When Bill Li conceived of the idea for an autonomous security robot company called Knightscope, he faced three common arguments. You may be facing these same three arguments, too. Here is what CEO’s need to know about capital to company fit.
This will never work.
This is too complicated, you can’t do software and hardware.
People will never invest in a physical security startup.
But obviously, those questions weren’t relevant in the case of Bill Li. Knightscope has over 19,000 individual investors, backing from four major corporations, and has done $10 million in lifetime revenue. Why?
“Relentless entrepreneurs like to prove everybody wrong,” Li says. But more than just squashing the naysayers, Li has a better approach for any startup in any industry. According to him, a lot of founders are told, “You must focus on product to market fit… when you get that, come back and see me.”
But what if “capital to company fit” was a better approach? Answering some basic questions—what are you trying to accomplish, what are your obligations, what type of capital do you need?—will determine how much success a startup enjoys and how fast, or whether there’s any success at all.
$130 billion goes into startups every year across every industry, although some areas—like software innovation—easily get the lion’s share. Most of those funds are going to entities whose business model is (simply put) to be wrong.
The people who are in a good stead to help you the most might not be in your field.
If you’re trying to innovate in one field, there’s nothing wrong with VCs who want to have the option to weigh in on key decisions as long as they have expertise in that field. On the other hand, some of the most beneficial relationships will come from VCs who don’t have any expertise in your field and who want to take a more hands-off approach.
Founders have a fiduciary responsibility to all of their shareholders, not just the so-called “big dogs,” to make sure that these working relationships are beneficial to the company, not just to one investor who moves in on the inner workings.
Sadly, in a lot of cases, “VC money is dumb money.” It can backfire if the right relationship isn’t maintained.
So Li’s advice for founders? “Before you start raising capital, really think about who you need on your team.” The deepest pockets might not be as beneficial as they appear if they’re going to insist on some measure of authority within your startup.
“You might just need silent capital — that’s a different type of capital need,” than someone who doesn’t know about the mechanics of actually building a company.
Speaking of his investors, Li adds that sometimes more investors with little expertise or knowledge of your industry can be far more useful than four major backers with a lot of funding but a lot of input that they insist on sharing… and expect to see incorporated into your business workings.
Another value-add that having numerous smaller investors brings to a startup is an instant market for the product once it’s finally available. With only a small handful of major, large-scale investors, the work of finding retailers can chew up a lot of capital through marketing once the product is ready.
In the case of Knightscope and its 19,000 investors, those numerous individuals become an instant source of support and traction when it’s time to take this to market.
But none of this is to disparage VCs in any way. That’s the last thing any founder should do, in fact. But doing the homework of finding the right fit — rather than signing up with the right money the moment it’s available — will mean the difference between success and failure.
How do you find the right fit?
Part of that homework involves understanding what role your VCs expect in the decision-making process, as well as deciding whether a company would be more successful in the long run with a lot of smaller investors instead of a few major players.
Li has one last bit of advice: “If you’re gonna go down this path… please don’t think that you’re gonna turn on a website and then you’re gonna download cash from the cloud. You have to put in the work.”
Murray Newlands
Murray Newlands is an entrepreneur, investor, business advisor and speaker. He is the founder of the How to CEO podcast and you can read his blog at MurrayNewlands.com.
London-based fintech startup Kennek has raised $12.5 million in seed funding to expand its lending operating system.
According to an Oct. 10 tech.eu report, the round was led by HV Capital and included participation from Dutch Founders Fund, AlbionVC, FFVC, Plug & Play Ventures, and Syndicate One. Kennek offers software-as-a-service tools to help non-bank lenders streamline their operations using open banking, open finance, and payments.
The platform aims to automate time-consuming manual tasks and consolidate fragmented data to simplify lending. Xavier De Pauw, founder of Kennek said:
“Until kennek, lenders had to devote countless hours to menial operational tasks and deal with jumbled and hard-coded data – which makes every other part of lending a headache. As former lenders ourselves, we lived and breathed these frustrations, and built kennek to make them a thing of the past.”
The company said the latest funding round was oversubscribed and closed quickly despite the challenging fundraising environment. The new capital will be used to expand Kennek’s engineering team and strengthen its market position in the UK while exploring expansion into other European markets. Barbod Namini, Partner at lead investor HV Capital, commented on the investment:
“Kennek has developed an ambitious and genuinely unique proposition which we think can be the foundation of the entire alternative lending space. […] It is a complicated market and a solution that brings together all information and stakeholders onto a single platform is highly compelling for both lenders & the ecosystem as a whole.”
The fintech lending space has grown rapidly in recent years, but many lenders still rely on legacy systems and manual processes that limit efficiency and scalability. Kennek aims to leverage open banking and data integration to provide lenders with a more streamlined, automated lending experience.
The seed funding will allow the London-based startup to continue developing its platform and expanding its team to meet demand from non-bank lenders looking to digitize operations. Kennek’s focus on the UK and Europe also comes amid rising adoption of open banking and open finance in the regions.
Featured Image Credit: Photo from Kennek.io; Thank you!
Radek Zielinski
Radek Zielinski is an experienced technology and financial journalist with a passion for cybersecurity and futurology.
As excitement around generative AI grows, Fortune 500 companies, including Goldman Sachs, are carefully examining the possible applications of this technology. A recent survey of U.S. executives indicated that 60% believe generative AI will substantially impact their businesses in the long term. However, they anticipate a one to two-year timeframe before implementing their initial solutions. This optimism stems from the potential of generative AI to revolutionize various aspects of businesses, from enhancing customer experiences to optimizing internal processes. In the short term, companies will likely focus on pilot projects and experimentation, gradually integrating generative AI into their operations as they witness its positive influence on efficiency and profitability.
Goldman Sachs’ Cautious Approach to Implementing Generative AI
In a recent interview, Goldman Sachs CIO Marco Argenti revealed that the firm has not yet implemented any generative AI use cases. Instead, the company focuses on experimentation and setting high standards before adopting the technology. Argenti recognized the desire for outcomes in areas like developer and operational efficiency but emphasized ensuring precision before putting experimental AI use cases into production.
According to Argenti, striking the right balance between driving innovation and maintaining accuracy is crucial for successfully integrating generative AI within the firm. Goldman Sachs intends to continue exploring this emerging technology’s potential benefits and applications while diligently assessing risks to ensure it meets the company’s stringent quality standards.
One possible application for Goldman Sachs is in software development, where the company has observed a 20-40% productivity increase during its trials. The goal is for 1,000 developers to utilize generative AI tools by year’s end. However, Argenti emphasized that a well-defined expectation of return on investment is necessary before fully integrating generative AI into production.
To achieve this, the company plans to implement a systematic and strategic approach to adopting generative AI, ensuring that it complements and enhances the skills of its developers. Additionally, Goldman Sachs intends to evaluate the long-term impact of generative AI on their software development processes and the overall quality of the applications being developed.
Goldman Sachs’ approach to AI implementation goes beyond merely executing models. The firm has created a platform encompassing technical, legal, and compliance assessments to filter out improper content and keep track of all interactions. This comprehensive system ensures seamless integration of artificial intelligence in operations while adhering to regulatory standards and maintaining client confidentiality. Moreover, the platform continuously improves and adapts its algorithms, allowing Goldman Sachs to stay at the forefront of technology and offer its clients the most efficient and secure services.
Featured Image Credit: Photo by Google DeepMind; Pexels; Thank you!
Deanna Ritchie
Managing Editor at ReadWrite
Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.
As Web3 companies increasingly consider leaving the United States due to regulatory ambiguity, the United Kingdom must simplify its cryptocurrency regulations to attract these businesses. The conservative think tank Policy Exchange recently released a report detailing ten suggestions for improving Web3 regulation in the country. Among the recommendations are reducing liability for token holders in decentralized autonomous organizations (DAOs) and encouraging the Financial Conduct Authority (FCA) to adopt alternative Know Your Customer (KYC) methodologies, such as digital identities and blockchain analytics tools. These suggestions aim to position the UK as a hub for Web3 innovation and attract blockchain-based businesses looking for a more conducive regulatory environment.
Streamlining Cryptocurrency Regulations for Innovation
To make it easier for emerging Web3 companies to navigate existing legal frameworks and contribute to the UK’s digital economy growth, the government must streamline cryptocurrency regulations and adopt forward-looking approaches. By making the regulatory landscape clear and straightforward, the UK can create an environment that fosters innovation, growth, and competitiveness in the global fintech industry.
The Policy Exchange report also recommends not weakening self-hosted wallets or treating proof-of-stake (PoS) services as financial services. This approach aims to protect the fundamental principles of decentralization and user autonomy while strongly emphasizing security and regulatory compliance. By doing so, the UK can nurture an environment that encourages innovation and the continued growth of blockchain technology.
Despite recent strict measures by UK authorities, such as His Majesty’s Treasury and the FCA, toward the digital assets sector, the proposed changes in the Policy Exchange report strive to make the UK a more attractive location for Web3 enterprises. By adopting these suggestions, the UK can demonstrate its commitment to fostering innovation in the rapidly evolving blockchain and cryptocurrency industries while ensuring a robust and transparent regulatory environment.
The ongoing uncertainty surrounding cryptocurrency regulations in various countries has prompted Web3 companies to explore alternative jurisdictions with more precise legal frameworks. As the United States grapples with regulatory ambiguity, the United Kingdom can position itself as a hub for Web3 innovation by simplifying and streamlining its cryptocurrency regulations.
Featured Image Credit: Photo by Jonathan Borba; Pexels; Thank you!
Deanna Ritchie
Managing Editor at ReadWrite
Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.
