The VC reveals why he thinks AI presents a massive opportunity and the classic mistake most entrepreneurs make when seeking investment
As a fresh engineering grad, Jon Coker took a slightly different route from many of his classmates and found himself on the trading floor at JP Morgan. But while that allowed him the opportunity to flex his financial muscles, Coker’s longstanding attraction to all things tech gave him a nagging feeling that the job wasn't quite the right fit. “Once I realised it wasn't for me, I began exploring other routes and found myself naturally drawn to the VC world,” he recalls. Starting out by making experimental, small-scale investments and speaking to other investors, he slowly got to know the scene and, at the age of just 25, wound up joining VC firm MMC Ventures.
Over the course of his ten-year journey from associate to co-managing partner, Coker has seen the firm morph into a major source of VC investment for European startups. And the niche it’s carved out for itself suits Coker to a tee. “We’ve consolidated our focus, concentrating on software and data science, which is where my interest lies,” he says. “At the core of any company we invest in, they almost always have an element of data science or software.” Success stories that have excited him in recent years include StoryStream, which helps brands manage their online content, and Gousto, the recipe-box startup. And while a food business might seem out of place amongst the other software startups in the VCs portfolio, software actually plays a key role in how Gousto manages its orders. “It simply couldn't deliver its service without the massive investment in automation and data science that it’s made,” says Coker.
And Gousto is just the start: AI is set to play an even bigger role in MMC’s future. While there’s a lot of hype surrounding the technology, Coker is convinced that it’s here to stay – in fact, he’d be wary of investing in a company that didn't see some form of automation technology in its future. “I feel like people are talking about how much AI is overhyped in every meeting I go to these days but the truth is that while it’s not always mission-critical now, it probably will be in eight years’ time,” he says. “We want to see entrepreneurs thinking about how they’ll integrate it now. But for startups with an AI offering, we’d want to make sure they’re meeting a genuine customer need rather than jumping on a bandwagon.”
But being able to fill a gap in the market is not the only thing Coker looks for in a potential investee: in an age where some startup circles are dominated by so-called tech bros and bad behaviour, Coker makes sure he can trust any entrepreneur he works with and that they’re treating the people around them well. “The idea is important but so are the people behind it so I always look at how a startup attracts, nurtures and retains talent,” he says. “If an entrepreneur is pitching to me and they have just a cursory slide on their team, that’s an issue. I also want to feel confident that I can trust them and that they’ll be transparent with me, even in bad times.” Don’t mistake this interest in your personal attributes for a desire to strike up a long-term friendship though. “While friendship can be a happy byproduct of forging an investment relationship, you shouldn't just invest in people you think you can socialise with – that’s just not what investment is about,” he says.
Coker is equally vocal about the fact that it’s important for entrepreneurs to be realistic about how much money they need. Having been in the game for over a decade, his experience has shown him that startups in it for the long haul need to give themselves enough wiggle room to cope with unexpected speed bumps. The VC has seen things end badly and admits he has the battle scars to prove it. “I’ve learned the hard way that entrepreneurs often present very ambitious forecasts,” he says. “And while that’s fine, if they use those figures to determine their cashflow forecast and investment needs, they end up being too conservative about how much funding they really need. When you don't have that extra buffer, an issue that shouldn’t be business critical can end up killing your startup.”
And while startups may well have a need for some cushioning in the next few years, given the uncertainty surrounding Brexit, Coker is feeling positive about tech’s investment prospects in the UK. “From innovation in the food supply chain to HR software, there are plenty of areas where there’s still a huge scope for tech to deliver massive improvements – especially with developments in AI that we’re seeing,” he says. “There’s a lot to be excited about.”