#2 RS: One step forward, two steps back
Revenue Syndicates newsletter, contained is our investing news, RS news, events, a GTM tip and an investing tip.
Their was a formatting error in our previous newsletter, please see amended version here.
We are a little bit later than usual on our newsletter because we were wrapping up the year and adjusting to the new UK government legislation that came into affect from 31st January 2024.
Please let Nick Dashfield (General Partner) or Hector Forwood (General Partner and Co-Founder) know if you have any queries, or you just want to chat and find out more about Revenue Syndicate!
Changes in Revenue Syndicate for 2024
The Good
Some of the more astute of you will notice that Nick Dashfield is referred to in the opening paragraphs as General Partner, where our previous Newsletter described him as Operations Partner. Nick has been indispensable in the re-structuring of Revenue Syndicate behind the scenes to make sure that we’re operating in a way that is compliant and most importantly, doing the right things behind the scenes for all members of the syndicate, including by taking a leading role in our evaluation of new opportunities. Accordingly, he was promoted to General Partner with effect from 1 January.
What’s good about Investor Changes to HNWI & Sophisticated Investors
Increased Disclosures: Companies that raise funds using these exemptions will now be required to provide more detailed disclosures in their financial communications. This is intended to enable investors to perform basic due diligence.
Updated Investor Statements: The statements for high net worth individuals and self-certified sophisticated investors are being updated. This aims to enhance investor engagement and understanding by simplifying the language and making the criteria clearer.
Let’s all congratulate him as we move into 2024 with Nick as our newest General Partner.
The Bad
On to the 2024 legislation changes:
Prior to 2024: You could invest as either a HNWI or Sophisticated Investor if:
High Net Worth Investor
you had an annual income in excess of £100K in the past financial year or
have net assets in excess of £250K beyond your pension fund assets and your private residence
Sophisticated Investor
You have been a director of a company turning over at least £1 million within the last two years
You have made more than one investment in an unlisted company in the last two years
You have been a member of a network or syndicate of business angels for at least six months
You have worked in the past two years in a professional capacity in the private equity sector or in the provision of finance for small and medium enterprises
2024 Onwards: You need to meet the new criteria.
High Net Worth Investor
have an annual income in excess of £170,000
have net assets in excess of £430K beyond your pension fund assets and your private residence
Sophisticated Investor
You have been a director of a company turning over at least £1.6 million within the last two years
You have been a member of a network or syndicate of business angels for at least six months
You have worked in the past two years in a professional capacity in the private equity sector or in the provision of finance for small and medium enterprises
The Ugly
Why the changes are bad:
Restricted Access to Capital for Startups: Higher financial thresholds could limit the pool of potential investors available to startups and emerging companies. This restriction might be particularly impactful for innovative enterprises that rely heavily on investments from high net worth individuals and sophisticated investors.
Potential Deterrent to Angel Investors: The increased financial criteria for sophisticated investors may deter potential angel investors. Angel investors often play a crucial role in early-stage funding, and their reduced participation could lead to a funding gap for innovative startups.
Impact on SMEs: Small and medium-sized enterprises (SMEs), which are often at the forefront of innovation, might find it more challenging to secure funding. This could hamper their ability to innovate and grow, ultimately affecting the broader economy.
Increased Bureaucracy and Compliance Costs: The additional disclosure requirements and updated investor statements could result in increased bureaucracy and compliance costs for companies seeking investment. This might divert resources away from core business activities, including research and development.
Risk Aversion: The heightened criteria might encourage a more risk-averse investment culture. In an environment where innovative projects, which often carry higher risks, struggle to secure funding, overall innovation could be stifled.
Revenue Syndicate is complying with all the new changes but we’d be lying if we said we were happy with the changes.
Portfolio news and updates
Lative raises $3M to reinvent sales planning & efficiency
Lative.io offers a sales performance, efficiency, and planning platform designed to enhance sales productivity and planning precision. The platform provides data-driven insights for sales teams, aiming to optimise efficiency and ROI. It features tools for strategic sales planning and real-time decision-making, tailored for sales leaders, revenue operations, and finance teams. Head over to https://lative.io/ to see it in action.
The whole of Revenue Syndicate is extremely excited to be part of their journey and congratulations to Werner Schmidt & Laura Tortosa Sancho for the success.
As you would’ve guessed, they’re hiring! So head over to the website to apply.
Event on 21st March
We are excited to announce hosting our next Revenue Syndicate meet-up in partnership with the #1 Sales Engagement Platform, Salesloft!
It's that time of year again when we get together and have a blast networking, learning from guest speakers, and enjoying some drinks.
If you're interested in hearing from leading Venture Capitalists, Entrepreneurs, Angels and Syndicate members, make sure to mark it in the diary.
Our topic for March is 'Investing in Startups in 2024’. We’ll be taking a look at how it’s going to differ from 2023 into 2024 and what technologies to look out for.
Our guest speakers will be released in the coming months.
The panel will be moderated by Nick Dashfield, our General Partner.
This is an ideal networking opportunity for both Founders & Investors alike as well as sharing ideas on how the UK investment scene will open up.
We'll be providing drinks and food throughout the evening to help you relax and enjoy the night.
A link to the event will be released later on next month. Follow our LinkedIn Page to make sure you register when tickets go live as we have limited capacity.
LinkedIn highlights
Adam Robinson - In a candid reflection on why he chose to avoid venture capital for his $22 million ARR SaaS business, a bootstrapped entrepreneur shares his insights gained from speaking with over 50 top-tier VC firms. Are we seeing a shift to no code to profitability and only taking funding if the founding team wants to? Similar to Adam Dunsdons point here.
Dry Powder Everywhere The significant drop in PE deal activity in 2023, with reductions ranging from 10-40% based on different metrics. However, there's an expectation of a rebound in 2024, driven by factors like more predictable interest rates, a recovering IPO market, liquidity needs, and substantial 'dry powder' (unallocated capital). PE is responsible for much of VCs (at later stages) funding. Times are changing, and quickly. Will we see a surge of investments?
GTM Tip of the month
AI Personalisation - with Video
True story, I used to create a prospecting list with everyone called “Paul” - Record one video and send it to everyone called Paul so it looked personalised.
Their is a new surge of generative AI for videos. These AI videos are able to take variables (much like the classic hi {{first_name}}), the videos dynamically update with each variable. The variables are currently capped to 3 at most HOWEVER, you will still be able to create a personalised video, make it scalable and embed it into your sequence.
We recommend you check out Ubique to try it out!
P.S. Sorry Paul…
Revenue Syndicate Academy
Every month we’ll seek to highlight an investment concept or market theme which may be of interest to our community. This month we discuss Advanced Subscription Agreements (‘‘ASAs’’), which are a popular means by which early-stage companies can raise capital from investors in return for shares which will be issued at the next equity funding round. ASAs have been a popular means of raising funding for some time as, like CLNs (which were covered in the last newsletter), they allow companies to quickly raise funding outside of a full investment round.
What is an ASA?
An ASA is an equity instrument made by an investor to a company. Unlike a CLN, an ASA is not a debt instrument and monies transferred in return for an ASA are not repayable by the company in any circumstances. ASAs enable a company to raise funding before it issues equity, with the ASA converting to shares at a future substantive funding round or by a long-stop date (typically 6-12 months from the date the ASA is signed) if there has been no equity round before then. Where he long-stop date is reached, the ASA will usually convert to shares at the valuation the company received at its last equity funding round. Where the company undertakes a funding round before the longstop date of the ASA, the ASA will typically provide for holders to be issued shares at a discount to the valuation achieved in that funding round and will often contain a valuation cap, meaning that ASA holders can benefit significantly compared to new equity investors where a company performs exceptionally and raises its next round at a high valuation.
Why do companies issue ASAs?
ASAs enable companies to raise money from investors quickly without having to re-value the company before it has reached certain commercial milestones and begun the process of launching a full equity round. This means that funding can be raised through ASAs without the company having to accept a lower valuation than it might achieve at a later date on its existing growth trajectory, avoiding the founders and existing shareholders being unnecessarily diluted.
What are the potential advantages/disadvantages of ASA’s for investors?
As noted above, the key potential advantage for investors of holding an ASA is the potential discount they will receive at a future funding round, which could be particularly attractive if the company is successful and the ASA holders also managed to negotiate a cap on the valuation at which the ASAs are eventually converted to equity. A discount on conversion will usually still apply if the company raises a flat or down round, providing holders some degree of downside protection. ASAs are also usually S/EIS qualifying instruments, potentially allowing investors to take advantage of generous UK tax incentives.
However, ASA holders will usually not be able to enjoy some of the rights that are enjoyed by shareholders until conversion, including voting and dividend rights.
Best wishes,
Nick & Hector