Investors are like London buses You wait for ages, then several come all at once

Investors are like London buses

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We’ve been approached by several big-name American VCs.

Isn’t it ironic!? We worked super-hard trying to raise capital here in the UK and then out of the blue several large US funds reached out to us.

Should we jump with joy and throw a party?

Unfortunately, it’s a bit premature. The reality of raising capital is as fun as chewing glass, and for now it’s a big fat no to party and drinks.

Only 10% of our business (but this share is increasing fast) is in the US at the moment, so I know these VCs are getting in touch not because they want to invest in Splento, but because they are doing their proper due diligence before investing into our competitors.

I’m always happy to chat, but to save everyone time, bandwidth and effort, here are my thoughts on what makes our industry and business model suitable for VC investment. You have to make your own conclusions about our competitors’ team and product, though.

What makes a certain business proposition attractive to VCs?

1 – You are offering something that people are already spending time or money on.

2 – You are offering a different way of satisfying this need.

3 – Your new way of satisfying this need is better than the old way in a very specific – critical to clients – way.

4 – You achieve this “betterness” by doing something differently or because you have an unfair advantage.

5 – Your product was only made possible because of recent technological, social or economic changes.

Let’s look at them one by one in relation to our industry and business model.

1 – You are offering something that people are already spending time or money on.

Businesses have been using professional visual content to sell more for centuries and are spending north of $100bln on it each year. With an amazing camera in everyone’s pocket, businesses now have even harder task of standing out amongst billions of photos and videos that are uploaded online daily, so this old industry has been given a new lease of life and is growing like crazy.

Thus Point 1 is easy.

2 – You are offering a different way of satisfying this need.

Multinationals use marketing agencies, who then subcontract visual content creation to freelancers. Medium sized businesses search on Google and end up with unreliable suppliers, unfair pricing and missed deadlines. Small businesses find generic stock photos and videos and use them for their unique products and services.

It’s just like the taxi industry in the pre-Uber era.

We are simply making it easier, faster and more affordable than ever to get your professional photos and videos done.

3 – Your new way of satisfying this need is better than the old way in a very specific – critical to clients – way.

I have a actually written a blog post on that topic: The 10x Value Proposition.

If you don’t have the time and want a short and sweet summary, the new and better way is the speed of delivery.

Go to a marketing agency and your corporate video or product shots will not just cost you a fortune, but also take weeks to coordinate and deliver.

Go to a freelancer and you may get it done cheaper, but you won’t have any guarantees, no professional customer support, forget about deadlines and if you need international reach or scale, then you are back to square one.

With Splento – whatever your business visual content needs are: you can hire us at a fraction of the cost, get it done on demand and delivered the next day.

4 – You achieve this “betterness” by doing something differently or because you have an unfair advantage.

We have identified our Unfair Advantage and Protective Moat long time ago and have continued deepening the moat and honing our unfair advantage.

Our unfair advantage? Our business model.

We are not your bog-standard marketplace, like hundreds of others out there. I’ve written a whole essay on why standard marketplaces are broken: Requiem For A Competitor. Suffices to say – marketplaces are just glorified “Google’s” and Google helps you find solutions, not solve problems. It’s businesses that help you solve your problems.

At the same time, we are not your bog-standard photography company, or creative or marketing agency, either. These businesses, just like private limousine hire companies worldwide 10 years ago, are wonderful in terms of consistent quality, but someone has to pay the rents and salaries… and it’s you. So unless you have Vodafone-like deep pockets, that’s probably not an option for you either.

Thus, our unique business model allows us to achieve our “betterness” and sustain it for years to come.

5 – Your product was only made possible because of recent technological, social or economic changes.

My favourite point – because this revolution would not be possible without faster internet, cheaper data, widespread acceptance of freelancing and the advent of AI.

Social:
20 years ago there weren’t enough high quality freelance photographers for us to use in order to deliver consistently great service at affordable prices to thousands of clients worldwide. It was only made by globalisation, immigration and wide acceptance of the “gig” economy.

Technological: 
Even 10 year ago sending terabytes of data from New York to Eastern Europe for editing was not just cost prohibitive, but time-wise (to meet our deadlines) actually technically impossible.

Economic:
At the moment we spend a fraction of our revenue on payments abroad. Thanks to TransferWise and Azimo we can save thousands upon thousands on international money transfers and that translates into great prices for our clients. Imagine if we had to pay £17 for each international transfer (instead of £2 that we are paying now) to a photographer in Asia, or photo retoucher in Eastern Europe. Our whole model would have crumbled.

Social + Economic + Technological:
The advent of AI makes our business model and market opportunity golden, but I’ll cover it in my next post. This post is already too long. Stay tuned!

To cut a long story short, you can’t go wrong with the market opportunity, but be careful with the team, product and business model. Still some questions remaining – I’m here to help.

 

by Roman Grigoriev