Playing fair

By Rayhan Rafiq Omar on April 12th, 2012

Federico Pirzio-Biroli

Angel investor and founder of Playfair Capital, 27

Where does the name Playfair come from?
Playfair is just a name that’s synonymous with my attitude to investment. I want to put across that I’m a nice guy. It sounds silly, but it seems to be working.

How does this “nice guy” image fit with your business?
It is proving to be a successful differentiating factor. I’m less institutional, more emotionally involved and more tolerant of day-to-day situations. For example, when KPIs are not being met, I am more ready to actually appreciate why and have more capacity to accept those reasons and help out without putting my foot down.

What are your KPIs?
Potential revenue streams, traction and social media. I’m always keen to see how much value can be extracted for the lowest cost. Social media in a business is much more important than just being the intern’s job – it deserves more attention and this is something I look for. Of course, my KPIs change from company to company, so it’s hard to generalise.

What did you do previously?
I spent four years working in non-governmental organisations in Uganda, Tanzania and Kenya. I then became an Aid Transparency lobbyist in London, where I developed my interest in philanthropically-minded third world-oriented for-profit ventures.

Are you involved in any philanthropic investments?
I’ve got two charitable investments. The first, Mobius Motors, addresses the issue of lack of mobility in the developing world. As a social enterprise, it’s for profit, but is still doing good and generating jobs and taxable income. It’s a sustainable model. I’m also looking at a second investment, in a yet-to-launch start-up called Believe.In. It’s a charitable social network whose aim is to create virality on the back of donations.

How did you decide to become an investor?
I became interested in investing after I left the NGO world in December 2010. I had some capital that I didn’t know what to do with, and saw many fascinating companies in the London start-up ecosystem. I thought the best way of putting the capital to good use would be to help get some of these ideas off the ground. I met Stefan Glaenzer, a partner at Passion Capital, who offered me a seat as an angel-in-residence investor at White Bear Yard.

Are you not in competition with Passion Capital?
We’ve invested in several companies together, and Passion has brought some very interesting companies to my attention and vice versa. Due to the focus of their portfolio, we very much have similar interests at heart – namely, very early-stage seed capital.

How much capital do you have to invest, and do you have any external investors?
No, I’m a one-man show. My capital comes from shares that I sold from the family business. Playfair has £3.3 million of capital, of which I’ve already invested £1 million. I’m trying to slow down now, as I’ve made eight investments in the last 18 months. My plan is to do two or three more, and then keep the rest of the capital for follow-on funding rounds.

Which businesses have you invested in so far?
Duedil, Flattr, OnDevice Research, Mobius Motors, Mixlr, Stratajet, Fourth & Main and I’m a Springboard investor as well.

How do you decide which businesses to invest in?
When I look back at all of my investments, I realise – and this may sound simplistic – that I knew that I would invest in them within five minutes of meeting them. I’ve often left a meeting and then had second thoughts about whether it is too risky, but ultimately I’ve trusted my gut instinct.

In seed capital, there is so little to do due diligence on that all you have is your gut feeling on the entrepreneur and how the product fits in the market.

What is more important, the founder or the product?
Absolutely the founder and the passion they have for their product. Even if you’ve got an incredibly slick product, if you don’t have any passion, it’s no good. I’d much rather invest in a company with a lacklustre, unexciting product that has a founder who lives and breathes it.

How much capital do you usually invest in a company, and what return do you look for?
All of my investments span between £25,000 and £300,000, for anything between 6 per cent and 30 per cent equity in each start-up.

To what extent do you get involved with your investments?
My strategy for involvement depends on the company. Certain companies, especially at the early stage, need more help with hiring, logistics, office space, etc. Others are well established enough that too much of my involvement could be a hindrance.

Do you have any favourite investments?
Mobius Motors is incredible. It’s the first company to manufacture a car in Africa; doing the R&D, testing, manufacturing and retailing locally. What they are doing will change the way that people move around in that part of the world. Currently, buying a vehicle restricts you to Japanese imports which are prohibitively expensive. The company is even partnering with others to provide business training and loans to allow communities to get a business up and running and take advantage of this new mobility.

You’re also an investor in Springboard – why?
For a relatively small investment, £25,000, it gives me a lot of exposure to what is going on in the tech start-up sector. Jon Bradford’s contacts are unrivalled. He has added so much value and credibility to my position as an investor. Also having a small share in 10 separate companies allows for the development of relationships in the future.

What do you think of the investment landscape in Britain?
It is drastically lacking in early-stage seed capital. More and more VC and private equity companies are setting up shop, but none are catering for the sub £500,000 seed-stage capital needed by start-ups. Barriers to entry for seed-stage investors are still relatively low, but they’re just not here.

Why is there a lack of early-stage seed capital?
It is, in part, because of the risk-averse British mentality. People will only invest in such a high-risk environment if they are very affluent. In the US, you get people who can’t afford to invest going as far as to re-mortgage their house. It’s the stereotype of the American dream; buying into big and risky ideas. That doesn’t exist here. The situation is improving, but it’s still a far cry from where it could be.

The downside is that although the situation is getting better, it’s for the wrong reasons. Because of the state of the economy, more people see early-stage seed capital as an attractive investment. While numerically speaking there is more capital around, there is more dumb capital. This will affect companies. You can already see more companies being set up and being rubber-stamped by accelerator groups. Because there is more dumb capital around, there are more unrealistic ideas chasing that capital.

How do you ensure that you don’t get your fingers burnt?
I can’t. Statistically speaking, I am sure that I’ll get my fingers burnt sometime soon. It hasn’t happened yet, but when it does, I won’t be bitter about about it. It’s something that needs to happen to me; it will educate me as an investor.

What would you love to invest in, but think is too risky?
I love the ideology behind Seedrs but remain uncertain as to the commercial viability of the product in the long run. Seedrs essentially enable affluent people to invest, but the overheads could be too significant and the model require too many deals to be sustainable.

I would love to change the British mentality and encourage the affluent to invest in riskier ventures such as tech start-up companies. Seedrs could achieve this, but I’m curious to see whether this will be possible.

Do you have any upcoming deals?
In addition to Believe.In, I’m looking at a potential investment in citizen journalism site Blottr.