AXIAL CAPITAL

We recently read that since 2015 almost a third of European companies who expanded to the US did so even before they had raised a Series A. That’s a big step at such an early stage. Expanding to the US is a strategic decision for a startup, and expanding too soon could potentially be at the expense of continued growth on your home turf. But expand too late and you risk losing the US market to a competitor.

The ideal scenario for any scaleup is to get traction and to position yourself both in your home market and in further growth markets – at the same time. Getting your business to a place where you have users in a target market already engaging with you, rather than going in cold with full commitment and a big investment risk, can make executing your growth plan a lot easier. And that’s a strategy that can pay dividends if it’s executed the right way.

Axial Capital has established a presence in key markets including the US and Europe to support our portfolio companies with a lean platform for accessing these new markets, providing a soft-landing approach for accessing the international marketplace. The creation of a US subsidiary will immediately bring you within the US tax net in one sense or another, so a soft-landing approach can be the ideal way for ambitious business operators to spearhead in-country market testing and business development ahead of making a more substantial commitment.

By investing our resources in first phase US expansion for British and European scaleups – or vice versa for US businesses that want to enter the UK market – our portfolio companies can manage this expansion from their home operating base until it feels right to ‘follow that growth’ with a new corporate entity in-country. As the post covid-era of growth businesses increasingly have a tech-enabled bias and are scalable by nature, the obtainable market for so many of them is as exciting as it’s ever been!

Technology advancements in indoor farming are revolutionising agriculture. When you think of the thousands of food varieties being farmed differently across countries and continents, the impact is truly global.

These innovations promise more sustainable and efficient food production, even in urban settings, and Axial Capital is leading investment and research collaborations for AgriTech startups in a number of these verticals. 

How do you define ‘AgriTech’? In short, broadly! Cutting-edge lighting and imagery systems provide tailored spectra for optimal plant growth while conserving energy as compared with legacy methods. Automated climate control systems adjust and balance temperature, humidity, and CO2 levels precisely across the breadth and varying height levels of each indoor environment – pivotal for accurately managing rising heat and pockets of humidity.

And further yet: hydroponic and aeroponic systems deliver essential nutrients directly to plant roots, enhancing yields and reducing water usage. And sensors driven by AI algorithms continuously monitor plant health, detecting issues before they escalate – a particular vertical we are supporting very actively.

These advancements not only boost crop productivity but also reduce the need for pesticides and herbicides. The very real threat of food shortages is an increasingly common news piece, but we’re highly conscious too of the long running use of chemicals and excessive water consumption in our food chain, and as new technologies improve yields across global centres it is slowly but surely contributing toward a healthier planet at the same time. Indoor farming’s future looks promising, being more than a glimmer of hope for the world’s food security and environmental challenges. A worthy commitment of time and resources in our view!

In the ever-evolving world of a business growth, traditional funding source of venture capital is no longer the outright lead provider of capital that it once was. As the funding landscape shifts, entrepreneurs are turning to alternative strategies like growth-debt, government-sponsored funding, and accelerator programs to fuel their ambitions. Let’s take a closer look at the current funding environment and the innovative pathways that are increasingly driving capital models and avenues for growth.

The funding scene in North America has experienced some stagnation across all stages, with later-stage startups and tech-focused companies taking the hardest hit. Since the first quarter of 2023, investments in these sectors have notably decreased by 33%. The root cause can be traced back to a broader market decline affecting technology and life science companies generally, leading to lower valuations and delayed pre-IPO rounds for startups.

Nearer to Axial’s HQ in the UK and Europe, a similar situation is unfolding. External factors such as the war in Ukraine and a struggling global economy have contributed to surging inflation and increased interest rates. These economic challenges starkly contrast with the record-breaking cash inflows that high-growth businesses enjoyed 18 months ago. As a result, startups in Europe are facing familiar territory in the cultural expectation that they should establish robust market positioning and demonstrate growth in topline income before funding might flow more freely.

In response to these shifting dynamics, founders and operators are exploring various avenues to sustain and grow their businesses. M&A has increasingly offered a mechanism to bolster market share (and ideally a stronger combined balance sheet) with businesses consolidating their funding via strategic partnerships – and at Axial we are leading on transactions on this basis both for accelerated growth and for more urgent defensive strategies. The realities for founders is this often requires a considerable amount of time and may even lead to valuation down-rounds.

Financing driven by forward revenues is another funding model that we build into our support for growth-companies. In this approach, a company receives an upfront sum of capital and future recuring earnings serve as both the rationale for for the financing and for repayment. This model aligns the interests of investors with those of the startup, promoting sustainable growth without the burden of traditional debt.

Corporate partnerships and sponsorships are also proving to be lifelines for businesses looking for growth. Larger companies are investing in startups, often in exchange for access to innovative products or supply chain advantages, and cross-border partnerships can be a pivotal catalyst for accelerating new business. These strategic partnerships can provide startups with the resources and expertise they need to thrive – whether in a new market or a challenging market – and with our offices operating across the US, Europe, UK and Canada, Axial’s team takes this approach with many of our portfolio clients.

Despite the challenging funding landscape, entrepreneurs are natural risk-takers and innovators, and the current funding dynamic is likely to drive even more creativity and open up unique opportunities for those who can adapt and pivot effectively.

The road ahead for ambitious business operators may be unchartered in many cases, but there’s nothing like a challenge to truly define the entrepreneurial journey. By embracing alternative funding avenues, strategic partnerships, and a resilient mindset, startups and growth-driven SMEs can weather the storm and re-shape the future of their industries. The entrepreneurial journey is ever-evolving, and those who navigate the changing tides with creativity and determination will undoubtedly find success in the new landscape.

Is it time to hand important financial decisions to GPT? The answer to that question was a resounding No not too long ago, but the ‘intelligence’ bit of AI has moved on rapidly in just the recent year, notably enhancing precision and adaptability, to the point where a recent market-review article illustrated how AI was fed technical data to undermine Reuters’ bullish stance on Rivian stock – ultimately giving a result of ‘under-perform’ when taking into account previous stock data, and suggesting a sell recommendation on stock that Reuters was openly positive about. Right or wrong, that’s interesting.

Across our client portfolio we are increasingly seeing AI (or at least an attempt at it; automation is not AI) bolster services and solutions that are being deployed across sectors from agri through to InsurTech and workflow management. If, like us, you have asked Bard or GPT the same question in different ways to ultimately get to a reasonable answer, you’ll appreciate that even if a certain level of manual intervention is still relevant, the emotive or ‘human factor’ is not – and that’s where the potential for value (and to outmaneuver a human) really runs deep.

One reason we really like the concept of bringing AI into the markets or sector applications across our client portfolio, is that it generally means the degree of scalability for that business is greater than before – and with our operational model being focused on expansion as much as investment, supported by our team across multiple geographies, the results from our collective efforts with each client can be all the more enhanced. A great case in point is a client in the AI process automation space, whose technology we are introducing across our portfolio for testing and circular feedback, so ultimately the collective financial returns can be incredibly impacting. It’s not quite a focus on financial decisions in the end, but the financial results speak for themselves!