10 January 2023
The CEO of Capital Pilot, Richard Blakesley discusses the working relationship between Capital Pilot and Venture Capitalists and how data can help all parties to make better, fairer and more diverse investments.
Tell me about Capital Pilot and its relationship with VCs.
Capital Pilot is a rating agency. Like any other rating agency, it creates data that a financial ecosystem can use to deliver transparency and efficiency in the financial markets - a requirement for the VC market.
We specifically built our rating tool for startups and the benefit of VCs and accelerators.
Let me explain. The rating benchmarks the strength of a founder’s proposition and guides them toward the elements of their business model they may need to change to make them more attractive to investors.
Within a marketplace where large volumes of startups apply to accelerators and VCs, there are some unique opportunities for a rating system to deliver similar efficiencies to a VC business model.
What is the problem you’re solving for VCs?
The key problem we're looking to solve is access for startups to source support, investors and, ultimately, investment.
There is a disparate market of individual startups spread across the country from many different backgrounds. They may or may not have the networks that will enable them to reach the right investors for their business. Currently, there is a large amount of imperfect information being fed to them via various sources.
So, what we're trying to achieve is the creation of clarity, transparency and visibility in a marketplace which is currently opaque.
And investors?
The reality is that investors tend to focus on their own networks to identify deal flow. They rely on introducers and/or syndication amongst people with long-standing business relationships.
They rarely see startups based outside of London or the South East, perhaps in underprivileged areas of the big regional cities.
Capital Pilot can provide a way of identifying high-quality startups via our rating tool. This allows VCs to enhance performance through better selection methodology and diversification.
How do we work with VCs?
We rate many companies and can identify the excellent ones. Where appropriate, we introduce the top-rated businesses to relevant VCs, delivering a consistent, high-quality deal flow for our partners.
We can work together in other areas, i.e. the Boost Fund. The Boost Fund will only ever be a minority investor in a fundraising round, so there is always a need to identify VC investors to complete that round.
These relationships can work both ways. VCs can bring their existing deal flow to us; we can rate it and see if it's suitable for Boost Fund investment and then share the ratings with the partner VC. This is an efficient service that can assist the VC in sorting good from bad deals while highlighting improvements the business needs to make to open up funding.
We provide qualitative input and then point them in the direction of investors.
What's your ambition with a Capital Pilot and VC partnerships…where can it go?
There are several answers to this question.
The primary objective of Capital Pilot is to ensure equal access to funding for every startup everywhere. That objective relies upon a VC community willing to assess a validated deal flow and a good volume of startups that can be matched. There is a future opportunity for us to play the role of a ‘clearing house’.
We can build efficiency for smaller VCs - so they don't need to look at hundreds of deals to identify the handful they want to invest in. We’re connecting startups that don't have networks and investors that may not have sufficient reach in the marketplace.
The future?
Our future goal is to ensure a greater volume of funding activity, building efficiency in the investment selection and completion process.
We will build scale and efficiency through a data-driven selection process. This process will enable the industry to grow to a level where institutional capital, pension and insurance funds and large family office investments can be distributed at scale.
Collaboration is a fundamental requirement.
If we're going to perform a clearing house role and become an investment hub - effectively the kite mark - for startups - we need to collaborate. When we built the business, we wanted to ensure we didn’t compete with anybody and could collaborate with everybody. Any VC can invest with the Boost Fund, utilise the rating system and benefit from our validated deal flow, subject to an in-place agreement.
Remember, the Boost Fund is only ever a minority investor. There will never be a fight over an individual deal because we can all be involved! So VC collaboration is critical to ensure deals are completed.
We need to promote transparency rather than competition.
Are you fundraising soon?
Capital Pilot’s Investability Assessment and Rating should be the first port of call for founders preparing to raise funds. We provide objective feedback on your investor proposition, with clear suggestions on how to improve. In addition, we provide rated startups with lists of matching investors to help focus your campaign.
The Capital Pilot website has a wealth of resources on different aspects of fundraising, which can be found HERE. Everything you need to know about preparing to meet investors all in one place.