Until now investing, in early stage tech has been inefficient and unnecessarily opaque. Besides crowdfunding, it remains largely the same since the first VCs set up shop in Silicon Valley in the 1950s and 60s. Enter Autopilot: the first RoboVC.
The Current Marketplace
The marketplace currently has tons of friction and inefficiencies. It currently optimises for the moneymen. With VCs, high fees (2%) are the norm, and only the top tier VCs actually provide a reasonable return. In addition, these funds are inaccessible to most investors.
Angel networks charge startups (and sometimes investors) huge fees. They are inflexible, meeting monthly or quarterly, which combined with the fees leads to their members missing out on top opportunities.
With crowdfunding valuations are high, validation is low, and only certain startups are a good fit. Plus the consumer investor has to pick winners and losers, meaning they have to have the same skills as a VC and top angels. The people that lose out in this system are the entrepreneurs and end investors providing the actual capital to ignite their ideas.
What is a RoboVC?
Like the emerging robo-advisors for ETFs and publicly traded companies, Autopilot provides the same automation and optimisation to investing in startups. It replaces human processes with online processes. It reduces cost and time. It enables more money to go into actual investments, rather than into the fees and expenses of the manager.
In the first year it will invest in around 25 companies. This number will grow as we scale. Autopilot takes a minority position – maximum 24.9% – in each fundraise. The funding commitment is conditional upon the rest of the fundraising round being completed. We commit at the beginning of the round, and fund at the end when the balance is secured.
Why it Works for Investors
Autopilot is all about investment optimisation. Low fees (1% – half of traditional VCs) means more of your investment is put to work in the startup. It also allows for great diversification than you would get investing directly via crowdfunding and angel investing, or even in most VC funds. This gives you a better chance of the large returns top startups provide. It also means you don’t have to pick winners and losers – the market does that for you. Plus it is all SEIS/EIS eligible which so you get tax relief on the investment in the first year and beyond.
Additionally, Autopilot’s online portfolio management and engagement tools allow investors to keep tabs and stay involved in startups they like.
Why it is Works for Startups
One of the hardest parts of fundraising for startups is getting an initial commitment. FOMO – or fear of missing out – plays an outsized role. Once a startup gets over the initial hurdle of having a lead investor, then the rest comes quicker. That is the problem Autopilot set out to solve for startups. They can begin their fundraise with a commitment from us based on our objective analysis and take that term sheet around to other investors as validation.
Powered by Capital Pilot
So where is the RoboVC magic? It is about scale and automation. Capital Pilot has a system, developed over several years, for evaluating tech startups. It is a rigorous, standardised and documented process which scores and measures each company based upon a range of criteria. Companies which register with Capital Pilot and reach a certain score qualify for the Autopilot funding commitment. Capital Pilot then helps them source the balance of the fundraise and complete the round.
By automating the investment process the RoboVC offers ultra-low fees and expenses to its investors. More capital is therefore put to work. And at the same time Autopilot facilitates more investment for more companies, driving greater success in a critical area of our economy.
What is the future of RoboVC?
As Autopilot grows, so does the amount of data we collect. We monitor outcomes and create a picture of what drives investment success – and what doesn’t. At the same time proving the benefits of diversification and low cost.
Eventually, the data can enable secondary market liquidity for Autopilot investors and for VC investors in general. In other words, the opportunity to exit at the option of the investor, not the company at a time of their choosing. Only a RoboVC operating at scale can achieve this goal which is the holy grail of early stage investment.
This data will also be used to make better investment decisions, more quickly and at scale. We’re already on this path to developing the models with our existing data sets. We hope to largely eliminate human bias from the selection process. This will improve outcomes and reduce time, energy and cost.
Be a Pioneer – Join the Beta Launch
Starting today – if you are a High Net Worth or Sophisticated Investors you can pre-register. As we get closer to launch we will begin officially onboarding investors. In the meantime, after registering we’ll give you sneak peaks as we develop the platform.