Trends Watch: Venture Capital
- Nov 7, 2019
EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.
This week, Elana talks with Reece Chowdhry, Founder & CEO, RLC Ventures.
What is your outlook for venture capital?
For me, venture capital is at a really exciting stage, in Europe and emerging markets especially. Although venture capital funds dominate the headlines across California and North America, it is a somewhat relatively unknown industry here in the U.K. and Europe (for now).
Many people entering the world of finance today will be setting their sights on a career in investment banking, private equity or hedge fund management, with very few considering venture capital as a possible destination. Based on what I have seen, it has a long way to grow as a sector and those who are a part of it early on will be able to capitalize on future growth over the next decade and beyond.
Due to the industry’s openness to discuss and tackle issues relating to diversity of not only gender, but also age and race, venture, for me, is on course to engrain open-mindedness This will inevitably attract top talent going forward, who will back the extraordinary founders and entrepreneurs of the future.
According to an article published in the Times last month, in the U.S., “98% of venture capital funding comes from institutions such as pensions and insurance companies.” This is something that is not legislated for in the U.K. and Europe, but that I think will unlock the next influx of capital into the industry when it does arrive. If a proposed 5% of the U.K.’s Direct Contributions budget is allocated to venture capital, it would result in around a £50 billion injection.
An area that I definitely think we get right here in the U.K. is access to the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS), which offer investors in early-stage companies tax benefits. RLC Ventures and our investors are very aware of the benefits these schemes bring to the U.K. economy and early-stage businesses. By the end of the 2014-2015 tax year, a cumulative total of £14.2 billion had been invested under the scheme into approximately 25,000 companies.
Anyone investing in (S)EIS funds can potentially benefit from tax relief and minimize downside risk. If other nations follow in the footsteps of the U.K. and implement similar schemes, I believe they can expect small businesses and entrepreneurial communities to thrive, whilst contributing substantially to the economy.
Which investment sectors are you particularly excited by going forward?
So the areas that I am most bullish on are those which we invest across, unsurprisingly enough. They are enterprise, artificial intelligence (AI), Proptech, Fintech, gaming and social impact. Of those verticals, I must say I am probably most excited by gaming at the moment.
Gaming is undoubtably on the rise with the overall industry currently estimated at around $138 billion and I expect that number to grow, fast. In 2018, the U.S. gaming industry bought in over $30 billion in revenue, with 178 million annual players. People often perceive gaming as a rather niche pastime, however, recent data has indicated that roughly 60% of Americans, both male and female, play a mobile game at least once a month.
Although it’s cliche to say, I am really excited by the current state of AI. For many years it was overstated in its capability as a technology, and subject to dismissal from some investors, however I think we have now arrived at some extremely interesting use cases. For example, our most recently publicly announced investment in Scribeless demonstrates a great use case. It enables companies to send hand written messages at scale to their customers, and harnesses AI to learn individual handwriting styles and pen types.
Ultimately, I am excited by many industries, but AI and gaming are both in a particularly ripe stage right now.
What keeps you up at night?
For me it is definitely thinking about how we can best support portfolio companies in becoming world leaders in their field. It’s an incredibly empowering but complex challenge in helping take these companies from the earliest of stages to products and services impacting thousands of peoples’ lives.
It’s funny you should ask that, as I am quite literally kept up at night due to one of the processes we implement, which is WhatsApp groups. I ensure all of the founders we work with have direct access to me and my team 24/7. We want to be the first person they get in contact with, during both the highs and, importantly, the lows.
No two companies or founders are the same, and therefore my team and I are constantly working out the ways in which we can most effectively add value beyond capital, and help move the needle across our entire portfolio.
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Elana Margulies-Snyderman is an investment industry reporter and writer who develops articles, opinion pieces and original research designed to help illuminate the most challenging issues confronting fund managers and executives.
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