Recent research from Penningtons Manches reveals that British tech companies are enjoying unprecedented investment from West Coast-based US firms – last year, 74 deals contributed a total value of £1.08bn, the first time Silicon Valley investment into the UK has broken the billion-pound mark. This week Lawyer monthly benefits from top insight from James Klein, Partner at Penningtons Manches, who discusses ways to support clients in international investment and expansion.
For law firms representing Britain’s brightest and most innovative businesses, mounting interest from US investors in domestic companies offers significant opportunity; law firms can play a vital role in creating and developing critical relationships between US investors and British fast-growth businesses seeking to scale.
1. The investor landscape is changing
It is not just conventional venture capital firms that are seeking to invest or partner in a business. Increasingly, we are seeing the venture arms of larger corporates seeking to spread their risk appetite and enter into creative partnerships with UK businesses, usually in the form of a joint venture or other strategic arrangement that will provide them with an all-important foothold in Europe. For UK businesses, having a strategic cornerstone corporate on board can help them scale even quicker.
2. Strong relationships with investors are key
Demonstrating strong, long-term relationships with a diverse range of investors is crucial to gaining clients’ trust. Too often, we hear impressive and ambitious fast-growth companies telling us that their pitches to US investors have gone unanswered. As is so often the case in business, it isn’t just what you know that counts – it’s who you know. Assuming it makes sense at that point in its lifecycle for a UK business to consider approaching a US investor, the first point of contact is often key and this is where the existing relationships can be vital.
3. Clients need a winning pitch deck
For many companies, creating a winning pitch deck that will engage investors and communicate the elements and story of the business that individual investors care about is crucial. Many founders simply don’t have the requisite level of knowledge and expertise about the investors to whom they are approaching, and efforts to engage investors often fail at the first hurdle. The best advisers will tailor their clients’ pitch decks to specific investors, ensuring the deck has the right ‘tone’ for one particular investor, as well as identifying potential synergies within an investor’s current portfolio.
4. A base in Silicon Valley shows you’re serious
When we opened our office in San Francisco in late 2014, we were approached by a number of founders of UK businesses who wanted to get on-board with us because of our foothold in Silicon Valley. These businesses look to us to help them start creating long-term relationships with other businesses, influencers, decision-makers and investors on the ground in the US, which is a key ingredient for their growth. Having an office in San Francisco assures clients that you are much more likely to be able to offer stronger relationships with key stakeholders in Silicon Valley.
5. Not all clients are ready for Silicon Valley
Be prepared that not every business will be ready or suitable for an injection of West Coast capital. Founders can initially be very excited about the prospect of Silicon Valley investment only to realise they are not quite ready, usually for several reasons. They may come to realise that their business isn’t scalable, or they may not have any senior management situated in the US. Sometimes it’s simply the case that they lack a sufficiently robust US client base. Don’t be disheartened – businesses that pull out in the final stages are often laying the groundwork for a later, stronger return.
This is an exciting time to be in the technology industry – and an exciting time for law firms able to bridge the gap between ambitious UK tech businesses and possible West Coast investors. Our research shows West Coast investment into UK firms is at an all-time high and businesses seeking US investment need a trusted partner that can offer vital insight and help get them in front of the right investors. For law firms with one foot either side of the Atlantic, it’s a golden opportunity not to be missed.