The Changing Face of UK VC 2020: Andy Davis, angel investor at Atomico and venture partner at Backstage Capital

We sat down with early stage investor Andy Davis earlier this year to discuss his journey into the venture capital industry and his experiences working at Arlan Hamilton's diversity-focused fund Backstage Capital and Atomico. Davis also discussed his passion for helping the minority and underrepresented founders which often go unnoticed by investors.

What follows is a lightly edited version of the conversation from the video below, for clarity and brevity.

Hannah Williams, online editor at Techworld: Hi Andy, could you tell me about your career to date, and how exactly you ended up in venture capital?

Andy Davis, angel investor at Atomico and venture partner at Backstage Capital: So I've never had a job. I guess whilst I was at university, which I didn't finish, I was always working on a startup, since 2008 or so.

That was before this whole tech scene in London had formed. I guess the tech scene came around 2011 and started taking the shape in the form of prominent investors, accelerator programmes, places that people go to and incubate their businesses. So I was working with startups since 2008, and I have gone through a few startups, so I've gone from having things in my head to speaking to customers about it, getting some sort of first version of a website or an app, put it in their hands to get feedback. I got some resources in the form of investment, office space, built out teams, reviewed the products and how they're used in various places.

I was doing that and setting up Backstage [Capital] here and it just became too much work. So I left to run Backstage full time. Now on the other side of the table, I'm investing as a founder, which [other] founders find helpful and most likely, I'll probably go back to being a founder again at some point this year.

HW: How would you say the industry's changed since the beginning of your career?

AD:In 2008 when I went into entrepreneurship, well I was an entrepreneur since school, I think I was driven by business and wanting to solve problems and there were only a few entrepreneurs around in London, we had those who built big businesses and we had the Richard Branson's and the Alan Sugar's of the world and a smaller batch, who were just building these things like the internet. I first put something together in 2009/2010, a football platform [].

The only things that people really used on the internet were Facebook and YouTube, and those people aren't really going into like the small micro sites anyway, I think I just signed up for Twitter because it was online at that point.

So I feel like the industry has changed from there being a few people solving a few mainstream big problems, but now the micro problems are being solved and what seems like a micro issue is actually something that can apply to everyone.

I saw something recently that was a bit hardware that you can attach to your phone, take a picture of your teeth and see your level of plaque and how to improve your brushing technique to have healthier teeth. What seems like a niche tool can actually be used by everyone at some point and improve everyone's health for the better.

So I think we're seeing a lot more of those companies now. The majority of companies were being started by middle class white males and over the last three to four years, we've seen an increase in the number of companies started by women, people of colour, LGBTQ, disabled and immigrant founders. So for everyone in tech, I was just a black guy in tech, being mixed-race – still black, identified as black and being referred to as the black guy in tech for years – that just shows you and tells you enough.

Could you just touch quickly on your experience as a BAME male in the VC industry?

I run a group called 10x10 that's a group of black founders. It's been running for five years, and there's a few spinouts, one of them is 10x10 VC, so there's all these black VCs in the group, or all the black VCs in the UK.

Given that I've been around for a long time in the industry I think, how I get treated is a bit different to everyone else because people have known me for ages, they've known me before diversity and BAME became themes that they should focus on or care about, or became prevalent to any capacity.

So the experiences I've had – yes, I've had a few negatives being a being a black male in the industry, especially being a black founder it's always hard. Now as an investor, there's a respect from before, because I think they felt less pressured before to do anything or to make any sort of change on their end, but in the last five years or so I've been driving the change.

So people are nice, people are respectful, and people are dismissive. Sometimes there are still a bunch of stupid meetings I go to every once in a while, and I take up to 100 meetings a month and have eventually seen some that will ask what you're doing, then you say you're investing in these companies, these founders, and you talk about the profit these businesses can make, the return of capital you can provide to the organisation and you get this response: 'OK great charity', and you're just like, 'where were you the last two hours?'

How important is it to have diversity and inclusion amongst the founding teams of startups?

So I was at a Black History Month event in October and spoke on the panel and there were three other panellists, and someone in the audience asked a question, which was: 'what do you think of black founders focusing on niche markets, which are markets for black and brown people?' The other panellists answered first, and they all said, yeah, we disagree, it is wrong, they should think of bigger markets, which include everyone.

My answer was a bit different. My answer is if you go back 30 years and Bill Gates is in a room and says he wants a computer on every desk, by that point only people that could afford computers were those who are wealthy and high up in society. But then at some point, these devices became more accessible and affordable, and a computer landed in every single home, or almost every single home, especially in this part of the world.

When you're talking about black and brown, is this the niche? The percentage of the UK are 4% black maybe, so I'd say look ahead 30 years, do you still think it will be that 4%? Talk to me about people of colour that are know as mixed, brown, black people, talk to me about that group and what percentage of the UK will fit into that criteria and I hear 30 to 40%, so that's what I'm betting on, that's what I'm talking about when I'm changing with the times.

Is that the strategy you've led with for the 10x10 initiative?

So 10x10 is a community of leading black founders in the UK, pre-seed tech founders. There's no website, no Twitter, no Instagram, there's nowhere to really find it and that's done for two reasons: one, because I've always believed that great products and services, people just find them, people hear through word of mouth, people going to solve a problem for themselves and discover it. Second is because I've never been bothered to be able to do any of those things.

It's just testament to the value being added and I guess we go back as a people, many, many decades and centuries, and we're from these small villages in different parts of the world. Those villages have always helped each other, right? The saying, 'it takes a village', comes from somewhere. In those villages, you have one small family and other families form and the village gets bigger and the people leave the village and go elsewhere but they never forget the village, they come back, and that is the same approach there.

Like we've got this community of black founders, whose ancestors are all from these villages, and the same behavioural traits of supporting each other, caring for each other, expanding and forming other groups and as you see in villages, even today, they've got the chiefs and you've got the the women's group, you've got the men's group, you've got the groups of those who are the next leaders.

That's why 10x10, it's expanded to 10x10 VC, there's also a 10x10 Angel group, 10x10 for the female founders, there's a 10x10 data group, there's a direct to consumer group, there's all these things, right.
That happens organically, and nobody dictates anything. It just happens and is highly focused on value and just solving problems.

How exactly did you go about finding these founders?

I didn't find anyone, they all found it themselves. So I think anyone who believes this isn't easy, isn't trying. I do say that anyone who believes it's hard, isn't trying. It's actually really easy, I didn't even try and it happens.

I have hundreds of founders reach out to me every week, just diverse founders. If I wanted to I could access thousands a week. I do go to them sometimes, I go to demo days and presentations for other investment groups. So I see founders and meet them there and I go to support these things, all these other initiatives. But it's easy, right?

People that say it's hard, they don't care and they're not trying and that's fine because that leaves more opportunity for us.

The founders, they do the work. Like for instance, with 10x10 VC, we do monthly office hours and we're going to start doing them more this year, and I remember when we put our first one out, we just put it on Twitter and then like hundreds of founders applied, all black, in the space of a week.

On the other side of the scale, what do you think of the current state of diversity and inclusion in the VC industry? It's something that you probably hear about a lot, but do you actually think there's anything happening there and and why do you think that is?

Well, I think people are threatened and admittedly they're just busy and just getting on and they don't want to change. They see it as 'this is what works', so they don't want to change it.

The other side of the landscape is, if we look back a few decades, at some point it was only the wealthy white men in this country could vote and eventually it became women too. These men didn't have to give women the right to vote, so there's certain pressure to do so and there's the moral issue they did so, and then people of colour got to vote and all of a sudden, you've got a better world for it.

So what I think about the state of it, it's the same behaviours, it's the same psychology, they don't want to change because they see nothing wrong. They're like, 'what we do works, we get money, we make money', but there's a lack of foresight and vision into the future. The world's better with everyone involved, and that level of inclusion.

What kind of companies you tend to focus on?

So I'm really early stage. The stage I invest at is if you've got a first version of your product or service, and you've got some early users, and I don't care about high numbers necessarily, I just want to see validation, just validate that people actually need this thing that you've built, and that your solution is the right fit and that could be 15 to 20, or 30 to 40 people just using it every single month or every single week, whatever the frequency should be.

Then you come to me and say: 'hey, I've got people using it, I need to get to more people now', but you don't have the capacity to do so, that's the perfect time to invest in any business if you want to get in early and if it helps support and add value they can probably get some more in from the first investor in, and that's where I come in.

What plans do you have for the future?

In Q2 we're launching a syndicate fund, which basically means anyone black can come in together and invest with us. The minimum criteria for the year is two £5,000 investments. So businesses have the opportunity to pitch to us every single month. We make monthly to quarterly decisions on investments in black founders, pre-seed, but you have to have some sort of product or service or some early customers who are ready to give us some data. So we know whether or not people want this thing, as I said, so as long as there is validation.

We'll see what the rest of the year holds.

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