – dynamic, well-organised and expansive in its ambition and delivery. The speakers encapsulated what is best about the venture capital scene: disruptive, energetic and highly intelligent entrepreneurs driving progress by refusing to accept established orthodoxies and endeavouring to ‘solve for’ issues previously thought about in a rigid and orthodox manner. Walker Morris is committed to supporting such dynamic change-makers and helping them efficiently navigate the legal challenges to securing the financial support they need to effect such disruption.”

Mike O’Halloran

“The conference offered an excellent insight into the challenges and opportunities facing businesses seeking investment in the current climate. The experts reaffirmed that new and disruptive technologies remain very attractive to investors, but that the value in such businesses will be heavily dependent on their ability to show prospective investors that they have secured the rights to their disruptive IP and technology. Clients should seek advice early – we stand well placed to offer assistance through pragmatic solutions to complex issues”.

Matt Lingard

The fast-growth companies and venture capital team at Walker Morris offers a full-service solution for companies or funds looking to obtain investment, scale a business or make an investment. If you would like to discuss anything raised in this article, or the subject generally, then please do feel free to reach out to the team using the details below.

Mike O’Halloran is a Director in Walker Morris’ Corporate Team. Mike has previously worked for some of the world’s leading law firms across London, Switzerland, Hong Kong and Singapore. Mike now specialises in supporting international private equity clients with their investments into the UK and venture capital work, where Mike advises both venture capital funds and fast-growth companies looking to secure investment.

Matt Lingard is a Senior Associate in our Intellectual Property team. Matt holds a postgraduate diploma in IP Law and Practice from Oxford University and specialises in advising digital-native companies on complex intellectual property and technology related issues.