UK dotcoms: Two success stories

How is the venture capital scene for dotcom start-ups in Britain?

Hopeless, is what many a young entrepreneur will tell you, as they struggle to keep their businesses afloat without support from investors.

But two new businesses in the UK have proved in recent days that you can get funding if you have the right idea.

Sarah CurranThe online fashion site My Wardrobe today announced that it had won £6m of funding, in a round led by the European venture capital firm Balderton.

My Wardrobe was started just four years ago by Sarah Curran, who once worked as a sub-editor on Times Online and then set up a real world fashion boutique in North London.

The UK has two other prominent online fashion retailers, ASOS and Net-a-Porter, but My Wardrobe has grown rapidly and its founder believes there is plenty of room in the market for all three.

“They’re all targeting different audiences,” she told me. “ASOS is very much late teens to late 20s, My Wardrobe is late 20s to 40 plus, and Net-A-Porter is 30 plus, high disposable income.”

Screenshot of My Wardrobe siteUnsurprisingly, Sarah Curran is far more positive about the venture capital scene in Europe than many entrepreneurs, but she says you have to be at the top of your game when you seek funding: “if you are passionate about your brand, you know your space, you know your product you know your business inside out, then people are far more receptive.”

She admits that when she visited venture capital firms a couple of years ago, she did not find it easy to get a positive hearing. “A lot of the time I was still having to defend online shopping. I think now it’s far more accepted.”

The sale earlier this year of Net-a-Porter to a luxury goods group in a deal estimated to be worth £350m has helped investors see the value of online retailers.

The My Wardrobe founder says you also have to be at the right stage of your development when you approach VC firms – her business had its first month of profitability last November.

That’s a lesson repeated by another UK success story. “You need to be aiming for a large exit and be addressing a big market,” says David Langer, fresh from a fruitful encounter with Index Ventures.

Screenshot of GroupSpaces siteHe and some fellow Oxford students started a business called GroupSpaces three years ago, which helps anyone with a club or a society organise its activities online.

It now has thousands of customers, ranging from sports clubs to churches, with more than half a million members between them.

What’s more, unlike most online businesses, it’s not entirely dependent on advertising – groups have to pay for the service once they have more than 250 members and GroupSpaces also earns revenue from handling payments.

Last week GroupSpaces announced that it had secured $1.3m in funding from Index Ventures and a consortium of angel investors.

So David Langer too is optimistic about the UK venture capital scene, though he admits that it’s still harder to get funding here than in Silicon Valley: “You need to prove certain things before you’re in a position to raise money in the UK, which may be different to Silicon Valley where you may need fewer proof points.”

Location still matters – Silicon Valley venture capital firms, with far more capital to dish out than their European counterparts, are unlikely to look very closely at firms which do not have at least an office in California.

But every time a My Wardrobe or a GroupSpaces gets funded, the outlook for other UK web firms gets just a little brighter.

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