David Peto on attracting funding for your startup

This article first appeared in issue 215 of .net magazine - the world's best-selling magazine for web designers and developers.

.net: What does Aframe do?
David Peto: Aframe is a massively powerful online platform for the professional video production industry. It stores video securely in a data centre ready to be delivered to anyone on the web, making it fast and easy to collaborate.

I used to run a post-production company and we’d have people with 30,000 files who couldn’t find their way around what they’d made because it didn’t have any metadata. It’s common for people to use a system called logging where teams of kids put metadata onto paper, believe it or not; or a spreadsheet or bespoke system. It’s slow, inefficient and unreliable – it gets lost and you often can’t find what you’re looking for.

We’ve built an outsourced metatagging service that makes tagging fast for a person to do and interesting enough for them to want to do it. It’s collaborative, so the metataggers work on the footage as a team, making the tags as detailed and diverse as possible. You’d think that the TV and film industry would be really technically advanced, but in fact it can be quite slow to adapt. People are amazed that no one has done this before.

.net: How did you go about getting investment?
DP: At the start we followed a very traditional way of raising money. I raised very small amounts of seed money, and then did an angel round in October 2009. We also got some grant money from the government because of the pioneering nature of what we’re doing. Once we’d built the system up, we raised what we called a super angel round, which is an interesting aspect of the state of UK fund raising at the moment.

It used to be that venture capitalists might put seed money of around £250k into a start-up, and angels might put in around £30k each. Recently, a lot of VCs have backed away from very early stage companies, and it’s been interesting to see the rise of the super angel – individuals who’ll put £100k or £150k into a start-up. We were very lucky – we had ordinary angels who put in £30k, and also several super angels who put in over 100k.

We’re a blend of a traditional web company and one that’s quite infrastructure-heavy, because we built our own storage. So we needed quite a sizeable sum of money to get going. It’s been interesting for us because we’ve had a small amount of VC, but mainly we’ve been funded by individuals from the TV and advertising industries.

.net: How difficult is it starting up in the UK? Would it have been easier in another country?
DP: We’ve been lucky to raise anything in the current market: it’s really tough out there. An accusation often levelled at the VC industry here is that the London offices are just for show; they don’t really have any decision making power, so in reality you’re competing against companies that are in front of the decision makers every day in Silicon Valley or New York.

One interesting thing I’ve heard is that the UK isn’t really competing against America for money, it’s actually competing against China and India. Often start-ups in those countries are seen as more attractive because the markets over there are so much bigger. I think it’s going to get better though, because we have the Silicon Roundabout [The East London area around Old Street and Shoreditch] springing up and if you get a cluster of companies it does inspire people to take a look and possibly invest.

.net: Is there a conflict between wanting to spread the word about yourself to attract investment, and the danger of someone stealing your idea?
DP: Yes. I made everyone sign an NDA. There’s a big thing about this: you might hear some people say something like “If someone wants me to sign an NDA then I won’t even talk to them because if they don’t trust me then why should I invest...” My belief is that if someone’s not willing to sign that kind of thing then you shouldn’t be talking to them anyway, especially in that really early stage. Literally everyone we spoke to signed an NDA before they came to see us and often even before I would give them the overview of what the business was. Obviously VCs don’t do NDAs, but they are governed by FSA regulations on confidentiality.

.net: Is Aframe up and running now?
DP: Yes. The whole system is live, we have half a petabyte of storage and we’ve got customers using it. We have data centres in London and Sunderland so that if London got nuked, the data would be safe in Sunderland. It sounds crazy, but that’s how seriously we take data security.