We collaborate with R&D and IP experts to source early stage deals at a low cost
It is a common observation that it is difficult to succeed in venture capital. One need only look at the overall success rates globally, not just in the headline grabbing, top-tier Silicon Valley firms. Only 1 in 10 investments is a success and typically it is these that pay for all the other 9 that weren’t so successful, or which failed entirely. Brightstar’s partners have looked hard at the traditional venture capital approach, similar to choosing from a sushi-train, and have re-engineered it to improve the chances of success and eliminating risks wherever possible. We looked at the ‘need’ and developed a more effective way of addressing the main problems we saw based on our particular strengths and backgrounds.
We now have a well-honed process, which works well for the types of opportunities we engage with. We believe our track record clearly demonstrates clearly that it reduces risk and improves the quality of the ventures in our portfolio. Our approach is based on a 5-stage process starting with identifying and filtering the opportunities we intend to work on and ending with operational and hands-on management. Each segment has its pre-requisites, and the benefits from deploying each is weighed against the limitations they impose on our overall operations.
We look at all our early stage opportunities from the view that successful start-ups start end with strong leadership and experienced hands-on management skills. Unfortunately most early stage ventures lack access to these and this can often prevent them even getting onto the first rungs of the ladder. It can become a catch-22, often referred to as the Valley of Death.
Our approach has been to specialise in a narrow sector where we can:
We find that properly established ventures attract better quality management, and more closely matched for the requirements of the business at the time. The fit is better and the ‘team’ and ‘people’ risks are commensurately reduced. The end result after Brightstar has progressively stepped back is a company with a management team more closely resembling a normal VC-back business with strong and confident leadership and management in place.
Brightstar Partners’ collaborative venture development approach coupled with our experience and capability in venture capital, means that we have a very well refined process when we engage with new opportunities.
Brightstar provides the necessary early stage leadership and management involvement, and as such we are often seen as ‘VC’s in lab coats’ as we get very hands-on, and very early on in the technology’s development, often well before any major proof of concept has been achieved. Naturally, we could easily get bogged down with too many very early stage, un-developed and unproven technologies to evaluate.
However, this is where the strength of Brightstar’s tight-beam subject matter focus and expertise, and our close-orbit advisory network provides invaluable input in pre-vetting and qualifying the opportunities we spend time on. In short, if a world renowned cardiologist on our board tells us the clinical or technical development team knows what it is about, and that the approach they are pursuing is significant, then it is a strong qualification for us to follow.
Brightstar then combines this early hands-on ‘frequent and in-depth’ involvement with our solid grounding in strategy, finance, legal, and strong strategic negotiation skills, and also our remorseless focus on value creation and de-risking. Importantly, all of Brightstar’s network is involved in this phase to ensure that important inputs are not overlooked. The final result after several months is either a ‘no’, a ‘not yet, and here are the things to work on in the meantime’, or an ‘okay, and here is how we suggest moving forward with this one…’.
Like all VC’s, we see it as being all about identifying and reducing risk. The pre-vetting with our technical subject matter advisors and clinicians identifies some of the risks, and significantly warns us away from inappropriate opportunities that could bog us down for months.
Then the early hands-on vetting, and the development of wire-frame commercialisation, launch and go-to-market strategies, lead to a more robust and resilient decision-making framework as the company starts gathering momentum. Smaller iterative loops, faster fixes and course corrections, lead to better long term decisions, and more milestones being hit. The sooner that mistakes can be corrected, the faster to market, the faster to an exit, and the sooner we can return the investment funds to our investors.
Having access to our own discretionary sources of funding can significantly improve the choices available to an early stage venture. Brightstar operates a small venture capital fund and is establishing another UK-based fund to provide support at an even earlier stage.
Brightstar’s in-house venture capital funds mean that we can also provide support and investment funding to ventures with their own management teams in place, and provide our specialist advice and support only where required.