I had a fairly chilled-out weekend for once. I spent some time at an arts festival, which gave me a bit of space to reflect on how much Kognise has changed over the past year and where we're taking it through the remainder of 2026 and into 2027.
We spend a lot of time advising businesses to recognise when their market has changed and be prepared to adapt. Looking back, that's exactly what we've done ourselves. Kognise started primarily as an advisory business, working with founders around strategy, investor readiness, governance, growth, funding and ultimately exit. We still do all of that, but over the last year we've seen a common pattern of requirements emerging from both founders and funders, and we've adapted the business around them.
In other words, we've taken some of our own advice and pivoted.
The most visible change is the name. Kognise has become Kognise Capital. That doesn't mean we've become a fund. Not yet, anyway. We've already had approaches from potential partners interested in exploring that with us and it's certainly something we're considering. It won't happen this year, but it's a direction we may look at as the business develops.
For now, Capital better reflects where much of our work is heading. We're not just advising a company about a funding transaction. We're helping it get into the right position to procure capital and increasingly looking at how that company will be funded over the next three, five or more years.
One of the parts I particularly enjoy is sitting down with a founder and working through the business. We normally start with a qualification call on Teams, but after that we want to meet people face-to-face and, where possible, meet the wider team. There are plenty of people offering lists of hundreds or thousands of funders and contact details. That's not really what we do. Before we introduce a business to anybody, we want to understand the business and the people we're putting in front of them.
We particularly want to see the team together. They're going to have to take the business through the next few years, and some of those years will be difficult. Sitting around a table over a pile of coffee tells us things we simply don't get from a deck or a Teams call. How do they work together? Who really knows the numbers? How do they challenge each other? Does the management team actually operate as a team?
AI doesn't replace that. We use AI extensively and it can do an excellent job of analysing a model, reviewing a deck or challenging assumptions. It can't sit around that table and get a feel for the people. There also needs to be some chemistry between us and the team. If we're going to spend months working together through a difficult funding process, that matters.
There's another conversation I seem to have with founders all the time, and it's one where I regularly see the penny drop. They've built a sales deck and then taken it to a funder.
A good sales deck tells a customer why they should buy your product or service. The funder is looking at something different. If I'm putting £1m into your company, I want to understand how you're going to turn my £1m into £3m, £4m or £5m. Obviously the product, market and people matter, but the funder is investing to make a return. They need to understand how the business grows in value, how much capital it will take to get there and how they eventually get their money out.
When we work through that with a founder, the conversation normally changes quite quickly. We stop just talking about why the product is good and start talking about why the business is a good investment.
I see something similar with new ideas. Someone develops a clever product and then starts looking for places to use it. I prefer to start with the market. What's happening in it? What's changed? What isn't working particularly well? What do customers want that they aren't getting? Is there a big enough opportunity to build a business around solving that?
I think that's particularly relevant at the moment. We've had a succession of major disruptions to markets. COVID changed customer behaviour and operating models almost overnight. Supply chains were disrupted. Inflation and interest rates followed. More recently, geopolitical conflict has put further pressure on energy costs. For sectors such as hospitality, where energy, food, labour and property costs are difficult to remove, these shocks can fundamentally change the economics of established businesses.
That's clearly difficult for the businesses caught in it, but from a startup and investment perspective there is another side to it. In a stable market, a new business may be trying to compete with incumbents that have scale, purchasing power, established customers, mature systems and a cost base optimised over decades. That's a very difficult place from which to start.
Disrupt the market and some of those advantages change. Customer behaviour moves, established operating models become expensive and legacy systems and property can become constraints rather than advantages. A new entrant isn't necessarily trying to beat the incumbent at its own game anymore. It has an opportunity to ask whether the game itself has changed.
We've seen throughout business history that periods of major economic, technological and social change create opportunities for new businesses and new models to emerge. I wouldn't suggest that every major company was created in a recession, because that simply isn't true, but there are plenty of examples of businesses that were created, transformed or accelerated when established markets were being disrupted. I think we're in another of those periods now.
Hospitality is a good example for me personally. I used to be a Hilton Diamond member. I booked Hilton almost automatically, generally received good service and valued the benefits. What increasingly frustrated me was finding that the same Hilton room could sometimes be cheaper through Booking.com when the hotel was trying to fill capacity. I never really understood why my loyalty wasn't better protected.
COVID eventually broke that habit. I don't have the same loyalty to a hotel group anymore and the nearest thing I probably have now is Booking.com. That's only my experience, but it's exactly the sort of change we'd want somebody building a new hospitality business to investigate. How has customer behaviour changed? What do people value now? What frustrates them about the current experience? What costs are established operators carrying that a new model might avoid? If you started with a blank sheet of paper today, would you build the same hotel business?
I've seen some interesting hospitality businesses in the Netherlands taking quite different approaches, and that's where I think the opportunity in disrupted markets sits. You don't necessarily have to compete with established businesses on their terms. You can look at what's changed and build something around the market as it is now.
The difficulty is that genuinely disruptive businesses can be harder to fund. Funders understandably like comparables because they make risk and value easier to assess. If you're doing something genuinely different, there may not be five similar businesses to benchmark against. The founder therefore has to work harder to demonstrate that the market exists, customers actually want the change and the economics work.
Being different isn't enough. The business still has to demonstrate how that difference creates value.
This is one of the reasons our investor-readiness work has changed. We don't want to start with a list of funders. We want to start by asking whether the business is ready to talk to them. Does the model work? Is the market opportunity properly evidenced? How much capital is actually required? What does that money achieve? What happens if the plan is six months late? What happens when this money runs out? Most importantly, where does the funder's return come from?
Sometimes we'll tell a business that it isn't ready yet. We'd rather do that than put a weak proposition in front of a funder and damage the opportunity.
We also continue to work on a non-exclusive basis. A client can talk directly to funders, use another adviser, use its own contacts or ask us to make introductions. We don't need to control the route to the money. If we've helped get the business properly prepared and it secures the right capital, we've done our job.
Another thing that's changed quite significantly is the way we look at the funding requirement itself. If a company needs £3m today but its plan says it will need another £10m over the following three years, I don't think it makes sense to treat those as separate exercises. The decisions made in the first round can make the second round easier or considerably more difficult.
The numbers put some context around that. Dealroom data suggests around 29% of new UK startups secure funding and only around 27% progress from Seed to Series A. Getting the first round doesn't mean you'll get the second.
That's why we're now spending much more time looking at the Capital Journey™. If there are likely to be rounds one, two, three and four, let's understand them now. What does each round need to achieve? How much capital is required and when? Does it all need to be equity? Could lending, asset finance, bonds or another structure make more sense at different points?
Funders are looking at this as well. One of the concerns we've heard is very simple: if I invest now, when I eventually want to exit, is there enough left in the business for the next investor to make a good return? Round one should increase the value of the business and make round two attractive. Round two needs to do the same for round three. A future investor still needs to see enough opportunity ahead to justify investing at a higher valuation.
Dilution is closely connected to this. We've seen founders give away too much equity early because they need to get a deal done, and then had a later funder question whether the founding team still owns enough of the company. It sounds odd at first, but the investor also needs the founders and management team to remain motivated to create the future value of the business.
This is why we think dilution has to be considered over the whole journey. What happens to the founders after round one? What happens after rounds two and three? Could we use another type of capital at one stage? Could we reach a milestone before raising more equity and get a better valuation? It's not about avoiding dilution. It's about getting the funding and dilution right for each stage without creating a problem further down the road.
We've made another change because of something we've repeatedly seen in projects. Funding and restructuring create a lot of work. There are models, forecasts, investor materials, due diligence, data rooms, lawyers, accountants, technical questions, funders and a constant stream of actions that somebody has to manage. A large corporate normally has project and programme people to do that. A startup or scale-up generally doesn't, so the founder ends up managing the funding project while also trying to run the company.
That's why we've developed the Kognise Delivery Office (KDO). We coordinate the parties, manage the actions and dependencies and keep the process moving. It's not particularly complicated as a concept, but it solves a problem we've seen repeatedly. It keeps the founder focused on the business, helps control professional costs and gives the funder a better organised process. It also gives us the structure to manage more engagements properly.
We've also changed the way we think about exit. I increasingly ask founders a fairly simple question: what are you actually trying to achieve personally?
For many founders, the company will be the largest asset they ever create. What's your number? What does financial independence look like? What do you want to provide for your family? If we're modelling several rounds of funding and dilution, we should also understand what that ultimately means for the people who created the business.
That's why we've partnered with Family Legacy. We're not wealth advisers and we're not trying to become wealth advisers. We simply want the founder's personal financial journey to be considered alongside the company's capital journey, with specialists involved where they're needed.
We're doing something similar around cyber security. It's increasingly something funders ask about, but we don't think the answer is automatically another certificate or a security model designed for a company ten times the size. We're working with a specialist cyber business on what sensible cyber maturity looks like for a startup or scale-up at different stages of its development: what it actually needs now, what it should be planning for and what a funder should reasonably expect to see.
As we bring more specialist capability around Kognise Capital, we also need to make sure we don't compromise our independence. We don't want to find a cyber problem because we happen to have a cyber partner, or recommend personal financial planning because we have a relationship with Family Legacy. Sometimes our partner will be right, sometimes somebody else will be better and sometimes the client won't need anything.
Looking back over the last year, we've done what we advise our clients to do. We've looked at what's happening in our market, listened to the founders and funders we're working with and changed the business around what we're actually seeing.
Kognise Capital is therefore quite different from Kognise a year ago. We're still advisers, but we're doing much more around capital strategy and procurement. We're looking at funding as a journey rather than a transaction. We've built KDO because our clients need help managing that journey, and we're bringing specialist capability around it where we see genuine gaps.
And we may ultimately become a fund. We're not there today, but it's now a discussion we're having.
There's quite a lot more we want to do with Kognise Capital over the next twelve months, and some of it is already starting to take shape. It took a quiet weekend at an arts festival to realise quite how much we'd already changed.
We've pivoted.