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Qi3 Ventures Insight

Does your heart rule your head when you invest?

The Qi3 Accelerator investment evaluation process is (in)famously rigorous. We follow a defined series of steps in order to evaluate businesses against a series of criteria.  My head tells me that’s all good and rational, a business-like approach.  But experience tells me that many angels rely much more heavily on ‘gut feel’ to reach investment decisions. So what happens when the head and heart feel differently, and which should you follow?

It is true that the argument of using your head is strong and logical, and we should make our business decisions based on research and evidence. NESTA states that every investment should have three critical factors in place: 1) a great business idea 2) a great management team 3) great mentors. If any one of those is missing, then business angels would be better off encouraging the start-up entrepreneur to seek to improve their idea, management team or mentors before parting with cash.

But emotion will always be part of investing especially when facing convincing applicants. Recent statistics from SEI (http://www.seic.com/enUS/about/4895.htm) showed that more than two-thirds (68%) of high-net-worth individuals surveyed have let their emotions get in the way of making the best investment decisions. Additionally, Dr. Gerd Gigerenzer, social psychologist and the director of the Max Planck Institute of Human Development in Berlin, writes (http://paultrout.com/leadership/trusting-your-gut-feelings/), “… gut feelings are based on simple rules of thumb, what we psychologists term ‘heuristics.’ These advantage of certain capacities of the brain that have come down to us through time, experience and evolution, when people use their instincts, they are heeding these cues and ignoring other unnecessary information.” In other words, he argues that gut feelings help us to sense when something is afoot without having actual proof that it is.

Perhaps Dr. Gigerenzer has a point here. Looking at the statistics (http://f3fundit.com/blog/what-makes-a-good-business-angel-investment/) , approximately 80% of angel-invested businesses fail. However, if one observes angel investor activity from individuals who have been actively investing in the industry, then the failure rate drops to about 60%.

So head or heart? And before you ask – yes it’s a live case for me.

Five principles of career happiness

People always ask me why I’m so relentlessly active and enthusiastic about my work. In all of my businesses, it actually comes down to some simple principles:

1) Do great stuff

Some people think that technology business is pure rationality and number crunching. I disagree. My industrial career has taught me that customers don’t just buy a product, they also invest trust in the salesperson and engineers as the embodiment of their company’s values. They purchase a product alongside building relationships with their suppliers to get the best product and service long term. After all, even in business to business (B2B), we are transacting with one another as human beings. Doing great work for customers results in repeated business and referrals, so I always seek a five star review. On top of that, happy customers are a great source of personal satisfaction and motivation.

2) Have fun at work

Life is too short. Work is about doing stuff that you are interested in and passionate about. My whole career has been about finding great technologies, working out how they should be marketed and then selling the hell out of them.  I love finding that ‘bite point’ where great technology finds a ‘must have’ market proposition.  I’ve always been keen on the integration of real engineering technology and business, creating products and services that benefit customers tangibly. That’s the reason I started Qi3 and Qi3 Accelerator – to help businesses discover new ways of doing things and co-create something new and exciting.

3) Build a good team

A successful business is built from skilled, experienced and enthusiastic people who derive pleasure from working in teams and have respect for the variety of skills and personalities required to build a business. This allows us to react faster to market needs and to understand the people dynamics.  Being keen on teams has helped me to coach companies better too.

4) Make a living

Honest business is good business. We provide access to hands-on skills and expertise at an affordable price, allowing businesses to rapidly see the real impact of our input and effort. Over the years, Qi3 has established a great reputation as a result.  But don’t be scared of making a reasonable profit – it’s the return on your investment and there to reinvest in the future.

5) Go home and enjoy

From all the things I’ve said above, you might think that I only care about work. And some of you have 4am emails from me to seemingly prove it.  But that infamous work-life balance is equally important. I enjoy many evenings at the theatre, or dining with friends and family. I’m also well known for my partiality to a glass of decent wine! After all, it’s only reasonable to enjoy the benefits of all that hard work and share my leisure time with my family and friends, who nurture me in so many other ways.

Seeds for the Future

The success of the Bootcamp was a milestone for Qi3 Accelerator and showed that Qi3 Accelerator can do a lot more to bring talents together and help start-up businesses. As a result, after holding meetings with a number of close associates, we’ve decided to step up and provide seed equity financing of up to £400, 000 for Seed Enterprise Investment Scheme (SEIS)-eligible businesses. Individual companies may apply for investment up to £150,000 through this call for proposals. We believe that this is a great opportunity for us to give some hands-on support for suitable businesses and to help businesses develop into profitable ventures.

The initial evaluation process is simple – The Syndicate would like to have a summary of up to four pages – including references – with the following headings: Summary, Management Team, Market Overview, Products and Services, Business & Revenue Model, Growth Strategy, Competition, Intellectual Property, Support required from Qi3 Accelerator, Exit Timetable, Financials and Funding Requirement (present and anticipated future), Existing investment, Ownership Structure and Contact Details. More information can be found on our website. Our areas of interest are technology-based manufacturing, engineering businesses, supply sectors such as cleantech, healthcare/ life sciences, aerospace, space and engineering industry and security. Whilst The Qi3 Accelerator Syndicate encourages seed stage companies in other areas to apply, it will not consider biotech, FMCG and e-businesses.

As a very broad indication, The Qi3 Accelerator Syndicate typically expects to offer investment of around £50,000 – £150,000 for 15-30% of company equity. So it is vital that applicants make the investment proposition clear in the initial application (how much money you are seeking, how you feel we can help you beyond cash and how much equity you are offering in return for this cash and support).

Initial applications will be considered within a few days of submission. We look forward to hearing from you.

For further information, please visit our website or contact Nathan Hill.

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