How did you decide to invest in the two VC funds in your portfolio?
I generally look for a big opportunity, no direct competition and a good team with lots of energy and enthusiasm. For the Portview VC fund, they approached me. That is now a US$100m fund fully invested. I was actually approached in 1999 by Robin Hacke, founder and member of the investment committee, and she invited me to be an adviser and investor in the fund.
For Create Ventures, the second one, I was also approached. I had organised a conference in London during September 2000 and managed to get US$17bn of VC funds in the audience, which spent around US$250m on UK companies. At that conference Boyd Mulvey, co-founder and chief executive of Create, was raising a fund and asked me if I’d like to help and so I got involved with him. Create Ventures is a US$20m fund working out of Cambridge and is looking to raise a second fund. I will probably invest in that one, but it’s an issue of firepower. The most I put into any venture is £150,000, the least is about £10,000. The way I make these allocations works in different ways. I can write a cheque or work gratis for a while and make my payment that way. I make the decision to invest on the basis of my assessment of the risk and I always bet on the people, they are a bigger component in any success than the idea or the technology.
Where do you find your direct deals?
I either dream them up or they find me. I have quite an address book, a blog read worldwide and a homepage that gets a lot of hits! The deals that the VCs won’t fund or the funds that are too small for the larger LPs, I will fund. There aren’t actually many traditional VCs left, they’re all acting like merchant bankers, they don’t want to take risk.
Where do you see the funding gap in venture investing?
It’s a very harsh environment for the start-up companies and a safer environment for the VCs at the moment. A fund like Create for example, which is only £20m, falls somewhere between the business angels and the VC funds of today and is definitely filling a funding gap. But I would say angel investors are now taking over the role of what venture originally used to mean.
The guys that I feel really sorry for are those that have a great idea and can’t get funding. A lot of the people working in the medical sector, for example, are unable to get funding at the initial stages. Electronics and IT have it easy by comparison. With biotechnology and nanotechnology you are almost certainly doomed if you are a start-up, the VCs are too scared to commit. For the VCs of today, it has to be a really simple proposition, if there’s no market and it’s never been seen before, they don’t want to know. It has to have a proven market. But this defeats the whole essence of what venture investing used to mean. The mobile phone, for example, came from some unprecedented idea and this is where the venture firms are losing out on their returns. And so for a VC fund nowadays a poor soul with a novel idea has no chance of getting funding.
What do you look for when investing in a company?
I normally talk to the people setting up the business, talk to their friends, talk with other investors who know them, look at their CV and employment/academic/publishing and success and failure records. I also look at their idea and the technology and discuss this with as many people as possible.
How can bodies such as the BVCA help sophisticated investors?
They can help by being my radar and the eyes and ears of what is happening in the market and with regard to Government initiatives.
How would you describe the investment environment for angel investors?
Tough! No one wants to take any risk. Most VCs are trying to clear up the mess created during the dot.com boom/bust and by and large, after angels, there is no risk capital. In fact, I have largely been working on a friends and family basis, rather than VC funds, for the past six years.
What are your plans for investing in the next year?
In July 2006 I will be 60 years old. I have completed an awful lot of start-up investments, invested in a few funds so I am now planning my ‘end up’ investment, i.e., my last start-up. Then I am going to focus on my portfolio which has grown to the point where it needs more of my attention.
Peter Cochrane: CV
Cochrane is a seasoned IT professional with over 40 years of technology and operational experience. As an angel investor, he is currently serving on the board of six companies in the UK and the US and is involved in the creation and deployment of new technologies. He is also investing in technology start-up worldwide. He is a frequent speaker at industry and international conferences and his consultancy activities span four continents.
Cochrane’s past highlights include a BT career that saw service as head of research and chief technical officer; he made contributions to optical fibre, fixed and mobile technologies and networks; initiated studies in artificial life, intelligence, healthcare, education and defence; and used war games and advanced modelling in business decision-making. Before and after leaving BT, Cochrane invested his own time, money and effort in building a broad range of new companies, and advising and supporting others. He has also committed to two venture funds: Portview VC Fund and CreateVentures. He also set up his own company ConceptLabs in 1998, which has a further seven start-ups in its portfolio spanning four continents.