Stephen Page On The Challenges And Opportunities Of Early-Stage Investing

Stephen Page, founder and CEO of SFC Capital, worked as an accountant after leaving school at 18, but found it “extremely boring”. But the world of entrepreneurship was opened up for him at the age of 22 when he went to work for a road haulage entrepreneur. 

“He took me into London one day, and went to Saville Row and got himself a suit made,” says Page. He was “sitting in the corner like a wallflower” and got called over to get his own suit made. While the business didn’t work out in the end for the road haulage entrepreneur, Page had the entrepreneurship bug and left to work for another founder. 

It was now 1979 and the software world was just beginning to kick off. This was before IBM had come out, and there was no accounting software for the microcomputer. So they imported one from Silicon Valley and tried to write accounting software. “Absolute rubbish is what we did, but it got us into that industry,” says Page.

Ten years ago, Page was building systems for startups but “very quickly we realised that what they wanted was money, not our services. And so we set up something called Startup Funding Club, which is now SFC Capital.”

What started as an angel network with a few friends was formalised into a fund following the introduction of the Seed Enterprise Investment Scheme (SEIS), a UK tax break that offers tax reliefs to individual investors.

More often than not, SFC Capital are the first investors and focused on the very early stage, but it’s had some huge successes – most notably Onfido. They are also prolific, aiming for 75 to 100 deals a year. ​​That means they need to see and talk to 1,000 companies.

So what do they look for? “​​It’s pretty much always the same,” says Page. “Half of our criteria are about the people. When these companies are so young and so new, it’s all about the people. We have a grid for marking the companies – 50 per cent of the points are based on the founders and the team.” This includes psychometric testing to look for a balance of skills within the leadership team.

“We really like startups from the regions,” says Page. “They’re different. You tend to find London-based startups follow the same sort of patterns. But if you go out to the regions there are different types of businesses. They can be engineering, manufacturing, product-centric – something that has to do with that region.” To this end, SFC Capital has partnered with the British Business Bank to deliver funding around the country.

Before Covid hit, they were physically meeting companies and that meant people would have to travel from Manchester or Scotland. Page says that often he would ask who else they were meeting, and the journey would often be just to meet SFC. “That’s quite a difficult situation because we felt quite guilty. We’ve brought them all the way down for a one-hour meeting – that’s a bit unfair. Now with the virtual world, we can see one after the other from anywhere.”

Page is seeing a lot of funds focusing more on later stages. He thinks the reason is “because early-stage is extremely hard work. What we do is very hard work. We’ve got a whole team dedicated to finding companies that are brand new, looking for SEIS, looking for that first round. And that’s a massive challenge to find those.”