Coutts’ investor report slammed by London VCs

A report published on Friday by Coutts, which concluded that venture capitalists in Europe are incompetent and poorly regarded by entrepreneurs, is ‘bizarre and convoluted’, according to investors.

Coutts & Co’s scathing report on the state of the venture capital industry, published on Friday and embedded below, was today blasted by VCs as “marketing dressed up as research”.

“What a bizarre, convoluted piece,” wrote Rob Kniaz, partner at Hoxton Ventures. “I’m baffled why there’s so much focus on perception of VCs from those who haven’t raised capital, versus actual experiences. It’s like asking people how they feel about supper at a restaurant they’ve only walked past.”

Coutts was fending off accusations this morning that its report was coloured by non-technology venture capital, television show stereotypes as well as “the bank’s own agenda”.

“They muddle clear facts when they talk about perceptions,” said one London venture capitalist, who spoke on condition of anonymity. “On the table on page 23 it’s clear that those that have worked with VCs find VC to be a preferable source of capital versus banks, but less preferable to self-financing.  I’m not sure why they’d bring ‘perception’ into that.”

“The piece seems a bit self-serving,” he continues, “By pointing out that ‘entrepreneurs are three times more likely to choose a bank for growth finance’.  At least in the tech world, I’ve yet to see a bank that will take any sort of early stage product or market risk nor do they back up this assertion in the document.”

The report contains several generalisations likely to be contested by readers, including the claim that venture capitalists “will not look at a business which needs £500,000 to £2m in funding”. Many VC firms that specialise in precisely that segment of the market, calling it seed or series A.

“The middleman section is also rather misleading,” says Kniaz. “The money line here sums it up: ‘The perception from those who have yet to raise finance is that going through a corporate financier is the best approach to take (44%). Those who have done so successfully rate a direct approach (43%) as the most favourable route to investors’.  We always prefer entrepreneurs that come directly to us – it shows they’re savvy enough to identify a VC who is a good fit for them and that they can be resourceful enough to reach us.”

Kniaz continues: “VC is certainly not for every entrepreneur. The risk profile of venture requires growth than many businesses cannot support. An entrepreneur should certainly consider all sorts of funding options and align themselves with the one that matches the growth profile of their business as well as their own attitude and appetite towards growth.”

One VC joked this morning that the report should have been titled Perceptions are Wrong About Venture Capital, “which is the conclusion Coutts’ own evidence actually supports”.

Stefan Glaenzer, partner at Passion Capital, said: “Personally I think the quality of venture capitalists in Europe, and especially the UK, has never been so good. For every stage of a company cycle there are at least three to five really world-class investors, from angels to seed funds all the way up to the really deep pocket guys.”