Making the journey from start up to scale is often the most unpredictable and difficult period in the life of any business. According to the Enterprise Research Centre, only 51.8% of London based companies who formed in 2014 survived the next three years. There are multiple factors that can lead to the failure of a business in its early stages, including better competition, poor location and the wrong workforce, however, industry research published by CB Insights indicates that 42% of start ups fail because of the lack of a market need.
Venture capitalists have traditionally approached this problem by researching a broad cohort of companies with the aim of identifying the most attractive investment proposition. However, this method does not always ensure that a company will have a genuine role in a marketplace.
New thinking is emerging in the venture capital space that responds directly to the issue. The industry is exploring smarter ways to improve returns for investors while at the same time providing greater support for those early stage businesses that have a real chance of success. By following a challenge-led approach, VCTs are selecting investments from the standpoint of the market need.
Today, many large corporations have recognised a business challenge but lack the in house expertise to solve it. The basic premise of a challenge led approach is to work alongside large corporates to identify the problems they face and then identify the early stage business with the innovative new product or service that can provide the solution to these challenges.
Rather than simply looking to firms that may have the potential, as the industry has conventionally done, VCTs deploying a challenge led approach target the early stage businesses that have already demonstrated an ability to deliver the solution for larger corporation’s known business challenges. This ensures that a market fit has already been established, as has a clear need for the product or service the business offers. For investors, this helps to mitigate some of the risk involved with investing in this asset class. For early stage businesses, this offers stable funding and a real prospect of future success, through working with a significantly larger corporate partner.
Triple Point’s Venture Fund VCT follows a challenge led philosophy. By drawing on the specialist skills and experience of all its members, the Triple Point Network has developed a strategy which proactively helps early stage businesses increase their chances of success.
With close ties to over 100 large corporates, and over 5,000 innovative companies, the Fund starts with the issue facing large businesses, and then invests in the innovative young company with the solution.
Ultimately, by focusing on early-stage businesses which have established a market fit for their products and services with large corporates, Triple Point addresses the most significant risks of early stage venture capital and can enhance investors chances of securing a robust return on their investments.
Risk Warning: The Triple Venture Fund carries all the risks of investment in smaller companies. Your capital is at risk. There is no guarantee that target returns will be achieved and investors may get back less than they invested. Tax rules and reliefs are subject to change
Triple Point Investment Management LLP is authorised and regulated by the Financial Conduct Authority, firm reference number 456597. Triple Point Administration LLP is authorised and regulated by the Financial Conduct Authority, firm reference number 618187.
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