This week, in the first of our Investor Profiles series, we are delighted to introduce Angel Investor and CFO of Moneymailme, Paul Mears.
Paul,tell us about your background: What was your first job and how did you make your money?I have a mathematical background with a pure mathematics degree from Loughborough University gained in 1989. I started my career at Ernst & Young in London and trained as a chartered accountant in the Small Business Group working with inward investment companies, UK based family businesses etc. It was a great time to be in that job as the start of the growth of Telco’s, Software and new Tech companies. My clients included Business Objects, Amdocs, and Molecular Devices who later on became very large companies. Over the years I have lived in several countries, working in Amsterdam, Long Island, Vancouver, Hong Kong and Monaco with a mix of finance and operational finance roles in the Telco, Constriction and Hedge Fund Industries. Over the years I have built up some free cash which I have in the last few years used to invest in start-up and growth companies.
How do you find new investment prospects?
I have a good relationship with a couple of organisations that raise funds for companies in the tech field such as Committed Capital and Chrystal Capital who seed companies at early stage and then look to raise additional funds. I like them as they have skin in the game and also take NED roles so you know your investment is monitored. I tend to do my larger investments with these two. I also look at Crowdfund sites for idea and look at many of the other sites where people are looking to raise funding such as Ruffena and also of course get direct contact from founders who see me on Linkedin or Twitter.
What do you look for in a startup?
I like to invest in companies who have a product that either I know I would buy or I can ask others if it is not targeted at my interests and age profile and the feedback is , Yes, I would buy and use that. I prefer relative low numbers of employees and to understand how the company can scale without having to add major infrastructure and employees. It is also important to me that the company secures funding for 12 months or so to ensure the founders are not distracted by fundraising all the time. I think there is a sweet spot around 12 months where the founder can concentrate of the business, but does not have so much money it gets spent just because it is there.
How much do you typically invest and do you tend to continue investing in future rounds?
I have investment from a few thousand via Crowdfunding to investments of 100k or so. At the higher levels, I prefer to have direct investment with shareholder protections such as pre-emption etc. which is not always the case on some crowdfunding or if a VC is in on preferential terms as a crowd round. I have generally reinvested.
When is the best time to contact you about a possible investment? Should prospects be ‘investment ready’ with full business plans? Or are you an ‘idea on a page’ investor?
I like applications, tech and that can be just an idea stage. I have several very early stage investments which are funding prototype or testing the idea. I am also not a huge fan of 30 page business plans, I prefer 2 or 3 separate documents, a market/sales plan, product overview, technical summary (not too technical, but so I can get a good understanding of risks) and background of the founder and if any other key employees. I then like to talk more and find that is a lot more useful than a 30 page word document that I get lost in.
Have you ever handed over a cheque same-day to a startup? Does this still happen nowadays or are you far more likely to consider a prospective investment for a period prior to acting?
Maybe not handed over a cheque, but made my mind up to invest within 15 minutes of meeting someone several times, a few for a few thousand and one for 50k, which I have followed up with additional investment
Are you an active investor or do you tend to let portfolio companies carry on independently?
It depends on what I feel I can add, if I can introduce the companies to people or companies I know where there may be business opportunities, I always try to do that. I also am quite happy to give opinions on anything, I have lived in a lot of places, so when a company says they want to go to Asia, I will always spend time talking to them and giving my views and introducing them to my friends there. I definitely do not want to strangle the founder as its them I have invested in.
How do you see the future of the FinTech sector evolving? Are the days of traditional banks and finance firms numbered?
I think that some people have really got Fintech wrong and it has not helped. I see the role and growth of Fintech being new companies building technology that can be useful and integrated into legacy banks and financial companies. I do not believe that new Fintech companies will replace the legacy companies, although I do believe that Telco’s will be a big challenger to legacy banks as they have the user base and technology. It’s interesting to see the possibility with Orange Bank and when you look at the global presence of Vodaphone it seems that it can be an interesting area for them. The scope to have social impact investing by the Telco’s is huge as we have seen in Kenya etc. with Mpensa. I think Fintech companies will be partners of legacy banks as the legacy banks have infrastructure in Compliance, Training, and Local Footprints that currently is a weakness for a lot of Fintech. The key for me is finding a niche process and looking how to integrate that with the current incumbent’s maybe white labelled. You can have a very attractive white label business and you do not need to be a unicorn to make the founder and investors very happy.
What areas of FinTech are of particular interest to you at the moment?
E-money and payments are very interesting as they solve a real problem for people. It is tough to set up a bank account if you are mobile and e-money can solve that with EU based licencing. There is also a good business case when you compare the amount of time that some people currently have to queue at a money transfer business outlet and then pay a large spread on the rate.
What’s your view of the crowd-funding investment websites? Do you think they are helping or hindering the marketplace?
I have several investments with Seedrs. The investments are of course high risk and maybe come with high reward. I believe there is a good amount of education needed for the founders, some are excellent with communication and engage with investors and then get help back which I think is part of the crowd experience, others seem to take the money and run and you get limited or no feedback. Seedrs have made good progress with reporting on Portfolios overall but I do feel a bit more monitoring, or pressure on the founders to meet the reporting requirements that they sign up for when they raise is needed. I also have a concern that investors can be classified as sophisticated, but invest 10 or 20 pounds. That can never make sense, if a company makes 10 times any broker fee of exit will take the returns out. I like the crowd concept, but I think there does need to be a de minimus limit of amount invested.
What Government action or tax policy would you like to see implemented to support or boost the startup economy?
I believe that the incubators are doing a job that the Government could invest more in. I know there are now small amounts of Government money that is earmarked for start-up direct investment, but this is minimal when you look at the funding to some other sectors. The Government could learn a lot from Singapore where I feel that you get action form their Government, in the UK there can be a lot of talk and little follow through , or the follow through takes 2 years which is a long time in the Fintech world. It would also be very interesting to look at how Estonia has made digital ID’s and compliance key as that can streamline processes, turnaround things quicker. There is still a lot of paperwork in the UK. I also think generally Entrepreneurs are not given enough credit in the UK, I am a strong believer that Entrepreneurs repeat and many are lost to the UK due to prohibitive tax rates.
Which (non portfolio!) FinTech startups have you been most impressed with recently?
I do focus a lot on the payments type and the ones that I like include:
TNG WALLET based in Hong Kong has been issued a licence by HKMA and is challenging legacy e-wallet providers in Hong Kong and has had dramatic growth in Hong Kong and is rolling out within the South Asia region and making payments and transfers way easier for expat workers in the region.
N26 have recently obtained investment from the investment company of Li Ka Shing one of Asia biggest investors which I believe opens up the possibility of them forming partnerships with companies within the Portfolio of Li Ka Shing which range from gas stations in Canada, supermarkets in Asia, Telecoms in Asia and many other businesses. They have I believe found one of the investors who can add so much more value than just money and it’s a great opportunity for them to really become global.
Finally, could you tell us about some of your recent investments?
Some of my investments have made very good progress recently and this is across both the crowdfunded ones and direct ones. Examples are
STAMPLAY investment via Seedrs, an Italian founder who following on form Seedrs have also been accepted to 500 Startups. They have some toolboxes that make making API’s simple and dramatically speed up coding. Recently won a API competition run by VISA in California and getting some good traction on clients
POQ Commerce investment via Seedrs, a company founded by a German and a Swede. The company is an app commerce company and has seen fantastic growth in revenues that their clients have made via app commerce which has led to POQ being nominated for several industry awards.
Celixir a stem cell company that was founded by Sir Martin Evans who won the Nobel Prize for stem cell research and Ajan Reginald who has a background in pharma such as Roche. The company has a pipeline of stem cell products that are in Phase 3 trials and can have a huge impact of quality of life for patients. They have also recently partnered with a major Japanese company for licensing in Japan which is a major market. I am passionate about this investment as there is also a social impact element which I am keen on.
FANTOO an Artificial Intelligence driven email management that is designed to maximise workflow and team collaboration. The company were chosen to be the first Dell Entrepreneur in Residence at Dells office in the UK after winning a pitch in front of Michael Dell. They have received support from Dell for two years across many business functions, are currently in final beta testing pre-launch. The product I think is leading edge, I use it and it helps me a lot and has made me more efficient. It’s great to see how working with a great company like Dell can also help start-ups gain fast track entry to sales channels and markets.
Moneymailme is a social money transfer application that provides the functionality of WhatsApp with peer to peer video chat and the ability to transfer e-money between users via a network of e-wallets with Mangopay as its Financial Partner. It is exciting to see the growth prospects in an area that I am very keen on.